2015 IL App (1st) 141689

No. 1-14-1689 

Opinion filed May 27, 2015 

Third Division

IN THE

APPELLATE COURT OF ILLINOIS

FIRST DISTRICT

THE PRIVATE BANK AND TRUST 

COMPANY,

Plaintiff-Appellee, 

v. 

EMS INVESTORS, LLC, HERBERT P. 

EMMERMAN, and EQUITY MARKETING 

SERVICES, INC., 

Defendant-Appellants. 

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Appeal from the Circuit Court 

of Cook County. 

No. 12 L 9313 

The Honorable 

Raymond Mitchell, 

Judge, presiding. 

JUSTICE HYMAN delivered the judgment of the court, with opinion. 

Presiding Justice Pucinski and Justice Lavin concurred in the judgment and opinion. 

OPINION

¶ 1 In the absence of a reservation of rights, co-borrowers contend that a lender's release and 

discharge of a third co-borrower regarding mortgages secured by property of the third coborrower and others released and discharged them as well. 

¶ 2 Herbert P. Emmerman and Cheryl Bancroft formed EMS Investors, LLC (Investors), to 

convert an apartment building in downtown Chicago into condominiums. To finance the project, 

Emmerman, Bancroft, and Investors borrowed $1.62 million from The Private Bank and Trust 

Company (Private Bank). Equity Marketing Services, Inc. (EMS), another entity Bancroft and 
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Emmerman owned, guaranteed the loan. Bancroft and her husband also had several mortgages 

with Private Bank on property they owned individually, together and through Bancroft Group LP

(BGLP). When the housing bubble collapsed in late 2008, Bancroft, Emmerman, and Investors

slid into financial difficulties. Sales of condominium units stalled, making repayment of the 

$1.62 million loan difficult. Before the note became due, Bancroft filed for chapter 11 

bankruptcy (11 U.S.C. § 101 et seq. (2006)), and she and her husband entered into a settlement 

agreement with Private Bank. The settlement agreement, which only mentioned the Bancrofts' 

personal real estate and not the $1.62 million loan, released and discharged them "from any and 

all claims, demands, actions, causes of action, suits, costs, damages, expenses and liabilities of 

every kind, character and description, either direct or consequential, at law or in equity." 

Emmerman was not a party to the release or aware of it at that time. 

¶ 3 When the note matured, Emmerman asked for an extension or modification. Private Bank 

refused and filed a breach of contract action against Emmerman and Investors on the loan and 

EMS on its guaranty. The parties filed cross-motions for summary judgment. Emmerman and 

Investors contended that Private Bank's release of Bancroft also released them from liability as 

co-obligors under the note. The trial court disagreed, granting Private Bank's motion for 

summary judgment and denying defendants' motion. The court also entered judgment in Private 

Bank's favor for the amount owed on the loan, interest, and attorney fees. 

¶ 4 Emmerman and Investors argue the trial court erred in finding that the Private Bank's 

settlement agreement with Bancroft did not release all of them from liability on the note in the 

absence of a reservation of rights. We affirm. The language of the release between the Bancrofts 

and Private Bank and the circumstances under which it arose present enough evidence to 

demonstrate that Private Bank did not intend to release defendants from liability on the note. 
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Thus, the trial court did not err in granting Private Bank's motion for summary judgment and 

entering judgment in the bank's favor.

¶ 5 BACKGROUND

¶ 6 The facts are not in dispute. EMS Investors, LLC, is an Illinois limited liability company, 

with two members, Herbert C. Emmerman and Cheryl Bancroft. On January 29, 2008, Private

Bank loaned $1.62 million to Investors, Emmerman and Bancroft, which was documented by a 

promissory note and a first amended promissory note. Emmerman and Bancroft were co-makers 

on the promissory note and agreed to be "jointly and severally" liable under it. Defendant Equity 

Marketing Services, Inc., guaranteed repayment of the loan. Defendants defaulted under the 

terms of the note and amended note by failing to make payment due on the maturity date, 

January 1, 2012. EMS also defaulted by failing to make payments after defendants defaulted. 

¶ 7 On November 22, 2011, a few months before the note became due, Private Bank entered 

into a settlement agreement with Cheryl Bancroft, Stephen Bancroft, and BGLP. The settlement 

agreement noted that Private Bank had mortgages on several residential properties owned 

together and separately by Cheryl and Stephen, and that "disputes exist among the Parties with 

respect to various claims and issues relating to" the residential real estate, and they want to 

"settle any and all claims and disputes by, among and against each other under this Agreement." 

