Union Tank Car Co. v. NuDevco Partners Holdings, LLC

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Appellate Court Date: 2019.04.16

13:49:35 -05'00'

Union Tank Car Co. v. NuDevco Partners Holdings, LLC,

2019 IL App (1st) 172858

Appellate Court UNION TANK CAR COMPANY, Plaintiff-Appellee and Cross-

Caption Appellant, v. NuDEVCO PARTNERS HOLDINGS, LLC,

Defendant-Appellant and Cross-Appellee.

District & No. First District, Second Division

Docket No. 1-17-2858

Filed January 15, 2019

Decision Under Appeal from the Circuit Court of Cook County, No. 16-L-2559; the

Review Hon. Diane M. Shelley, Judge, presiding.

Judgment Affirmed in part and vacated in part.

Counsel on Duane Morris LLP, of Chicago (Paul E. Chronis and Elinor H.

Appeal Murárová, of counsel), for appellant.

DLA Piper LLC, of Chicago (Thomas F. Geselbracht and Eric M.

Roberts, of counsel), for appellee.

Panel PRESIDING JUSTICE MASON delivered the judgment of the court,

with opinion.

Justices Lavin and Pucinski concurred in the judgment and opinion.

OPINION

¶1 Following a 2017 bench trial, plaintiff-appellee, Union Tank Car Company (Union Tank),

was awarded $1.27 million in damages as a result of the breach of a lease guaranty by

defendant-appellant, NuDevco Partners Holdings, LLC (NuDevco). On appeal, NuDevco

challenges the verdict, claiming the trial court erred by (i) concluding that Union Tank’s cause

of action was not governed by the Uniform Commercial Code (UCC) (810 ILCS 5/1-101

et seq. (West 2016)), (ii) awarding Union Tank damages when Union Tank failed to satisfy the

UCC’s condition precedent to the recovery of damages, (iii) awarding damages to Union Tank

for anticipated blasting and future storage costs, and (iv) admitting certain evidence, which, in

turn, influenced the amount of damages.

¶2 Union Tank cross-appeals from the trial court’s refusal to award the present value of lost

future rent under the lease and the trial court’s deduction of $10,000 from Union Tank’s

petition for attorney fees.

¶3 For the reasons that follow, we affirm in part and vacate in part.

¶4 BACKGROUND

¶5 In January 2003, Ponderosa Petroleum Company (Ponderosa) entered into a lease with

General Electric Railcar Services Corporation (GE Railcar) for 47 railcars to carry crude

petroleum. In the ensuing years, the parties executed numerous riders providing for lease terms

ending between May 2017 and February 2020. On April 1, 2015, Associated Energy Services,

LLC (Associated Energy) assumed the obligation to make payments under the lease, although

Ponderosa remained a party to the lease.

¶6 Associated Energy is a wholly owned subsidiary of NuDevco. On March 3, 2015,

NuDevco executed a guaranty in favor of GE Railcar to pay Associated Energy’s obligations

under the lease. The terms of the guaranty provided that NuDevco would

“absolutely, irrevocably and unconditionally guarantee the full and prompt payment

when due of all the obligations *** due under the Leases, including, but not limited to,

rent, service charges, freight, railroad charges, *** [and] cleaning charges *** together

with all other sums which may or shall become due and payable pursuant to the

provisions of the Leases, including, without limitation, any damages resulting from the

Lessee’s failure to perform its obligations thereunder.”

The guaranty further provided that NuDevco would reimburse Union Tank for all costs it

incurred in enforcing the guaranty, including reasonable attorney fees.

¶7 In September 2015, Union Tank acquired the lease, riders, and railcars from General

Electric Capital Corporation, which owned or controlled (directly or indirectly) all of the

interest in GE Railcar.

¶8 On September 1, 2015, Associated Energy sent a notice of termination of the lease to GE

Railcar citing as justification that the cars were approaching the end of their permitted use to

haul crude oil. No provision of the lease authorized termination for this reason. At the same

time, Associated Energy also began returning the railcars to Union Tank. Associated Energy

discontinued rental payments as of September 30, 2015, and returned all the leased cars to

Union Tank by December 2015. Union Tank then invoked the guaranty, but NuDevco refused

to honor it.

