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                                     Appellate Court                             Date: 2019.04.11
                                                                                 14:28:15 -05'00'




                  Shapich v. CIBC Bank USA, 2018 IL App (1st) 172601



Appellate Court         BRANKO SHAPICH, Plaintiff-Appellee and Cross-Appellant, v.
Caption                 CIBC BANK USA, f/k/a The PrivateBank and Trust Company;
                        M.P.D., INC., an Illinois Corporation; and THOMAS MILOWSKI, an
                        Individual, Defendants (CIBC BANK USA, f/k/a The PrivateBank
                        and Trust Company, Defendant-Appellant and Cross-Appellee).



District & No.          First District, Fifth Division
                        Docket No. 1-17-2601


Filed                   December 14, 2018



Decision Under          Appeal from the Circuit Court of Cook County, No. 14-L-013146; the
Review                  Hon. Margaret A. Brennan, Judge, presiding.



Judgment                Affirmed in part and reversed in part; cause remanded.


Counsel on              Joseph P. Lombardo and Eric S. Silvestri, of Chapman and Cutler
Appeal                  LLP, of Chicago, for appellant.

                        Cory D. Anderson and Patrick W. Chinnery, of Rock Fusco &
                        Connelly, LLC, of Chicago, for appellee.



Panel                   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, formerly known as 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 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
¶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].”


         1
           Shapich’s pleadings in the circuit court identified the Bank as “Privatebancorp, Inc., d/b/a The
     PrivateBank.” In this opinion, we adopt the name used by the Bank and Shapich in their briefs on
     appeal.
         2
           For readability, this order omits emphasis and uppercase type when quoting the exhibits.

                                                   -2-
       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 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 e-mail 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 $1.35 million 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.
¶ 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) $1.35 million 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” $1.35 million. The circuit court

           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.

                                                      -3-
       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 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
       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

           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.

                                                       -4-
       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.” 735 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. La Salle, 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
       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. “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 & 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).



                                                   -5-
¶ 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
       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 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


                                                   -6-
       of fact that 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.
¶ 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)
       (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.




                                                    -7-