The agreement also noted that Cheryl filed for bankruptcy under chapter 11 on January 14, 2011, 

and that the bank had begun legal action against Stephen on property he owned separately and 

with BGLP. The settlement agreement then stated, in relevant part: 

 "10) Release of Cheryl, Stephen and BGLP. Except as expressly set forth in this 

Agreement, the Bank, and each of its respective successors, affiliates, assigns, 

shareholders/members, directors, officers, agents, servants, employees, heirs, 
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executors, administrators and assigns, does hereby forever release and discharge 

Cheryl, Stephen, and BGLP, and their respective parents, successors, affiliates, 

assigns, directors, officers, agents, servants, and employees from any and all claims, 

demands, actions, causes of action, suits, costs, damages, expenses and liabilities of 

every kind, character and description, either direct or consequential, at law or in 

equity, which they may now, may have had at any time heretofore, or in any manner 

whatsoever, provided, however, that such released claims shall not include any claims 

asserted by any Party arising solely out of any obligation specifically set forth in this 

Agreement.

 * * * 

 26) Parties in Interest. Nothing herein shall be construed to be to the benefit of 

any third party, nor is it intended that any provision shall be [for] the benefit of any 

third party." 

¶ 8 The settlement agreement does not specifically mention the note or the amended note

with Emmerman or Investors and does not mention Emmerman or Investors by name. 

¶ 9 On August 16, 2012, Private Bank filed a two-count complaint in the circuit court of 

Cook County alleging breach of contract claim against Emmerman and Investors, as obligors of 

the loan (count I), and against EMS, as guarantor of the loan (count II). Defendants filed an 

answer admitting the note was in default and raising as an affirmative defense that Private Bank's 

unconditional release of Bancroft's liability under the note, without a reservation of rights, also 

released Emmerman and Investors from liability under the note and EMS from liability under the 

guaranty. 
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¶ 10 Private Bank moved to strike EMS's affirmative defense as to its liability on the guaranty, 

which the trial court granted, with prejudice. Private Bank then moved for summary judgment. 

Defendants filed a combined motion for summary judgment and a response to Private Bank's 

motion for summary judgment. Among the exhibits attached to Private Bank's motion was an 

affidavit from Kimberly Kourelis, a Private Bank managing director, stating, that the bank's 

settlement agreement with Bancroft was unrelated to the note, amended note, and guaranty and 

was not intended to apply to Emmerman, Investors, or EMS. Private Bank also attached 

deposition testimony from Emmerman stating that at the time the settlement agreement was 

executed, he had no knowledge of it and had not been asked to review it at any time. Emmerman 

also stated that after the loan matured in January 2012, he spoke with Alan Fine, another Private 

Bank managing director, about how Emmerman was going to repay the loan. Emmerman stated, 

"I was looking for a modification of the loan. None of that was forthcoming. They were 

interested in me paying or else."

¶ 11 On May 1, 2014, the trial court granted Private Bank's motion for summary judgment and 

denied defendants' motion. The court also entered judgment in Private Bank's favor in the 

amount of $1,704,718.79, which included the principal due on the loan, plus interest, attorney 

fees, and costs. The court found that defendants' liability under the note was joint and several, 

and thus, "a plaintiff is entitled to pursue distinct remedies upon the same instrument, treating it 

as a joint contract and as a several contract, until satisfaction is fully obtained. [Citation]."

Further, citing Diamond Headache Clinic, Ltd. v. Loeber, 172 Ill. App. 3d 364, 369 (1988), the 

trial court stated that joint and several liability permits the plaintiff to sue until payment in full 

from one or more of the defendants, with the limitation that the plaintiff may not collect more 

than what is owed by the defendants jointly. This prevents multiple recoveries for a single injury.
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¶ 12 Addressing the settlement agreement, the court stated, "an obligor is not released when it 

is apparent from the circumstances that the settling parties did not intend the release of one to act 

as a release of all." The court found that the evidence, including Kourelis's affidavit, 

Emmerman's deposition testimony, and a third-party beneficiary clause in the release ("[n]othing 

herein shall be construed to be to the benefit of any third party") demonstrates that Private Bank 

always intended to enforce its rights against defendants. 

