Roth v. Dillavou

Case Date: 09/08/2005
Court: 2nd District Appellate
Docket No: 2-04-0840 Rel

No. 2--04--0840


IN THE

APPELLATE COURT OF ILLINOIS

SECOND DISTRICT


DAVID E. ROTH,

          Plaintiff-Appellant,

v.

MARY JAYNE DILLAVOU and
DIANE L. TEAL,

          Defendants-Appellees.

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Appeal from the Circuit Court of Du Page
County.


No. 03--LM--3364


Honorable
Patrick J. Leston,
Judge, Presiding.


JUSTICE CALLUM delivered the opinion of the court:

Plaintiff, David E. Roth, sued defendants, Mary Jayne Dillavou and Diane L. Teal, for possession of a residence and past-due rent arising from a lease agreement entered into by the parties. Teal, who executed the agreement as co-signer, moved to dismiss (735 ILCS 5/2--619(a)(7), (a)(9) (West 2002)). The trial court granted Teal's motion. Roth moved to reconsider, and the court denied his motion. Roth appeals. We reverse and remand.

I. BACKGROUND

On September 25, 2001, the parties entered into a lease agreement, whereby Dillavou and her five children would occupy the residence at 569 Maywood Lane in Lisle. Teal co-signed for Dillavou. The term of the lease was September 26, 2001, through June 30, 2002. Paragraph 10 of the agreement provides, in relevant part:

"If the Lessee retains possession of the Premises after the term of this lease expires, the Lessor may either accept further rent payments by the Lessee, in which case a month-to-month tenancy shall be created, or sue for possession; and Lessor shall be entitled to recover from Lessee all damages sustained by him as a result of Lessee's failure to vacate the Premises, including but not limited to lost rent, court costs and attorneys fees. In no case shall a holdover tenancy be created. In the event Lessee retains possession without Lessor[']s consent beyond the term of this lease, the monthly rental shall be 150% of the rental for the original term.

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*** Lessee or Lessor shall pay all reasonable attorneys' fees incurred by the other in enforcing the terms of this agreement as a result of a default by the other or in defending against acts or omissions of the other."

Paragraph 40 of the agreement, entitled "Acceptance of this lease by co-signer," provides: "Co-signer for this lease, Diane Lynn Teal[,] agrees to be fully responsible for upholding all covenants of this lease, including monthly rent payments in the event that Mary Jayne Dillovou [sic] does not or cannot perform these obligations."

On October 31, 2003, Roth filed a complaint seeking possession of the residence, alleging that Dillavou unlawfully withheld possession and that defendants owed him $6,710 in rent, plus costs and attorney fees pursuant to the parties' lease agreement.

In an agreed order dated November 13, 2003, Dillavou agreed to grant possession of the premises to Roth, but reserved the question of damages. On February 11, 2004, Roth filed an amended complaint. He alleged that he obtained possession of the premises on January 14, 2004, and that both defendants were jointly and severally liable for rent and late fees for the period July 2003 through January 14, 2004. He sought total damages in the amount of $11,487.78, plus attorney fees and costs.

On March 19, 2004, Teal moved to dismiss Roth's complaint as to her. 735 ILCS 5/2--619(a)(7), (a)(9) (West 2002) (statute of frauds and other affirmative matter). She argued that the parties intended that Teal, as "guarantor/co-signer," would guarantee payment only during the lease term, September 26, 2001, through June 30, 2002. Noting that Roth sought payment for a period beginning in July 2003, 13 months after the expiration of the lease, Teal argued that she could no longer be held liable as guarantor after the expiration of the lease, where Teal did not sign a renewal lease and where Dillavou remained in possession based on successive oral month-to-month tenancies and failed to pay rent beginning in the thirteenth month after the expiration of the lease. Also, Teal argued that, where the contract provided there would be no holdover tenancy, Dillavou's possession constituted a tenancy at sufferance, and, as such, the tenant and guarantor had no privity with the landlord. Addressing the statute of frauds, Teal argued that she never signed any agreement obligating her to pay rent after the lease expiration and thus the statute of frauds barred Roth from claiming rent from her after that period.