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¶9 On March 10, 2016, Union Tank filed a complaint against NuDevco alleging breach of the

guaranty. The complaint alleged that the reason given for Associated Energy’s termination of

the lease was not valid per the lease terms and NuDevco’s refusal to comply with Union

Tank’s demand for payment was a material breach of the guaranty.

¶ 10 At the bench trial, Union Tank presented evidence that Associated Energy sent all of the

leased railcars to a Union Tank facility in Evanston, Wyoming, without first informing Union

Tank. Because that facility was unable to process that number of cars, Union Tank transferred

39 of the 47 railcars to a facility in Kansas, 2 of the cars to a facility in Texas, and kept only 6

in Wyoming. The cars were cleaned at those locations, at a cost of $137,690.09, of which

Associated Energy paid only $60,710. Union Tank also incurred costs (known as “freight”) in

moving the railcars from Wyoming to Kansas and Texas and “switching” charges in

connection with transporting the cars. A switching charge is incurred when a car is transported

from a main line railroad and “switched” to storage by way of a short-line railroad or privately

held yard.

¶ 11 Union Tank had to pay to store the cars after their return, as it had excess inventory of those

specific railcars and could not market them to new customers. (Union Tank had insufficient

yard space to store the cars on its own and generally shipped excess inventory to third-party

rail yards.) Union Tank again incurred freight and switching charges in shipping the cars from

where they were cleaned to where they were ultimately stored. Through the date of trial, Union

Tank incurred $192,975.80 in freight costs, $9605 in switching costs, and $41,315.30 in

storage charges.

¶ 12 As evidence to support these incurred costs, Union Tank introduced invoices that it

received from third parties. While none of the third parties generating the invoices were called

to testify, Frederick Koenig, a 40-year Union Tank employee currently serving as Union

Tank’s director of fleet repair, testified that Union Tank receives freight invoices through an

Internet portal or via e-mail in the ordinary course of its business. A Union Tank employee

then signs the invoice, whereupon it is routed to the accounts payable department, which

generates payment by check or electronically. William Constantino, the general manager of

Union Tank’s leasing business unit, testified that he receives similar invoices for storage,

switching, and cleaning charges, which are checked for accuracy and then sent to him for

countersignature if above a certain amount. According to Constantino, he receives these

invoices during the normal and typical course of his business activity anytime Union Tank has

idle equipment in storage. Finally, Union Tank’s controller and vice president for the leasing

business unit, James Murauskis, testified that, after the invoices (for cleaning, freight, storage,

or switching) are routed to accounts payable, the invoices are paid.

¶ 13 Murauskis’s testimony regarding payment was based on a spreadsheet Union Tank

generated in the course of its business. That spreadsheet listed the bills associated with the 47

railcars Associated Energy returned and linked each invoice to the authorization for payment

by wire transfer through Bank of America. NuDevco objected to Murauskis’s testimony on

this issue given that the payment confirmation pages from Bank of America were not

introduced at trial.

¶ 14 In addition to the costs incurred as of the date of trial, Union Tank also sought $97,215.90

in storage costs for the remainder of the lease terms. In support of these costs, Constantino

testified that in the beginning of 2016, shortly after Associated Energy returned the leased cars,

Union Tank had 3000 DOT-111 cars (the type leased by Associated Energy) in storage and not

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leased to customers. But by the end of 2016 and at the time of trial, Union Tank had leased only

550 DOT-111 cars to new lessees while the number of cars in storage had increased to 6000.

(The remainder of Union Tank’s DOT-111 inventory—approximately 16,000 cars—was

leased.) Constantino testified that the pace of leasing these cars was not increasing. While

Constantino nevertheless expected to eventually re-lease the 47 cars Associated Energy

returned, he admitted that he could not make a final determination as to the fate of the cars until

they are brought to the repair shop and Union Tank undertakes an economic evaluation of their

condition.

