The opinion of the court was delivered by: Shadur, District Judge.
MEMORANDUM OPINION AND ORDER
On February 27, 1985 (in the "Opinion," 605 F. Supp. 793) this
Court denied Guarantors' motion for summary judgment as to Count
I. Appendix A to this memorandum opinion and order comprises (1)
the statement of facts from the Opinion, equally applicable
here,*fn2 and (2) the two letter agreements at the heart of this
In opposition to NGI's motion, Guarantors rely in principal
part on premises this Court has already rejected in the Opinion.
From those flawed premises they purport to find the documents
ambiguous. They then tender evidentiary material that assertedly
1. It was the parties' intention that the Guaranty
Agreement not take effect until after SIEX approval
of the License Agreement.
2. NGI is not entitled to payments from Guarantors
because it "frustrated" SIEX's approval of the
License Agreement, thus preventing performance of the
Guarantors also address the measure of damages in case the
Guaranty Agreement is determined to be enforceable against them.
They propose two limitations on the extent of their liability:
1. Despite its 5% language, they say the Guaranty
Agreement was meant only to supplement the
anticipated 3% royalty provision of a modified
License Agreement. According to them, Guarantors were
to be liable only for the 2% difference between the
amount of royalties permitted by SIEX and that
desired by NGI.
2. For purposes of converting Guarantors'
obligation (measured in bolivares) to dollars, the
applicable exchange rate is that prevailing on the
date of judgment rather than the date of Guarantors'
breach of their agreement.
Rules of Construction*fn3
Illinois courts treat the meaning of an unambiguous contract as
a question of law for the court. National Tea Co. v. Commerce &
Industry Insurance Co., 119 Ill.App.3d 195, 199-200, 74 Ill.Dec.
704, 708, 456 N.E.2d 206, 210 (1st Dist. 1983). Guarantors seek
to avoid that rule (and hence summary judgment) by characterizing
the Guaranty Agreement as ambiguous, and then by presenting
evidence they say raises a factual issue as to the parties'
intentions when they put pen to paper.
But the threshold issue whether a contract is ambiguous is
itself a question of law, not fact. Joseph v. Lake Michigan
Mortgage Co., 106 Ill.App.3d 988, 991, 62 Ill.Dec. 637, 640,
436 N.E.2d 663, 665 (1st Dist. 1982). For that purpose a contract is
ambiguous only if it is "reasonably and fairly susceptible to
more than one meaning." Lenzi v. Morkin, 116 Ill.App.3d 1014,
1016, 72 Ill.Dec. 414, 416, 452 N.E.2d 667, 669 (1st Dist. 1983).
Ambiguity is not established by mere disagreement of the parties
as to the contract's meaning. Bank of Homewood v. Sjo,
113 Ill. App.3d 179, 183, 68 Ill.Dec. 817, 820, 446 N.E.2d 1214, 1217
(1st Dist. 1983). And an unambiguous agreement "must be given a
fair and reasonable interpretation by the courts based on a
consideration of the language and provisions contained therein."
Arthur Rubloff & Co. v. Comco Corp., 63 Ill. App.3d 362, 367, 20
Ill.Dec. 338, 342, 380 N.E.2d 15, 19 (2d Dist. 1978).
Independent Viability of the Guaranty Agreement
Because the Confidentiality and Guaranty Agreements were
executed at the same time in the course of the same transaction,
they must be read and construed together.*fn4 Thread and Gage Co. v.
Kucinski, 116 Ill.App.3d 178, 182, 71 Ill. Dec. 925, 928,
451 N.E.2d 1292, 1295 (1st Dist. 1983). And when they are read
together, the Guaranty Agreement is not at all "reasonably and
fairly susceptible to" the interpretation urged by Guarantors.
There is no question enforcement of the Confidentiality
Agreement did not depend in any respect on enforceability of the
License Agreement. On the contrary, un-enforceability of the
License Agreement was the very predicate for the existence of the
It is understood that because of recent enacted
legislation in Venezuela the license agreement will
not become enforceable until such time as the
provisions of the agreement are approved by the
In consideration of the covenants herein entered into
between the parties, it is agreed that pending the
approval of said license agreement that Newman-Green,
Inc. will undertake to provide to Newman-Green de
Venezuela aerosol valve assembly machinery embodying
the proprietary, confidential and technical
information and know-how of Newman-Green, Inc.
