Richer v. Morehead, 14–2618.
| Decision Date | 11 August 2015 |
| Docket Number | No. 14–2618.,14–2618. |
| Citation | 798 F.3d 487 |
| Parties | Marvin H. & Gail L. RICHER, Plaintiffs–Appellants, v. Patrick MOREHEAD, Defendant–Appellee. |
| Court | U.S. Court of Appeals — Seventh Circuit |
Bradley T. Koch, Jocelyn Lindsay Koch, Attorneys Holmstrom & Kennedy, Rockford, IL, for Plaintiffs–Appellants.
Raymond John Ostler, Attorney, Gomberg, Sharfman, Gold & Ostler, Chicago, IL, for Defendant–Appellee.
Before POSNER, KANNE, and HAMILTON, Circuit Judges.
This appeal presents a question of contract interpretation. The Richers, a married couple, filed for bankruptcy. Morehead, who had invested in commercial real estate owned by a trust controlled by Mr. Richer, filed an unsecured claim for $945,000 in the bankruptcy proceeding. The Richers filed an adversary action claiming that Morehead's only lawful interest in the property was to receive a share of the net proceeds of the property if and when it was sold, which hadn't happened. The bankruptcy judge disagreed with the Richers, upheld Morehead's claim, and was affirmed by the district court, precipitating the Richers' appeal to us.
On November 25, 2005, Richer and Morehead had executed an “Equity Participation Agreement” in which Morehead had agreed to pay Richer $700,000 for the right to receive 8 percent of the net proceeds from any sale of the property of the trust. The agreement provided no security for Morehead, but did give him “the sole and exclusive option to convert his Participation Interest to a Demand Note payable within one hundred eighty (180) days of conversion.” (The agreement calls the option the “Conversion Option.”) If he exercised that right on the third, fourth, or fifth anniversary date (that is, November 25 of 2008, 2009, or 2010), the value of the demand note would be $700,000 plus 7 percent simple interest, which jacked up Morehead's claim to $945,000. The agreement went on to provide in a separate section that any notice, request, demand, or other communication governed by the agreement “shall be in writing and shall be delivered by hand or mailed by certified mail, return receipt requested, postage prepaid, or by simultaneous fax transmission.” The parties agreed that Illinois law would govern the interpretation of the agreement should a dispute arise.
Four years after the Equity Participation Agreement was signed, minus one day (and thus on November 24), Morehead sent Richer by certified mail return receipt requested a letter purporting to convert Morehead's participation interest to a demand note for $700,000 (plus interest), effective the day after the letter was mailed, November 25, 2009—the anniversary date. The Richers argue that the letter had to be mailed or otherwise communicated to them on November 25, the anniversary date, neither before nor after. The Equity Participation Agreement provides that “the Conversion Option is exercised on the ... anniversary date,” and the Richers argue that since the mode of exercise is by a written...
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