On April 14, 2004, the trial court granted Teal's motion. It found that there was a novation that converted the lease into a month-to-month tenancy, which terminated Teal's obligations as guarantor. Because the terms changed, Teal could not be held to the same obligations. Roth moved to reconsider, and the trial court denied Roth's motion, reiterating that a month-to-month tenancy was created after the lease's expiration and that it constituted a new legal relationship that released the guarantor. Roth timely appealed.

II. STANDARD OF REVIEW

A section 2--619 motion to dismiss admits all well-pleaded facts in the complaint together with all reasonable inferences that can be drawn from those facts in the plaintiff's favor (Redwood v. Lierman, 331 Ill. App. 3d 1073, 1076-77 (2002)), and it raises other defects or defenses that defeat the claim (Krilich v. American National Bank & Trust Co. of Chicago, 334 Ill. App. 3d 563, 569-70 (2002)). Such other matters may appear on the face of the complaint or may be established by the submission of additional evidence.Krilich, 334 Ill. App. 3d at 569-70. The trial court must consider whether the defendant presented facts constituting an affirmative defense that could defeat the plaintiff's cause of action. Prodromos v. Poulos, 202 Ill. App. 3d 1024,1028 (1990). Where a cause of action is dismissed under a section 2--619 motion, the question on appeal is whether a genuine issue of material fact exists and whether the defendant is entitled to judgment as a matter of law. Nowak v. St. Rita High School, 197 Ill. 2d 381, 389 (2001). We review de novo a dismissal under sections 2--619(a)(7) and (a)(9). Prodromos v. Howard Savings Bank, 295 Ill. App. 3d 470, 474 (1998).

III. ANALYSIS

Roth argues first that Dillavou's continued possession of the house after June 30, 2002, was permitted as a continuation of the original lease rather than pursuant to a new contract or lease term. He contends that the original lease never expired and thus neither did Teal's obligation. Roth relies on the language in the lease that provides that a month-to-month tenancy arises if the lessee retains possession of the premises. He argues that the trial court erred in finding that Roth's acceptance of rent after June 30, 2002, constituted a novation or new lease agreement. According to Roth, although the original lease term expired on June 30, 2002, the lease itself did not expire.

A tenant who remains in possession after his or her lease has expired becomes a tenant at sufferance. A.O. Smith Corp. v. Kaufman Grain Co., 231 Ill. App. 3d 390, 398 (1992). At the landlord's sole option, a tenant at sufferance may be evicted as a trespasser or treated as a holdover tenant. A tenant at sufferance has only naked possession; he or she has no privity with the landlord. Bradley v. Gallagher, 14 Ill. App. 3d 652, 656 (1973). The possession can be put to an end whenever the landlord, acting promptly, wishes; no notice to quit or demand for possession is necessary. Bradley, 14 Ill. App. 3d at 656. A holdover tenancy is created when a landlord elects to treat a tenant, after the expiration of his or her lease, as a tenant for another term upon the same provisions contained in the original lease. Only the lessor, not the lessee, has the right to decide whether to treat the lessee as a holdover tenant. Bransky v. Schmidt Motor Sales, Inc., 222 Ill. App. 3d 1056, 1061 (1991).

Even when a holdover tenancy is not created, the parties' conduct may create a month-to-month tenancy. A.O. Smith Corp., 231 Ill. App. 3d at 399. Acceptance of monthly rental payments by the landlord will generally create a month-to-month tenancy. A.O. Smith Corp., 231 Ill. App. 3d at 399; see also Hoefler v. Erickson, 331 Ill. App. 577, 584 (1947) ("it is the holding over and paying the same rent, without further agreement, that creates a tenancy from month to month"). Both a holdover tenancy and a month-to-month tenancy are governed by the terms of the original lease. A.O. Smith Corp., 231 Ill. App. 3d at 399. However, a holdover tenancy lasts as long as the original lease term, while a month-to-month tenancy can last indefinitely, although it can be terminated on 30 days' notice. A.O. Smith Corp., 231 Ill. App. 3d at 399.

In this case, the agreement clearly provided that no holdover tenancy would be created; rather, Dillavou's continued possession would be in the form of a month-to-month tenancy. Contrary to Teal's contention, a month-to-month tenancy is not a tenancy at sufferance in which no privity exists between the tenant and landlord. A month-to-month tenant holds the premises with the landlord's permission, whereas a tenant at sufferance wrongfully holds over after termination of his or her interest. Black's Law Dictionary 1466 (6th ed. 1990).

