United States District Court, N.D. Illinois, Eastern Division
R. Wood Judge
R. Wood United States District Judge
Leon Bailey's motion to dismiss  is denied. See the
accompanying Statement for details.
case involves the alleged breach of a guaranty agreement.
Plaintiff AEL Financial, LLC seeks to recover pursuant to a
guaranty entered into by Defendant Leon Bailey. AEL claims
that Bailey breached the guaranty agreement by refusing to
make payments when due. Now before the Court is Bailey's
motion to dismiss the Complaint pursuant to Federal Rule of
Civil Procedure 12(b)(6). For the purposes of Bailey's
motion, this Court accepts as true all well-pleaded facts and
views them in the light most favorable to AEL. See,
e.g., Apex Digital, Inc. v. Sears, Roebuck &
Co., 572 F.3d 440, 443-44 (7th Cir. 2009).
alleged in the Complaint, AEL entered into Motor Vehicle
Lease Agreement No. 67512 (the “Lease”) with
Fluid Logistics LLC for the lease of certain equipment.
(Compl. ¶ 6, Dkt. No. 1.) Pursuant to the Lease, Fluid
Logistics agreed to pay AEL fifty-seven monthly payments of
$5, 000. (Id. ¶ 7.) Bailey also executed a
personal guaranty, promising prompt payment and performance
of all obligations under the Lease. (Id. ¶ 8.)
According to the guaranty agreement,
[i]f [Fluid Logistics] defaults under the Agreement [Bailey]
will immediately perform all obligations of [Fluid Logistics]
under the Agreement including but not limited to, paying all
amounts due under the Agreement. [Bailey] will pay to [AEL]
all expenses including attorney's fees incurred by us in
enforcing our rights against you or [Fluid Logistics].
(Compl. Ex. 1, Dkt. No. 1-1.) On October 31, 2009, Fluid
Logistics executed the Certificate of Acceptance and
thereafter began making monthly payments. (Compl.
¶¶ 9-10, Dkt. No. 1.) Fluid Logistics made eleven
monthly payments and one partial payment under the Lease but
failed to make any further payments. (Id. ¶
10.) AEL then demanded payment from both Fluid Logistics
(under the Lease) and Bailey (under the guaranty agreement),
but both refused. (Id. ¶ 18.) AEL now asserts a
claim against Bailey for breach of the guaranty agreement,
which Bailey seeks to dismiss based on AEL's purported
failure to file suit within the time period prescribed by the
statute of limitations.
plaintiff's failure to file suit within the limitations
period is an affirmative defense. See Fed. R. Civ.
P. 8(c). Generally, complaints do not have to anticipate
affirmative defenses to survive a motion to dismiss. See
United States v. Lewis, 411 F.3d 838, 842 (7th Cir.
2005). But there is an exception when “the allegations
of the complaint itself set forth everything necessary to
satisfy the affirmative defense, such as when a complaint
plainly reveals that an action is untimely under the
governing statute of limitations.” Id.
support of his motion to dismiss, Bailey argues that the
guaranty is no longer enforceable because the statute of
limitations to enforce the principal's underlying
obligation has expired. The Lease is subject to a four-year
limitations period, 735 ILCS 5/2-725, which AEL concedes has
already expired. Guarantees, however, are subject to a
ten-year statute of limitations. 735 ILCS 5/13-206.
Generally, a guaranty is an independent obligation separate
from the underlying contract. As such, the ten-year statute
of limitation applies to an action for beach of a guaranty,
“even though the statute of limitations for suits to
collect the underlying debt (the debt that the guarantor
promises to repay if the debtor doesn't) is
shorter.” Johnson v. Pushpin Holdings, LLC,
821 F.3d 871, 875 (7th Cir. 2016); see also Armbrister v.
Pushpin Holdings, LLC, 896 F.Supp.2d 746, 755-56 (N.D.
Ill. 2012) (finding that the ten-year statute of limitations
applied to guarantees for equipment leases, despite the fact
that the statute of limitations on the underlying debt had
relies on Riley Acqusitions, Inc. v. Drexler, 946
N.E.2d 957 (Ill.App.Ct. 2011), for the proposition that the
extinguishment of a lease holder's obligations nullifies
the obligations of the guarantor. But Riley is not
clearly applicable to this case. In Riley, there
were two principal debtors on the contract. One debtor's
liability on the contract ended when it dissolved as a
corporation and the other debtor's liability ended when
it was released pursuant to a settlement agreement.
Id. at 964. The Riley court held that when
no principals remain on the contract, a “defendant may
still be liable if the guaranty contract expressly provides
for continuing liability in this situation.”
Id. at 964-65. Ultimately, the court found that the
contract at issue in Riley did not make the
guarantor liable when the principal was not. Id. at
966. Notably, however, the court's holding was not
dependent on a statute of limitations defense and instead was
based on the fact that the two principal debtors were
absolved of liability. Id. (“Accordingly, we
affirm the directed verdict on the ground of discharge and do
not reach the alternative ground of the statute of
assuming that Riley applies here, Bailey's
guaranty would still be enforceable because his contract
expressly provides for liability independent of the
principal's liability. In interpreting Bailey's
guaranty agreement, the Court applies general rules of
contract construction. See AAR Aircraft & Engine
Group, Inc. v. Edwards, 272 F.3d 468, 470 (7th Cir.
2001). “Where the language of a contract is
unequivocal, it must be carried out according to its
language.” McLean Cnty. Bank v. Brokaw, 519
N.E.2d 453, 456 (Ill. 1988). Here, the guaranty states, in
pertinent part: “You agree that this is a guaranty of
payment and not of collection, and that we can proceed
directly against you without first proceeding against the
Lessee or against the Property or collateral covered by the
Agreement.” It is clear from the language of the
guaranty agreement that Bailey's obligations as a
guarantor are separate and distinct from the principal's
obligations. As a separate agreement, the guaranty is not
dependent upon the limitations of the lease agreement.
Consequently, the expiration of the statute of limitations
for the lease agreement does not affect the viability of the
aforementioned reasons, Bailey's motion to ...