Shapich v. CIBC Bank USA , 428 Ill. Dec. 629 ( 2018 )

2018 IL App (1st) 172601FIFTH DIVISION
Opinion filed: December 14, 2018
No. 1-17-2601
______________________________________________________________________________
IN THE
APPELLATE COURT OF ILLINOIS
FIRST DISTRICT
______________________________________________________________________________
BRANKO SHAPICH, ) Appeal from the
) Circuit Court of
Plaintiff-Appellee and Cross-Appellant, ) Cook County
)
)
v. ) No. 14 L 013146
)
CIBC BANK USA, f/k/a The Private Bank and Trust )
Company; M.P.D., INC., an Illinois Corporation; and )
THOMAS MILOWSKI, an Individual, )
)
Defendants, )
) Honorable
(CIBC BANK USA, f/k/a The PrivateBank and Trust ) Margaret A. Brennan,
Co., Defendant-Appellant and Cross-Appellee). ) Judge, Presiding.
______________________________________________________________________________
JUSTICE HOFFMAN delivered the judgment of the court, with opinion.
Justices Hall and Lampkin concurred in the judgment and opinion.
OPINION
¶1 The defendant, CIBC Bank USA, f/k/a The PrivateBank and Trust Co. (Bank), 1 appeals
from orders of the circuit court of Cook County (1) entering a summary judgment in favor of the
plaintiff, Branko Shapich, on his claim for tortious interference with a contractual relationship,
and (2) denying its cross-motion for summary judgment. Shapich cross-appeals from the circuit
1
Shapich’s pleadings in the circuit court identified the Bank as “Privatebancorp, Inc., d/b/a The
PrivateBank.” In this order, we adopt the name used by the Bank and Shapich in their briefs on appeal.
No. 1-17-2601
court’s order awarding him damages, which he claims were insufficient as a matter of law. For
the following reasons, we affirm in part, reverse in part, and remand the matter for further
proceedings.
¶2 The following factual and procedural history is derived from the pleadings, exhibits, and
depositions of record.
¶3 M.P.D., Inc. (MPD) is a manufacturing company founded by Shapich and Joseph Hajnos.
In 2013, Shapich entered into discussions to sell his stock in the company to MPD in exchange
for a $1.5 million promissory note (Note) payable in 10 annual installments, with interest. As a
condition of the stock redemption plan, MPD’s lender, the Bank, required MPD and Shapich to
execute an agreement providing that MPD’s obligation to Shapich would be subordinate to
MPD’s debt to the Bank. The Bank drafted the agreement (First Subordination Agreement),
which Shapich and MPD signed on October 15, 2013.
¶4 The First Subordination Agreement defined the terms “Subordinated Indebtedness” and
“Superior Indebtedness” as follows:
“ ‘Subordinated Indebtedness’ *** mean[s] all present and future indebtedness,
*** of any kind *** owing from [MPD] to [Shapich] *** in its broadest sense and
includes without limitation all principal, all interest, *** and all other obligations,
*** of any nature whatsoever.
‘Superior Indebtedness’ *** include[s] all present and future indebtedness, *** of
any kind *** owing from [MPD] to [the Bank] *** in its broadest sense and
includes without limitation all principal, all interest, *** and all other obligations
of [MPD] to [the Bank], *** of any nature whatsoever.” 2
2
For readability, this order omits emphasis and uppercase type when quoting the exhibits.
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¶5 According to the First Subordination Agreement, “[a]ll Subordinated Indebtedness of
[MPD] to [Shapich] is and shall be subordinated in all respects to all Superior Indebtedness of
[MPD] to [the Bank].” Additionally, the First Subordination Agreement stated:
“[MPD] will not make and [Shapich] will not accept, at any time while any
Superior Indebtedness is owing to [the Bank], *** any payment upon any
Subordinated Indebtedness, *** except upon [the Bank’s] prior written consent.
***
Should any payment, *** be received by [Shapich] at any time on the
Subordinated Indebtedness contrary to the terms of this Agreement, [Shapich]
immediately will deliver the same to [the Bank].”
