Opinion ID: 658820
Heading Depth: 1
Heading Rank: 7

Heading: intent of parties to release indemnity and insurance claims

Text: 32 Vitkus asserts that, assuming the general language of the Release is not confined to the specific claims and obligations enumerated therein as a matter of law, the district court nevertheless improperly decided factual issues concerning the parties' intent by granting summary judgment in favor of Beatrice on the scope of the Release. Vitkus contends that he did not intend to discharge Beatrice's financial obligation to indemnify him and to provide directors and officers' insurance; rather, he argues that the Release was only intended to discharge any employment compensation and termination claims he might have. 10 We believe there is a latent ambiguity in the Release as to its intended scope and that summary judgment was therefore inappropriate. 33 Under Illinois law, a release is a contract, and therefore is governed by contract law. Farm Credit Bank of St. Louis v. Whitlock, 144 Ill.2d 440, 163 Ill.Dec. 510, 513, 581 N.E.2d 664, 667 (1991). Where a written agreement is unambiguous, the court must enforce the agreement as written. Rakowski v. Lucente, 104 Ill.2d 317, 84 Ill.Dec. 654, 657, 472 N.E.2d 791, 794 (1984). In such a case, [b]oth the meaning of the instrument, and the intention of the parties must be gathered from the face of the document without the assistance of parol evidence or any extrinsic aids. Id.; see Farm Credit, 163 Ill.Dec. at 513, 581 N.E.2d at 667; Haley v. Posdal, 201 Ill.App.3d 963, 147 Ill.Dec. 743, 748, 559 N.E.2d 1083, 1088 (1990); Aqua-Aerobic Systems, Inc. v. Ravitts, 166 Ill.App.3d 168, 117 Ill.Dec. 77, 79, 520 N.E.2d 67, 69 (1988); Shultz v. Delta-Rail Corp., 156 Ill.App.3d 1, 108 Ill.Dec. 566, 571, 508 N.E.2d 1143, 1148 (1987). However, where a court determines that a contract is ambiguous as a matter of law, its construction becomes a question of fact, and parol evidence is admissible to ascertain the parties' intent. Farm Credit, 163 Ill.Dec. at 513, 581 N.E.2d at 667 (citing Quake Constr., Inc. v. American Airlines, Inc., 141 Ill.2d 281, 152 Ill.Dec. 308, 565 N.E.2d 990 (1990)). 34 Whether a contract is ambiguous is a question of law. Farm Credit Bank, 163 Ill.Dec. at 513, 581 N.E.2d at 667; Shultz, 108 Ill.Dec. at 571, 508 N.E.2d at 1148. A contract is ambiguous if it is capable of being understood in more than one sense. Farm Credit, 163 Ill.Dec. at 513, 581 N.E.2d at 667. The Illinois Supreme Court recently recognized the doctrine of latent ambiguity. A latent ambiguity exists where the language employed is clear and intelligible and suggests but a single meaning, but some extrinsic factor or extraneous evidence creates a necessity for interpretation or a choice among two possible meanings. Hoglund v. State Farm Mutual Auto Ins. Co., 148 Ill.2d 272, 170 Ill.Dec. 351, 355, 592 N.E.2d 1031, 1035 (1992) (quoting Black's Law Dictionary 102 (3d ed. 1933)); see also FDIC v. W.R. Grace & Co., 877 F.2d 614, 620-22 (7th Cir.1989), cert. denied, 494 U.S. 1056, 110 S.Ct. 1524, 108 L.Ed.2d 764 (1990) (recognizing similar doctrine in Illinois intermediate appellate court cases). 35 The apparently clear language in the Release discharging financial obligations that are on account of arising out of or in connection with [Vitkus'] employment with Beatrice or the termination thereof contains a latent ambiguity as to whether the parties intended to release Beatrice's obligations to provide indemnity and insurance. The circumstances surrounding the execution of the Release suggest two reasonable meanings. That Vitkus served on the Silverado board at the request of Beatrice suggests that, in fact, the parties viewed Vitkus' directorship as connected with his employment; consequently, the Release could be read as encompassing Beatrice's duty to provide insurance and indemnity when it discharged financial obligations ... on account of arising out of or in connection with his employment at Beatrice. 36 On the other hand, Vitkus stated in an affidavit that he understood the Release to cover such traditional employee claims as age discrimination, wrongful termination, or the like. Although under Illinois law, a contract is not rendered ambiguous simply because the parties do not agree upon its meaning, Shultz, 108 Ill.Dec. at 571, 508 N.E.2d at 1148, other circumstances surrounding the execution of the release suggest that Vitkus' understanding of the Release was not unfounded. Language in the pre-merger Severance Agreement indicates that the termination benefits that it offered were to be in addition to rather than in lieu of other employment benefits Beatrice owed Vitkus:It is expressly agreed that this Agreement supersedes any and all existing agreements between you and the Company or any of its subsidiaries, and any and all plans and policies of the Company or any of its subsidiaries, ... with regard to benefits to be paid to you on account of termination of employment or a Change of Control pursuant to any severance policy or any individual arrangement (including an employment or severance agreement) which you may have with the Company or any of its subsidiaries. Except as provided in the preceding sentence, payments and benefits to you hereunder will be made and provided without regard to and in addition to any other payments or benefits required to be paid and provided to you at any time hereafter under any other agreement, plan or policy of the Company ... relating to compensation, retirement or other benefits. In other words, the payments and benefits provided herein shall be in addition to and not in lieu of salary, consulting payments, bonus payments, incentive compensation retirement benefits, and any other payments or benefits other than benefits to be paid to you on account of termination of employment or a Change of Control pursuant to any individual arrangement (including an employment or severance agreement) which you may have with the Company or any of its subsidiaries. 37 Aplt. App. 464. Thus, under the Severance Agreement, Vitkus had the right to retain benefits that he received from Beatrice that were not provided in conjunction with his termination. The circumstances suggest that when Vitkus received the Termination Letter, which provided benefits nearly identical to those to which he was entitled under the Severance Agreement, he could have been justified in believing that the Termination Letter was simply implementing the Severance Agreement and that it, like the Severance Agreement, left unaffected benefits other than those in connection with his termination. In fact, the Termination Letter states it is to confirm the provisions of [Vitkus'] separation from Beatrice. Aplt.App. at 511. In the context of the Severance Agreement and the Termination Letter (to which the Release was attached), we believe that language releasing Beatrice's financial obligations in connection with Vitkus' employment creates a latent ambiguity as to whether it was intended to include Beatrice's financial obligations in relation to Vitkus' service on the Silverado board, such as the obligation to provide insurance and indemnity. 38 Because the Release is ambiguous, the determination of what the parties intended to be included within its scope is a fact question for the jury. We believe that the evidence detailed above is sufficient to raise a genuine issue of material fact as to whether the parties intended the Release to discharge Beatrice's insurance and indemnity obligations relating to Vitkus' service on the Silverado board. Summary judgment was therefore inappropriate, and we remand Vitkus' claims to the district court.