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Lease Partnets Corporation v. R & J Pharmacies Inc.

March 26, 2002


The opinion of the court was delivered by: Justice Gordon


Appeal from the Circuit Court of The Honorable Cook County. Raymond Funderburk, Judge Presiding.


Lease Partners Corporation (plaintiff or Lease Partners) appeals from a decision of the circuit court of Cook County dismissing its breach of contract complaint for failure to pay Illinois state corporate franchise tax, pursuant to section 15.85 of the Illinois Business Corporations Act (section 15.85) (805 ILCS 5/15.85 (West 2000)), and for failure to file security for costs, pursuant to section 5-103 of the Illinois Civil Practice Code (section 5-103) (735 ILCS 5/5-103 (West 2000)). Lease Partners contends that the court misconstrued section 15.85 as requiring dismissal of the action, rather than staying the proceedings with directions that it pay the arrearage. Lease Partners also contends that the court exceeded its authority by sua sponte raising the issue of security for costs under section 5-103, and summarily dismissing its complaint. Lease Partners further contends that, on its face, section 5-103 violates the equal protection clause of the United States and Illinois constitutions and that the trial court's order denied it due process of law. For the reasons discussed below, we reverse the circuit court's dismissal of this action under both sections 15.85 and 5-103. Because our analysis of the proper application of each of these sections disposes of the instant appeal and grants the relief sought by Lease Partners, we do not reach Lease Partners' alternative constitutional challenges.


The facts, as outlined in plaintiff's brief to this court, were adopted unchallenged by defendants. Lease Partners is a California corporation with an Illinois office responsible for administering the contracts at issue. Defendants are R & J Pharmacies, Inc. (R & J Pharmacies), Steve Randall and Randall Pharmacies (Randall Pharmacies), and Wells Yeager Best Co., Inc. and Steven Klink (Wells Yeager). During 1993 and 1994, Recomm International Display Limited Corporation (Recomm), a non-party to this suit, sold equipment ("Advisory Boards"-which were designed to display advertising) to Lease Partners. At the time of the sales, Lease Partners executed leases for the boards with defendants, and Recomm delivered this equipment directly to defendants. Recomm simultaneously entered into separate agreements with defendants to rent advertising space on the boards.

In 1995, Recomm ceased to meet its obligations to defendants, who in turn ceased to make lease payments to Lease Partners. Ultimately, Recomm filed for bankruptcy and in 1998 the bankruptcy court entered an order modifying the leases between defendants and Lease Partners to reflect a total amount due. Each defendant failed to make payments under this order and Lease Partners brought suit against the defendants individually in the circuit court of Cook County.

On June 27, 2000, the circuit court dismissed Lease Partners' suit against one defendant, R & J Pharmacies, without prejudice, making the following conclusions of law:

"2) As a result of its failure to pay its current Illinois state corporate franchise taxes [Lease Partners] may not maintain any civil action in the state of Illinois, pursuant

to 805 ILCS 5/15.85: and,

3) Pursuant to 735 ILCS 5/5-103, this action having been commenced without previously filing or causing to be filed a security for costs, the action should be dismissed." *fn1

The court indicated that the ruling was based only on the above mentioned grounds and not upon R & J Pharmacies' previously filed "motion to dismiss" which contested personal jurisdiction. On July 10, 2000, the court dismissed plaintiff's complaint against Randall Pharmacy with prejudice, reaching the same conclusions of law quoted above. On July 12, 2000, the court dismissed plaintiff's complaint against the third defendant, Wells Yeager, in the same manner. No defendant made a motion to dismiss for failure to file security for costs.

Plaintiff appealed each of the dismissals to this court and moved to consolidate the cases based on similarity in issues ...

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