Appeal from the Circuit Court of Cook County. Honorable Paddy H. McNamara, Judge Presiding.
Rehearing Denied October 17, 1997. Released for Publication November 10, 1997.
The Honorable Justice Leavitt delivered the opinion of the court. Cousins, P.j., and Cahill, J. concur.
The opinion of the court was delivered by: Leavitt
The Honorable Justice LEAVITT delivered the opinion of the court:
In March 1981, Telco Capital Corporation (Telco) issued debentures in a principal amount exceeding $5.6 million. At that time, Telco and Chicago Title and Trust Company (CTT) executed an indenture pursuant to which CTT acted as trustee for the debenture holders' benefit. The indenture was subject to the Trust Indenture Act of 1939. 15 U.S.C. sec. 77 aaa et seq. (1981).
On April 1, 1995, Telco owed CTT $207,342.98 in interest. The outstanding principal balance, at that time, was $2,256,790.76. Telco did not pay the interest then due. Pursuant to the indenture, CTT declared the principal due and payable immediately. Nonetheless, Telco paid nothing.
CTT filed suit seeking the principal and interest Telco owed. Telco filed an answer admitting the default and the amount owed, but alleging an affirmative defense. Telco asserted that it owed approximately $59.7 million to other parties and that debt was senior to the debentures. Telco claimed the senior indebtedness barred CTT from obtaining judgment against Telco based on the indenture's language.
CTT moved to strike Telco's affirmative defense and for summary judgment. No question of fact was raised. The court denied CTT's motion to strike and it's motion for summary judgment. The court then granted summary judgment in favor of Telco.
In reviewing a grant of summary judgment, we apply the de novo standard. Demos v. National Bank of Greece, 209 Ill. App. 3d 655, 659-60, 567 N.E.2d 1083, 153 Ill. Dec. 856 (1991). Accordingly, we grant no deference to the trial court's conclusion and conduct an independent review of the legal issue. Demos, 209 Ill. App. 3d at 659-60. No fact question was raised here. Because we disagree with the trial court's interpretation of the indenture and find Telco was not entitled to judgment as a matter of law, we reverse.
Telco claimed it was not obliged to pay CTT because it had senior indebtedness. Section 1103 of the indenture, which was the basis of Telco's affirmative defense, is part of Article Eleven. That article is entitled "Subordination of Debentures." Section 1103 states:
"Upon the maturity of any Senior Indebtedness by lapse of time, acceleration or otherwise, all principal of and interest on all such matured senior indebtedness shall first be paid in full, or such payment shall have been duly provided for, before any payment on account of principal or premium, if any, or interest is made upon the debentures."
Senior Indebtedness is defined:
"*** the principal of, premium, if any, and interest on indebtedness (other than the debentures), whether outstanding on the date of the indenture or thereafter and howsoever created, incurred, assumed or guaranteed by [Telco] for any purpose whatsoever, and all renewals, extensions and refunding thereof, unless in each case the terms of the instrument creating or evidencing the indebtedness provide that such indebtedness is not superior in right of payment to the debentures."
The court agreed with Telco and found, based on section 1103, CTT could not obtain judgment for past due principal and interest on the debentures because Telco undisputedly had ...