Court Opinion

ID: 9543121
Source: CourtListenerOpinion
Date Created: 2023-08-07 16:42:20.28855+00
Date Added: 2024-06-11T15:09:43.436581
License: Public Domain

JUSTICE PINCHAM, dissenting: I dissent. I do not agree with the majority’s conclusion that the language of the buyout agreement provides that the five-year successive payments to Bert Ferrell by Plasti-Drum Corporation were to begin with the corporation’s May 1, 1975, to April 30, 1976, fiscal year. Nor do I agree with the majority’s conclusion that the trial court did not estop plaintiff, Bert Ferrell’s widow, from asserting that the first payment was to begin with the corporation’s May 1, 1976, to April 30,1977, fiscal year. On January 19, 1976, Bert Ferrell and Walter Craig signed a memorandum of the buyout agreement and on January 29, 1976, the memorandum was incorporated into the formal buyout agreement signed by Ferrell and Craig. The January 29, 1976, buyout agreement provided in pertinent part as follows: “A. For the next five (5) successive fiscal years, commencing with the close of its current fiscal year, the corporation shall pay to Ferrell, within ten (10) days of the preparation of its annual federal income tax return, ten percent (10%) of its net profits; such net profits to be determined from the federal income tax return prepared by a certified public accountant engaged by the corporation for that purpose.” (Emphasis added.) On this appeal plaintiff contends that the trial court erred in ruling that the first payment under the buyout agreement was for the corporation’s fiscal year May 1, 1975, to April 30, 1976, and in ruling that the five payments under the buyout agreement were for the five fiscal years from May 1, 1975, to April 30, 1980, and not from May 1, 1976, to April 30, 1981. The gravamen of the conflict arises out of the fact that under the terms of the buyout agreement the corporation was to pay Bert Ferrell 10% of the corporation’s net profit “for the next five (5) successive fiscal years, commencing with the close of its current fiscal year” and there were no corporate profits for its fiscal years May 1, 1975, to April 30, 1976, and May 1, 1976, to April 30, 1977, whereas there were corporate profits for each fiscal year thereafter, particularly May 1, 1980, to April 30, 1981. This court stated in Illinois Valley Asphalt, Inc. v. La Salle National Bank (1977), 54 Ill. App. 3d 317, 319-20, 369 N.E.2d 525, “[i]t is well settled in Illinois that the construction, interpretation or legal effect of a contract are issues to be resolved by the court as questions of law. [Citations.] The principal issue in this case involves the construction and legal effect of the [contract] terms ***.” Since defendant’s appeal raises a question of law, the rule that a reviewing court may not set aside findings of a trial court unless contrary to the manifest weight of the evidence does not apply. “The construction and legal effect of the relevant terms of the [contract] are to be determined by this court as any question of law, independent of the trial court’s judgment.” 54 Ill. App. 3d 317, 320, 369 N.E.2d 525. The court further stated in Illinois Valley Asphalt that the principal objective in construing an agreement is to give effect to the intentions of the parties and that the intentions of the parties are to be derived from the language of the agreement. If the terms of a written agreement are certain and unambiguous the sole determinant of the parties’ intentions is the instrument itself. This court stated in Joseph v. Lake Michigan Mortgage Co. (1982), 106 Ill. App. 3d 988, 991, 436 N.E.2d 663, that “[i]t is well established that the primary objective in construing a contract is to give effect to the intention of the parties involved. [Citations.] The intention of the parties must be ascertained from the language employed in the instrument itself and where there is no ambiguity, from such language alone.” (Emphasis added.) In Vigilante v. National Bank (1982), 106 Ill. App. 3d 820, 823, 436 N.E.2d 652, the court stated, “[t]he law is clear that parties are bound by the language which they use regardless of their intent. *** Construction is a pure question of law, and the court must determine this from the documents’ clear language.” These legal principles are also expressed in Benn & Associates, Ltd. v. Nelsen Steel & Wire, Inc. (1982), 107 Ill. App. 3d 442, 446, 437 N.E.2d 900. Application of these principles to the agreement in the case at bar compels the conclusion that the language of the buyout agreement provides that the first payment to Mrs. Ferrell by the corporation was to be for the corporation’s fiscal year May 1, 1976, to April 30, 1977, as Mrs. Ferrell asserts. A mere cursory reading of the agreement, when the words therein are given their plain, ordinary, customary and simple meaning and usage, leads to no other reasonable conclusion than that the parties intended that the first payment, “for the next five (5) successive fiscal years, commencing with the close of its current fiscal year,” was to be for the corporation’s fiscal year May 1, 1976, to April 30, 1977. On January 29, 1976, when the buyout agreement was signed, “the close of [the corporation’s] current fiscal year” was April 30, 1976. On January 29, 1976, when the buyout agreement