¶ 15 Finally, the evidence at trial revealed that before it could lease the 47 railcars to other

customers, Union Tank would need to “blast” the interior of the cars to remove the residue

from the prior service, namely, crude oil. Union Tank introduced evidence that the railcars

would necessarily be used to transport something other than crude oil, as they no longer

complied with governmental regulations for the transport of crude petroleum. Based on the

size of the cars, blasting would cost Union Tank $109,930; however, blasting had not occurred

as of the date of trial, given that the cars had not yet been reassigned to transport a different

commodity.

¶ 16 Following the conclusion of Union Tank’s case in chief, NuDevco moved for a directed

verdict, which was denied after briefing. NuDevco did not present any evidence, and on May

18, 2017, the trial court found in favor of Union Tank, awarding it $192,975.80 in freight costs,

$207,510.18 in cleaning costs, $41,315.30 in past due storage costs, $97,214.90 in future

storage costs, $109,930 in “anticipated future blasting,” and $743,912.90 in past due rent,

amounting to a total of $1,332,149, plus prejudgment interest and attorney fees to be

determined. The trial court did not award damages for the present value of future rent because

the lease did not contain a rent acceleration clause.

¶ 17 Union Tank filed its attorney fee petition, and while that petition was pending, NuDevco

moved for reconsideration of the trial court’s judgment, which was denied.

¶ 18 On December 21, 2017, the court issued its order on the fee petition and other

miscellaneous relief, granting Union Tank attorney fees in the amount of $255,139.66, which

was $10,000 less than Union Tank requested, based on the court’s finding that the $10,000 was

for excessive, redundant, or otherwise unnecessary work. The December 2017 order also

reduced Union Tank’s damages to reflect a miscalculation in cleaning costs and additionally

awarded $9605 in switching costs, reducing the judgment to $1,271,935.80.

¶ 19 NuDevco timely appeals, and Union Tank cross-appeals.

¶ 20 ANALYSIS

¶ 21 NuDevco urges reversal of the trial court’s decision on four grounds. We consider each in

turn.

¶ 22 Initially, NuDevco argues that the trial court erred in finding the UCC inapplicable to

Union Tank’s cause of action alleging breach of the guaranty. This is a question of law which

we review de novo. Hessler v. Crystal Lake Chrysler-Plymouth, Inc., 338 Ill. App. 3d 1010,

1017 (2003) (applying de novo review to trial court’s construction of contract).

¶ 23 At the outset, we acknowledge that the UCC is applicable to any transaction that creates a

lease. 810 ILCS 5/2A-102 (West 2016). Here, however, Union Tank did not sue Associated

Energy based on its breach of the lease but sued NuDevco for its failure to perform under the

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guaranty. NuDevco maintains that this is a distinction without a difference given that its

liability under the guaranty is predicated on the amounts due under the lease. We disagree.

¶ 24 Notwithstanding the fact that the guaranty would not have been triggered but for

Associated Energy’s breach of the lease, the guaranty, as the trial court aptly noted, is a

contract in and of itself. See TH Davidson & Co. v. Eidola Concrete, LLC, 2012 IL App (3d)

110641, ¶ 10 (guaranty is contract subject to traditional principles of contractual

interpretation). And the guaranty, unlike the lease, was not a contract for the lease of goods or

services but was a promise to pay a debt. Contracts promising to pay a debt are not governed by

the UCC, and none of the cases NuDevco relies on support a conclusion to the contrary. Under

these circumstances, we conclude that the UCC is not applicable to the guaranty.

¶ 25 Because we conclude that the trial court correctly found the UCC inapplicable to Union

Tank’s cause of action for breach of the guaranty, we necessarily reject NuDevco’s argument

that the trial court erroneously allowed Union Tank to recover notwithstanding its alleged

failure to satisfy the UCC’s conditions precedent to recovery.1

¶ 26 Next, NuDevco contends that the trial court erred in awarding damages to Union Tank for

anticipated blasting and future storage costs. We review a trial court’s damages award under

the manifest weight of the evidence standard. Bell Leasing Brokerage, LLC v. Roger Auto

Service, Inc., 372 Ill. App. 3d 461, 473 (2007). A decision is against the manifest weight of the

evidence only when the opposite conclusion is apparent or the findings are unreasonable or

arbitrary. Jameson Real Estate, LLC v. Ahmed, 2018 IL App (1st) 171534, ¶ 59. Given that the

trial court is the finder of fact, its award of damages is entitled to substantial deference. See

Young v. Alden Gardens of Waterford, LLC, 2015 IL App (1st) 131887, ¶ 80.

