In recognition of Assignee’s |defendant’s| reliance upon this Notice and
Acknowledgment of Assignment, Lessee [plaintiff] certifies, confirms and agrees as
follows:

1. The Lease and the Designated Schedule... constitute the legal, valid and binding
obligation of Lessce....

2. There are no modifications, amendments or supplements to the Lease which relate
to the Designated Schedule; and any future modification, termination, amendment
or supplement to the Lease which relates to the Designated Schedule, or
settlement of amounts duc thercunder which relates to the Designated Schedule,
shal] be ineffective without Assignee’s prior written consent.

The Acknowledgment was not referenced in plaintiff's complaint, but rather was

submitted by defendant in support of the instant motion.

In October 2001, plaintiff informed defendant of its intention to purchase all of the
trailers listed in Schedules Kk through S “in accordance with, and on the same terms as, all of its
other pre-term acquisitions from the lessor, Wabash.” Defendant refused to: (1) acknowledge
plaintiff's right to purchase the trailers; (2) allow plaintiff to purchase the trailers on the same
terms as plaintiff's other pre-term purchases; and (3) allow any pre-term purchase by plaintiff
without the payment of an additional fee or penalty of $100,000 or more. Plaintiff subsequently
filed the instant suit seeking a declaratory judgment that it is entitled to purchase the trailers prior
to the end of their scheduled lease terms without incurring a prepayment penalty, as well as
specific performance and damages for breach of contract and tortious interference with
prospective advantage. In response, defendant maintains that, even assuming the truth of the
allegations of plaintiff's complaint, the Acknowledgment is essentially an estoppel letter that

trumps the plaintiff's and Wabash’s course of performance, entitling defendant to summary

Judgment. With this background in mind, the court turns to the legal standards governing the

instant motion.



not consider plaintiff's extrinsic evidence in construing the terms of the Lease Agrecment as
written. Because the Lease Agreement requires specific monthly payments, Wabash’s
subsequent acceptance of plaintiff’s prepayment, as well as the terms thercof, thus constitutes a
modification‘ to the Lease Agreement as written, not merely an interpretation of an ambiguity
therein.

Even if the court concluded otherwise, and permitted consideration of plaintiff's extrinsic
evidence in construing the Lease Agreement, such extrinsic evidence would “supplement” the
Lease Agreement as written. Indeed, both partics refer to the official comments to §1-205 of the
UCC, which provides: “The measure and background for interpretation are set by the commercial
context, which may explain and supplement even the language of a formal or final writing.”
(Emphasis added.) Thus, at the very least, the parties’ course of performance was a supplement
to the Lease Agreement as written, which did not reference a right of prepayment,

Plaintiff, by signing an Acknowledgment that there have been “no modifications,
amendments or supplements” to the Lease Agreement, in “recognition of [defendant’s] reliance
upon the terms” of the Acknowledgment, effectively represented to defendant that the Agrecnent
(in its original form - not as subscquently modified or supplemented to permit prepayment
without penalty) was intact. In reliance on this representation, as contemplated by the

Acknowledgment, defendant assumed the leases at issue in the instant dispute. Plaintiff cannot

“The court will assume strictly arguendo that the presumed modification or supplement
complied with Section 24 of the Lease Agreement, which provides that the terms of the
Agreement “may not be changed or terminated orally, but only by agreement in writing.” Indeed,
defendant admits in its response to plaintifi’s Local R. 56.1 Statement of Uncontested Facts that
plaintiff sought and reccived “pay-off letter[s]” from Wabash regarding its pre-term acquisition
of trailers.


prepayment without penalty was a permissible interpretation of the original Leasc Agreement, or
constituted a modification or supplement to that Agreement.

According’to defendant, plaintiffs allegations regarding ‘the parties’ course of
performance and/or understanding are a supplement to the original Lease Agreement which are
rendered “irrelevant” by plaintiff's execution of the Acknowledgment:

In short, WTL can plead and argue all it wants that the written terms of the Lease

Agreement were supplemented by some unwritten “[interpret]atation” or

“underst[anding]” between WTL and Wabash, whether that be by course of

dealing, course of performance, or whatever legal doctrine WLT recites. Such

arguments and allegations, however, are rendered entirely irrelevant in light of

WTL’s explicit admission that it executed the Acknowledgment and the

uncontested fact that the Acknowledgment contains WTL’s express representation

that there exist “no... supplements” to the written terms of the Lease Agreement.

Indeed, such supplementation is precisely what course of dealing and course of

performance do. (Emphasis in original.)

