Srivastava v. Russell's Barbecue, Inc.

• Decision Date: 29 March 1988
• Docket Number: No. 87-2561,87-2561
• Citation: 168 Ill.App.3d 726,119 Ill.Dec. 562,523 N.E.2d 30
• Parties: , 119 Ill.Dec. 562 Gyan P. SRIVASTAVA, Plaintiff-Appellee, v. RUSSELL'S BARBECUE, INC., Defendant-Appellant.
• Court: United States Appellate Court of Illinois

Page 30

523 N.E.2d 30

168 Ill.App.3d 726, 119 Ill.Dec. 562

Gyan P. SRIVASTAVA, Plaintiff-Appellee, v. RUSSELL'S BARBECUE, INC., Defendant-Appellant.

No. 87-2561.

Appellate Court of Illinois,

First District, Second Division.

March 29, 1988.

Marty J. Schwartz, Chicago, for defendant-appellant.

Sullivan & Associates, Ltd., Chicago, for plaintiff-appellee.

Presiding Justice HARTMAN delivered the opinion of the court:

Defendant appeals summary judgment granted to plaintiff in an action for declaratory judgment construing a stock purchase agreement. The issues properly presented for review include whether: (1) defendant's action in opening a third restaurant required a payment of $25,000 to plaintiff by the terms of the agreement; and (2) the agreement is ambiguous.

Plaintiff, Gyan P. Srivastava, Joseph Saly and Robert Pearlman were shareholders in two corporations operating restaurants specializing in barbecued foods: defendant Russell's Barbecue, Inc. ("Russell's"); and Russell's Barbecue of Elmwood Park, Inc. ("Russell's of Elmwood Park"). During 1982, Saly initiated negotiations between the shareholders concerning plaintiff's sale of his holdings and on November 17, 1982, plaintiff, Pearlman, Saly, and the two corporations signed a stock purchase agreement. In return for the sale of plaintiff's 100 shares of stock in Russell's and his 5000 shares of stock in Russell's of Elmwood Park, he would receive $200,000 plus a $52,000 consulting fee. Plaintiff also would obtain $105,000 in return for a covenant not to compete in five Illinois counties. The agreement further provided:

"VI. EXPANSION PAYMENTS

"The Corporation shall have the option of adopting either of the following arrangements with Seller:

"A. The sum of TWENTY-FIVE THOUSAND ($25,000.00) DOLLARS within twelve (12) months following the opening of a third 'RUSSELL's BARBECUE' format restaurant by either of the Corporations, SALY and/or PEARLMAN or a Corporation in which they or their nominees or agents own or control stock; or

"B. In the event that within ten (10) years following the Closing, SALY or PEARLMAN convey all or a majority of their interest in the Corporations or cause the Corporations to convey their restaurants to a third party or parties and the compensation for such transfer or sale includes a continuing franchise fee, then PEARLMAN and SALY agree to pay to Seller a total sum equal to twenty (20%) percent of such franchise fees for the lesser of (a) the term of the franchise agreement, or (b) a period of ten years.

"C. The corporation shall have no obligation to make either the payments hereunder, if at the time the payment becomes due, the Seller shall be engaged either directly or indirectly in a barbecue format restaurant."

According to deposition testimony, plaintiff was concerned with the expansion potential of the business and initially asked for $50,000 for each additional restaurant opened; he later agreed to accept $25,000 for a third restaurant and no money for any later restaurants. Plaintiff believed section VI meant he would benefit in case of expansion. Saly believed this section established alternative forms of payment with the choice up to purchasers. Plaintiff understood he would be paid if either event or both occurred.

In August, 1984, a third Russell's restaurant opened. Plaintiff thereafter sought payment of the $25,000 under section VI(A). Russell's responded that it was electing to choose the method of section VI(B) to make any expansion payments.

On January 10, 1986, plaintiff filed a verified complaint for declaratory relief against Russell's, Russell's of Elmwood Park, Saly and Pearlman, under section 2-701 of the Code of Civil Procedure (Ill.Rev.Stat.1985, ch. 110, par. 2-701), asserting that defendants violated section VI(A) by failing to pay him $25,000 after opening a third restaurant. Plaintiff requested that the circuit court declare the rights of both parties in regard to expansion payments, find that defendants had exercised option VI(A), direct them to pay plaintiff accordingly and award him costs.

On February 18, 1986, defendants moved to dismiss the complaint for failure to state a cause of action, alleging the agreement gave defendants a choice of options and defendant had chosen the section VI(B) option. On June 17, 1986, the circuit court entered an order denying the motion to dismiss. All defendants filed verified answers on July 14, 1986, stating no payment was due plaintiff. Discovery was conducted including depositions of Saly and of plaintiff. Plaintiff filed a motion for summary judgment on March 31, 1987, attaching the agreement, plaintiff's affidavit that no "interests in any Russell's Barbe[c]ue restaurant corporation [were conveyed] in a transfer or sale which includes a continuing franchise fee," and excerpts from Saly's deposition.