¶ 27 NuDevco bases its argument on the well-settled principle that a plaintiff is not entitled to

recover damages that are remote, speculative, or uncertain. Doornbos Heating & Air

Conditioning, Inc. v. James D. Schlenker, M.D., S.C., 403 Ill. App. 3d 468, 485 (2010).

Instead, a plaintiff must establish an actual loss with measurable damages in order to recover.

Pepper Construction Co. v. Palmolive Tower Condominiums, LLC, 2016 IL App (1st) 142754,

¶ 85. Importantly, however, “absolute certainty” with respect to the damage amount is not

required. Kirkpatrick v. Strosburg, 385 Ill. App. 3d 119, 130 (2008). Rather, so long as the

existence of damages is certain, a plaintiff need not necessarily establish the precise amount of

damages. See Westlake Financial Group, Inc. v. CDH-Delnor Health System, 2015 IL App

(2d) 140589, ¶ 51. A contrary rule would “immunize *** defendants from the consequences of

their wrongful conduct” by allowing them to escape liability merely because the amount of

damages they have caused cannot be proved with mathematical certainty. Id.

¶ 28 Turning first to future storage costs, while Union Tank had not incurred these costs as of

the date of trial, this does not necessarily render the costs too speculative to support an award

of damages. The need to recover future storage costs was supported by Constantino’s

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Under the UCC, in order to be entitled to recovery, Union Tank would have to show that it was

unable after a reasonable effort to dispose of the cars at a reasonable price or that circumstances

indicated that such an effort would have been unavailing. 810 ILCS 5/2A-529(1)(b) (West 2016).

Union Tank’s damages would also be reduced by the value of the available market rent for the leased

goods. Id. § 2A-528(1). We note that, even if the UCC applied, the proof Union Tank adduced at trial

showed that its inventory of unleased DOT-111 railcars doubled from the date of Associated Energy’s

breach through trial, thus supporting the reasonable inference that there was no market for the cars.

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testimony that in 2016, Union Tank had leased only 550 DOT-111 cars to new customers,

leaving 6000 unleased cars in its inventory. This excess inventory of the DOT-111 cars,

coupled with Constantino’s testimony that the demand for the cars was not increasing, is a

reasonable basis for concluding that UTC will incur storage costs for the 47 cars leased to

Associated Energy through the end of the cars’ last lease term in 2020.

¶ 29 To the extent that NuDevco argues that testimony regarding the need for future storage

costs was unreliable due to the fact that the testifying witness was not an expert, we disagree. A

lay witness is permitted to give opinion testimony where it is based on that witness’ personal

observation, is one the witness is competent to make, and assists in a clearer understanding of

the relevant issues. Klingelhoets v. Charlton-Perrin, 2013 IL App (1st) 112412, ¶ 44.

Constantino, who testified to the need for future storage and blasting costs, was the general

manager of leasing for Union Tank. As such, the market demand for the cars was certainly

within his purview. We cannot say the trial court’s decision to allow his testimony

notwithstanding the fact that he was not qualified as an expert in the rental market of railroad

cars was an abuse of discretion. See id. (reviewing trial court’s decision to allow lay witness

testimony for abuse of discretion).

¶ 30 With regard to anticipated blasting, however, we agree with NuDevco that these damages

are too speculative to be recoverable. The extent of Union Tank’s surplus of DOT-111 railcars

and the anemic rate of new leases suggests that it is highly unlikely these 47 cars will ever be

re-let to transport a different commodity so as to require blasting. This is particularly true

where Constantino testified that the cars had not yet undergone an economic evaluation of their

condition in Union Tank’s repair shop, which was required before Union Tank could

determine whether they could be remarketed in the first place. Further, as NuDevco points out,

it is incongruous to award both future storage costs, which will only be incurred if the cars are

not re-let by the end of the lease terms, and costs for blasting, which will be incurred if the cars

are re-let. This inconsistency compels us to conclude that the trial court’s decision on this

element of damages was against the manifest weight of the evidence. See Jameson Real Estate,

LLC, 2018 IL App (1st) 171534, ¶ 59 (decision is against manifest weight of the evidence

where opposite conclusion is apparent). We therefore vacate this component of the damage

award.