Thus the purpose and effect of the Confidentiality Agreement
were to provide NGV the benefits it had bargained for in the
License Agreement — but to do so in the period of unknown
duration before the License Agreement could become enforceable
under Venezuelan law. In turn, those benefits triggered royalty
burdens under the License Agreement — but burdens that could not
be enforced directly under that Agreement so long as Venezuelan
law alone controlled. Clearly the only rational reading of the
Guaranty Agreement is as a means to assure NGI's recovery of the
corollary benefits defined by the License Agreement,
corresponding directly to the benefits derived by NGV while SIEX
approval of the License Agreement was pending.
Guarantors attempt to avoid reading the Guaranty and
Confidentiality provisions in tandem by pointing out:
1. the Guaranty Agreement's caption refers to
2. the text of the Guaranty Agreement is replete
with references to the License Agreement; and
3. the Guaranty Agreement makes no reference to the
But the cases applying the "contemporaneous execution" rule do
not require the documents to make explicit reference to one
another.*fn5 Instead the common circumstances of their execution
suffice to bind them into a single unit for contract construction
purposes. And the Guaranty Agreement's references to the License
Agreement reinforce rather than undercut the plain reading given
by the Opinion and this opinion. What the Confidentiality
Agreement contemplated (and accomplished) was the creation of NGV
performance of its License Agreement undertakings, to get NGI
under way before formal SIEX approval had been obtained. Of
course the natural way to define Guarantors' responsibility — an
obligation to match that NGV performance with the correlative
royalties — was to state their responsibility in terms of the
License Agreement's formula and term. They did exactly that in
the Guaranty Agreement:
In consideration for the execution of the license
agreement dated June 13, 1974 from Newman-Green,
Inc., Addison, Illinois to Newman-Green de Venezuela,
the undersigned personally, individually and/or
collectively agree that they guarantee the payment to
Newman-Green, Inc. of an amount of money up to the 5%
royalty set forth in the license agreement and for
the period of time specified in the license
In much the same way, the Confidentiality Agreement also
referred to the License Agreement to define the scope of the
parties' responsibilities, rather than repeating the terms and
conditions of the other agreement simply to produce a
self-contained document. Plainly Guarantors cannot say those
references somehow made the enforceability of the Confidentiality
Agreement dependent on enforceability of the License Agreement.
No more reason exists for reading such an implied condition into
the Guaranty Agreement.
Guarantors Mem. 2 says to interpret the Guaranty Agreement as
requiring royalty payments before SIEX approval of the License
Agreement would be "to postulate that the parties contemplated
operating illegally in the event anything but the entire license
agreement was approved." But Guarantors' asserted interpretation
suffers from precisely the same asserted infirmity: Guarantors
would still operate in violation of SIEX strictures, this time by
ensuring royalty payments in excess of SIEX-approved levels.*fn6
Thus Guarantors are really foreclosed by the plain meaning of
the unambiguous documents, before they even get into their
asserted issues of fact. But the poverty of their position is
reconfirmed by the fact their only evidence in support of their
interpretation — the deposition testimony of Guarantor William
Bettison, Jr. ("Bettison")*fn7 — would fail even were it admissible
to raise a genuine issue of fact.
Although Bettison claimed his understanding was the Guaranty
Agreement would not take effect before SIEX approval of the
License Agreement, he:
1. specifically admitted the Guaranty Agreement
contains no language supporting his interpretation
(Dep. 217-19); and
2. also acknowledged Guarantors had neither
communicated that understanding to NGI nor discussed
the issue with NGI in any fashion (Dep. 228).
Thus Guarantors have produced no evidence at all of a mutual
intent or understanding to exclude from the Guaranty Agreement
any royalty obligations accruing before SIEX approval of the
It is patently absurd for Guarantors to maintain, in the face
of NGI's persistent concern over royalties, that NGI was willing
to perform without any royalties for the indefinite period before
SIEX approval. Parties opposing summary judgment are entitled to
favorable factual inferences, but those inferences must be
reasonable. Even were Guarantors able to overcome the first
hurdle to permit introduction of ...