Lyons Lumber & Building Center, Inc. v. 7722 North Ashland, LLC
2016 IL App (3d) 140487
Ill. App. Ct.2016Background
- Lyons Lumber sued two LLCs (7722 North Ashland, LLC and Ashland-Juneway, LLC) and Jay Johnson (who personally guaranteed both loans) for breach of two installment notes and sought principal, interest, costs, and attorney fees.
- Defendants were served; after attorney Joseph Casper became nonresponsive and missed hearings, the trial court entered default against the LLCs, deemed admissions proved, barred Johnson from testifying, and granted summary judgment against Johnson—total judgment $165,806.84.
- Defendants only learned of the default judgment when served with a citation to discover assets in January 2014; new counsel filed a section 2-1401 petition to vacate the default judgment within 30 days of discovering it.
- Defendants asserted (via Johnson's affidavit and deposition) a meritorious defense that Johnson only intended to guarantee principal (not interest, fees, or costs), that the documents were prepared by plaintiff’s lawyer, and that Johnson did not understand the guaranty; they also alleged lack of notice due to prior counsel’s failures.
- The trial court granted the section 2-1401 motion, finding a meritorious defense and due diligence; the appellate majority reversed, holding defendants failed to plead a meritorious defense as a matter of law; Justice Carter dissented.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the trial court properly vacated the default judgment under 735 ILCS 5/2-1401 | Defendants failed to plead a meritorious defense and thus vacatur was improper | Defendants timely and diligently sought relief and showed a meritorious defense | Reversed: vacatur improper because no meritorious defense shown |
| Existence of a meritorious defense (general) | Johnson’s assertions (no counsel, documents drafted by plaintiff, didn’t understand guaranty) are legally insufficient | Johnson’s affidavit/deposition show factual dispute over scope of guaranty (principal only) | No: signing without counsel or drafter-status not a defense; alleged misunderstanding not a meritorious defense to LLC liability |
| Effect of Johnson’s claimed misunderstanding of the guaranty | Plaintiff: clear, unambiguous guaranties control; ignorance is not a defense | Defendants: alleged mutual mistake/reformation theory — writing didn’t reflect parties’ agreement | Majority: guaranties unambiguous; unilateral mistake not a defense; no allegation of mutual mistake, so reformation unavailable on presented facts |
| Availability of parol evidence / reformation to change guaranty terms | Parol evidence unnecessary; writing is clear and enforceable as written | Parol evidence admissible to show mutual mistake and support reformation | Dissent: reformation/mutual mistake colorable and parol evidence permissible; majority: defendants pleaded only unilateral mistake, so parol evidence/reformation not warranted |
Key Cases Cited
- Dowd & Dowd, Ltd. v. Gleason, 181 Ill. 2d 460 (Illinois 1998) (ambiguities construed against drafter)
- Rakowski v. Lucente, 104 Ill. 2d 317 (Illinois 1984) (clear written agreements are enforced as written; extrinsic evidence not used)
- Air Safety, Inc. v. Teachers Realty Corp., 185 Ill. 2d 457 (Illinois 1999) (court must interpret clear instruments without extrinsic aids)
- Black v. Wabash, St. Louis & Pacific Ry. Co., 111 Ill. 351 (Illinois 1884) (signer charged with knowledge of a document he willingly signs)
- Smith v. Airoom, Inc., 114 Ill. 2d 209 (Illinois 1986) (section 2-1401 petition burden and evidentiary standards)
- Suburban Bank of Hoffman-Schaumburg v. Bousis, 144 Ill. 2d 51 (Illinois 1991) (reformation available for mutual mistake or unilateral mistake plus fraud)
- Warren County Soil & Water Conservation Dist. v. Walters, 2015 IL 117783 (Illinois 2015) (standards and equitable nature of section 2-1401 relief)