¶ 31 Finally, NuDevco argues that the trial court erred in admitting evidence of third-party

invoices and testimony that those invoices were paid. A trial court has broad discretion

regarding the admission of evidence, and we will not disturb the court’s ruling absent an abuse

of discretion. Wheeler Financial, Inc. v. Law Bulletin Publishing Co., 2018 IL App (1st)

171495, ¶ 104. An abuse of discretion is the most deferential standard of review, and a trial

court abuses its discretion only when its decision is unreasonable, arbitrary, or no reasonable

person would take the view it adopted. Gulino v. Zurawski, 2015 IL App (1st) 131587, ¶ 64.

¶ 32 At trial, Union Tank relied on the business records exception to the general rule prohibiting

hearsay to introduce the third-party invoices as evidence. Under this exception, the proponent

of evidence must show that the record was kept in the ordinary course of business and it was

the regular practice of the business to make that record at that time. City of Chicago v. Old

Colony Partners, L.P., 364 Ill. App. 3d 806, 819 (2006); see also Ill. S. Ct. R. 236(a) (eff. Aug.

1, 1992). Records made by a third party may be admissible as business records so long as the

person authenticating the record was either their custodian or other person familiar with the

business and its mode of operations. Bank of America, N.A. v. Land, 2013 IL App (5th)

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120283, ¶ 13. Significantly, the circumstances surrounding the making of the record, including

the lack of personal knowledge, go to the weight of the evidence rather than its admissibility.

PennyMac Corp. v. Colley, 2015 IL App (3d) 140964, ¶ 17.

¶ 33 The theory underlying the business records exception to the hearsay rule is that because

their purpose is to aid the business (and they are useless for that purpose unless accurate), there

is no motive to falsify the record and every reason to ensure its accuracy. Kimble v. Earle M.

Jorgenson Co., 358 Ill. App. 3d 400, 413-14 (2005).

¶ 34 NuDevco’s primary objection to the introduction of the invoices is that they were prepared

by third-party service providers who were not called as witnesses. But this alone does not

preclude their admission where the foundational requirements are satisfied. Id. at 413. Old

Colony Partners is instructive. There, the plaintiff challenged the admission of certain

documents an architecture firm provided to the defendant at the defendant’s request. Old

Colony Partners, 364 Ill. App. 3d at 820. The trial court admitted the documents as business

records based on the testimony of the defendant’s property manager, who testified that she

maintained the documents from the architecture firm on site in the ordinary course of business

and confirmed that the documents were received by the defendant. Id. On appeal, we affirmed

the trial court’s decision to admit the documents, notwithstanding the fact that the property

manager could not testify as to how they were generated. Id.

¶ 35 Likewise, in this case, Koenig and Constantino testified that they maintained the

third-party invoices and confirmed that they received the invoices on a regular basis by e-mail

or Internet portal during the ordinary course of Union Tank’s business. Koenig also identified

the relevant portions of the invoices, including the car number to which they corresponded and

the initials of the Union Tank employee approving them for payment. Under these

circumstances, the fact that there was no testimony regarding how the invoices were generated

does not compel a conclusion that no reasonable person would find the foundational

requirements for the business records exception satisfied. This is particularly true since Union

Tank relied on these invoices to make payments to third parties.

¶ 36 Apa v. National Bank of Commerce, 374 Ill. App. 3d 1082 (2007), on which NuDevco

relies, is inapposite. There, we considered the admissibility of the plaintiff’s bank statements

as business records evidencing his lost income from the conversion of a bus he had purchased.

Id. at 1084. We acknowledged that the business record need not be created by the party seeking

to introduce it in order to be admissible but held that the proponent of the record nevertheless

needed to satisfy Rule 236’s foundational requirements, namely that the record was made in

the regular course of business at or near the time of the occurrence. Id. at 1087-88. Finding that

the plaintiff failed to present evidence of “the circumstances of [the statements’] creation,” we

held that the trial court abused its discretion in admitting the bank statements. Id. at 1088.