Notwithstanding, the First Subordination Agreement also provided that “[t]he contractual
principal and interest payments referenced on the Note are allowed but any additional
accelerated payments would need prior Bank approval.” Finally, the First Subordination
Agreement specified that it “will remain in full force and effect until [Shapich] shall notify [the
Bank] *** to the contrary.”
¶6 On October 23, 2013, Shapich and MPD executed a Stock Redemption Agreement (SRA)
and the Note. The SRA and the Note each stated that the Note “shall be subordinate” to the
Bank’s “rights of payment and redemption” for MPD’s debt. That day, MPD paid Shapich the
first annual installment on the Note, and Shapich tendered his stock to MPD and resigned from
the company.
¶7 In April 2014, MPD executed a new loan agreement with the Bank. Although Shapich
never terminated the First Subordination Agreement, and the parties agree that it remained in
effect at all times relevant to this case, the new loan agreement provided that the Bank “shall not
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be required” to disburse the loan if MPD “fail[s] to execute and deliver” a “Subordination
Agreement executed by *** Shapich in favor of [the Bank].” A Bank manager, Tom Milowski,
gave Hajnos a copy of a new subordination agreement (Second Subordination Agreement) for
Shapich to sign.
¶8 On July 24, 2014, Shapich met with Hajnos and Milowski. Their depositions contain
differing accounts of the meeting, but they agreed that Shapich refused Milowski’s request to
sign the Second Subordination Agreement. Afterwards, Milowski sent an email to Hajnos stating
that, due to Shapich “not wanting to re-sign [the] subordination agreements, *** MPD is not
approved to make any payment to *** Shapich as agreed to under the [SRA].” MPD did not pay
Shapich the installment on the Note due in October 2014, nor did it make any additional
payments thereon.
¶9 On December 19, 2014, Shapich filed a verified complaint alleging breach of contract
against MPD (Count I) and tortious interference with a contractual relationship against the Bank
(Count II). 3 As to Counts I and II, Shapich sought $1,350,000 plus interest, costs, and attorney
fees. On April 14, 2017, he moved for a summary judgment on both counts. Regarding Count II
against the Bank, he contended that the SRA “expressly authorized” MPD to make payments on
the Note and that MPD violated the SRA when it complied with the Bank’s instruction to cease
payment thereon, which was given without legal justification. The Bank filed a cross-motion for
summary judgment, arguing that MPD did not breach its agreement with Shapich because the
SRA afforded higher priority to the Bank’s debt and that any conduct on its part to induce a
breach by MPD was privileged.
3
Shapich’s verified complaint also contained a third count that alleged tortious interference with
a contractual relationship against Milowski. The circuit court dismissed that count with prejudice, and it is
not at issue in this appeal.
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¶ 10 On August 1, 2017, the circuit court entered a written order that: (1) entered summary
judgments in favor of Shapich and against MPD and the Bank; (2) denied the Bank’s cross-
motion for summary judgment against Shapich; and (3) determined that MPD and the Bank were
jointly and severally liable to Shapich. Additionally, the court awarded Shapich (1) $1,350,000
from MPD, plus interest, attorney fees, and costs, and (2) $450,000 from the Bank “as of”
August 1, 2017, which “shall increase as ‘consequent damages’ ” for all future payments on the
Note which are not paid by MPD, “up to” $1,350,000. The circuit court instructed Shapich to
prepare a petition for attorney fees, which he filed on August 18, 2017. On September 12, 2017,
before the court ruled on Shapich’s petition, the Bank filed a “Motion for Clarification” of the
August 1, 2017 judgment.
¶ 11 On September 29, 2017, the circuit court entered an order disposing of both Shapich’s
petition for attorney fees and the Bank’s motion for clarification. In that part of the order relating
to Shapich’s petition, the court awarded him a total of $401,836.29 for interest, attorney fees, and
costs against MPD, in addition to the relief previously granted in the order of August 1, 2017. In
that part of the order relating to the Bank’s motion for clarification, the court specified that the
judgment entered against the Bank “is capped at $1,350,000.00 and does not include *** interest
or attorneys fees and costs.” The order stated that it is “final and appealable,” and the Bank filed
a notice of appeal therefrom on October 19, 2017.
