Omnitrus Merging Corp. v. Illinois Tool Works, Inc., 1-92-2761

Citation195 Ill.Dec. 701,256 Ill.App.3d 31,628 N.E.2d 1165
Decision Date30 December 1993
Docket NumberNo. 1-92-2761,1-92-2761
Parties, 195 Ill.Dec. 701 OMNITRUS MERGING CORPORATION, Plaintiff-Appellant, v. ILLINOIS TOOL WORKS, INC., Defendant-Appellee.
CourtUnited States Appellate Court of Illinois

Pope & John, Ltd., Chicago (Dean A. Dickie, John J. O'Shea, of counsel), for plaintiff-appellant.

Jenner & Block, Chicago (Joan M. Hall, Patricia A. Bronte, of counsel), for defendant-appellee.

Justice BUCKLEY delivered the opinion of the court:

Plaintiff, Omnitrus Merging Corporation, brought an action seeking rescission, indemnification, and damages against defendant, Illinois Tool Works, Inc., for defendant's alleged fraudulent misrepresentations and breach of certain warranties in relation to a merger agreement entered into between the parties. The trial judge granted defendant's motion for summary judgment (Ill.Rev.Stat.1991, ch. 110, par. 2-1005 (now 735 ILCS 5/2-1005 (West 1992))) on the grounds that indemnification was plaintiff's exclusive remedy under the contract, that plaintiff's action was barred by the limitations period included in the contract, and that plaintiff's action was barred by the doctrine of laches. On appeal, plaintiff contends: (1) that the trial judge erred in finding that indemnification is plaintiff's exclusive remedy under the contract; (2) that the merger agreement does not place a time limit on the filing of an appropriate action under the agreement; and (3) that the trial judge erred in applying the doctrine of laches. We affirm the judgment of the trial court.

On November 19, 1987, plaintiff acquired Truswal Systems Corp. from defendant. The merger agreement which the parties signed became effective on January 6, 1988. Plaintiff alleges that on December 12, 1989, plaintiff became aware that defendant made certain material misrepresentations during the negotiation of the purchase. On December 28, 1989, plaintiff gave defendant notice of the alleged breaches of warranty. According to plaintiff, this notice began a contractually mandated six-month negotiation period. At the conclusion of the six-month negotiation period, the controversy remained unresolved. Therefore, on June 29, 1990, one day after the six-month period had elapsed, plaintiff filed its complaint.

Plaintiff subsequently filed a second-amended complaint in which it requested (a) indemnification under section 8.2 of the merger agreement, (b) rescission for breach of warranty, (c) damages for common law fraud, and (d) rescission for common law fraud. Defendant filed a motion for summary judgment (Ill.Rev.Stat.1991, ch. 110, par. 2-1005 (now 735 ILCS 5/2-1005 (West 1992))) on the grounds that plaintiff's action was barred by the exclusive remedy provision in section 8.2 of the merger agreement, by the limitations period in section 8.3 of the agreement, and by the doctrine of laches.

The trial judge granted defendant's motion for summary judgment for all the reasons asserted by defendants in their motion. Plaintiffs filed a timely appeal to this court.

Plaintiff's first contention on appeal is that the trial judge erred in finding that indemnification is its exclusive remedy under the contract. Plaintiff contends that the term "exclusive of" in section 8.2 of the merger agreement is reasonably susceptible of more than one meaning and thus makes the contract ambiguous. Therefore, plaintiff maintains that the trial judge erred when he found the contract to be unambiguous as a matter of law. Further, plaintiff asserts that it is settled Illinois law that an ambiguity in a contract is a question of fact for the jury. (TDC Development Corp. v. First Federal Savings & Loan Association of Ottawa (1990), 204 Ill.App.3d 170, 149 Ill.Dec. 446, 561 N.E.2d 1142.) Plaintiff argues that, when a contract is unambiguous, the trial judge may only consider the contract from "within its four corners." Plaintiff contends that the trial judge erred, therefore, when he considered extrinsic evidence offered by defendant, but struck similar parol evidence offered by plaintiff. Plaintiff asserts that the trial judge implicitly recognized that an ambiguity existed by his use of parol evidence in arriving at his conclusion.

On the other hand, defendant maintains that the term "exclusive of" is unambiguous. Defendant contends that the only reasonable interpretation of section 8.2 is that indemnification is plaintiff's exclusive remedy or else the other provisions of the merger agreement would be rendered meaningless. Additionally, defendant asserts that prior judicial interpretations and other legal authorities are not parol evidence.

Section 8.2(f) of the merger agreement states:

"The indemnity under this section 8.2 is exclusive of any other rights or remedies which [plaintiff] or its subsidiary corporations, or any of their respective successors or assigns, may have at law or in equity on account of, or with respect to, any of the matters covered by this Section 8.2, or any other action based upon any of the representations, warranties or covenants set forth in this Agreement." (Emphasis added.)