¶ 13 ANALYSIS

¶ 14 Defendants' primary contention is that the trial court erred in entering summary judgment 

and a monetary judgment in Private Bank's favor, because the release of one joint and several coobligor releases all other joint and several co-obligors absent a reservation of rights. Defendants 

also contend the trial court erred by: (i) referring to Bancroft as a guarantor rather than as a coobligor and (ii) relying on section 294 of the Restatement (Second) of Contracts (Restatement 

(Second) of Contracts § 294 (1981)), which has not been enacted in Illinois. Defendants ask us to 

reverse the summary judgment in plaintiff's favor and enter summary judgment in their favor and 

vacate the monetary judgment.

¶ 15 Summary judgment is proper where the pleadings, depositions, admissions and affidavits 

on file, when viewed in the light most favorable to the nonmoving party, reveal no genuine issue 

of material fact and the moving party is entitled to judgment as a matter of law. 735 ILCS 5/2-

1005(c) (West 2012); Home Insurance Co. v. Cincinnati Insurance Co., 213 Ill. 2d 307, 315 

(2004). We review the entry of summary judgment de novo and may affirm on any ground 

appearing in the record. Id.
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¶ 16 Release of a Joint and Several Co-Obligor 

¶ 17 Defendants' primarily argues that the trial court erred in finding that Private Bank's 

release of Cheryl Bancroft did not release defendants from liability on the note. But we first 

address defendants' contention that the trial court erred when, in its order, it referred to Cheryl 

Bancroft, who is not a party, as a guarantor rather than as a co-obligor on the note. We agree the 

trial court erred when it stated that "Cheryl Bancroft also guaranteed the obligations brought 

about by the loan documents" and "Private Bank *** released Cheryl Bancroft from any 

obligations she had arising under the guaranty." But the court then proceeded to whether Private 

Bank's release of Bancroft also released defendants, who were jointly and severally liable under 

the note or whether they were not released because the circumstances indicated that Private Bank 

did not intend for their release of Bancroft to also release defendants. Thus, because in making 

its decision the trial court addressed whether joint and several co-obligors on a note are released 

after release of one of a co-obligor, any error in describing Bancroft as a guarantor rather than a 

co-obligor did not affect the outcome and was harmless. 

¶ 18 Turning to the liabilities of joint and several co-obligors on a loan, under Illinois law, a 

joint and several contract has been deemed "equivalent to independent contracts, founded upon 

one consideration, for performance severally, and also for performance jointly, and distinct 

remedies upon the same instrument, treating it as a joint contract and as a several contract, may 

be pursued until satisfaction is fully obtained.” Moore v. Rogers, 19 Ill. 347, 348 (1857); see also

People v. Harrison, 82 Ill. 84, 86 (1876) (“Contracts which are joint and several may be regarded 

as furnishing two distinct remedies: one by a joint action against all the obligors, the other by a 

several action against each.”); 735 ILCS 5/2-410 (West 2012) ("All parties to a joint obligation, 

including a partnership obligation, may be sued jointly, or separate actions may be brought 
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against one or more of them. A judgment against fewer than all the parties to a joint or 

partnership obligation does not bar an action against those not included in the judgment or not 

sued. Nothing herein permits more than one satisfaction."). Each of the obligors “may be liable 

for the entire damages resulting from the failure to perform.” Brokerage Resources, Inc. v. 

Jordan, 80 Ill. App. 3d 605, 608 (1980). 

¶ 19 Despite the general rule holding joint and several co-obligors separately liable, a release 

of one co-obligor may also release the other co-obligor. Under Illinois common law, the full 

release of one co-obligor released all “even if the release contained an express reservation of 

rights against the others.” Porter v. Ford Motor Co., 96 Ill. 2d 190, 193 (1983). As observed by 

the supreme court in Porter, it “rejected the strict common law rule ‘in favor of the more 

reasonable rule, that where the release of one of several obligors shows upon its face, and in 

connection with the surrounding circumstances, that it was the intention of the parties not to 

release the co-obligors,' " the agreement shall be construed as a covenant not to sue, rather than a 

release. (Emphasis omitted.) Id. at 194-95 (quoting Parmelee v. Lawrence, 44 Ill. 405, 413-14 

(1867)). In other words, the entry of one co-obligor into an unconditional release will release all 

co-obligors except when a contrary intent appears from the face of the document with the 

release. Id.; see also Cherney v. Soldinger, 299 Ill. App. 3d 1066, 1070 (1998). 