On July 16, 1987, the circuit court held a hearing. Plaintiff asserted defendants had chosen section VI(A) by their action in opening a third restaurant. Defendants replied that opening the new restaurant only triggered their election of options and they had selected section VI(B) in their letter of June 12, 1985. The circuit court held that defendants had chosen section VI(A) by virtue of their conduct. The court stated that sections VI(A) and VI(B) were alternatives; since Russell's had adopted section VI(A), plaintiff no longer had rights under section VI(B).

On July 24, 1987, the circuit court entered an order nunc pro tunc July 16, 1987 requiring that Russell's pay plaintiff $25,000 pursuant to section VI(A), interpreting sections VI(A) and VI(B) as mutually exclusive, declaring that Russell's had no further obligations under section VI, and dismissing all other defendants with prejudice. Russell's appeals. No cross-appeal was filed by plaintiff.

I.

Russell's first alleges error in the circuit court's interpretation of the stock purchase agreement and contends that it had the right to elect alternative methods of performance and exercised that right by its letter of June 12, 1985 invoking section VI(B). Russell's asserts that the mere occurrence of events mentioned in sections VI(A) and VI(B) did not constitute an election because the agreement specifically provided that the corporation had the option of choosing. Plaintiff responds that the contract set forth two options for expansion payments and that Russell's adopted section VI(A) by its action in opening an additional restaurant without any provision for payment of a franchise fee, which then could have triggered the option available in section VI(B).

Summary judgment, while a salutary procedure in administering justice, should be granted cautiously so that no party is denied its right to trial in the presence of conflicting facts and inferences. (In re Estate of Bresler (1987), 159 Ill.App.3d 535, 539, 110 Ill.Dec. 26, 510 N.E.2d 1057, appeal denied (1987), 116 Ill.2d 555, 113 Ill.Dec. 293, 515 N.E.2d 102; La Salle National Bank v. Illinois Housing Development Authority (1986), 148 Ill.App.3d 158, 161, 101 Ill.Dec. 373, 498 N.E.2d 697.) Summary judgment is appropriate, however, when the pleadings, depositions, affidavits and other evidence show there is no triable issue of material fact and the movant is entitled to judgment as a matter of law. (Ill.Rev.Stat.1985, ch. 110, par. 2-1005(c); In re Estate of Bresler, 159 Ill.App.3d at 539, 110 Ill.Dec. 26, 510 N.E.2d 1057.) Construing a contract is a matter of law suitable for summary judgment. In re Estate of Bresler, 159 Ill.App.3d at 539, 110 Ill.Dec. 26, 510 N.E.2d 1057; La Salle National Bank, 148 Ill.App.3d at 161, 101 Ill.Dec. 373, 498 N.E.2d 697.

The primary object of contract construction is to give effect to the intention of the parties. (Martindell v. Lake Shore National Bank (1958), 15 Ill.2d 272, 283, 154 N.E.2d 683; Freeland v. Edwards (1957), 11 Ill.2d 395, 401, 142 N.E.2d 701.) That intention should be ascertained from the language of the contract. (Wil-Shore Motor Sales, Inc. v. Continental Illinois National Bank & Trust Co. (1984), 130 Ill.App.3d 167, 172, 85 Ill.Dec. 648, 474 N.E.2d 376; see A.A. Conte, Inc. v. Campbell-Lowrie-Lautermilch Corp. (1985), 132 Ill.App.3d 325, 328-29, 87 Ill.Dec. 429, 477 N.E.2d 30.) Clear and unambiguous contract terms must be given their ordinary and natural meaning ( In re Estate of Bresler, 159 Ill.App.3d at 539, 110 Ill.Dec. 26, 510 N.E.2d 1057; Purolator Security, Inc. v. Wells Fargo Alarm Service (1986), 141 Ill.App.3d 1106, 1111, 96 Ill.Dec. 347, 491 N.E.2d 161.) Contracts should be interpreted as a whole, giving meaning and effect to each provision thereof. (Martindell v. Lake Shore National Bank, 15 Ill.2d at 283, 154 N.E.2d 683; St. John v. City of Naperville (1987), 155 Ill.App.3d 919, 923, 108 Ill.Dec. 551, 508 N.E.2d 1128.) Contracts imply good faith and fair dealing; when an instrument is susceptible of two constructions, an interpretation which imputes bad faith to a party or is inequitable should be avoided. Martindell v. Lake Shore National Bank, 15 Ill.2d at 286, 154 N.E.2d 683; see Business Development Services, Inc. v. Field Container Corp. (1981), 96 Ill.App.3d 834, 839, 52 Ill.Dec. 405, 422 N.E.2d 86.

In the case sub judice, the agreement provided that Russell's had the option of adopting either of two arrangements with seller: to pay $25,000 within one year of opening a third restaurant; or to pay 20% of any franchise fees generated within 10 years for the lesser of the term of the franchise agreement or 10 years. No wording in the contract specified that Russell's would make a written election and promptly notify the seller. Instead, using the ordinary and natural meaning of the words involved, it is clear that adoption of an arrangement by action was contemplated. The circuit court correctly found that opening a third restaurant compelled a payment of $25,000; and that negotiating a continuing franchise fee required another type of payment.

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