Carollo v. Irwin

• Decision Date: 22 September 2011
• Docket Number: No. 1–10–2765.,1–10–2765.
• Citation: 959 N.E.2d 77,2011 IL App (1st) 102765,355 Ill.Dec. 49
• Parties: Donna CAROLLO, f/k/a Donna Syracusa, Plaintiff–Appellee, v. Lawrence IRWIN, Realty Consulting Services, Inc., and DL Realty Partnership, Defendants–Appellants.
• Court: United States Appellate Court of Illinois

2011 IL App (1st) 102765

355 Ill.Dec. 49

959 N.E.2d 77

Donna CAROLLO, f/k/a Donna Syracusa, Plaintiff–Appellee,

v.Lawrence IRWIN, Realty Consulting Services, Inc., and DL Realty Partnership, Defendants–Appellants.

No. 1–10–2765.

Appellate Court of Illinois, First District, Fourth Division.

Sept. 22, 2011.

Law Office of C. Corey S. Berman, Ltd., Chicago, IL (C. Corey S. Berman, of counsel), for Appellants.

ML LeFevour & Associates (Mark L. LeFevour, of counsel), Des Plaines, IL, for Appellee.

OPINION

Justice PUCINSKI delivered the judgment of the court, with opinion.

[355 Ill.Dec. 52] ¶ 1 Plaintiff, Donna Carollo, entered into a settlement agreement with her former business partner, defendant Lawrence Irwin, and the partnership, defendant DL Realty Partnership (DL Realty), in settlement of claims she asserted against defendants for sexual harassment. That settlement agreement provided for an additional payment of $30,000 if a certain property owned by DL Realty did not sell by December 31, 2008. Defendants argue that the property sold when articles of agreement for deed were executed on December 31, 2008. The agreement indicated the buyer was an unformed limited liability company (the LLC) and was signed by an individual on behalf of the unformed LLC. The agreement provided for certain installment payments and payments of interest, as well as an initial closing, prior to the final closing and final payment of the balance of the purchase price, when the title to the property would transfer. It is undisputed that no payments were ever made and no closing occurred. The circuit court granted summary judgment in favor of plaintiff, finding that no sale occurred, and awarded her the additional payment under her settlement agreement with defendants.

¶ 2 We affirm and hold: (1) there was no sale because (a) the execution of the articles of agreement did not constitute a sale but merely an executory contract to sell property and did not transfer legal title and (b) there was no sale after the execution of the articles of agreement because no payments were ever made and no closing was held, which were conditions precedent of the transfer of title to the property. We also hold: (2) the contract in any event was not enforceable because there was no buyer bound by the contract where (a) the LLC was never subsequently formed and never ratified the contract or authorized Scott Mason to enter into it, and (b) Scott Mason cannot be individually liable on the contract because he is statutorily protected under the Limited Liability Company Act (805 ILCS 180/10–10 (West 2006)).

¶ 3 BACKGROUND

¶ 4 The amended complaint alleges that plaintiff, Donna Carollo, formerly known as Donna Syracusa, worked for defendant Lawrence Irwin and was a partner with Irwin in defendant DL Realty Partnership. Plaintiff filed complaints of sexual harassment against Irwin with the Equal Employment Opportunity Commission (EEOC) and the Illinois Department of Human Rights. Plaintiff also filed a separate lawsuit for dissolution of DL Realty Partnership. Plaintiff and defendants agreed to settle both the sexual harassment complaint and the dissolution of partnership litigation, and executed a settlement agreement on October 18, 2007. Pursuant to the terms of the settlement agreement, defendants made certain guaranteed payments to plaintiff.

¶ 5 DL Realty owned a property referred to as the River Oaks apartment complex, which it had been trying to sell for about two years, and for more than eight months before plaintiff and defendants entered into the settlement agreement. Defendants wished to obtain a selling price of $4.2 million. Pursuant to paragraph 3 of the settlement agreement, plaintiff was also entitled to an additional payment of $30,000 if the River Oaks property either did not sell on or before December 31, 2008, or sold for an amount in excess of $4.2 million. Paragraph 4 of he settlement agreement further provided:

“Any Additional Payment that becomes due to [plaintiff] pursuant to Paragraph 3 of this Agreement shall be sent to [plaintiff] within seven (7) days following the earlier of: (i) the closing date of the sale of River Oaks or (ii) December 31, 2008. If River Oaks is sold on or prior to December 31, 2008, Irwin shall provide [plaintiff] with copies of the final sales contract and closing statement within seven (7) calendar days after the closing date.”

