Metalex Corp. v. Uniden Corp. of America, 87-2282

• Court: United States Courts of Appeals. United States Court of Appeals (7th Circuit)
• Writing for the Court: Before POSNER, EASTERBROOK, and MANION; MANION
• Citation: 863 F.2d 1331
• Parties: METALEX CORPORATION, an Illinois corporation, Plaintiff-Appellee, v. UNIDEN CORPORATION OF AMERICA, a foreign corporation, Defendant-Appellant.
• Docket Number: No. 87-2282,87-2282
• Decision Date: 09 December 1988

Page 1331

863 F.2d 1331 METALEX CORPORATION, an Illinois corporation, Plaintiff-Appellee,
v.
UNIDEN CORPORATION OF AMERICA, a foreign corporation,
Defendant-Appellant. No. 87-2282. United States Court of Appeals,
Seventh Circuit. Argued Feb. 16, 1988.
Decided Dec. 9, 1988.

Page 1332

Elsie G. Holzwarth, Chicago, Ill., for defendant-appellant.

Barbara J. Stuetzer, Katten Muchin & Zavis, Chicago, Ill., for plaintiff-appellee.

Before POSNER, EASTERBROOK, and MANION, Circuit Judges.

MANION, Circuit Judge.

Uniden Corporation of America (Uniden) appeals the district court's grant of summary judgment against it and in favor of Metalex Corporation (Metalex) in a contract dispute. We reverse and remand.

I.

Uniden, whose businesses include selling television satellite receiver systems to consumers, agreed in December, 1984, to buy receiving antennas from International Video Communications Corporation (IVC). A few days later, on January 1, 1985, IVC agreed to buy mesh panels from Metalex to use in manufacturing the antennas IVC was to sell to Uniden. As a condition of the Purchase Agreement between IVC and Metalex, Uniden agreed to guarantee IVC's payment and performance under the Purchase Agreement with Metalex.

The Purchase Agreement between IVC and Metalex provided that between January 1, 1985 and March 31, 1986, IVC was to purchase not less than 80,000 "units" (a unit consisting of four panels) from Metalex. The Purchase Agreement further provided that concurrently with executing the agreement, IVC was to place a purchase order with Metalex for the initial 19,500 units "for delivery during the first two calendar quarter [sic] of 1985 as follows:"

January 500 units ( 9,000 panels)
                February 1,200 units ( 27,000 panels)
                March 2,500 units ( 45,000 panels)
                April 4,000 units ( 72,000 panels)
                May 5,000 units ( 90,000 panels)
                June 6,000 units (108,000 panels)
                

IVC agreed to place additional purchase orders for delivery of the remaining units during calendar quarters beginning July 1, 1985. The Purchase Agreement further provided that Uniden was to countersign all of IVC's purchase orders. Uniden's Guaranty also provided for Uniden's countersignature on IVC's purchase orders as a condition precedent to Uniden's liability under the Guaranty.

Although goods were delivered, Uniden never countersigned any document specifically denominated "purchase order." Instead, on March 19, Uniden sent an executed copy of the Guaranty to Metalex, accompanied by a letter from Harold Ducote, Uniden's general counsel. The letter confirmed "Uniden's acquiescence to the purchase schedule through June, 1985 as contained in the aforementioned Agreement and the terms and conditions thereof." Uniden and Metalex agree that Ducote sent the letter in lieu of countersigning a purchase order. They disagree, though, about the letter's effect. Uniden contends that it meant only to extend its Guaranty to units delivered before July 1, 1985. Metalex, on the other hand, contends that the letter can only be reasonably interpreted as guaranteeing payment for the initial 19,500 units set out in the delivery schedule in the Purchase Agreement no matter when those units were delivered.

On August 29 and September 4, 1985, Metalex issued five invoices for mesh panels that it shipped to IVC. The total amount due for those units was $170,597.69. IVC never paid Metalex for those panels. In October, 1985, Metalex notified

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Uniden that IVC had not paid the invoices and requested that Uniden pay pursuant to the Guaranty. Uniden did not pay, and in March, 1986, Metalex filed this lawsuit against IVC and Uniden.