was signed, the corporation’s “next five (5) successive fiscal years” were: (1) 1st year — May 1,1976, to April 30,1977. (2) 2nd year — May 1,1977, to April 30,1978. (3) 3rd year — May 1,1978, to April 30,1979. (4) 4th year — May 1,1979, to April 30,1980. (5) 5th year — May 1,1980, to April 30,1981. The first annual payment, “for the next five (5) successive fiscal years, commencing with the close of its current fiscal year, [April 30, 1976,]” under any rational reading of the language of the agreement was for the corporation’s May 1,1976, to April 30,1977, fiscal year. From the plain language of the agreement, the first payment certainly could not have been for the corporation’s fiscal year May 1, 1975, to April 30, 1976, as the trial court and the majority hold, for such a payment could not be a payment “for the next five (5) successive fiscal years, commencing with the close [April 30, 1976] of [the corporation’s] current fiscal year.” The simple language of the buyout agreement clearly designated the number of payments, when and for what periods the payments were to be made. The language is unambiguous and it governs the intent of the parties. The trial court’s and the majority’s interpretations of the language of the agreement are repugnant to the agreement’s expressed terms, are based upon contrary extrinsic evidence, and are inappropriate and unacceptable. Such interpretation violates the clear intent of the parties as expressed in the agreement. Contrary to the majority’s contention, the trial court ruled, inter alia, that plaintiff, Mrs. Ferrell, was estopped from asserting that the first payment under the buyout agreement was for the fiscal year May 1, 1976, to April 30, 1977, because of pleadings she filed in previous litigation in Will County in the case Plasti-Drum Corp. v. Ferrell (1979), 70 Ill. App. 3d 441, 388 N.E.2d 438. This previous Plasti-Drum suit was instituted by Plasti-Drum in Will County, Illinois, to enjoin Mrs. Ferrell from entering PlastiDrum, from disposing of any of the collateral notes made by PlastiDrum and held by the estate of Bert Ferrell, and from making any representation of Plasti-Drum’s financial condition or communication with any of Plasti-Drum’s suppliers. Plasti-Drum further sought from the court a declaration that the notes made by Plasti-Drum and held by the Ferrell estate were not in default. Mrs. Ferrell filed a counterclaim in the Will County case and asked for an accounting of interest, salary and expense reimbursement due the estate, judgment against Plasti-Drum in the amount of $168,802 plus interest and attorney fees, or, in the alternative, delivery of the collateral which secured the notes, payment to her of 10% of Plasti-Drum’s profits for the fiscal year ending April 30, 1976, payment of certain water charges, and possession of the premises occupied by Plasti-Drum under a lease from Bert Ferrell, plus judgment for accrued rent and attorney fees. The trial court ordered that $17,547.42 on deposit with the court could be withdrawn by Mrs. Ferrell, conditioned upon her acceptance of it as satisfaction for the back rent and the February salary payment, and the trial court granted her judgment on the water charges. The trial court also found that she was not entitled to possession of the premises; that she was not entitled to interest accrued on the April 1975 $153,802.14 note prior to its cancellation; that she had improperly accelerated the $153,802.14 note and was not entitled to judgment thereon; and that an injunction would issue preventing her from entering the leased premises without further authorization from Plasti-Drum or the court. The question of which fiscal year the first payment was due under the buyout agreement was not pursued by Plasti-Drum or Mrs. Ferrell in this previous Will County Plasti-Drum case. Defendant, Plasti-Drum, urged in written pleadings filed in the trial court in the case at bar that “plaintiff in 1976 sued for 10% of Plasti-Drum’s net profits as determined by the federal income tax return for the fiscal year ending April 30, 1976” and that “plaintiff [Mrs. Virginia Ferrell] is collaterally estopped from relitigating the issue of the terms of the contract.” Mrs. Virginia Ferrell, plaintiff in the case at bar, was the defendant and counterplaintiff in the previous Plasti-Drum Will County suit. Regarding the Will County case, Mrs. Ferrell asserted in her pleadings in the trial court in the case at bar: “In 1976, some months after Mr. Ferrell’s death, the administratrix of his estate *** [sought] to collect certain obligations due the estate which were then in default. At the time, the plaintiff believed that the corporation was insolvent, but despite repeated demands, she was unable to secure audited financial statements for the corporation’s recently completed fiscal year. On the advice of local counsel, plaintiff included among her claims an allegation that the estate was due a percentage of the profits of the corporation for the year ending April 30, 1976. Plaintiff, who was not a party to the contract, took this action because she believed on the advice of counsel that this allegation would enable her to obtain this financial information even though she was aware that the corporation had no profits through April 1976, and even though