Plaintiff maintains, however, that the parties’ interpretation of the contract as including a
right to prepay without a penalty does not constitute a modification or supplement to the contract;
tather, according to plaintiff, the contract has always been interpreted to include a right of
prepayment without penalty. Moreover, plaintiff argues that, even if the court concluded
otherwise, the Acknowledgment is not binding on plaintiff for a variety of reasons, including a
lack of consideration. For the reasons that follow, the court concludes that the right to prepay,
with or without penalty, constitutes a modification or, at the very least, a supplement, to the
original Lease Agreement, and that the Acknowledgment is indeed valid.

The court begins its analysis with the Lease Agreement as written. Under Indiana law,

which governs the substance of the instant contract dispute, “in absence of ambiguity, it is not

within the function of the courts to look outside the instrument to arrive at the intention of the



DISCUSSION
A movant is entitled to summary judgment under Fed. R. Civ. P. 56 when the pleadings,
depositions, answers to interrogatories, and admissions on file, together with any affidavits, show
that there is no genuine issue of material fact and the movant is entitled to judgment as a matter
of law. See Fed. R. Civ. P. 56(c); Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986);

Unterreiner v. Volkswagen of America, Inc., 8 F.3d 1206, 1209 (7th Cir. 1993). Once a moving

party has met its burden, the nonmoving parly must go beyond the pleadings and set forth
specific facts showing there is a genuine issue for trial. See Fed. R. Civ. P. 56(e); Becker v.

Tenenbaum-Hill Assoc., Inc., 914 F.2d 107, 110 (7th Cir, 1990). The nonmoving party “must do

more than simply show that there is some metaphysical doubt as to the material facts.”
Matsushita Elec, Indus, Co., Ltd, y. Zenith Radio Corp., 475 U.S. 574, 586 (1986). “The mere
existence of a scintilla of evidence in support of the [nonmoving party’s] position will be
insufficient; there must be evidence on which the jury could reasonably find for the [nonmoving
party].” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 252 (1986).

The operative facts of the instant case are not in dispute. ‘The parties agree that: (1) on its
face, the Lease Agreement is silent regarding plaintiff's right to prepay without a penalty; (2)
Wabash, on at least five occasions, permitted plaintiff to prepay without penalties; (3) Wabash
and plaintiff performed the Lease Agreement in accordance with their understanding that plaintiff
had the right to prepay without penalty or premium, and defendant knew or should have known
this fact at the time it executed the assignment; and (4) plaintiff signed the Acknowledgment,
which provided that there had been “no modifications, amendments or supplements” to the Lease

Agreement. Rather, the parties’ dispute hinges on whether Wabash’s acceptance of plaintiff's



The cases cited by plaintiff regarding a court’s ability to consider the parties’ course of
performance in construing a contract do not compel a different result. In R.T, Hepworth Co. v.

Dependable Insurance Co., Inc., 997 F.2d 315, 318 (7" Cir. 1993), the Seventh Circuit

considered extrinsic evidence to construe a contract, but only after noting that it was applying
Mlinois law, which has “largely rejected” the “four comers rule” of contract construction,
Moreover, the R.T. Hepworth court noted that “extrinsic evidence should not be used to add
terms to a contract that is plausibly complete without them.” Id., quoting Bidlack vy.

Wheelabrator Corp., 993 F.2d 603, 608 (7" Cir, 1993),

DeHaan v, DeHaan, 572 N.E.2d 1315 (Ind, App. 1* Dist. 1991), is similarly

distinguishable. In DeHaan, the appellate court noted that “the trial court reasonably could have

considered the agrccment’s intent to be ambiguous so that extrinsic, parol evidence of the parties’
intent was necessary to interpret the agreement.” Id, at 1323. Thus, neither case cited by
plaintiff supports the proposition that, under Indiana law, the court can consider extrinsic
evidence in the absence of ambiguity.

As the Seventh Circuit noted in Bidlack v. Wheelabrator Corp., 993 F.2d 603, 608 (7"
Cir. 1993):

Although extrinsic evidence is admissible to show that a written contract which

looks clear is actually ambiguous, perhaps because the parties were using words in

a special sense ..., there musi be either contractual language on which to hang the

label of ambiguous or some yawning void ... that cries out for an implied term.

Extrinsic evidence should not be used to add terms to a contract that is plausibly

complete without them. [Internal citations omitted.]