In coming to the conclusion that this paragraph clearly and unambiguously provides for indemnification to be plaintiff's exclusive remedy, the trial judge considered both Williston on Contracts (Williston on Contracts, Forms sec. 1457, Form No. 1 (3d ed. 1979) and the appellate court decision in Citicorp Savings of Illinois v. Ascher (1990), 196 Ill.App.3d 570, 143 Ill.Dec. 474, 554 N.E.2d 409. At the same time, the judge refused to consider and struck the affidavit of Professor Judith N. Levi, a linguistics professor from Northwestern University, who averred that the term "exclusive of" has at least seven different meanings under the plain and ordinary usage of that term.

Summary judgment is proper when the pleadings, affidavits, and other evidence on file viewed in the light most favorable to the nonmovant demonstrate that there is no issue of material fact and that the movant is entitled to judgment as a matter of law. (Ill.Rev.Stat.1991, ch. 110, par. 2-1005 (now 735 ILCS 5/2-1005 (West 1992)); Srivastava v. Russell's Barbecue, Inc. (1988), 168 Ill.App.3d 726, 730, 119 Ill.Dec. 562, 565, 523 N.E.2d 30, 33.) The construction of a contract is a question of law for the trial judge and thus suitable for summary judgment. Srivastava, 168 Ill.App.3d at 730, 119 Ill.Dec. at 565, 523 N.E.2d at 33.

The primary objective in contract construction is to give effect to the intention of the parties and that intention is to be ascertained from the language of the contract. (Srivastava, 168 Ill.App.3d at 730, 119 Ill.Dec. at 565, 523 N.E.2d at 33.) If a contract is clear and unambiguous, the judge must determine the intention of the parties "solely from the plain language of the contract" and may not consider extrinsic evidence outside the "four corners" of the document itself. (Tishman Midwest Management Corp. v. Wayne Jarvis, Ltd. (1986), 146 Ill.App.3d 684, 689, 102 Ill.Dec. 538, 541, 500 N.E.2d 431, 434.) "Clear and unambiguous contract terms must be given their ordinary and natural meaning" and contracts must be interpreted "as a whole, giving meaning and effect to each provision thereof." Srivastava, 168 Ill.App.3d at 730, 119 Ill.Dec. at 565, 523 N.E.2d at 33.

A contract term will only be found to be ambiguous "if the language is reasonably or fairly susceptible to more than one construction." (Tishman, 146 Ill.App.3d at 689, 102 Ill.Dec. at 541, 500 N.E.2d at 434.) Although the question of whether a contract is clear or ambiguous is a question of law for the court (Tishman, 146 Ill.App.3d at 688, 102 Ill.Dec. at 541, 500 N.E.2d at 434), the meaning of any ambiguity found by the court is a question of fact for the determination of the jury. ( TDC Development Corp., 204 Ill.App.3d at 175, 149 Ill.Dec. at 449, 561 N.E.2d at 1145.) Moreover, "[o]nce the trial court has interpreted the contract as a matter of law, the reviewing court may likewise independently construe the contract." Tishman, 146 Ill.App.3d at 689, 102 Ill.Dec. at 542, 500 N.E.2d at 435.

Illinois courts have recognized and enforced exclusive remedy provisions in contracts. (See Veath v. Specialty Grains, Inc. (1989), 190 Ill.App.3d 787, 137 Ill.Dec. 892, 546 N.E.2d 1005; Citicorp Savings, 196 Ill.App.3d at 570, 143 Ill.Dec. at 477, 554 N.E.2d at 412.) In fact, remedy provisions have been held to be exclusive even absent the express use of the word exclusive in the contract when that is the only reasonable construction of the contract as a whole. Veath, 190 Ill.App.3d at 797, 137 Ill.Dec. at 898, 546 N.E.2d at 1011.

Based on the above stated principles, we agree with the trial judge that the language in the merger agreement which provided that indemnification "is exclusive of any other rights or remedies" is clear and unambiguous and intended to be plaintiff's exclusive remedy. Although the term "exclusive of" may have different meanings depending on the context in which it is used, its use in this contract was clearly intended by the parties to mean that indemnification was plaintiff's exclusive remedy. See e.g. IK Corp. v. One Financial Place Partnership (1990), 200 Ill.App.3d 802, 811, 146 Ill.Dec. 198, 205, 558 N.E.2d 161, 168.

Additionally, the trial judge did not improperly rely upon parol evidence by considering Williston on Contracts or the decision in Citicorp Savings. Moreover, we do not believe that he erroneously struck the affidavit of plaintiff's expert as inadmissible parol evidence.

Since the question of whether a contract is clear or ambiguous is a question of law (Srivastava, 168 Ill.App.3d at 732, 119 Ill.Dec. at 567, 523 N.E.2d at 35), it is proper for a court to consider legal precedent when deciding the issue. (See IK Corp., 200 Ill.App.3d at 811, 146 Ill.Dec. at 206, 558 N.E.2d at 169 (interpreting the contract term "subject to" to be unambiguous as a...

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