Court of Appeals of Illinois, First District, First Division
LAKESHORE CENTRE HOLDINGS, LLC, Plaintiff-Appellee/Cross-Appellant,
LHC LOAN, LLC; PETER GOLDMAN; JOHN READING WILSON; JONATHAN BROSS; and LHC INVESTMENT, LLC, Defendants-Appellants/Cross-Appellees.
from the Circuit Court of Cook County No. 12 L 10029 The
Honorable James E. Snyder, Judge Presiding.
JUSTICE PIERCE delivered the judgment of the court, with
opinion. Justice Griffin concurred in the judgment and
opinion. Presiding Justice Mikva dissented, with opinion.
1 Defendants LHC Loan, LLC (Loan), Peter Goldman, John
Reading Wilson, Jonathan Bross, and LHC Investment, LLC
(Investment) and plaintiff Lakeshore Centre Holdings, LLC
(Lakeshore) appeal from the circuit court's judgment
granting in part and denying in part defendants' motion
for sanctions filed pursuant to Illinois Supreme Court Rule
137 (eff. July 1, 2013). For the reasons that follow, we find
that defendants' motion for sanctions-which was filed
nearly five months after the circuit court's final
judgment on Lakeshore's claims, and while those claims
were before this court on appeal-was untimely, and therefore
the circuit court lacked jurisdiction to grant any of the
relief requested in the motion. We therefore vacate the
circuit court's judgment on defendants' Rule 137
sanctions motion and dismiss this appeal.
2 I. BACKGROUND
3 We set forth only those facts necessary to understand our
disposition. Lakeshore, facing financial difficulties related
to a health club it owned, sold its 34% ownership interest in
LHC Operating, LLC (Operating) to Loan in exchange for an
option to repurchase the 34% ownership interest on or before
two specified dates for amounts specified in the parties'
agreement (repurchase option). Lakeshore attempted to
exercise the repurchase option, but was unsuccessful.
Lakeshore filed its initial complaint in September 2012.
Lakeshore's complaint related solely to the sale of its
34% interest in Operating and the alleged failure of Loan to
perform under the repurchase option. Over the course of four
years, and through four iterations of its complaint,
Lakeshore pursued claims against defendants for fraudulent
inducement, fraudulent misrepresentation, breach of contract,
and tortious interference with a contract. During the course
of the litigation, Loan filed a counterclaim against
Lakeshore for breach of contract based on Lakeshore's
alleged failure to enter into good faith negotiations
concerning Loan's potential purchase of a different
health club owned by Lakeshore. None of the other defendants
were named as counterplaintiffs in Loan's counterclaim.
Loan's counterclaim against Lakeshore was not related to
or dependant on the claims advanced by Lakeshore in its
underlying amended complaints.
4 On July 12, 2016, the circuit court entered summary
judgment in favor of defendants on the breach of contract
claims in Lakeshore's second amended complaint and
dismissed Lakeshore's remaining claims, but granted
Lakeshore leave to amend its fraud claims. Lakeshore filed a
third amended complaint that contained amended fraud claims.
The third amended complaint also asserted breach of contract
and tortious interference claims that were nearly identical
to the claims that were disposed of in the July 12, 2016,
order. On November 30, 2016, the circuit court dismissed
Lakeshore's third amended complaint in its entirety with
prejudice and made a finding pursuant to Illinois Supreme
Court Rule 304(a) (eff. Mar. 8, 2016). The November 30,
2016, order also made final the circuit court's July 12,
2016, order entering summary judgment in favor of defendants
on Lakeshore's breach of contract claims. Lakeshore filed
a timely notice of appeal on December 28, 2016. We affirmed
the circuit court's judgment in all respects, with one
justice dissenting in part. Lakeshore Centre Holdings,
LLC v. LHC Loan, LLC, 2017 IL App (1st) 163402-U
(Lakeshore I), petition for leave to appeal
denied, No. 123814 (Sept. 26, 2018).
5 On May 25, 2017, while Lakeshore I was pending in
this court, defendants filed a motion in the circuit court
for sanctions against Lakeshore pursuant to Illinois Supreme
Court Rule 137 (eff. July 1, 2013).  Defendants asserted that,
based on the deposition testimony of Lakeshore's owner
Walter Kaiser, all of Lakeshore's claims falsely alleged
that Goldman, Wilson, and Bross made misrepresentations about
the nature of the transaction and whether Lakeshore's
ownership interest would be returned intact upon exercise of
the repurchase option. Defendants also argued that
Lakeshore's fraud claims, which were in the nature of
promissory fraud claims, were legally deficient, and that
Lakeshore's breach of contract claims were
"baseless" and contained false factual allegations.
In short, the Rule 137 sanctions motion related solely to the
underlying sale and repurchase option of the 34% interest in
Operating, and nothing in the sanctions motion related to the
underlying transaction that was the subject of Loan's
6 After briefing and an evidentiary hearing, the circuit
court entered a written order that granted defendants'
Rule 137 sanctions motion in part and denied it in part. The
circuit court awarded defendants $825 in attorney fees. The
circuit court denied defendants' subsequent motion to
vacate and reconsider the sanctions award and denied
defendants leave to file an amended fee petition. Defendants
filed a timely notice of appeal, and Lakeshore filed a timely
notice of cross-appeal.
7 After the parties briefed this appeal and cross-appeal of
the sanctions judgment, we ordered supplemental briefing on
the issue of whether the circuit court had subject-matter
jurisdiction to grant the relief requested in defendants'
Rule 137 sanctions motion, which was based solely on the
allegations in Lakeshore's complaint, where the Rule 137
sanctions motion was filed more than 30 days after the
circuit court entered a final and appealable judgment
pursuant to Rule 304(a) on all of the claims in
8 II. ANALYSIS
9 We have an independent duty to consider the circuit
court's subject-matter jurisdiction, even if the issue is
not raised by the parties. J&J Ventures Gaming, LLC
v. Wild, Inc., 2015 IL App (5th) 140092, ¶ 33,
aff'd, 2016 IL 119870. Whether the circuit court
had subject-matter jurisdiction is a question of law reviewed
de novo. J&J Ventures Gaming, LLC v. Wild,
Inc., 2016 IL 119870, ¶ 25. Furthermore, our
jurisdictional analysis is guided by our interpretation of
Rule 137, which is also a question of law that we review
de novo. Kaull v. Kaull, 2014 IL App (2d)
130175, ¶ 28. "Because Rule 137 is penal in nature,
it will be strictly construed." Dowd & Dowd,
Ltd. v. Gleason, 181 Ill.2d 460, 487 (1998).
10 Rule 137 provides, in relevant part,
"(b) Procedure for Alleging Violations of This Rule. All
proceedings under this rule shall be brought within the civil
action in which the pleading, motion or other document
referred to has been filed, and no violation or alleged
violation of this rule shall give rise to a separate civil
suit, but shall be considered a claim within the same civil
action. Motions brought pursuant to this rule must be
filed within30 days of the entry of final
judgment, or if a timely post-judgment motion is filed,