Court Opinion

ID: 9707476
Source: CourtListenerOpinion
Date Created: 2023-08-26 02:12:51.178252+00
Date Added: 2024-06-11T18:22:33.564612
License: Public Domain

JUSTICE THEIS, dissenting: Enterasys does not contest the trial court’s finding that it breached the Remarketing Agreement, but argues only that section 4.4(b) of that agreement is an unenforceable penalty clause. The majority apparently finds that the provision is a recourse provision requiring Fleet to be placed in the same position it was in prior to financing the Vitts Retail Contracts, and therefore, is enforceable. In so holding, the majority, like the trial court, confuses two separate agreements and conflates two separate remedies for separate breaches. Because I believe that section 4.4(b) of the Remarketing Agreement is not a recourse provision in the event of a Vitts default, I respectfully dissent. First, in this highly sophisticated transaction, the Remarketing Agreement never explicitly states that the purpose of the resale of the equipment was to provide Fleet with recourse upon default of the customer, or to provide Fleet with any credit support whatsoever. Rather, two sections of the Remarketing Agreement refer to the Transaction Supplements for the sole applicable recourse provisions. Section 1.7 explains that “any applicable recourse provisions with respect to such Retail Financing” would be contained in the Transaction Supplement and section 3.3 states that “[t]he extent of and manner of recourse shall be set forth in the Transaction Supplement.” These supplements contained a specific recourse provision in the event that Vitts defaulted on its retail contract whereby Enterasys would pay Fleet 75% of the purchase price of each supplement with a decreasing percentage scale depending on whether Vitts increased its capital by a certain amount. In contrast, Enterasys agreed in the Remarketing Agreement to remarket the equipment upon either the expiration or termination of a lease agreement or in the event of a customer default, using its “best efforts,” but with “no representations or warranties as to uhe results of such efforts.” I find that Enterasys made no guarantees that Fleet would be made whole. The majority cites parol evidence, including testimony by Fleet’s representatives, that the combination of the 75% credit recourse plus the remarketing proceeds gave Fleet 100% credit protection. The majority uses this testimony despite its finding that the Remarketing Agreement is not ambiguous. If the agreement is unambiguous, this court cannot consider any extrinsic evidence beyond the four corners of the contract. Air Safety, 185 Ill. 2d at 462-63. Thus, while I disagree that any parol evidence is necessary in this case, I must add additional evidence ignored by the majority. In his deposition, Fleet’s vice-president, Stuart Schwartz, testified that if Enterasys complied with all of the terms of the Remarketing Agreement, Fleet might not recover the remaining 25% from the proceeds of the remarketing efforts. At best, the parol evidence on this issue creates a question of fact. While the majority finds that the contractual language in section 4.4(b) obligated Enterasys to provide Fleet with 100% recovery of its financing, it omits the title of that section: “[Enterasys] Breach and Remedies.” It is clear, then, that section 4.4(b) is a remedy provision for an Enterasys breach of the Remarketing Agreement, not a recourse provision in the event that the deal with Vitts “went bad,” as the trial court held. In fact, section 4.4(b) is unrelated to any breach or default by the customer, Vitts. The language is clear that upon Enterasys’ breach of the Remarketing Agreement, the parties agreed in section 4.4(b) to provide a formula to determine the damages as a remedy to Fleet for that breach. Thus, I would find that this section is a liquidated damages clause. See Penske Truck Leasing Co., 311 Ill. App. 3d at 454-55 (finding a liquidated damages clause where the paragraph did not set forth a sum certain in case of a breach by the customer, but provided a formula for computing damages in case of a breach). However, I believe that fact questions remain as to whether section 4.4(b) is enforceable or a penalty. Therefore, I would reverse the decision of the trial court and remand for further proceedings.