Because the Lease Agreement does not contain cither ambiguous contractual language or

a yawning void calling out for an implied term in the instant case, the court concludes that it may



‘wiinate Onder Form (06/97)

United States District Court, Northern District of Mlinois

Name cfuaied Jute | __ Robert W. Gettleman | Sint ater me

CASE NUMBER 02 C 8572 DATE May 27, 2003
CASE , WTL Rail corp. v_ Transport International Pool, Inc,
TITLE

[In the following box (a) indicute the party filing the motion, e.g., plaintiff, defendant, 3rd party plaintiff, and (h) state briefly the nature
of the motion being presented, |

MOTION;

DOCKET ENTRY:

qd) a Filed motion of [ use listing in “Motion” box above.)

(2) oO Brief in support of motion due

(3) a Answer bricfto motion due. Reply to answer briefdue___
4 a Hearing

(5) o Status hearing

(6) o Pretrial conference[held/continued to] [set for/re-set for]on set for at.
(7) Q Trial[set for/re-set for] on at

(8) o [Bench/Jury tial] [Hearing] held/continued t to _ ate

)

(10) Ml [Other docket entry! Memorandum opinion and order entered.
Accordingly, defendant’s motion for summary judgment pursuant to Fed.R.56(c) is
granted.

ad) [Por further detail sce order attached to the original minute order.]

X_ | No notices requiced, advised in open court,

No natices required. coumber of nol ics

Notices mailed by judge's staff. MAY 99 ms

Notified counsel by telephone.

date dockvle

Decketing to muil notices,

Mail AO 450 form. yb

Aockebjogd epi initials

Copy to judge/magistrate judge.

ats mailed notice
courtroom

Gps deputy’s
initials

Date/time reccived in
central Clerk's Office railing deputy intake



now demand prepayment without a premium on the basis of a modification or supplement that it
has disclaimed.

That defendant could have been more diligent in researching plaintiff's prepayment of
other trailer schedules docs not alter the court’s conclusion, given plaintiffs unequivocal
execution of, and representations in, the Acknowledgment. Lack of consideration does not
change the result, either, since plaintiff was obligated to execute the Acknowledgment pursuant
to Section 20 of the Lease Agreement, for which the parties thereto unquestionably received
considcration, Moreover, in the absence of any evidence or allegations in the complaint to the
contrary, the court concludes that plaintiff did noi sign the Acknowledgment under duress or
coercion, and that defendant did not act in bad faith in securing plaintiff's signature. The court
thus concludes that the Acknowledgment is enforceable and that plaintiff cannot demand
prepayment without paying a premium on the basis of its modification or supplement to the
Lease Agreement.

CONCLUSION
For the reasons stated herein, defendant’s motion for summary judgment pursuant to Fed.

R. Civ. P. 56(c) is granted.

ENTER: May 27, 2003

Robert W. Gettleman
United States District Judge

10



partics.” _McCae Management Corp. v. Merchants Nat. Bank & Trust Co, of Indianapolis, 553

N.E.2d 884, 887 (Ind. App. 4" Dist. 1990). The Lease Agrecment did not mention prepayment,
The court therefore concludes that the Lease Agreement, as originally written by Wabash and
plaintiff, did not contemplate prepayment,” but instead required specified monthly payments.
See. ¢.g., Consolidated Bearings Co. v, Ehret-Krohn Corp,, 913 F.2d 1224, 1233 (7" Cir. 1990)
(“A contract is not ambiguous merely because it fails to address some contingency; the general
presumption is that ‘the rights of parties are limited to the terms expressed’ in the contract.)
(applying Illinois law) (Internal citations omitted; Emphasis added.); Dvorak v. Christ, 692
N.E.2d 920, 924 (Ind. App. 1998) (declining to “construe clear and unambiguous provisions [or]

add provisions not agreed upon by the parties”); Piskorowski v. Shell Oil Co, 403 N.E.2d 838,

845 (Ind. App. 3d Dist. 1990) (“It is not the province of the courts to rewrite contracts for parties;
rather, it is our duty to enforce the unambiguously stated intentions of the parties, absent
assertions that the formation of the contract was somehow defective.”). Cf. Indiana Glass Co. v.
Indiana Michigan Power Co., 692 N.E.2d 886, 887 n.1 (Ind. App. 1998) (“There is no merit to
[defendant’s] claim that the contract’s silence as to the recovery of attorney’s fees by either party
in the event of a breach creates an ambiguity in the contract to be construed in its favor, We find
silence to be the simplest way to draft a contract to indicate that no such fees are contemplated by

the parties.”).

Had the Lease Agrcement provided for prepayment, but neglected to specify the terms
thereof, then perhaps the parties’ subsequent course of performance - specifically, the terms on
which prepayment was permitted - would be relevant to the court’s interpretation of the original
Lease Agreement as written. In the absence of such an ambiguity, however, the court is
constrained by the four corners of the Lease Agreement, See McCae Management Corp. at 887.