¶ 37 Here, too, there was no evidence of the invoices’ creation. But unlike Apa, where the

plaintiff used the bank statements solely to establish his damages and did not introduce

evidence indicating that he relied on the bank statements in the course of his business, in this

case, the evidence established that Union Tank did rely on the accuracy of the invoices in that

it made payments based on them. This diminishes the concern that they are inaccurate or

falsified, which forms the basis of the general rule prohibiting hearsay evidence. Kimble, 358

Ill. App. 3d at 414.

¶ 38 We likewise reject NuDevco’s argument that the testimony regarding the fact that the

invoices were paid was inadmissible because Union Tank did not produce the Bank of

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America payment confirmation statements. For this argument, NuDevco cites the best

evidence rule, which prefers the production of the original documentary evidence when the

contents of that document are sought to be proved. See Village Discount Outlet v. Department

of Employment Security, 384 Ill. App. 3d 522, 526 (2008). It is sufficient to note that the best

evidence rule applies only when the contents or terms of a writing are at issue and must be

proved. People v. Davis, 2014 IL App (4th) 121040, ¶ 20 (citing People v. Pelc, 177 Ill. App.

3d 737, 742 (1988)). Here, however, the issue was not the content of the payment

confirmation, but whether the payment was made. And the fact that a payment was made

existed independent of any writing confirming that payment. Accordingly, the best evidence

rule is inapplicable. Continental Illinois National Bank & Trust Co. of Chicago v. Eastern

Illinois Water Co., 31 Ill. App. 3d 148, 159 (1975) (“The best evidence rule does not apply

where a party seeks to prove a fact which has an existence independent of any writing, even

though the fact might have been reduced to, or is evidenced by, a writing.”).

¶ 39 Because we find that the evidence regarding the invoices and their payment was properly

admitted, we reject NuDevco’s argument that it was error for the trial court to award damages

based on this evidence.

¶ 40 Having disposed of NuDevco’s arguments, we turn next to Union Tank’s cross appeal.

Initially, Union Tank challenges the trial court’s deduction of $10,000 from the attorney fees it

requested pursuant to the terms of the guaranty. We review an award of attorney fees for an

abuse of discretion. Timan v. Ourada, 2012 IL App (2d) 100834, ¶ 29.

¶ 41 After considering Union Tank’s fee petition, the trial court reduced the amount of attorney

fees Union Tank requested by $10,000 after finding that “some of the work” performed by

Union Tank’s counsel was duplicative. Union Tank points out that the court’s order referred

only to entries in November 2015, which amounted to $5917.50 in fees, less than the $10,000

the trial court deducted. However, the trial court’s decision in no way suggested that the work

it found redundant, excessive, or otherwise unnecessary was limited to services rendered in

November. Indeed, in its response in opposition to Union Tank’s petition for fees, NuDevco

pointed to $13,688.50 in excessive or duplicative fees, in January, February, and March 2016.

For example, time entries on February 2 and 3, 2016, reflect that two attorneys charged for

reviewing e-mails from each other. Similarly, entries in March 2016 reveal that multiple

attorneys billed Union Tank for reviewing the same draft complaint. The trial court’s order

supports the conclusion that it considered these other entries in finding $10,000 in fees to be

redundant or unnecessary, and we cannot say that the trial court’s decision to reduce the fee

award under these circumstances was an abuse of discretion.

¶ 42 Finally, Union Tank argues that the trial court should have awarded it the present value of

future rent under the leases through their expiration dates. As discussed supra ¶ 26, we review

a trial court’s decision on damages under a manifest weight of the evidence standard.

¶ 43 Because this argument turns heavily on the construction of the guaranty, we transcribe it in

full here:

“The Guarantor hereby guarantees, as principal and not as surety, absolutely,

irrevocably and unconditionally, the full and prompt payment when due of all of the

obligations, whether primary, secondary, direct, contingent, sole, joint, several or joint

and several, due under the Leases, including, but not limited to, rent, service charges,

freight, railroad charges, lessee responsible repairs and maintenance, casualties, return

obligations, cleaning charges, taxes and governmental impositions, assessments,

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customs and duties, mandated modification charges, fines, penalties and other charges,

costs associated with removal of liens and encumbrances, high mileage utilization and

indemnity obligations thereunder, together with all other sums which may or shall

become due and payable pursuant to the provisions of the Leases, including, without

limitation, any damages resulting from the Lessee’s failure to perform its obligations

thereunder.”