¶ 20 In Parmelee four partners, Bigelow, Parmelee, Gage, and Johnson, borrowed $50,000 

from Lawrence and conveyed real estate to Lawrence as security. The partners agreed to repay 

the loan in five annual installments with 10% interest, after which Lawrence agreed to reconvey 

the property to the partners. Parmelee, 44 Ill. at 406-07. After they stopped repaying the loan, the 

partners argued that a release executed in favor of one of the partners, Bigelow, served to release 

them all. Id. at 408. The release read, in relevant part:
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" 'I release and discharge *** Bigelow, his property and estate, from all claims on 

account of the same. 

If the property mentioned in the above articles has to be sold under any order of 

the court at Chicago, the interest of said Bigelow in it is to be protected according to 

this settlement. Nothing herein shall in anywise affect my rights or demand against 

said Parmelee, Gage or Johnson, or their interest in said property.' " Id. at 408. 

¶ 21 In examining the effect of the release on the liability of Bigelow's partners, the Illinois 

Supreme Court held that a "release, like every other written instrument, must be so construed as 

to carry out the intention of the parties. This intention is to be sought in the language of the 

instrument itself when read in light of the circumstance which surrounded the transaction." Id. at 

410. The court further stated that "where the release of one of several obligors shows upon its 

face, and in connection with the surrounding circumstances, that it was the intention of the 

parties not to release the [co-obligors], such intention, as in the case of other written contracts, 

shall be carried out, and to that end the instrument shall be construed as a covenant not to sue." 

Id. at 414. 

¶ 22 Accordingly, a court must assess whether the parties intended the agreement to serve as 

an “absolute and unconditional” release of the co-obligor executing the agreement. Id. The 

purpose of this doctrine is to prevent a claimant from receiving multiple recoveries for a single 

claim (Diamond Headache Clinic, 172 Ill. App. 3d at 369), and not to release a co-obligor when 

a claim has been only partially settled if the claimant's intent is not to release the other obligor 

but to hold him or her responsible for the balance. Id. 

¶ 23 In ruling in Lawrence's favor, the Parmelee court had "no hesitation or doubt" finding 

that Lawrence executed the release "for the purpose of saving Bigelow from further legal 
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liability so far, and only so far, as this could be done without affecting [his claim] against the 

[co-obligors.]" Parmelee, 44 Ill. at 411. The court noted the release contained an express 

reservation of rights and that Lawrence had refused to sign other releases Bigelow presented to 

him lacking a reservation of rights out of concern that it might jeopardize his rights against the 

co-obligors. Id. 

¶ 24 To determine Private Bank's intent in releasing Bancroft from liability, we examine the 

language of the release and the circumstances leading to its execution. In finding that Private 

Bank's release of Bancroft did not release defendants from liability under the note, the trial court 

cited the affidavit of Kimberly Kourelis of Private Bank, the deposition testimony of Herbert 

Emmerman, and the third-party beneficiary language of the settlement agreement ("Nothing 

herein shall be construed to be to the benefit of any third party, nor is it intended that any 

provision shall be [for] the benefit of any third party."). 

¶ 25 Addressing the last item first, defendants assert that the trial court erred in relying on the 

third-party beneficiary language in paragraph 26 of the settlement agreement as evidence that 

Private Bank reserved its rights against Emmerman and Investors. Defendants note that in 

Holland v. United States, 621 F.3d 1366 (Fed. Cir. 2010), a case from the Federal Circuit Court 

of Appeals interpreting Illinois law, the court stated that "the general 'Third Party Beneficiaries' 

clause in the Settlement Agreement is not sufficient to show that the parties intended the release 

to be less than an absolute release of the FDIC as a manager of the FRF and thus, under Illinois 

law, fails to establish that the agreement should be construed as merely a covenant not to sue the 

FDIC as manager of the FRF." Id. at 1381. Defendants contend that because the third-party 

beneficiary clause is not sufficient to reserve rights against them and the settlement agreement 
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contained no reservation of rights clause, the agreement contains no evidence that Private Bank 

intended to reserve its rights against Emmerman and Investors. 

