and not to third parties. In order to overcome that presumption, the implication that the contract applies to third parties must be so strong as to be practically an express declaration.'" 155 Harbor Drive Condominium Ass'n, 568 N.E.2d at 375 (emphasis in original) (quoting Ball Corp. v. Bohlin Building Corp., 187 Ill. App. 3d 175, 543 N.E.2d 106, 107, 134 Ill. Dec. 823 (Ill. App. 1989)).
GECCAF has failed to point to any language in the contract between GECC and Equifax which expressly declares GECCAF to be a beneficiary of that contract. Nowhere in the contract do we find the words "General Electric Capital Commercial Automotive Finance, Inc." or its acronym GECCAF, or even GECCAF's predecessor's name Transamerica. This is not surprising considering that GECCAF did not come into existence until sometime after GECC and Equifax entered into their contract.
Moreover, having closely examined the language of the GECC-Equifax contract, the court concludes that none of the provisions of the contract even imply an intent by the parties to benefit GECCAF.
The second means by which parties to a contract may indicate an intent to benefit a third party does not require the contracting parties to specifically identify the third party.
It is not necessary that a contract for the benefit of an third party identify him by name. The contract may define a third party by description of a class, and it is sufficient if the plaintiff may be identified at the time of performance is due as a member of the class intended to be benefited. Restatement (Second) of Contracts sec. 139 (1981); 4 Corbin, Contracts sec. 781 (1951); 2 Williston, Contracts sec. 356A (3d ed. 1959).
Altevogt, 421 N.E.2d at 187. For example, this practice may be used by a seller intending to benefit an as yet unknown purchaser. Compare Altevogt, 421 N.E.2d at 187 (developer who contracted with builder to construct houses in subdivision for sale to general public intended to benefit ultimate purchaser) with People ex. rel. Resnik v. Curtis & Davis, Architects & Planners, Inc., 78 Ill. 2d 381, 400 N.E.2d 918, 36 Ill. Dec. 338 (Ill. 1980) (corporation's contract with builder to construct public building expressly identified state agency as beneficiary of contract); see also Hunter, 844 F.2d at 432-33 (option agreement entered into by corporation held to intend to benefit shareholders who were defined as "optioners (members of the association)").
In contrast to the facts in Hunter and Altevogt, the GECC-Equifax contract does not identify a class intended to be benefitted by the contract. GECCAF argues that "although 'the beneficiary must be identified before he has enforceable rights' it is 'not necessary that he should be identified or identifiable at the time that the contract is made. It is enough that he be identified at the time performance is due.'" Plaintiff's Memorandum in Opposition, at 13 (quoting Avco Delta Corp. v. United States, 484 F.2d 692, 702 (7th Cir. 1973), cert. denied sub nom., Canadian Parkhill Pipe Stringing, Ltd. v. United States, 415 U.S. 931, 39 L. Ed. 2d 490, 94 S. Ct. 1444 (1974)). GECCAF's quotation from Avco is correct but out of date. Fifteen years after Avco, the Seventh Circuit adopted in Hunter the formulation set forth by the Illinois Supreme Court in Altevogt quoted supra. The Hunter/Altevogt rule requires the contracting parties to "define a third party by description" at the time of contracting 50 that the beneficiary can be identified at the time of performance. Another case cited by GECCAF, Organization of Minority Vendors, Inc. v. Illinois Cent. Gulf Railroad, 579 F. Supp. 574, 597 (N.D. III. 1983), follow's the Altevogt formulation by requiring "the plaintiff [to] be identified at the time performance is due as a member of the class intended to be benefitted."
GECCAF can not escape the fact that the GECC-Equifax contract does not define a class of future beneficiaries of the contract.
