Commercial Landlord’s Suit for Rent Damages Accruing After Possession Order Survives Tenant’s Res Ju

18th Street Property, LLC v. A-1 Citywide Towing & Recovery, Inc., 2015 IL App (1st) 142444-U examines the res judicata and collateral estoppel doctrines in the context of a commercial lease dispute where the lease has an acceleration clause and there have been prior eviction cases involving the same property and lease parties.

The plaintiff lessor obtained a possession order and judgment in late 2012 on a towing shop lease that expired March 31, 2013. About six months after the possession order, the lessor sued to recover rental damages from January 2013 – March 2013. The defendant moved to dismiss on the basis of res judicata and collateral estoppel. It argued that lessor’s damage claims were defeated because they could have and should have been brought in the earlier eviction suit. The trial court agreed, dismissed the suit and the lessor plaintiff appealed.

Held: Reversed.

Q: Why?

A: Res judicata (claim preclusion) and collateral estoppel (issue preclusion) seek to foster finality and closure by requiring claims to be brought in the same proceeding instead of filing claims in a piecemeal fashion across different cases. Res judicata applies where there is a final judgment on the merits, the same parties are involved in the first and second case, and the same causes of action are involved in them. It precludes the litigation of claims that could have brought in an earlier case. Collateral estoppel prevents the re-litigation of law or fact that were actually decided in an earlier case. (¶¶ 20-21, 30)

In Illinois, a commercial landlord’s claim for past rent due and a claim for future rent on an abandoned lease are not the same cause of action. Generally, the payment of future rent is not a present obligation and a tenant’s breach will not typically accelerate rent (i.e. require the tenant to immediately pay the remaining payments under the lease) unless there is a clear acceleration clause. Each month of unpaid rent gives rise to a fresh set of operative facts for purposes of res judicata.

The landlord’s remedy where a tenant breaches a lease is to (a) sue for rents as they become due, (b) sue for several accrued monthly installments or (c) sue for the entire amount at the end of the lease. A written lease is a contract and must be enforced as written so long as its terms are clear.

Here, the commercial lease gave the landlord a wide range of remedial options upon the tenant’s breach including acceleration of rental payments. The tenant defendant argued that since the lessor failed to try to recover future rent payments in the earlier eviction case, it was barred from doing so in the second lawsuit. For its part, the lessor argued the opposite – that its claims for damages post-date the possession order and so are entirely separate claims; not barred by res judicata or collateral estoppel.

The court held that res judicata did not bar the lessor’s post-possession order damage suit. It noted that while the lease contained an optional acceleration clause, it was one of many remedies the landlord had if the tenant breached. The lease did not require the landlord to accelerate rents upon the tenant’s breach.

The court also noted that the lease required the landlord to notify the tenant in writing if it (the landlord) was going to terminate the lease. Since terminating the lease was a prerequisite to acceleration, the Court didn’t have enough evidence as to whether the lessor terminated the lease. Since more evidence was needed on whether the lesser tried to accelerate rent in the earlier case, the trial court erred when it dismissed the lessor’s suit.

Afterwords:

1/ If a lease does not contain an acceleration clause, a landlord can likely file a successive damages action after a prior eviction case without risking a res judicata or collateral estoppel defense.

2/ If a lease does have mandatory acceleration language, and a landlord tries to sue for damages accruing after a possession order but while the lease is still in force, a tenant will have a strong claim for defeating the claim under claim or issue preclusion rules.