IVC defaulted and is not a party to this appeal. In October, 1986, after completing its discovery against Uniden, Metalex filed a motion for summary judgment. Uniden filed a cross-motion for summary judgment. The district court held that in the March 15 letter from Ducote, considered with the Guaranty and Purchase Agreement, Uniden agreed to guarantee the initial 19,500 units designated for delivery by June 30, 1985, even if those units were delivered after that date. The district court also found that no fact issue existed regarding whether the units at issue in this case were part of the initial 19,500 units. The district court accordingly entered summary judgment for Metalex. Uniden appeals that judgment.

II.

The Guaranty provides, and the parties agree, that Illinois law governs. In interpreting a contract under Illinois law, a court must first decide whether or not the contract is ambiguous. That is a question of law which we review de novo. LaSalle Nat'l Bank v. Service Merchandise Co., 827 F.2d 74, 78 (7th Cir.1987); National Tea Co. v. American Nat'l Bank and Trust, 100 Ill.App.3d 1046, 56 Ill.Dec. 474, 476, 427 N.E.2d 806, 808 (1st Dist.1981). If the court determines the contract is unambiguous, the court must then declare the contract's meaning. That declaration is also a question of law. LaSalle Nat'l Bank, 827 F.2d at 78. But if the court finds that the contract is ambiguous, the contract's meaning becomes a fact question for the trier-of-fact. Id.

Contract interpretation is a subject particularly suited to disposition by summary judgment. Summary judgment is appropriate where no genuine issues of material fact exist and the moving party is entitled to judgment as a matter of law. Fed.R.Civ.P. 56. If a contract is unambiguous, by definition no material issues of fact exist regarding the contract's interpretation; that interpretation is a question of law for the court.

Metalex contends that the Purchase Agreement, Guaranty, and Ducote's March 15 letter unambiguously establish that Uniden agreed to guarantee IVC's payment for the initial 19,500 units delivered under the Purchase Agreement, no matter when delivered. Uniden, on the other hand, contends that these three documents unambiguously establish that Uniden only guaranteed units delivered before July 1, 1985; for units delivered after that date, Uniden's Guaranty applied only if Uniden countersigned purchase orders for those units. Since the invoices at issue here were dated after June 30, 1985, and Uniden never countersigned purchase orders for those shipments, Uniden contends that it had no obligation to pay for those units. Uniden argues alternatively that the contract documents are ambiguous, and that a material issue of fact exists regarding their interpretation.

The Guaranty itself is unambiguous (despite the fact that it is written in stultifying legalese). Uniden agreed to guarantee payments due from IVC to Metalex on purchase orders "executed by IVC and countersigned by [Uniden]." Uniden also waived notice of modifications in the delivery schedule for IVC's purchases, and agreed that Metalex and IVC could modify the delivery schedule without affecting Uniden's obligation under the Guaranty. Thus, if Uniden had countersigned a purchase order for the initial 19,500 units, Uniden would be obliged to guarantee IVC's payments for those units no matter when Metalex delivered them. Likewise, if Uniden did not countersign any purchase orders, it would not be liable under the Guaranty alone.

The problem here is that instead of countersigning any document specifically denominated a "purchase order," Uniden sent Metalex Ducote's March 15 letter "acquiesce[ing] to the purchase schedule through June 1985 as contained in the [Purchase] Agreement and the terms and conditions thereof." Reading Ducote's letter in

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isolation, it is possible to interpret it as saying that Uniden was guaranteeing IVC's payments only through June, 1985 and, therefore, was not guaranteeing payment for units IVC purchased after June, 1985. But we cannot read Ducote's letter in isolation; in determining whether a contract is ambiguous (that is, whether it can reasonably be interpreted more than one way) we must examine the contract as a whole. United Equitable Ins. Co. v. Reinsurance Co. of America, 157 Ill.App.3d 724, 109 Ill.Dec. 846, 890, 510 N.E.2d 914, 918 (1st Dist.), appeal dismissed, 117 Ill.2d 554, 115 Ill.Dec. 410, 517 N.E.2d 1096 (1987). Ducote's letter specifically mentioned, and was accompanied by, the written Guaranty executed by Metalex, and specifically incorporated the Purchase...