GECCAF's final argument is that the question of whether GECCAF is a third party beneficiary is a question of fact, citing May's Family Centers, Inc. v. Goodman's, Inc., 571 F. Supp. 1012, 1015 (N.D. Ill. 1983) and Securities Fund Services, Inc. v. American Nat'l Bank & Trust Co., 542 F. Supp. 323, 329 (N.D. Ill. 1982). These cases stand for the proposition that the question of whether a contractual benefit is direct or incidental depends on the contracting parties intent and must be determined on a case-by-case basis. This is so because the contracting parties intent must be determined from the text of the contract itself. Under Illinois law, the chief objective in construing contracts is to give effect to the intent of the parties. Wikoff v. Vanderveld, 897 F.2d 232, 238 (7th Cir. 1990) (citing Braeside Realty Trust v. Cimino, 133 Ill. App. 3d 1009, 479 N.E.2d 1031, 1033, 89 Ill. Dec. 25 (Ill. App. 1985)). This intent is determined by viewing the language of the contract as a whole. Wikoff, 897 F.2d at 238 (citing Braeside Realty Trust, 479 N.E.2d at 1033). Thus, the inquiry into the parties' intent starts with the contract. La Salle Nat. Bank v. Service Merchandise Co., 827 F.2d 74, 78 (7th Cir. 1987).
When interpreting a contract under Illinois law, the court's first decision is whether the contract is ambiguous. This is a question of law. Metalex Corp. v. Union Corp. of America, 863 F.2d 1331, 1333 (7th Cir. 1988) (citing La Salle Nat. Bank, 827 F.2d at 78). If the court concludes that the contract is unambiguous, the court must interpret the contract and state the meaning of the contract. This, too, is a question of law. La Salle Nat. Bank, 827 F.2d at 78. If the court concludes that the contract is ambiguous, the contract's meaning becomes a question of fact. La Salle Nat. Bank, 827 F.2d at 78.
As a result, summary judgment is particularly appropriate in cases involving the interpretation of contracts. Metalex, 863 F.2d at 1333. Summary judgment is proper where there are no genuine issues as to any material fact and the moving party is entitled to judgment as a matter of law. FED. R. Civ. P. 56. When a contract is unambiguous, there are no genuine issues of material fact on the interpretation of the contract. Hence, the interpretation of the contract is a question of law for the court and summary judgment may be granted. Metalex, 863 F.2d at 1333.
A contract provision is ambiguous if it is subject to two reasonable interpretations. Ooley v. Schwitzer Div., Household Mfg. Inc., 961 F.2d 1293, 1298 (7th Cir. 1992); Metalex, 863 F.2d at 1334 (citing Lenzi v. Morkin, 116 Ill. App. 3d 1014, 452 N.E.2d 667, 669, 72 Ill. Dec. 414 (1st Dist. 1983)); see generally II E. ALLAN FARNSWORTH, FARNSWORTH ON CONTRACTS § 7.12a (1990) (the mere fact that each party -- or each party's lawyer -- advances a different interpretation will not suffice, each interpretation must be reasonable). "It is not ambiguous if the court can determine without any guide other than a knowledge of the simple facts on which from the nature of the language in general, its meaning depends." Reichelt v. Urban Inv. & Dev. Co., 611 F. Supp. 952, 953 (N.D. Ill. 1985) (citing Public Relations Board v. United Van Lines, 57 Ill. App. 3d 832, 373 N.E.2d 727, 728, 15 Ill. Dec. 381 (1st Dist. 1978)). The mere fact that the parties do not agree upon the proper construction does not render a contract ambiguous.
GECCAF's reference to paragraph 10 of the GECC-Equifax contract is insufficient to create a question of fact precluding summary judgment. Paragraph 10 states in part: "This agreement shall be binding upon on the successors and assigns of the parties, but no assignment by Equifax shall be binding on GECC." Plaintiffs' Statement of Material Facts Which Require Denial of Defendant's Motion for Summary Judgment, Exhibit J, at P 10. The court does not interpret this clause as intending to create a class of intended beneficiaries. GECCAF's citation to May's for the proposition that an assignment chose in a contract automatically makes a potential assignee a third party beneficiary is incorrect. First, May's must be limited to its rather narrow facts. May's involved a lessee suing a lessor and the applicability of an assignment clause in the lease to successive lessees.