¶ 12 On October 25, 2017, Shapich filed a motion to modify the order of September 29, 2017,
seeking an award of interest against the Bank. MPD, in turn, filed a motion to vacate or modify
the September 29, 2017 order on October 27, 2017, on the basis that the summary judgment
entered against it was improper, the judgment for attorney fees was excessive, and “[t]he
judgment against [the Bank] should have included the entire amount of damages assessed against
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MPD.” Shapich filed a motion to strike MPD’s posttrial motion on November 3, 2017. On
November 6, 2017, the circuit court denied Shapich’s motion to strike and set “[a]ll pending
motions” for hearing. Then, on November 14, 2017, the Bank filed an amended notice of appeal
from the court’s September 29, 2017 order.
¶ 13 On February 16, 2018, the circuit court entered an order that, in relevant part: (1) denied
MPD’s motion to reconsider; (2) modified the judgment entered against the Bank to reflect
“unpaid principal payments” of $600,000 and interest totaling $236,250; and (3) stated that it
was “final and appealable.” Shapich, on March 12, 2018, filed a notice of appeal from the orders
of September 29, 2017 and February 16, 2018. Subsequently, on March 16, 2018, he filed a
motion to modify or vacate the September 29, 2017 judgment, as modified on February 16, 2018,
on the basis that, “as a result of the judgment against MPD,” another of its secured creditors,
Crestmark Bank, “held a UCC sale of all MPD’s assets on February 28, 2018.” Therefore,
Shapich asked the court to modify the judgment entered against the Bank “to reflect the full
value of the unpaid Note, because MPD’s satisfaction of the Note is now an impossibility.”
¶ 14 On May 7, 2018, the circuit court entered an order which modified its February 16, 2018
order to specify that the Bank pay $600,000 to Shapich “for all *** principal payments” that
MPD had not made to date on the Note, plus accrued interest totaling $236,250, and stated that
“the judgment against [the Bank] shall increase as consequential damages on all future new
payment amounts not made” by MPD. On June 18, 2018, this court granted the Bank’s and
Shapich’s Joint Motion for Leave to File Amended Notices of Appeal and Cross-Appeal. 4
¶ 15 On appeal, the Bank urges us to reverse both the summary judgment entered in favor of
Shapich and the denial of its own motion for summary judgment. According to the Bank, the
4
MPD is not a party to this appeal, nor does the record show that it filed a notice of appeal from
any judgment of the circuit court.
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First Subordination Agreement, SRA, and Note provided that MPD’s debt to Shapich was
subordinate to MPD’s debt to the Bank, and prohibited MPD from making “regular payments” to
Shapich, which would vitiate the purpose of subordination. Shapich, in response, argues that the
circuit court properly granted summary judgment in his favor due to language in the First
Subordination Agreement creating an exception that permitted MPD to make payments on the
Note.
¶ 16 Summary judgment is appropriate when “the pleadings, depositions, and admissions on
file, together with the affidavits, if any, show that there is no genuine issue as to any material fact
and that the moving party is entitled to a judgment as a matter of law.” 720 ILCS 5/2-1005(c)
(West 2016). When, as here, the parties file cross-motions for summary judgment, “they concede
the absence of a genuine issue of material fact, agree that only questions of law are involved, and
invite the court to decide the issues based on the record.” Stevens v. McGuireWoods LLP, 2015
IL 118652, ¶ 11. Notwithstanding, the “filing of cross-motions for summary judgment does not
establish that there is no issue of material fact, nor does it obligate a court to render summary
judgment.” Pielet v. Pielet, 2012 IL 112064, ¶ 28. The reviewing court’s function “is to
determine whether the trial court correctly found that no genuine issue of material fact existed
and whether it correctly entered summary judgment in favor of the plaintiff and denied the
defendant’s cross-motion for summary judgment.” Morningside North Apartments I, LLC v.
