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L.D.S., LLC, An Illinois Limited Liability Company v. Southern Cross Food

June 10, 2011

L.D.S., LLC, AN ILLINOIS LIMITED LIABILITY COMPANY,
PLAINTIFF-APPELLANT,
v.
SOUTHERN CROSS FOOD, LTD.,
DEFENDANT
(BRENDAN SKEHAN, )
DEFENDANT-APPELLEE.



Appeal from theCircuit Court of Cook County. No. 08 L 8363 Honorable Brigid Mary McGrath, Judge Presiding.

The opinion of the court was delivered by: Justice Robert E. Gordon

JUSTICE ROBERT E. GORDON delivered the judgment of the court, with opinion. Justices Cahill and McBride concurred in the judgment and opinion.

OPINION

The appeal in the instant case concerns a lease between plaintiff, L.D.S., an Illinois limited liability company (L.D.S.), and defendant Southern Cross Food, an Illinois corporation (Southern Cross).*fn1 Six days after the execution of the lease, defendant Brendan Skehan, the principal of Southern Cross, executed a rider to the lease containing a personal guaranty of the rent payment. When Southern Cross failed to pay rent, L.D.S. brought suit for breach of the lease and breach of the guaranty against Southern Cross and Skehan and a default judgment was entered against Southern Cross. After L.D.S. amended its verified complaint twice, the trial court dismissed L.D.S.'s verified second amended complaint with prejudice on a motion under section 2-615 of the Code of Civil Procedure (the Code) (735 ILCS 5/2-615 (West 2004)), denied L.D.S.'s motion to reconsider, and denied L.D.S. leave to file a verified third amended complaint. L.D.S. appeals and we reverse.

BACKGROUND

On July 20, 2006, L.D.S., as landlord, and Southern Cross, as tenant, executed a lease dated March 31, 2006, for a property located at 117 South Clinton Street in Chicago, which was to be used as a Quizno's restaurant; Skehan signed the lease as president of Southern Cross. The lease contained a provision allowing Southern Cross certain rights to display signs, including a provision allowing Southern Cross to "make nonstructural alterations and improvements to the interior of the Premises totaling $10,000 or less per alteration and not to exceed $20,000 in total costs in a given calendar year without Landlord's prior consent, which Landlord shall not unreasonably withhold or delay, provided the work is performed in a good and workmanlike manner." The lease also contained a provision that "[c]lauses, exhibits, schedules, plats, riders and addenda, if any, affixed to this Lease are a part hereof" and a provision stating:

"Prior Agreement. This Lease contains all of the agreements of the parties hereto with respect to any matter covered or mentioned in this Lease, and no prior agreements or understanding pertaining to any such matters shall be effective for any purpose. No provision of this Lease may be amended or added to except by an agreement in writing signed by the parties hereto or their respective successors in interest. This Lease shall not be effective or binding on any party until fully executed by both parties hereto."

On July 21, 2006, Southern Cross took possession of the property and the keys. On July 24, 2006, Southern Cross tendered L.D.S. its security deposit. On July 26, 2006, L.D.S. and Skehad executed a document entitled "RIDER ATTACHED TO THE LEASE DATED 03-31-2006 BY & BETWEEN L.D.S. LLC Limited Liability Company And Southern Cross Food, Ltd an Illinois Corporation, ('Tenant')." The document provided:

"It is hereby agreed as follows:

The tenant, Mr. Brendon [sic] Skehan has signed the lease agreement in [sic] behalf of Southern Cross Food, Ltd an Illinois Corporation, ('Tenant'). Upon signing below Brendon Skehan as principal of the corporation 'Southern Cross Food, Ltd corporation' hereby personally guarantees the payments of rent and all others [sic] performance or obligations of the tenant."

During the lease term, Southern Cross failed to pay rent, leaving an outstanding balance in 2007 and entirely ceasing to pay rent beginning in March 2008. On July 14, 2008, L.D.S. relet the premises to a Dunkin Donuts restaurant, which began paying rent in November 2008. On July 30, 2008, L.D.S. filed a verified complaint against Southern Cross and Skehan, alleging that they failed to perform their obligations under the lease and seeking a monetary judgment of approximately $100,000. On November 10, 2008, L.D.S. filed a motion for default judgment against both Southern Cross and Skehan. On November 17, 2008, Skehan filed an appearance. On February 24, 2009, the trial court entered a default judgment against Southern Cross in the amount of $94,361.30, plus attorney fees of $2,756.25 and costs.

On December 22, 2008, Skehan filed a motion to dismiss pursuant to section 2-615 of the Code. In the motion, Skehan claimed that the verified complaint did not allege any new consideration for Skehan's personal guaranty of the lease, which was required since the guaranty was executed after the lease became effective. The trial court allowed L.D.S. time to respond to Skehan's motion to dismiss.

