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Deschaine v. Central Systems

June 13, 2006

MARK DESCHAINE, PLAINTIFF,
v.
CENTRAL SYSTEMS, INC., DEFENDANT.



The opinion of the court was delivered by: Stiehl, District Judge

MEMORANDUM & ORDER

Before the Court is defendant's motion for summary judgment, and in the alternative, motion for partial summary judgment (Doc. 15), to which plaintiff has filed a response (Doc. 17), and defendant a reply (Doc. 22).

Plaintiff filed a single count complaint against defendant Central Systems, Inc. ("CSI") seeking indemnity from CSI for judgments totaling $145,051.59, entered against Ecological Services, Inc. and plaintiff in his role as personal guarantor under a commercial lease. Plaintiff also seeks costs, interest and attorney fees.

BACKGROUND

Plaintiff formed Ecological Services, Inc. of Illinois in December of 1997. He was the majority shareholder, owning 37% of the company, and there were four other shareholders. (Doc. 17, Pl. Aff. ¶ 2). Ecological Services, Inc.'s main business function was to transport liquid waste material. (Doc. 17, Pl. Aff. ¶ 3). On December 19, 1997, the company entered into a five-year agreement with Lazarus Realty Corporation (Lazarus Realty") for the lease of 2601 McCausland, East St. Louis, Illinois. Plaintiff personally guaranteed the agreement. (Doc. 16, Ex. 2). Thereafter, the company operated from that premises. In July of 1998, the company's name was changed to Ecological Services of America, Inc. of Illinois. The company was purchased by Ecological Services of America, an Indiana corporation, in April of 1999 (hereinafter, "the Indiana Company"). (Doc. 17, Pl. Aff. ¶¶ 6 and 9).

When the Indiana Company purchased Ecological Services of America, Inc. of Illinois, the two companies executed a document entitled "Agreement for Sale and Transfer of Assets." (Doc. 16, Ex. 3). Article II of that agreement stated as follows:

The purchase price to be paid by [the Indiana Company] to [Ecological Services of America, Inc. of Illinois] is the assumption of the corporate liabilities of Ecological Services of America, Inc., an Illinois Corporation, as set forth in Schedule 1.1 and reasonable expenses incurred in connection with the preparation, execution and performance of this agreement.

Additionally, [the Indiana Company] will ensure that Mark Deschaine and Marnie E. Deschaine are indemnified by Central Systems, Inc., an Indiana Corporation[,] against any debt relating to the business of Ecological Services of America, an Illinois Corporation, in which they are personal guarantors at the time of the closing.

Schedule 1.1 listed several personal obligations of plaintiff, but did not list the lease agreement with Lazarus Realty, and the Indiana Company did not assume plaintiff's obligation on the lease. However, in purported accordance with Article II, above, Greg Totten, president of CSI, executed a document entitled "INDEMNIFICATION," which stated the following:

Central Systems, Inc., an Indiana Corporation, pursuant to adequate and sufficient consideration, agrees and acknowledges that it is indemnifying Mark Deschaine and Marnie E. Deschaine against any debt relating to the business of Ecological Services of America, an Illinois Corporation, in which they are personal guarantors at the time of the closing.

This Indemnification Agreement was purportedly signed at or about the same time that the sale agreement between Ecological Services of America, Inc., an Illinois corporation, and the Indiana Company was executed. (Doc. 16, Ex. 1, Depo. of Greg Totten, Tr. 15--17). Therefore, the "closing" referred to in the Indemnification Agreement relates to that sale.*fn1

Plaintiff was also a controlling shareholder of CSI, defendant in this matter. Several individuals owned shares in each of the three corporations-Ecological Services, Inc. of Illinois, the Indiana Company, and Central Systems, Inc. (Doc. 17, Pl. Aff. ¶¶ 2, 11--12). Ecological Services, Inc. thereafter defaulted on its lease of the McCausland property, and two judgments were entered against it and plaintiff as personal guarantor. The first judgment, issued September 4, 2003, by the Circuit Court of St. Clair County, Illinois, in case number 00-L-0009, Lazarus Realty Corp. and John Cusumano v. Ecological Systems Inc. and Mark Deschaine, was in the amount of $111,960.88. The second judgment, a supplemental order by the same court, issued January 20, 2004, was entered in the amount of $19,182.46 in attorney fees and costs, and $13,908.05 in prejudgment interest. Plaintiff satisfied both judgments by paying the required amounts to Lazarus Realty.

Plaintiff argues that the Indemnification Agreement requires CSI to reimburse him for monies spent in satisfaction of the judgments rendered against him. Defendant moves for summary judgment on the basis of two theories: (1) the Indemnification Agreement is unenforceable under applicable law because it does not "clearly and explicitly" define CSI's obligations, and/or (2) the Indemnification Agreement is not supported by adequate consideration. ...


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