1000 N. LaSalle, LLC, 2017 IL App (1st) 162274, ¶ 10. Our review of the circuit court’s ruling
on a motion for summary judgment is de novo. Stevens, 2015 IL 118652, ¶ 11.
¶ 17 To support a cause of action for tortious interference with a contractual relationship, a
plaintiff must show: “(1) the existence of a valid and enforceable contract between the plaintiff
and another; (2) the defendant’s awareness of the contract; (3) the defendant’s intentional and
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unjustified inducement of a breach of the contract; (4) a subsequent breach by the other, caused
by the defendant’s conduct; and (5) damages.” Complete Conference Coordinators, Inc. v.
Kumon North America, Inc., 394 Ill. App. 3d 105, 109 (2009). Here, the parties do not dispute
the validity and enforceability of the Note, SRA, and First Subordination Agreement, nor do they
contest that the Bank was aware of those agreements. Consequently, we begin our analysis with
the third and fourth elements—namely, whether MPD breached its agreements with Shapich, and
if so, whether the breach resulted from intentional and unjustified inducement by the Bank.
¶ 18 To determine whether MPD violated its agreements with Shapich, we turn to the well-
established rules of contract interpretation. In construing a contract, our primary objective is to
give effect to the intent of the parties. Thompson v. Gordon, 241 Ill. 2d 428, 441 (2011). We look
to the language of the contract to determine the parties’ intent and construe the contract as a
whole, “viewing each provision in light of the other provisions.” Id. at 441. “Where the terms of
an agreement are clear and unambiguous, they will be given their plain and ordinary meanings,
and the parties’ intent must be determined from the language of the agreement alone.” State
Farm Fire and Casualty Co. v. Watts Regulator Co., 2016 IL App (2d) 160275, ¶ 27. A contract
is not ambiguous merely because the parties disagree as to its interpretation, nor is it necessarily
unambiguous when “each party insists that the language unambiguously supports its position.”
Central Illinois Light Co. v. Home Insurance Co., 213 Ill. 2d 141, 153-54 (2004). Rather, a term
is ambiguous when it may reasonably be interpreted in more than one way. Id. at 153. Whether
contractual language is ambiguous as to the parties’ intent is a question of law. Quake
Construction Inc. v. American Airlines, Inc., 141 Ill. 2d 281, 288 (1990).
¶ 19 With these principles in mind, we turn to the language of the First Subordination
Agreement. As noted, the First Subordination Agreement provided that “[a]ll Subordinated
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Indebtedness” owing from MPD to Shapich “is and shall be subordinated in all respects to all
Superior Indebtedness” due from MPD to the Bank. Both Shapich’s subordinated debt and the
Bank’s superior debt are defined to include “all present and future indebtedness *** without
limitation” owing from MPD to Shapich and the Bank, respectively. The First Subordination
Agreement generally prohibits MPD from making “any payment upon any Subordinated
Indebtedness” so long as “any Superior Indebtedness is owing,” and states that any payment
received by Shapich “contrary to the terms of this [SRA]” must be surrendered to the Bank.
Despite this language, the First Subordination Agreement also provides that “[t]he contractual
principal and interest payments referenced on the Note are allowed.” The SRA and the Note, for
their part, each state that the debt owed from MPD to Shapich “shall be subordinate” to the
Bank’s “rights of payment and redemption” on the debt owed from MPD to the Bank.
¶ 20 Relying on the First Subordination Agreement’s definitions of subordinate and superior
indebtedness, and its additional language prohibiting MPD from paying the subordinated debt to
Shapich while the superior debt to the Bank is still outstanding, the Bank maintains that MPD’s
nonpayment on the Note did not violate its agreement with Shapich because such payment was
disallowed. Shapich, in contrast, cites the First Subordination Agreement’s provision
“allow[ing]” payment on the Note in support of the theory that those payments were permissible,
and posits that, by not tendering payment, MPD committed a breach of contract.
