2011 IL App (1st) 102765
Ill. App. Ct.2011Background
- Donna Carollo settled sexual harassment claims with Lawrence Irwin and DL Realty Partnership; settlement included a $30,000 contingency if River Oaks property did not sell by Dec. 31, 2008.
- Articles of agreement for deed were executed on Dec. 31, 2008 listing Cal City Apartments, LLC (unformed) or its nominee as purchaser; signed by Irwin for DL Realty and Mason for a yet-to-be-formed LLC.
- No payments were made, no closing occurred, and title transfer was never completed; initial closing was scheduled for Dec. 31, 2008 but the final closing never occurred.
- Cal City Apartments, LLC was never formed or ratified, Mason lacked authority to bind a non-existent LLC, and the LLC could not ratify the contract once formed.
- Plaintiff moved for summary judgment on Counts I (breach of settlement) and II (declaratory judgment); the circuit court granted judgment for $30,000 and dismissed other counts.
- The appellate court held (1) no sale occurred due to the executory nature of the contract and lack of conditions precedent, and (2) the contract was unenforceable because there was no buyer bound to the contract, as the LLC never formed and Mason could not be personally liable under the Limited Liability Company Act.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Did a sale occur under the articles of agreement for deed? | Carollo contends a sale occurred when DL Realty executed the deed agreement. | Defendants contend there was an actual sale upon contract, or at least a binding transfer upon closing. | No sale; contract was executory and title never transferred. |
| Is the contract enforceable given an unformed LLC and potential liability of Scott Mason? | Argues LLC structure or Mason could bind the buyer; the contract should be enforceable. | LLC not formed; Mason cannot be bound personally under LLC Act; contract unenforceable. | unenforceable; LLC never formed; Mason shielded by LLC Act; no liable party bound. |
Key Cases Cited
- 8930 South Harlem, Ltd. v. Moore, 77 Ill.2d 212 (Ill. 1979) (distinction between sale and contract to sell real estate)
- In re Estate of Martinek, 140 Ill.App.3d 621 (Ill. App. 1986) (contract to sell real estate not sale; title transfer conditions matter)
- McAnelly v. Graves, 126 Ill.App.3d 528 (Ill. App. 1984) (conditions precedent; contract validity when conditions precede transfer)
- H.F. Philipsborn & Co. v. Suson, 59 Ill.2d 465 (Ill. 1974) (preformation contracts; later ratification controls liability)
- Tin Cup Pass Ltd. Partnership v. Daniels, 195 Ill.App.3d 847 (Ill. App. 1990) (post-formation ratification can bind the entity)
- Puleo v. Topel, 368 Ill.App.3d 63 (Ill. App. 2006) (LLC member liability limited absent §10-10(d) provisions)