7



the present value of the scheduled “Estimated Residual Value” for cach trailer; and (b) the
discount rate used in determining these present values was the implicit interest rate utilized in
calculating the scheduled monthly lease payments.

According to plaintiff, “At no time did [plaintiff] or Wabash interpret or understand the
Lease Agreement as entitling Wabash, the lessor, to demand or receive a prepayment fee or
penalty. At no time in the course of any of the transactions... did Wabash, the lessor, ask for or
demand, and at no time did [plaintiff] pay, a prepayment fee or penalty.”

Section 20 of the Lease Agrcement gives the lessor the right to assign its interests under
the Lease Agreement to a third party, “subject to Lessee’s rights under [the Lease Agreement].”
Section 20 further provides that “Lessee shall execute any documents required by the assignee or
other transferee of Wabash’s interest, in order to effectuate the same.”

On or about February 28, 2001, Wabash assigned its rights under the Lease Agreement
for schedules K through $ to defendant, Wabash remained lessor with respect to Schedules A, B,
C, E and J, however, and subsequently allowed plaintiff to prepay some of these schedules,
pursuant to the terms described above. According to plaintiff's complaint, “At the time it
executed the assignment, defendant knew (or as a result of its due diligence investigation prior to
the Assignment, should have known)” about plaintiff's and Wabash’s understanding regarding
prepayment of the leases without penalty.

Prior to Wabash’s assignment of its interests under the Lease Agreement to defendant,
plaintiff signed a “Notice and Acknowledgment of Assignment” (the “Acknowledgment”),

According to the Acknowledgment,



In 1996, plaintiff entered into a lease agreement (the “Lease Agreement”)? with Wabash
National Finance Corporation (“Wabash”) to lease several groups of piggyback trailers that were
identified on separate schedules, labeled A through 5, attached to the Lease Agreement. The
Lease Agreement was, and at all times has been, negotiated, interpreted and implemented by
Wabash and plaintiff as a finance lease through which Wabash financed plaintiff's acquisition of
the scheduled piggyback trailers. ‘Io this end, the monthly leasc payments negotiated by Wabash
and plaintiff were premised upon implicit rates of interest on the principal debts necessary to
finance the acquisitions.

The Lease Agreement makes no reference to any right of plaintiff to purchase the trailers
in advance of the full term of the lease schedules - i.e., to prepay the principal, interest and other
charges under the Lease Agreement. To the contrary, the Lease Agreement requires specified
monthly rental payments for each unit listed on the schedules. Nonetheless, according to
plaintiff's complaint, plaintiff and Wabash “at all times interpreted and understood the Lease
Agreement to give [plaintiff] the right to purchase the trailers prior to the full terms scheduled for
those trailers.” Indeed, on five separate occasions, plaintiff purchased certain groups of trailers
before their scheduled lease termination dates pursuant to the following terms: (a) the purchase

price was equal to the present value of all remaining rental payments for the full lease term, plus

'On January 28, 2003, counsel for defendant stipulated in open court that, for the
purposes of the instant motion only, defendant would admit all factual allegations in plaintiff's
complaint. Accordingly, unless otherwise indicated, this factual summary is drawn from
plaintiff's complaint and exhibits attached thereto.

>The Lease Agreement provides that all tights and obligations thereunder shall he
governed by Indiana law.



IN THE UNITED STATES DISTRICT COURT
FORTHE NORTHERN DISTRICT OF ILLINOIS

EASTERN DIVISION
WTL RAIL CORPORATION, a Delaware corp., —_)
)
Plaintiff, ) ;
) No. 02 C 8572
v. )
7 ) Judge Robert W. Gettleman
TRANSPORT INTERNATIONAL POOL, INC., )
a Pennsylvania corporation, )
) PEt yp
Defendant. ) Gitag Tig

MAY 2
MEMORANDUM OPINION AND ORDER 9 2003

Plaintiff WTL Rail Corporation (“WTL”) initially filed the instant lawsuit in state court
seeking damages, specific performance and declaratory relief arising from its trailer lease agreement
with defendant Transport International Pool, Inc. (“TIP”). Defendant subsequently removed the
instant lawsuit to this court and moved to dismiss it under Fed. R. Civ. P. 12(b)(6). Because
defendant’s motion to dismiss relied on a document that the court determined was outside the four
corners of the complaint, the court converted defendant’s motion to one for summary judgment

under Fed. R. Civ. P. 56(c). For the reasons stated herein, defendant’s motion for summary

judgment is granted.