United States District Court, Northern District of Illinois, Eastern Division
June 6, 2003
GENERAL ELECTRIC CAPITAL CORP., A DELAWARE CORPORATION, D/B/A HELLER, A GE CAPITAL COMPANY, PLAINTIFF, VS. DESERT COLOR LAB, INC., A NEVADA CORPORATION; DESERT MEDIA GROUP, INC., A NEVADA CORPORATION; JAMES K. WESTMORELAND, INDIVIDUALLY; STEVE W. WESTMORELAND, INDIVIDUALLY; AND TOM W. WESTMORELAND, INDIVIDUALLY, DEFENDANTS,
The opinion of the court was delivered by: James Moran, Senior District Judge
MEMORANDUM OPINION AND ORDER
Plaintiff General Electric Capital Corporation (GE) brought this action against defendants Desert Color Lab, Inc. (DCL), Desert Media Group, Inc. (DMG), James K. Westmoreland (James), Steve W. Westmoreland (Steve), and Tom W. Westmoreland (Tom), alleging breach of contract arising from defendants' failure to pay money due plaintiff pursuant to the terns of a rental agreement. Defendants filed an answer to the complaint, along with affirmative defenses and a counterclaim, alleging that the parties agreed to a subsequent oral agreement releasing defendants from their obligation to pay. Plaintiff filed a motion to strike defendants' answer, affirmative defenses and counterclaim. For the following reasons, plaintiff's motion is denied.
On May 28, 1998, DCL entered into an agreement to lease certain equipment in exchange for monthly payments in the amount of $6,306.28, plus applicable taxes and fees, for a period of sixty months. DMG, James, Tom and Steve, each unconditionally guaranteed the prompt payment of the monthly rent. Plaintiff alleges that it fulfilled all conditions precedent and subsequent required by the rental agreement but that DCL has failed to wake the monthly payments since October 2001, despite frequent demands by plaintiff.
Defendants claim that the parties reached an oral agreement in 2002 releasing defendants from their obligation to pay. They further allege that the oral agreement laid out specifics as to how plaintiff would handle the resale of the equipment and that it failed to follow these terms, thereby failing to mitigate their damages. Plaintiff argues that any such oral contract violates paragraph 26 of the rental agreement, which expressly precludes subsequent oral modifications and is therefore unenforceable.
In deciding a Rule 12(b)(6) motion to dismiss or strike a pleading we must assume the truth of all well-pleaded allegations, making an inferences in the non-movant's favor. Sidney S. Arst Co. v. Pipefitters Welfare Educ. Fund, 25 F.3d 417, 420 (7th Cir. 1994). The court should dismiss a claim only if it appears "beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief." Conley v. Gibson, 355 U.S. 41, 45-46 (1957).
Under Illinois law, a contract may be modified by a subsequent oral agreement even when the contract expressly precludes oral contracts. Much v. Pacific Mutual Life Ins., 266 F.3d 637, 644 n. 1 (7th Cir. 2001), citing Tadros v. Kuzmak, 277 Ill. App.3d 301, 213 Ill. Dec. 905, 660 N.E.2d 162, 170 (Ill.App. 1st Dist. 1995). If parties reach such an agreement, courts reason that they have waived their right to enforce the contractual prohibition and thus choose to enforce the oral agreement. Czapla v. Commerz Futures, LLC, 114 F. Supp.2d 715, 718 (N.D. Ill. 2000). Whether such a modification took place is generally a question of fact. Household Financial Services, Inc. v. Coastal Mortgage Services, Inc., 152 F. Supp.2d 1015, 1022 (N.D. Ill. 2001).
Even if paragraph 26 expressly precluded the parties from orally modifying the contract, defendants can show that plaintiff explicitly or implicitly waived enforcement of this provision if they can demonstrate that the parties actually reached such an agreement. We do not need to determine whether or not they did so at this stage or the litigation. Defendants sufficiently plead the existence of such a modification so as to serve plaintiff's motion to dismiss the pleadings.
For the foregoing reasons, plaintiff's motion to strike defendants' answer, affirmative defenses and counterclaim is denied.
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