¶ 6 On or about January 6, 2009, defendants sent plaintiff a copy of articles of agreement for deed dated December 31, 2008, listing the buyer as Cal City Apartments, LLC, “or its Nominee, Assignee, or Transferee.” The articles were signed by Lawrence Irwin, on behalf of DL Realty Partnership, and Scott Mason, on behalf of Cal City Apartments, LLC, “an Illinois Limited Liability Company yet to be formed.” Cal City Apartments, LLC, was not incorporated at the time of agreement and was not ever subsequently incorporated. Cal City Apartments, LLC, also never provided for a nominee, assignee, or transferee for its interest in the articles of agreement for deed.

¶ 7 The articles provided for an installment payment from the buyer on June 30, 2009, consisting of the difference between the purchase price and the amount of the principal of the seller's mortgage on the property, and 7% accrued interest between December 31, 2008, and June 30, 2009. The final payment of the purchase price and all accrued interest was due at the final closing. The “initial closing” was scheduled to occur on December 31, 2008, but the “final closing” was not scheduled to occur until the date the underlying mortgage was due to be paid. Title would not transfer until the final closing. The articles provided that if the buyer does not make the required payments to the seller on June 30, 2009, as required in paragraph 3(f), the “Agreement shall be terminated and held for naught.” Further, paragraph 17 of the articles provided that at the initial closing the buyer shall execute an assignment of all the buyer's right, title and interest to the seller in the event the buyer defaults under the terms and conditions of the articles.

¶ 8 The articles did not provide for a completed sale and transfer of title to the property prior to December 31, 2008. Rather, the articles provided the following regarding the deed in paragraph 2:

“(a) If the Buyer shall first make all the payments and perform all the covenants and agreements in this Articles of Agreement for Deed as required to be made and performed by said Buyer, at the time and in the manner hereinafter set forth, Seller shall convey or cause to be conveyed to Buyer or his nominee, by a recordable, stamped general warranty deed with release of homestead rights, good title to the premises * * *.

* * *

(b) The performance of all the covenants and conditions herein to be performed by Buyer shall be a condition precedent to Seller's obligation to deliver the deed aforesaid.”

¶ 9 The articles further provided that the buyer was entitled to an affidavit of title at any time upon payment of all amounts due under the articles. A DL Realty's attorney, Allen Gabe, who is the attorney who represented DL Realty and drafted the articles of agreement for deed, held the title to the property in trust until the buyer complied with the terms and conditions of the articles.

¶ 10 Additionally, the memorandum of articles of agreement for warranty deed stated that “the terms of said Agreement provide for the future conveyance of said property to the Contract Purchasers at a date certain, provided the Contract Purchasers shall perform in accordance with the terms contained in said Agreement.” The record on appeal also includes an affidavit of Allen Gabe, who averred that “[w]hen seller-financing is involved, Articles of Agreement for Deed provide a measure of security to the Seller because title to the Property is not transferred to the Buyer until the Buyer fulfills it payment obligations to the Seller.”

¶ 11 Cal City Apartments, LLC, did not make the payment required on June 30, 2009, nor did it make any payments, and it did not perform any of the covenants in the articles of agreement for deed. Scott Mason also did not make any payments and did not perform any of the covenants in the articles of agreement for deed. On July 15, 2009, Gabe sent a letter to Cal City Apartments, LLC, c/o Scott Mason, of notice of default. Neither Cal City Apartments, LLC, nor Scott Mason cured the default.

¶ 12 Defendants refused to pay plaintiff the additional $30,000 under their settlement agreement. Plaintiff filed the instant cause of action for breach of contract. Count I of her first amended complaint was based on breach of the settlement agreement. Count II was for a declaratory judgment that the articles of agreement did not constitute a sale of the property, and that the invalid execution of the articles by a nonexistent LLC did not affect plaintiff's right under the settlement agreement to the additional $30,000 payment. Count III and IV were alternative breach of contract claim and declaratory judgment claims alleging that if the court found the articles of agreement to be an effective sale, plaintiff was still entitled to the additional payment because the property sold for more than $4,350,000.

¶ 13 Plaintiff filed a motion for summary judgment on counts I and II on the basis that there was no sale of the River Oaks property. The court granted summary judgment on counts I and II and awarded plaintiff $30,000 and costs. Counts III and IV were voluntarily dismissed. Defendants appeal the grant of summary judgment and award to plaintiff.

¶ 14 ANALYSIS

¶ 15 Defendants argue that plaintiff was not entitled to summary judgment because a “sale” of the River Oaks property occurred when DL Realty entered into the articles of agreement for deed on December 31, 2008. Summary judgment is appropriate where the pleadings, depositions, affidavits, and admissions on file, when viewed in the...