More importantly, the contract in May's does not even remotely resemble the GECC-Equifax contract. The May's contract specifically provided for successive assignments and contained language obligating the promisor (lessor) to each proposed assignee. The district court found this language indicative of an intent by the original contracting parties to benefit the later assignees. Here, we have no specific promise to assignees of the GECC-Equifax contract. The clause in the GECC-Equifax contract, which is a typical assignment clause, merely allows GECC to assign its rights to the contract to another party. The clause is certainly not the type of declaration necessary to indicate a class of beneficiaries to which Equifax expressly promised performance of it duties under the contract.
GECCAF has not shown that the GECC-Equifax contract was intended to directly benefit GECCAF. Accordingly, summary judgment is appropriate in Equifax's favor. Summary judgment is entered in Equifax's favor on Count III.
Equifax states in its memorandum in support of its motion for summary judgment that because GECCAF is not a third-party beneficiary of the contract, Equifax is entitled to judgment on Counts III and IV. Count IV, as we have noted above, simply restates GECC's negligent misrepresentation claim but extends it to GECCAF. It does not follow, however, that because GECCAF is not a third-party beneficiary of the GECC-Equifax contract, GECCAF might not be able to proceed on a tort theory of recovery. An action in tort, as we have seen, does not require contractual privity. Since GECCAF alleged negligent misrepresentation,
the question becomes whether Equifax owed a duty to provide accurate information to both GECC and a third-party, GECCAF.
The answer to this question requires an analysis of the same principles raised in Justice Cardozo's famous opinion in Ultramares Corp. v. Touche, Niven & Co., 255 N.Y. 170, 174 N.E. 441 (N.Y. 1931), which held an auditing firm which negligently certified an inaccurate audit of an insolvent firm was not liable to a third party who, in reliance on the audit, loaned money to the insolvent firm. The Illinois Supreme Court rejected this approach, at least in part, in Rozny v. Marnul, 43 Ill. 2d 54, 250 N.E.2d 656, 663 (Ill. 1969), by holding that a surveyor, who negligently prepared a survey requested by a developer, was liable to a third party who had relied upon the survey. The Rozny court circumscribed the scope of its holding by emphasizing facts such as the surveyor made an "absolute guarantee for accuracy" and that very few people would rely on the survey. Rozny, 250 N.E.2d at 663. Later Illinois court decisions have narrowed the scope of liability further for negligent misrepresentation. The Seventh Circuit noted this trend, stating "[the Illinois decisions] hold that 'one who in the course of his business or profession supplies information for the guidance of others in their business transactions' is liable for negligent misrepresentations that induce detrimental reliance." Greycas, Inc. v. Proud, 826 F.2d 1560, 1565 (7th Cir. 1987), cert. denied, 484 U.S. 1043, 98 L. Ed. 2d 862, 108 S. Ct. 775 (1988). Thus, for Equifax to be liable to GECCAF, GECCAF must show that Equifax is in the business of providing information for the guidance of others for use in their business transactions and that GECCAF detrimentally relied upon the information provided by Equifax.
With this standard in mind, it becomes clear that Equifax may not be held liable to GECCAF for allegedly negligently misrepresenting the status of the Dabelow dealership in its report. While we have found that Equifax is in the business of providing information for the guidance of others, clearly GECCAF has not shown that it relied on Equifax's representations to its detriment. The first bar to Fquifax's liability is that GECCAF did not even exist at the time Equifax submitted its report. GECCAF has also failed to show in what manner GECCAF relied upon the Equifax report once GECCAF came into existence. Second, it is abundantly clear from the record before the court that Equifax prepared the inspection report on the Dabelow dealership for GECC's use in its business transaction with Transamerica. What GECCAF has not shown, and what requires judgment in Equifax's favor on Count IV, is any indication that GECC would pass on the information contained in the Dabelow dealership report to GECCAF, and that GECCAF relied on the information to GECCAF's detriment. GECC claims that "it relied upon the information that Equifax provided to guide it in its business relationships with dealership including the Dabelow dealership. . . ." and "to guide [it] in connection with its business transactions with Transamerica." Plaintiffs' Statement of Material Facts Which Require Denial of Defendant's Motion for Summary Judgment, PP 14, 15. Nowhere in plaintiffs' filings is the same claim made for GECCAF. GECCAF has failed to put forth any evidence supporting the existence of a duty on Equifax which would support GECCAF's claim of negligent misrepresentation. Summary judgment on Count IV in Equifax's favor is therefore appropriate.