plaintiff believed that the intent of the parties to the contract was for profits for the five year period beginning May 1, 1977. At the time that this suit was brought, the defendant was in default on three obligations owed the estate totalling almost $200,000.00, not counting delinquent back rent. Because these obligations were of greater immediate concern to the estate than what at that time seemed to be illusory future profits, plaintiff made a claim for non-existent profits to obtain what she believed to be pertinent financial information about the company. In retrospect, this financial statement could probably have been requested in discovery without making these allegations in the context of her other claims, but that was not her belief at the time. In the final analysis, this claim was abandoned and the statements in the pleadings claiming profits for 1976 did not advantage the plaintiff in any material way.” Mrs. Ferrell pointed out in her pleadings in the case at bar that in the previous Will County Plasti-Drum case “the court made no finding regarding the commencement of the contract period.” Thus, opposed to Plasti-Drum’s contention, Mrs. Ferrell further asserted in her written pleadings filed in the case at bar, “contrary to defendant’s assertions, the plaintiff [Mrs. Ferrell] is not collaterally estopped from relitigating a claim where the issue was not before the court for final determination.” Plasti-Drum expressly admitted in the case at bar that “the trial court in [the previous Will County] case specifically found in its final judgment order dated September 14, 1977 that plaintiff [Mrs. Ferrell] had abandoned that claim.” The question of whether Plasti-Drum’s fiscal year May 1, 1975, to April 30, 1976, or May 1, 1976, to April 30, 1977, was the first year for payment to Ferrell under the terms of the buyout agreement was not decided, discussed or raised on appeal in the previous Will County Plasti-Drum case. In spite of the foregoing, in its findings on April 27, 1984, the trial judge in the case at bar stated: “The following comments represent my findings of fact and conclusion of law. The court reporter’s transcription of these findings and conclusion is to be attached to and made a part of any order hereafter presented. The findings and conclusion are to be referred to and explicitly incorporated in the final order. * * * For the purposes of this suit, she [Mrs. Ferrell] believes the contract period for the percent of profits is May ’77 to May ’81 and not May ’76 to May ’80. * * * *** [Pjlaintiff in a prior case took the affirmative position that the terms of the agreement set by paragraph 2(a) was five years commencing May of 1976. *** She has not satisfactorily explained why that judicial posture, once aggressively asserted, should not estop her from seeking a contractual term commencing with 1977. *** * * * *** [S]he affirmatively asserted in her counterclaim [in her previous suit against Plasti-Drum] that the agreement provision for 10 percent was to commence in 1976, exactly as the terms of the agreement state. Contrary to that prior litigation posture, she now asserts that the agreement provision for 10 percent was not to begin until the fiscal year ending April 30,1977. * * * *** [N]o reason has been offered why estoppel should not bar her claim in this regard.” (Emphasis added.) From the foregoing, it is clear that the trial judge took the position that Mrs. Ferrell was estopped from asserting in the case at bar that Plasti-Drum’s fiscal year May 1, 1976, to April 30, 1977, was the first year for which payment was due from the corporation under the terms of the buyout agreement. The majority’s opposite assertions are contrary to the record and without merit. In my opinion estoppel was inapplicable to Mrs. Ferrell. Estoppel may apply when a party has had his day in court and an opportunity to establish a claim. (Haizen v. Yellow Cab Co. (1963), 41 Ill. App. 2d 330, 336-37, 190 N.E.2d 514.) Estoppel precludes a litigant from denying a prior assertion where it would be unjust to permit the litigant to disavow such assertions upon which another party has relied to his detriment. (Real v. Kim (1983), 112 Ill. App. 3d 427, 434, 445 N.E.2d 783.) Estoppel is inapplicable where a representation of a party sought to be estopped is due to ignorance founded upon an innocent mistake or where there has been no detrimental reliance on the representation. (Carey v. City of Rockford (1985), 134 Ill. App. 3d 217, 220, 480 N.E.2d 164.) Estoppel must be proven by clear and unequivocal evidence. 