¶ 26 State courts are not bound to follow decisions of the federal district courts or circuit 

courts of appeal. Hinterlong v. Baldwin, 308 Ill. App. 3d 441, 452 (1999) (except for the United 

States Supreme Court, federal courts exercise no appellate jurisdiction over state courts and their 

opinions are not binding on state courts). Federal decisions may, however, be considered 

persuasive authority. Wilson v. County of Cook, 2012 IL 112026, ¶ 30. In the absence of Illinois 

precedent on whether a general third-party beneficiary clause shows an intent to reserve rights 

against other co-obligors, we may be inclined to follow the Holland and find that the third-party 

beneficiary clause in the release failed to expressly reserve Private Bank's rights against 

defendants. But we need not address that issue, because even absent that clause, the remainder of 

the settlement agreement, the circumstances surrounding its execution, and the stated intent and 

understanding of both Private Bank and Emmerman as to the effect of the release establish that 

Private Bank did not intend to release Emmerman or Investors from liability under the note. 

¶ 27 We start with the fact that the release refers to mortgages on several parcels of residential 

real estate Cheryl Bancroft and her husband own individually, together, and through BGLP. 

Private Bank and the Bancrofts entered into the settlement 10 months after Cheryl Bancroft filed 

for chapter 11 bankruptcy and while Private Bank had pending litigation against Stephen 

Bancroft and BGLP involving property referred to in the release. The note, the amended note, or 

the co-obligors here are not mentioned at all. In her affidavit, Kourelis states that the settlement 

agreement was unrelated to the note, the amended note, or the obligations of Emmerman, 

Investors, and EMS and was not intended to apply to them. Emmerman's deposition testimony 
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likewise indicates he did not think that in releasing Bancroft, Private Bank also intended to 

release him or Investors from their obligations under the note. 

¶ 28 Emmerman testified that he was unaware of the release just before and after it was 

signed, that when the note became due in January 2012, three months after the release was 

executed, he spoke with Alan Fine from Private Bank about a modification but none was 

forthcoming and that he knew that the bank was "interested in me paying or else." Private Bank's 

actions in attempting to obtain payment from Emmerman and Investors, as the only remaining 

liable co-obligors, show it intended to continue to hold them liable despite the release of 

Bancroft.

¶ 29 Further, we reject defendants' contention that the mere absence of a reservation of rights 

clause in the note and amended note means that Private Bank did not intend to reserve its rights 

against defendants. Specifically, defendants assert that because all other notes and loan 

modifications they or Bancroft executed included a reservation of rights clause and because 

Private Bank almost always included that provision in their notes and loan agreements, the 

absence of that clause in this note and amended note is evidence that Private Bank did not intend 

to preserve its rights against co-obligors. As noted, Illinois case law holds that it is the intent of 

the parties to the release and the language of the release that controls is scope and effect. 

Defendants offer no cases to support their argument that the language of the note alone controls 

whether a later release of one co-obligor also releases the other co-obligors. 

¶ 30 Thus, even in the absence of an express reservation of rights in the release, the 

circumstances, which we must consider, show that Private Bank did not intend to release 

defendants from their liability under the note when they entered into a settlement agreement with 
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defendants' co-obligor, Cheryl Bancroft. Therefore, the trial court did not err in granting Private 

Bank's motion for summary judgment and entering a judgment in the bank's favor. 

¶ 31 Section 294 of Restatement of Contracts 

¶ 32 Defendants contend the trial court erred in relying on section 294 of the Restatement 

(Second) of Contracts (Restatement (Second) of Contracts § 294 (1981)), because it has not been 

enacted as law in Illinois. Nothing in the record or the order granting summary judgment shows 

that the trial court relied on the restatement in reaching its decision. Defendants note that in its 

order, the trial court relied, in part, on El Funding Partnership v. Voegel, 2012 IL App (1st) 

113712-U. In El Funding, the appellate court mentioned the trial court's reliance there on section

294 of the Restatement (Second) of Contracts but found it irrelevant, because Illinois courts 

modified the common law rule to find that intent is the determining factor in whether the release 

of a co-obligor is releases the remaining obligors. Even though, as noted above, the trial court

improperly relied on El Funding under Supreme Court Rule 23 (eff. July 1, 2011), its reference 

does not amount to evidence that the trial court relied on the Restatement (Second) of Contracts 

in reaching its decision. 

¶ 33 CONCLUSION

¶ 34 The trial court did no err in granting plaintiff's motion for summary judgment or entering 

judgment in plaintiff's favor. 

¶ 35 Affirmed.