Opinion ID: 4016156
Heading Depth: 2
Heading Rank: 2

Heading: The Ambiguous Language

Text: The threshold question on the merits is whether the par‐ ties’ agreement has a clear meaning within the document’s four corners. Under Illinois law, if a contract only permits one interpretation, that meaning controls. AM Int’l, Inc. v. Graphic Mgmt. Assocs., Inc., 44 F.3d 572, 574 (7th Cir. 1995) (citing Om‐ nitrus Merging Corp. v. Ill. Tool Works, Inc., 628 N.E.2d 1165, 1168 (Ill. Ct. App. 1993)). If a contract’s language is reasonably 6 Nos. 15‐3326 & 15‐3327 or fairly susceptible to multiple meanings, Illinois courts will find the contract ambiguous. Bourke v. Dun & Bradstreet Corp., 159 F.3d 1032, 1037 (7th Cir. 1998) (quoting Flora Bank & Tr. v. Czyzewski, 583 N.E.2d 720, 725 (Ill. Ct. App. 1991)). And when determining whether an agreement is ambiguous, the court must construe that contract as a whole. Flora Bank & Tr. v. Czyzewski, 583 N.E.2d 720, 725 (Ill. Ct. App. 1991). We agree with the district court’s reading of the contract, which juxtaposes conflicting statements in the Hoffman‐FDIC settlement. On the one hand, the contract contains specific statements that absolve the Hoffmans from liability arising from “the Loan Documents or the Properties.” The scope of this release is limited: “the Properties” are clearly defined as the three Milan parcels that secured the $157,300 loan. Fur‐ ther, Fyre Lake is not named anywhere in the contract. On the other hand, the settlement agreement also contains language that generally releases the Hoffmans from all liabilities. The FDIC, for itself and its successors, states that it: hereby releases and discharges KENNETH E. HOFFMAN JR. and BARBARA A. HOFFFMAN … from any and all liabilities, obligations, claims, actions, causes of action, liens, fees, and demands of whatso‐ ever kind or nature, whether known or unknown, that FDIC‐RECEIVER had, now has, or may have against such Released Parties, including, but not limited to, those arising out of, based on, or in any way connected with the Loan Documents, or any portion thereof, or the Properties or relating to claims against the Released Parties. This sweeping language, read only in isolation, could release Kenneth Hoffman from liability on the Milan properties, the Nos. 15‐3326 & 15‐3327 7 Fyre Lake guarantee, and any other obligation he might have to the FDIC. Within its four corners, then, the Hoffman‐FDIC settlement contains conflicting language. The Illinois courts have repeatedly examined contracts with multiple release statements, where the “general lan‐ guage is inconsistent and conflicts with the specific lan‐ guage.” See, e.g., Countryman v. Indus. Commʹn, 686 N.E.2d 61, 64 (Ill. Ct. App. 1997). These contracts are deemed ambiguous. See id. As a threshold matter, we thus conclude that the con‐ tract before us is ambiguous. This ambiguity requires us to determine the contract’s specific meaning through extrinsic evidence. Richard W. McCarthy Trust Dated Sept. 2, 2004 v. Ill. Cas. Co., 946 N.E.2d 895, 903 (Ill. Ct. App. 2011). C. The Extrinsic Evidence and Rules of Construction When interpreting an ambiguous contract, Illinois courts rely on two methods: extrinsic evidence and the rules of con‐ struction. See Countryman, 686 N.E.2d at 64; McCarthy Trust, 946 N.E.2d at 903. We utilize both today, as we examine the settlement contract that Hoffman and the FDIC signed. Hoffman’s own testimony leads us to conclude that the Hoffman‐FDIC contract admits only one meaning. His words establish that he knew he was negotiating for a release of the $157,300 loan only, not for a multi‐loan release. Hoffman testified that, when negotiating the release on his smaller loan, he specifically asked loan officer Erica Covey whether he could also be released from his Fyre Lake obliga‐ tions. While Covey was apparently sympathetic to his situa‐ tion, Hoffman’s understanding was that “she wasn’t quite sure how, you know, all of this could be tied together.” And 8 Nos. 15‐3326 & 15‐3327 as he further testified, both parties understood that their con‐ tract on the $157,300 obligation had “nothing to do” with the Fyre Lake guarantee. The obligations remained separate. Against this unambiguous record, Hoffman asks us to ac‐ cept his claim that, when he executed the settlement agree‐ ment, he subjectively believed he was obtaining relief from both the $157,300 loan and the $900,000 Fyre Lake guarantee. This contradicts his testimony, strains credibility, and is insuf‐ ficient to create a genuine factual issue. To reach a trier of fact, Hoffman would have to show material facts in the record that conflict with his own sworn testimony. Like the parole evidence, the Illinois rules of construction also establish that Hoffman was only released from his $157,300 loan. When a contract might allow different con‐ structions, Illinois courts prefer the reading that is “fair, cus‐ tomary, and such as prudent men would naturally execute.” Trade Ctr., Inc. v. Dominickʹs Finer Foods, Inc., 711 N.E.2d 333, 338 (1999) (quoting Chi. Title & Trust Co. v. Telco Capital Corp., 685 N.E.2d 952, 956 (1997)) (internal marks omitted). This fair reading is preferred over an interpretation that makes a con‐ tract “inequitable, unusual, or such as a reasonable man would not be likely to enter.” Id. And on the particular type of facts before us, Illinois courts have expressly provided a rule of construction for finding the contract’s meaning: “where an ambiguity exists in a contract due to a conflict between two of its provisions, the more specific provision relating to the same subject matter controls over the more general provision.” Countryman, 686 N.E. 2d at 64. The specific provisions in the Hoffman‐FDIC agreement refer to the $157,300 debt secured by mortgages on three Mi‐ Nos. 15‐3326 & 15‐3327 9 lan properties. A reasonable interpretation of what these spe‐ cific provisions mean leaves no ambiguity. The contract states that the FDIC believes it is entitled, by the particular loan de‐ fault at issue, to foreclose on the three Milan properties. It states that the FDIC will accept, in lieu of foreclosure, the deeds to these three properties. And with the deeds in lieu of foreclosure, the Hoffmans’ $157,300 obligation is wiped out. On the specific language of this contract, therefore, the mean‐ ing is unequivocal: Hoffman’s $157,300 obligation is the loan forgiven. The contract also contains a general release, with sweep‐ ing language by the FDIC, “[f]or itself and its past, present and future predecessors, creditors, employees, agents, attor‐ neys, affiliates, insurers, successors or assigns.” As we have shown, this part of the contract releases the Hoffmans from “any and all liabilities, obligations, claims, actions, causes of action, liens, fees, and demands of whatsoever kind or nature, whether known or unknown.” This general language, read in isolation, might appear to release all manner of liabilities. When interpreting a contract with specific and general re‐ lease language on the same subject matter, Illinois courts must allow the specific language to control. See id. This does not mean that the general language is knocked out of the contract, never to be seen again. Instead, we interpret the general pro‐ vision in light of the specific provision. Here, under the Illi‐ nois legal standard, this means that the Hoffman‐FDIC agree‐ ment is designed to release all manner of liabilities that are specifically related to the $157,300 loan. Thus, Hoffman is free from this loan only. He can never owe the FDIC or its succes‐ sors anything on this particular loan. When we acknowledge the plain meaning of the specific release, and read the general 10 Nos. 15‐3326 & 15‐3327 release in light of the specific language on the same subject matter, this is the necessary interpretation.