¶ 21 Neither Shapich’s nor the Bank’s interpretation of the contractual language cited in
support of their respective arguments is facially unreasonable. This court, however, must
construe the First Subordination Agreement as a whole and give effect “to each clause and word
used, without rejecting any words as meaningless or surplusage.” Hufford v. Balk, 113 Ill. 2d
168, 172 (1986). When we read the relevant provisions in conjunction with each other, it is
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apparent that they are contradictory. To find that the First Subordination Agreement disallows
MPD from making payments on the Note would ignore the clause providing that “[t]he
contractual principal and interest payments referenced on the Note are allowed.” At the same
time, to hold that such payments are permissible would overlook other contractual language
stating that MPD “will not make,” and Shapich “will not accept *** any payment upon any
Subordinated Indebtedness” while MPD’s debt to the Bank is still owing.
¶ 22 Based on the foregoing, we find that the First Subordination Agreement is ambiguous as
to whether MPD was permitted to pay Shapich on the Note. In reaching this conclusion, we are
mindful that the SRA and the Note, both of which postdated the First Subordination Agreement,
set forth MPD’s obligations to Shapich in detail, and that MPD made one payment thereon
without objection from the Bank. Although it is true that “[t]he intended meaning of ambiguous
contract language may be derived from the circumstances surrounding the formation of a
contract or from the conduct of the parties subsequent to its formation” (Szafranski v. Dunston,
2015 IL App (1st) 122975-B, ¶ 102), the issue before us is whether the First Subordination
Agreement contained an ambiguity, not a determination of how that ambiguity should be
resolved. Moreover, because we cannot resolve the ambiguity in the First Subordination
Agreement at this juncture, the rule of construction providing that a contract should be construed
against the drafter—in this case, the Bank—is inapplicable. See Morningside North Apartments
I, LLC, 2017 IL App (1st) 162274, ¶ 18 (“If the language of a contract is ambiguous regarding
the parties’ intent, interpretation of the contract is a question of fact which cannot be resolved by
a summary judgment.”). As the First Subordination Agreement between Shapich and MPD is
ambiguous, the summary judgment entered by the circuit court on Shapich’s claim for tortious
interference with a contractual relationship against the Bank must be reversed.
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¶ 23 In so holding, we find this case to be distinguishable from Strosberg v. Brauvin Realty
Services, Inc., 295 Ill. App. 3d 17, 33-34 (1998), relied on by the Bank, where we rejected a
subordinate creditor’s claim for tortious interference with a contractual relationship against a
superior creditor because, pursuant to the terms of an agreement between the subordinate creditor
and the debtor, the debtor could not pay the subordinate debt prior to paying the superior debt.
The present case, unlike Strosberg, involves a question as to whether the First Subordination
Agreement afforded Shapich the contractual rights vis-à-vis MPD which, in his lawsuit, he
alleged were subject to the Bank’s interference. Notwithstanding, the Bank posits that any
conduct which induced MPD to breach its agreement with Shapich was privileged because it
acted to protect its own interests of equal or greater value. See, e.g., HPI Health Care Services.,
Inc. v. Mt. Vernon Hospital, Inc., 131 Ill. 2d 145, 157 (1989)). Because ambiguities in the First
Subordination Agreement prevent a summary judgment determination as to whether a breach
occurred, any findings as to whether the alleged breach resulted from the Bank’s interference,
and whether such interference was privileged, would be premature. As such, the circuit court’s
denial of the Bank’s motion for summary judgment was proper.
¶ 24 In summary, we reverse that part of the circuit court’s orders of August 1, 2017;
September 29, 2017; February 16, 2018; and May 7, 2018, which entered and modified the
summary judgment and monetary award in favor of Shapich and against the Bank. Because we
reverse the summary judgment entered in Shapich’s favor, his argument on cross-appeal that his
monetary judgment was insufficient as a matter of law is moot. As MPD is not a party to this
appeal, nor did it file a notice of appeal, we do not disturb the judgment entered against it. See,
e.g., Nickel Plate Cloverleaf Federal Credit Union v. White, 120 Ill. App. 2d 91, 94 (1970)
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(declining to disturb a judgment from which no appeal was taken). We remand this matter back
to the circuit court for further proceedings consistent with the opinions expressed herein.
¶ 25 Affirmed in part and reversed in part; cause remanded.
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