134 Ill. App. 3d 217, 219, 480 N.E.2d 164. Mrs. Ferrell correctly contends that the question of which was the first year for payment under the terms of the agreement was not resolved by the trial or appellate courts in the previous Will County Plasti-Drum case and that Plasti-Drum did not rely on such representations to its detriment. Mrs. Ferrell contends therefore that she could not be validly estopped from asserting in the case at bar that the first payment under the terms of the agreement was for the fiscal year May 1,1976, to April 30,1977.1 agree. In the previous Will County Plasti-Drum case, not only were Mrs. Ferrell’s attorney, the trial court and the appellate court not called upon to interpret the plain language of the agreement for which fiscal year the first payment was to be made, her lawyer’s interpretation or her own previous erroneous interpretation contrary to the plain words of the agreement would not be binding upon this court. Nor should they be. Nor do their previous erroneous interpretations justify the trial court or this court affixing an interpretation to the agreement which is contrary to the agreement’s clear, unequivocal, unambiguous and plain language. Mrs. Ferrell was not a party to the agreement. She is the administrator of the estate of her late husband, who was a party to the agreement. It is the intent of the parties to the agreement, determined from the plain and clear language, which should control the interpretation of the agreement and not the statements of nonparties to the agreement filed in a lawsuit in which collateral issues were presented. In Chambers v. Appel (1945), 392 Ill. 294, 64 N.E.2d 511, the supreme court held that the inconsistent allegations of heirs in a probate proceeding were not binding on those heirs in another proceeding because at the time the heirs filed the original inconsistent allegations, on advice of counsel, they did not have complete knowledge of the facts. The supreme court held in Lenzi v. Morkin (1984), 103 Ill. 2d 290, 293, 469 N.E.2d 178, that “the intention of the parties at the time the contract was entered into must be ascertained by the language utilized in the contract itself, not by the construction placed upon it by the parties.” (Emphasis added.) The majority concludes that “[t]he trial court properly considered the prior statement made by plaintiff of the date payment was to begin as an evidentiary or judicial admission.” (159 Ill. App. 3d at 942.) This conclusion is ill-founded. Plaintiff’s previous interpretation of the terms of the agreement entered into by her late husband was no more than what plaintiff said it was — a mistaken interpretation, at a time and in a lawsuit in which the first year for the payment under the agreement was not an issue. Plaintiff’s previous erroneous interpretation is contrary to the clear language of the agreement and should therefore be rejected. Murphy v. Rochford (1977), 55 Ill. App. 3d 695, 371 N.E.2d 260, on which the majority relies as authority for its conclusion that plaintiff’s previous pleadings in the Will County case was an evidentiary or judicial admission, is not on point or analogous to the case at bar. In Murphy, plaintiff, a Chicago police officer, asserted his fifth amendment privilege against self-incrimination and refused to testify before a Federal grand jury, for which he was suspended from the police department. Six months later plaintiff resigned from the police department after signing a release in which he waived his salary during the six-month suspension period. Subsequently, in another case the United States Court of Appeals affirmed a judgment which enjoined the superintendent of the Chicago police department from suspending or firing other Chicago police officers because they asserted their fifth amendment privilege against self-incrimination and refused to testify before a Federal grand jury. The judgment affirmed by the court of appeals also ordered that the officers be reinstated with back pay for their suspension or discharge periods. Murphy thereafter filed an action for his back pay, based upon the court of appeal’s decision. On the hearing of the defendant’s motion for summary judgment, regarding the validity of the release signed by Murphy, the police department’s attorney stated, “[t]he court understands valuable consideration. In other words, not proceeding to go to trial and let [sic] him resign and he [sic] would withdraw all of the charges before him — before the Board. That is the consideration he was seeking, because even if he resigned, he could have been charged, tried, and convicted ***.’ ” (55 Ill. App. 3d 695, 700, 371 N.E.2d 260.) The trial judge granted the police department’s motion for summary judgment and Murphy appealed. The appellate court vacated the summary judgment, remanded the cause for trial and stated: “These representations of fact by defendants’ attorney strongly suggest that part of the consideration for the release signed by plaintiff was an agreement not to prosecute him. An agreement not to prosecute is void because it is against public policy, as well as possibly constituting a criminal offense. [Citations.] Clearly, such an agreement could not constitute valid consideration for the release. Nor could the recited consideration of one dollar suffice, for it is not logically separable from the rest of the agreement. In such a case illegality of part of the consideration renders the entire agreement unenforceable. [Citation.] It is clear under Illinois law that this statement of fact by defendants’ attorney, made in his capacity as their attorney at a judicial hearing, may be used as an admission of fact by them.” 55 Ill. App. 3d 695, 700, 371 N.E.2d 260. Murphy is therefore not analogous to or authority in the case at bar for the proposition that Mrs. Ferrell’s unresolved pleadings in a previous lawsuit were properly considered by the trial court as an evidentiary or judicial admission. Significantly, however, the court in Murphy clearly spelled out the requisite ingredients for collateral estoppel, which ingredients are conspicuously absent in the case at bar. The court stated in Murphy: “Our supreme court has provided a succinct statement of the [collateral estoppel] doctrine: ‘Where some controlling fact or question material to the determination of both causes has been adjudicated in the former suit by court of competent jurisdiction and the same fact or question is again at issue between the same parties, its adjudication in the first cause will, if properly presented, be conclusive of the same question in the later suit, irrespective of the question whether the cause of action is the same in both suits or not.’ ” (55 Ill. App. 3d 695, 703, 371 N.E.2d 260.) Thus, it was improper for the trial court to have applied collateral estoppel to Mrs. Ferrell’s contention in the case at bar based upon her pleadings in the Will County case. The majority further concludes that “[t]he fact that the trial judge did not believe plaintiff’s belated claims of mistake after a number of years of receiving payment is no reason for an appellate court to overturn this conclusion [that the first payment under the agreement was for the fiscal year May 1, 1975, to April 30, 1976].” (159 Ill. App. at 942.) This conclusion is bootstrapping from facts which are given an erroneous construction. Plaintiff received payments from PlastiDrum pursuant to the terms of the agreement for a number of years, namely fiscal years: (1) May 1,1977, to April 30,1978, (2) May 1,1978, to April 30,1979, (3) May 1,1979, to April 30,1980. Plaintiff did not receive payment for the fiscal year May 1, 1976, to April 30, 1977, because Plasti-Drum operated at a loss during that year. Under the terms of the agreement, plaintiff did not expect payment for that year. Moreover, plaintiff has not urged the ludicrous contention before this court, as the majority suggests, that “[t]he fact that the trial judge did not believe plaintiff’s belated claim of mistake after a number of years of receiving payment [was a] reason for the appellate court to overturn [the] conclusion [that the first year for payment under the agreement was May 1, 1975, to April 30, 1976].” 159 Ill. App. 3d at 942. Because the agreement was clear and unambiguous it was improper for the trial court to resort to extrinsic evidence to interpret the agreement or to determine the intention of the parties. The court stated in Wilson v. La Salle Manufacturing & Machine Co. (1978), 58 Ill. App. 3d 219, 221, 374 N.E.2d 30, “[w]hen language of the agreement is unambiguous and clear, there is no need to look beyond the instrument to determine the intention of the parties.” Nevertheless, the trial court heard testimony from Walter Lewis that Mr. Ferrell intended to receive 10% of Plasti-Drum’s net profits for the upcoming five years, beginning with May 1, 1976. The memorandum between the parties stated that Bert Ferrell was to receive 10% of the net profits of Plasti-Drum for the next five years after May 1, 1976. Wayne Johnson, who was the attorney for Plasti-Drum and was the drafter of the buyout agreement between the parties, admitted that the agreement called for payment of 10% of Plasti-Drum’s net profits for the next five years, not 10% for the current fiscal year and the next following four years. Even though the trial judge had before it this extrinsic evidence, which was supportive of, compatible to and in accord with the language of the agreement, nevertheless, the trial judge in his interpretation of the agreement instead relied on other extrinsic evidence which was contrary to the plain language of the agreement. The trial judge’s interpretation of the agreement was likewise contrary to the plain language of the agreement. The language of the agreement in the case at bar is clear. The language of the agreement, “[flor the next five (5) successive fiscal years, commencing with the close of its current fiscal year,” precludes the inclusion of the then current fiscal year, May 1, 1975, to April 30, 1976, as the first year of the five years for which payments were to be made. The court will not resort to rules of construction where an agreement itself is clear and unambiguous. (Ricke v. Ricke (1980), 83 Ill. App. 3d 1115, 1118, 405 N.E.2d 351.) The agreement was entered into on January 29, 1976. To reach the conclusion that the first year for payment under the agreement was May 1, 1975, to April 30, 1976, compels a disregard for the agreement’s language “[flor the next five (5) successive fiscal years, commencing -with the close of its current fiscal year, the corporation shall pay to Ferrell ***.” The court stated in Whaley v. American National Insurance Co. (1975), 30 Ill. App. 3d 32, 34, 331 N.E.2d 571, that “the courts cannot make a new contract by supplying provisions nor give plain and unambiguous language a distorted construction.” In Wilson v. La Salle Manufacturing & Machine Co. (1978), 58 Ill. App. 3d 219, 221, 374 N.E.2d 30, the court stated: “It is not within the province of a court to make a new agreement into which the parties have not entered.” The plain language of the agreement in the case at bar is that the first payment was due at the end of the May 1, 1976, to April 30, 1977, fiscal year. I disagree with the majority’s contrary holding and I therefore dissent.