Union Tank parses the guaranty into two subparts defining NuDevco’s responsibilities: first,

NuDevco guarantees prompt payment of all of the obligations due under the lease, and second,

it guarantees “all other sums which may or shall become due” pursuant to the lease terms,

including damages resulting from Associated Energy’s failure to perform its obligations under

the lease. According to Union Tank, it is this second clause (the “guaranty of damages”) that

entitles Union Tank to acceleration of rent based on the breach of the lease.

¶ 44 Damages for breach of contract are intended to place the nonbreaching party in the same

position as if the contract had been performed. Delatorre v. Safeway Insurance Co., 2013 IL

App (1st) 120852, ¶ 36. To that end, all damages foreseeably resulting from a breach are

generally recoverable. Midland Hotel Corp. v. Rueben H. Donnelley Corp., 118 Ill. 2d 306,

318 (1987). However, as NuDevco correctly points out, Illinois common law does not

recognize a present obligation to pay future rent in the event of a breach of contract. Miner v.

Fashion Enterprises, Inc., 342 Ill. App. 3d 405, 416-17 (2013). For that reason, the failure to

pay rent when it accrues does not accelerate the unpaid rent absent a contractual provision to

that effect. Id.

¶ 45 Neither the guaranty nor the lease says anything about rent acceleration in the event of

breach of the lease. Instead, the guaranty only provides that NuDevco guarantees “damages”

resulting from Associated Energy’s breach of the lease. Under the common law, damages for

breach of a lease do not include future rent (id.), thus precluding Union Tank from recovering

this amount.

¶ 46 In an attempt to avoid this conclusion, Union Tank relies on the UCC to support its

argument that it is entitled to the present value of future rent. But Union Tank previously

argued that the UCC does not govern the guaranty, as it is a contract separate from its lease

with Associated Energy. It strains logic to conclude, as Union Tank urges, on the one hand,

that the UCC cannot limit Union Tank’s recovery, but on the other, its provisions can serve to

increase Union Tank’s damages award. Accordingly, having agreed with Union Tank that the

UCC is inapplicable to a cause of action alleging breach of the guaranty (supra ¶ 24), we

conclude that Union Tank cannot rely on the UCC to support its argument for rent acceleration,

particularly when the lease does not contain a rent acceleration clause.

¶ 47 We do not agree with Union Tank’s contention that this conclusion nullifies the guaranty

of damages clause. See Guterman Partners Energy, LLC v. Bridgeview Bank Group, 2018 IL

App (1st) 172196, ¶ 51 (courts should not interpret a contract to nullify or render provisions

meaningless; all provisions in a contract are presumed to have a purpose). The present value of

future rent is not the only “damage[ ] resulting from [Associated Energy’s] failure to perform

its obligations [under the lease].” The damages resulting from Associated Energy’s breach of

the lease also include the future storage costs. Contrary to Union Tank’s contention, these

damages are not encompassed under the guaranty of prompt payment clause, which allows

Union Tank to recover the accrued rent and the freight, railroad, and cleaning charges defined

in the lease. Thus, the two clauses of the guaranty—the guaranty of prompt payment and the

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guaranty of damages—can be read in harmony without application of the UCC.

¶ 48 CONCLUSION

¶ 49 For the foregoing reasons, we affirm the trial court’s judgment in favor of Union Tank and

its award of damages for freight costs, cleaning costs, past due storage costs, future storage

costs, and past due rent but vacate the court’s award of damages for anticipated future blasting

in the amount of $109,930. With respect to Union Tank’s cross-appeal, we affirm the $10,000

reduction in attorney fees and the judgment in favor of NuDevco on Union Tank’s request for

an award of the present value of future rent due under the leases.

¶ 50 Affirmed in part and vacated in part.

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