L.D.S. did not respond to Skehan's motion to dismiss but, instead, on February 9, 2009, filed a verified amended complaint. Count I of the verified amended complaint was substantially identical to the allegations in the verified complaint. An additional count II included several new allegations:

"9. On or about July 24, 2006, defendant BRENDAN SKEHAN requested permission of plaintiff to place interior signage upon the Premises, which signage marketed and described defendant BRENDAN SKEHAN'S business at the Premises, and defendant agreed to execute a personal guarantee ('the Guarantee') of the obligations of defendant SOUTHERN CROSS FOOD, LTD. under the Lease in favor of plaintiff.

10. Pursuant to the July 24, 2006 agreement between plaintiff and defendant BRENDAN SKEHAN, plaintiff agreed to permit defendant BRENDAN SKEHAN to place interior signage upon the Premises, and on or about July 26, 2006, defendant

BRENDAN SKEHAN executed a personal guarantee ('the Guarantee') of the Lease, guaranteeing 'the payments of rent and all (other) performance or obligations of the tenant.' "

On March 31, 2009, Skehan filed a motion to dismiss count II of L.D.S.'s verified amended complaint pursuant to section 2-615 of the Code. Once again, Skehan claimed that the verified amended complaint did not allege new consideration for the guaranty.*fn2 He claimed that the purported consideration was L.D.S.'s granting of permission to install interior signage pursuant to an alleged agreement on July 24, 2006, but claimed that could not be new consideration for the guaranty since installation of the signage was already permitted under the original terms of the lease.

On May 18, 2009, L.D.S. filed a response in opposition to Skehan's motion to dismiss in which it claimed that the guaranty was executed contemporaneously with the lease and therefore no new consideration was needed for the guaranty. On June 10, 2009, Skehan filed a reply in support of his motion to dismiss. In his reply, Skehan acknowledged that if the lease and guaranty were signed contemporaneously, there would be no need for new consideration for the guaranty, but argued that they were not signed contemporaneously. Skehan claimed that L.D.S. failed to allege any facts demonstrating that when L.D.S. and Southern Cross signed the lease, they intended that Skehan would guarantee the lease and that, instead, the verified amended complaint alleged that the guaranty was executed pursuant to a separate agreement on July 24, 2006. On August 14, 2009, the trial court granted Skehan's motion to dismiss without prejudice and granted L.D.S. leave to file a second amended complaint.

On September 11, 2009, L.D.S. filed a verified second amended complaint. Count I concerned the breach of the lease agreement and was substantially identical to the earlier complaints. Count II concerned the breach of guaranty and included several new allegations:

"10. Contemporaneously with the signing of the Lease, on July 26, 2006, Skehan executed a personal guaranty ('Guaranty'). *** The Lease and Guaranty were part of a single lease transaction in which Southern Cross procured a Lease for the Premises and Skehan guarantied Southern Cross's obligation under the Lease.

11. This single transaction took place over the course of several days. On or about July 21, 2006, Skehan signed a Receipt for the keys to the Premises. The Security Deposit was dated July 24, 2006, and was delivered to Plaintiff thereafter with a copy of the executed Lease. *** Plaintiff refused to accept the Security Deposit until Skehan executed the Guaranty on July 26, 2006.

Plaintiff never intended to enter into the Lease without the Guaranty."

On October 13, 2009, Skehan filed a motion to dismiss count II of the verified second amended complaint pursuant to section 2-615 of the Code. Skehan claimed that the verified second amended complaint failed to cure the pleading defect in the verified amended complaint and that no cure was possible. Skehan claimed that the allegations in the verified second amended complaint were "completely different" than the allegations in the verified amended complaint but that, since the amended complaint was verified, the earlier allegations "remain[ed] judicially binding." Since the court had "already ruled" that the July 24, 2006, agreement lacked consideration and the verified second amended complaint provided "no basis" for the court to rule otherwise, Skehan argued that the court should dismiss count II of the verified second amended complaint with prejudice.

On November 12, 2009, L.D.S. filed a response in opposition to the motion to dismiss, in which it argued that it was permitted to "amplify" its legal theory and include additional consistent facts in support thereof. It also claimed that the factual allegations in the verified second amended complaint were "cumulative, not contradictory" to those in the verified amended complaint and that they demonstrated that the guaranty was executed contemporaneously with the lease. L.D.S. denied that the trial court had ruled on the guaranty's enforceability, noting that a section 2-615 motion was based on the pleadings rather than the underlying facts, and denied that there was a formal " 'July 24, 2006 agreement.' " L.D.S. also claimed that "the allegation in L.D.S.'s Amended Complaint that its agreement to allow Southern Cross ...


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