C. Equifax's and GECC's
Cross-Motions for Partial Summary Judgment
Equifax and GECC move for partial summary judgment based upon an alleged contractual limitation on damages. Paragraph four of the contract between GECC and Equifax states:
If a loss is sustained by GECC from a dealer caused substantially by the negligent or willful acts or omissions of the employee of Equifax while in the course of providing service under this agreement and in the scope of their employment, Equifax shall be responsible, on the units involved, for the remaining balance and for interest at the legal rate from the date of the inspection which produced the discrepancy. Such liability of Equifax is limited to that based on material discrepancies found by GECC which are based on Equifax's failure to follow specific printed instructions sent with the inquiry request for inspections (Customer Specific Instructions). Such discrepancies shall be reported by GECC to Equifax within either 45 days after the discovery by GECC of the discrepancy or within six months of the date of the inspection which initially produced the discrepancy, whichever is earlier. The foregoing obligation of Equifax to assume certain liabilities is contingent on GECC mitigating or minimizing any damage or loss by pursuing reasonably available legal remedies. Equifax's liability as described in this section shall not be affected by the cancellation or termination of this Agreement, but such liability shall not be extended or varied by this paragraph from that set out elsewhere in the Agreement. All Equifax Floor Plan Inspections shall be covered by Fidelity Bond Insurance.
We consider paragraph four under the same criterion as discussed supra. If the language of paragraph four is unambiguous, we may construe its meaning as a matter of law and summary judgment is appropriate. If the language is ambiguous, the meaning of the contract is a question for the jury.
Equifax's argument regarding paragraph four is simple. Equifax claims that if it failed "to follow GECC's inspection procedures and . . . vehicles [were] misreported, resulting in 'material discrepancies' in the inspection report, Equifax's liability is limited to the outstanding balance owed to GECC by the dealer on the misreported vehicles." In other words, "if Equifax missed a vehicle, Equifax pays for it." Defendant's Memorandum in Support of Summary Judgment, at 3. Essentially, Equifax's position is that no matter what theory GECC proceeds under, whether it be tort or contract, paragraph four limits Equifax's total liability. GECC, of course, reads the contract differently. GECC claims that paragraph four limits only tort damages, but does not address contract damages. Alternatively, GECC suggests that even if paragraph four does apply to contract damages, the language does not unambiguously limit GECC's consequential damages.
GECC concedes that paragraph four limits its tort damages.
The question becomes, then, does paragraph four limit GECC's contract damages, and if so, how are these damages limited. GECC contends that the language of paragraph four clearly pertains only to Equifax's tortious acts. GECC points to language in paragraph four which sets forth a state of mind requirement necessary to incur liability in tort. Paragraph four states liability will be limited only when "a loss is . . . caused substantially by negligent or willful acts or omissions of the employee of Equifax. . . ." (emphasis added) GECC further notes that liability will be limited under the paragraph only when the employee is "in the course of providing service under the Agreement and in the scope of their employment." GECC argues that the "scope of employment" concept normally relates only to a master's liability for the torts of his servants under the doctrine of respondeat superior.
The court believes paragraph four clearly was not intended by the contracting parties to relate to contract damages. There are several unmistakable reasons for this conclusion. First, as GECC suggests, much of the language in paragraph four is couched in tort concepts. Second, the internal structure of the paragraph also supports a reading that the paragraph limits only tort damages. As we have noted, the first sentence of the paragraph clearly defines the limitation in terms of tort concepts. The second sentence begins "such liability" referring to the liability established in the first sentence. The second sentence goes on to require any liability established in sentence one to be based on "material discrepancies found by GECC which are based upon Equifax's failure to follow specific printed instructions. . . ." At first glance, the second sentence might be read to establish a contract standard by requiring a "material" breach or discrepancy. This reading must be rejected, however, since the parties clearly attempted to relate the first sentence with the second by beginning the sentence "such liability."