Guaranty contracts are to be strictly construed in favor of the guarantor. Cohen v. Continental Illinois National Bank & Trust Co. of Chicago, 248 Ill. App. 3d 188, 192 (1993). The guarantor of a lease, absent his or her consent, cannot be held liable for the lessee's obligations incurred during any extended term other than one secured in accordance with the lease's terms. T.C.T. Building Partnership v. Tandy Corp., 323 Ill. App. 3d 114, 118 (2001). However, the guarantor is entitled to such benefit only where some doubt arises as to the meaning of the guaranty language. Bank of America National Trust & Savings Ass'n v. Schulson, 305 Ill. App. 3d 941, 946 (1999). Where the terms of a guaranty are clear and unambiguous, they must be given effect as written. T.C.T. Building Partnership, 323 Ill. App. 3d at 119. Moreover, a guaranty that is unequivocal in its terms must be interpreted according to the language used, because " 'it is presumed that the parties meant what their language clearly imports.' " Bank of Homewood v. Sjo, 113 Ill. App. 3d 179, 182 (1983), quoting National Acceptance Co. of America v. Exchange National Bank, 101 Ill. App. 2d 396, 402 (1968). Here, the guaranty unambiguously states that the guarantor will uphold "all covenants of this lease," and one of the lease covenants is the holdover provision, which contemplates a month-to-month tenancy.

Roth argues that a month-to-month tenancy following a set period of time is generally governed by the terms of the original lease. Thus, because the original lease here contemplated a month-to-month tenancy, Teal is not being obligated to anything more than she originally agreed to when the lease was executed. Teal relies on the language in section 10 of the lease that states that a month-to-month tenancy "shall be created" upon the lease expiration date, and she asserts that there is no language in the lease whereby she agreed that her liability would extend to any subsequent month-to-month tenancy.

There are no Illinois cases directly addressing whether a guaranty applies during a tenancy after the original lease term. However, we find Kagan v. Gillett, 269 Ill. App. 311 (1933), close and persuasive. In that case, the defendant executed a guaranty for the payment of rent and all of the covenants of a sublease and an attached rider. The sublessor exercised an option for a lease extension. Addressing the defendant's obligation during the extended period, the court held that he was liable on his guaranty for the performance of the covenants during that period. Kagan, 269 Ill. App. at 321. Reviewing the guaranty language, the court noted that it guaranteed all of the lease covenants, including those in the rider, which provided for the extension. The court stated: "An intention to exclude seems inconsistent with the use of the word 'all.' " Kagan, 269 Ill. App. at 320. The court also found significant the fact that the guaranty specifically referred to the rider:

"This language seems to manifest an intention to affirm rather than negative an obligation on the part of the guarantor for the term as extended. If it was the intention of the parties to exclude liability for the extended term, why was the rider which provided for the extension thus specifically mentioned in the guaranty? Thus the language of the guaranty indicates the intention of the parties that the guarantor should remain liable if the term was extended." Kagan, 269 Ill. App. at 320.

Although the lease here did not involve a separate document, we find the facts in Kagan substantially similar to the facts in this case. The separate document--the rider--in Kagan contained the provision for a lease extension. In this case, the analogous provision--the holdover provision--is contained in the lease itself. This placement renders superfluous a specific reference to the provision where the guaranty states that the guarantor agrees to uphold "all covenants of this lease."

We do not find that the fact that Kagan involved a lease extension, as opposed to a tenancy after a lease expiration, mandates a different outcome here. The Kagan court rejected the distinction made by courts in other jurisdictions between lease renewals and extensions and, instead, instructed that each case be decided "upon the intention of the parties as expressed in the writing interpreted in the light of all the circumstances under which the agreement was entered into." Kagan, 269 Ill. App. at 320. Nevertheless, we note that there is a split of authority on the question of whether a guaranty applies to an occupation under an extension or renewal of the original lease term. See, e.g., C. Sumner, Annotation, Liability of Lessee's Guarantor or Surety Beyond the Original Period Fixed by Lease, 10 A.L.R. 3d 582 (1966); M. Friedman, Friedman on Leases