The complaint prays that the said decree heretofore entered be set aside and for certain injunctive relief. The injunctive relief sought in the instant case, to restrain the defendants from the use of the name Dormeyer, is the same injunctive relief sought in the original equity action, in which the decree sought to be set aside was entered. The contract set up in the instant complaint and attached to the complaint as an exhibit is the identical contract which this court had occasion to pass upon in Dormeyer v. Haffa, 343 Ill. App. 177, an action between the same parties, which we shall presently discuss. The defendants filed two motions to strike the complaint — one for reasons appearing upon the face of the complaint, assigning grounds why the complaint is insufficient, and the second under section 48, paragraph 1, subparagraph (e) of the Civil Practice Act [Ill. Rev. Stats. 1951, ch. 110, par. 172, subpar.
Considering the record in its entirety, it is apparent that the trial court did not abuse its discretion in not sustaining defendant's position on the issue of illegality. Defendant relies heavily on Dormeyer v. Haffa (1951) 343 Ill. App.? 177 [ 98 N.E.2d 532]. He overemphasizes, however, the significance of that case.
“Contracts” that are entered into for the purpose of evading taxes may be void as against public policy. See Dormeyer v. Haffa, 343 Ill.App. 177, 98 N.E.3d 532 (1951); Heavenly Ham Co. v. HBH Franchise Co., LLC., 2005 WL 331558, at *9 (N.D. Ill. 2005). But, Mr. Carroll's initial pleading also alleged that the “notes” were designed to “avoid” the payment of taxes.
Contracts that are entered into for the purpose of evading taxes may be void as against public policy. See Dormeyer v. Haffa, 343 Ill. App. 177, 98 N.E.3d 532 (Ill.App.Ct. 1951). Plaintiffs proffer several facts that purportedly establish the slicing fee agreement was not created for the sole purpose of evading taxes.
Enforceability of the Guaranty Agreement under Illinois Law That leaves for decision whether an Illinois court applying Illinois law would find the Guaranty Agreement enforceable. Guarantors assert a guarantor's obligation must be co-extensive with that of the principal, citing State Bank of Blue Island v.Benzing, 383 Ill. 40, 54-55, 48 N.E.2d 333, 340 (1943); Mercantile Trust Co. of Illinois v. Kastor, 273 Ill. 332, 342-43, 112 N.E. 988, 992 (1916); and Dormeyer v. Haffa, 343 Ill. App.? 177, 180-81, 98 N.E.2d 532, 534 (1st Dist. 1951). If so, the unenforceability of the License Agreement against NGV would compel unenforceability of the Guaranty Agreement against Guarantors. Once again Guarantors try to stretch case law beyond its proper bounds.
Plaintiff contends that the sale and lease-back arrangement between the purchaser and defendants for a stated consideration of $900,000 was so far in excess of the sum defendant would have been willing to accept for a cash sale of the motel as to be a sham, that the amount was nominated in order to afford certain tax benefits to the purchaser, thereby constituting a conspiracy to cheat and defraud the United States Government of income tax and, therefore, void as against public policy; and that the trial court erred in overruling plaintiff's motion to strike defendants' answer. Plaintiff cites Dormeyer v. Haffa, 343 Ill. App. 177, 98 N.E.2d 532, an Illinois case, for the contention that the courts will not aid in the enforcement of certain contracts because of their illegality. Such a rule would not apply in this case.
Western National Bank v. Moenning (1991), 224 Ill. App.3d 67, 74, 586 N.E.2d 412; Irving Tanning Co. v. American Classic, Inc. (N.D. Ill. 1990), 736 F. Supp. 161, 163-64. While a few cases state that a guarantor's obligation is merely coextensive with that of the principal ( State Bank v. Benzing (1943), 383 Ill. 40, 54-55, 48 N.E.2d 333; Mercantile Trust Co. v. Kastor (1916), 273 Ill. 332, 342-43, 112 N.E. 988; Dormeyer v. Haffa (1951), 343 Ill. App. 177, 180-81, 98 N.E.2d 532), it has been held that only guaranties of performance expressly incorporate the terms and conditions of the principal obligation, whereas guaranties of payment are not limited in the same way. Newman-Green, Inc. v. Alfonzo-Larrain R. (N.D. Ill. 1985), 605 F. Supp. 793, 799. In the case at bar, defendant's guaranty is one of both performance and payment.
The law of Illinois provides a defense to those who oppose the enforcement of the contract if that contract is illegal — either as a matter of Illinois or of Federal law. ( First Trust Savings Bank v. Powers, 393 Ill. 97, 65 N.E.2d 377; Zeigler v. Illinois Trust Savings Bank, 245 Ill. 180, 91 N.E. 1041.) The relevant Federal statute need not declare the contract void or unenforceable to make itself available to the defendant as a ground for the defense of illegality. ( Ideal Building Material Co. v. Benson Concrete Co., 273 Ill. App. 519; Finch Co. v. Zenith Furnace Co., 245 Ill. 586, 92 N.E. 521.) Where the performance of a contract would have defrauded the United States of income taxes due, it was held unenforceable in Dormeyer v. Haffa, 343 Ill. App. 177, 98 N.E.2d 532. Where a contract violated the policy and spirit, but not the letter of the Natural Gas Act ( 15 U.S.C. § 717), it was held to violate Illinois public policy as well. ( In re Estate of Johnson, 339 Ill. App. 110, 88 N.E.2d 886.) Hence, it is clear that a contract which violates Federal law, even where that law does not purport to (or even where it expressly denies any purpose to) affect State regulated transactions, is nevertheless subject to the defense of illegality or a violation of State public policy.
• 2 A contract, the purpose of which is to defraud the United States Government out of tax money, is an illegal and unenforceable contract. ( Dormeyer v. Haffa, 343 Ill. App. 177, 98 N.E.2d 532 (1st Dist. 1951).) And an illegal contract is not enforceable by an estate or the beneficiaries of such an illegal contract.