Third, paragraph four is significant in what it does not say. The parties have conclusively chosen not to limit contract liability by nowhere mentioning the concept of "contract" or "breach." A basic principle of contract law is that parties may expressly agree in the contract to an exclusive remedy that limits their rights, duties, and obligations. The contract, however, must clearly indicate that the parties intend the stipulated remedy to be exclusive. Board of Regents v. Wilson, 27 Ill. App. 3d 26, 326 N.E.2d 216, 220 (Ill. App. 1975). Parties are not required to state in the contract all of the remedies which the law permits them to pursue. Furthermore, inclusion in a contract of a specific provision for one remedy does not preclude the parties from seeking other legal remedies. Brian McDonagh v. Moss, 207 Ill. App. 3d 62, 565 N.E.2d 159, 161, 151 Ill. Dec. 888 (1st Dist. 1990).
The converse is also true: where a party seeks to limit one remedy, it does not follow that it intends to limit other unmentioned remedies in a similar fashion. By not explicitly stating a limitation in the common terms of contract, we may conclude that the parties intent was not to limit GECC's contract remedies.
One list point deserves mention. In GECC's response to Equifax's motion for summary judgment, GECC argues that if Equifax is found liable in either tort or breach of contract, GECC's damages must be computed based upon every automobile listed on the Dabelow dealership inventory sheet. Plaintiffs' Memorandum in Opposition, at 9. In other words, according to GECC, Equifax will not only be liable for the value of the cars allegedly misreported, but also for the value of the more than 100 other cars listed on the inventory sheet. GECC bases its claim on the language in paragraph four which states that "Equifax shall be responsible, on the units involved, for the remaining balance and for interest at the legal rate from the date of the inspection which produced the discrepancy." (emphasis added).
GECC's argument is disingenuous and unsupported by the language of paragraph four. Unquestionably, the intent of paragraph four is to limit Equifax's liability to only those vehicles misreported, i.e. the "units involved." Of Equifax's liability on those automobiles, "such liability . . . is limited to that based on material discrepancies found by GECC which are based on Equifax's failure to follow specific printed instructions sent with the inquiry request for instructions." GECC's interpretation of the words "units involved" would clearly expand Equifax's liability beyond any reasonable construction of the contract. Such a construction does not comport with the court's construction of paragraph four as a partial "limit" on Equifax's liability.
The court finds paragraph four an unambiguous and clearly intentioned limitation on GECC's tort damages only. Paragraph four does not limit GECC's contract damages. GECC's motions for partial summary judgment on Count I will be granted in part. To the extent that Equifax's motion for partial summary judgment sought to limit Equifax's contract liability to the outstanding on the nine misreported vehicles, Equifax's motion will be denied.
D. GECC's Motion to Strike Equifax's Affirmative Defenses
GECC moves to strike Equifax's First and Fifth Affirmative Defenses. Equifax's First Affirmative Defense states that GECC's complaint fails to state a claim because Equifax owes no extra-contractual duty to GECC and because GECC's damages are for economic loss and thus not recoverable in tort. GECC's Fifth Affirmative Defense essentially states that Equifax's total liability to GECC is limited by paragraph four of the GECC-Equifax contract. GECC's motion is moot as a result of the court's disposition of the parties' summary judgment motions.
For the reasons set forth above, Equifax's motion for summary judgment on Count II is DENIED. Equifax's motion for summary judgment on Counts III and IV is GRANTED. Judgment is entered on Counts III and IV of the complaint in favor of Equifax Services, Inc. and against General Electric Capital Commercial Automotive Finance, Inc. Equifax's motion for partial summary judgment on Count I is DENIED. GECC's motion for partial summary judgment on Count I is GRANTED.
JAMES H. ALESIA
United States District Judge
Date: JUL 30 1992