Opinion ID: 670736
Heading Depth: 2
Heading Rank: 1

Heading: Paragraph 3.B

Text: 36 Whether a contract is ambiguous is a question of law that we must review de novo. A.W. Wendell & Sons v. Qazi, 254 Ill.App.3d 97, 193 Ill.Dec. 247, 259, 626 N.E.2d 280, 292 (1993); Goodwine State Bank v. Mullins, 253 Ill.App.3d 980, 192 Ill.Dec. 901, 625 N.E.2d 1056, 1068 (Ill.App.Ct.1993). Contractual language is ambiguous if it is reasonably susceptible to different constructions. Stein v. Scott, 252 Ill.App.3d 611, 192 Ill.Dec. 558, 561, 625 N.E.2d 713, 716 (1993); Kolmin v. Village of Wilmette, 250 Ill.App.3d 83, 190 Ill.Dec. 195, 197, 621 N.E.2d 64, 66 (1993). The fact that, as discussed at length supra, Paragraph 3.B is susceptible to three different constructions (and indeed was construed at various points in all three ways) reveals that the agreement is in fact ambiguous. 37 Because Paragraph 3.B is ambiguous, Smith is entitled under Illinois law to recover overpayments made under the contract. Had Smith erroneously made payments to Wendy's under a claim of right based on a mistake of law, i.e. a mistake regarding the legal effect of unambiguous language, Smith could not recover those payments. See Jogger Mfg. Corp. v. Addressograph-Multigraph Corp., 346 Ill.App. 1, 104 N.E.2d 655, 658 (1952). That rule, which forbids recovery of payments voluntarily made under a claim of right, has a long-standing exception: Overpayments are recoverable if the payments were made because of a mistake of fact. Commercial Nat'l Bank v. Bruno, 75 Ill.2d 343, 27 Ill.Dec. 351, 355, 389 N.E.2d 163, 167 (1979). 38 Thus, the central question is whether Smith made its payments to Wendy's based on a mistake of fact. Smith paid Wendy's the amount it did because it mistakenly interpreted the contract to require those payments. That conclusion, however, was not a legal one. Just as the construction of an ambiguous contract is a question of fact, Qazi, 193 Ill.Dec. at 259, 626 N.E.2d at 292, a mistake made in construing an ambiguous contract is a mistake of fact, Carollo v. Financial Fed. Sav. & Loan Ass'n, 182 Ill.App.3d 996, 131 Ill.Dec. 509, 512, 538 N.E.2d 884, 887 (1989). See also Jogger, 346 Ill.App. 1, 104 N.E.2d at 658. Because the district court found Paragraph 3.B to be ambiguous and later resolved that ambiguity 9 in favor of Smith, Smith's mistaken interpretation of Paragraph 3.B was a mistake of fact entitling it to reimbursement of overpayments made to Wendy's assuming that the district court was correct in resolving the ambiguity in favor of Smith. 39 In determining whether the district court erred in resolving the ambiguity in favor of Smith, we examine whether the determination of the district court was clearly erroneous. See Fed.R.Civ.P. 52(a); see also Mucha v. King, 792 F.2d 602, 604-06 (7th Cir.1986). The clearly erroneous standard of appellate review allows us to reverse the district court's findings only if we have the firm conviction that the district court made a mistake. United States v. United States Gypsum Co., 333 U.S. 364, 395, 68 S.Ct. 525, 541-42, 92 L.Ed. 746 (1948). 40 We do not have a firm conviction that the district court made a mistake. The district court heard the testimony of Emanuel Halper, an expert in real estate leases familiar with percentage rent provisions. Halper testified that percentage lease provisions operate in the manner explained in Interpretation Three. 10 The district court then examined both the draft and final versions of the Wendy's-Authority Agreement, and concluded that Wendy's accidentally modeled the Wendy's-Smith Agreement after the draft, rather than final, Wendy's-Authority Agreement. 41 The draft version of the Wendy's-Authority Agreement, on which the district court found Paragraph 3.B was modeled, unambiguously works in the same manner as Interpretation Three. The draft agreement takes the sum of 15% of gift shop gross sales in excess of $200,000 and 10% of floral shop sales in excess of $87,500, and requires the payment of that sum less minimum compensation of $22,400. The in excess of language makes it clear that only sales above $200,000 and $87,500 are multiplied by 15% and 10% respectively. In terms of an example, if the gift shop had $300,000 in gross sales, only $100,000 would be multiplied by 15% for the purposes of computing whether percentage compensation is due. 42 The district court examined expert testimony and harmonized all relevant agreements in concluding that Interpretation Three is the correct construction of Paragraph 3.B. That finding is bolstered by the fact that Wendy's drafted Paragraph 3.B, and under settled Illinois law ambiguous contracts usually are construed against their drafters. See Mitchell v. Jewel Food Stores, 142 Ill.2d 152, 154 Ill.Dec. 606, 610, 568 N.E.2d 827, 831 (1990). The district court formulated a well-reasoned opinion in this very complex matter, and as such we are not left with a firm conviction that it committed a mistake. See Anderson v. Bessemer City, 470 U.S. 564, 576-77, 105 S.Ct. 1504, 1512-13, 84 L.Ed.2d 518 (1985) (Where there are two permissible views of the evidence, the fact finder's choice between them cannot be clearly erroneous.).