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HORBACH v. KACZMAREK

December 5, 1997

EUGENE HORBACH, Plaintiff,
v.
ALVIS KACZMAREK and ONE THREE SIX, INC., f/k/a SHRED PAX CORPORATION, an Illinois Corporation, Defendants.



The opinion of the court was delivered by: BUCKLO

 Eugene Horbach filed a multi-count complaint against Shred Pax Corporation ("Shred Pax") and its president, Alvis Kaczmarek. Both sides now move for summary judgment. For the reasons stated below, both motions for summary judgment are denied.

 Background

 The parties have a long history before me. *fn1" After numerous motions by the parties, Count IX of Mr. Horbach's complaint remains. This count pertains to Mr. Horbach's attempted purchase of stock in Mr. Kaczmarek's company, Shred Pax. Mr. Horbach claims that he and Mr. Kaczmarek executed a Stock Purchase Agreement ("the Agreement") in November 1990. The Agreement acknowledges that Mr. Horbach paid $ 580,000.00 as part of the purchase price of Shred Pax.

 It is undisputed that the deal never closed. Mr. Horbach alleges that, despite his demand that the money be returned, Mr. Kaczmarek is holding onto $ 580,000.00. Mr. Horbach claims that Mr. Kaczmarek breached the Stock Purchase Agreement by refusing to finalize certain ancillary agreements and thus prevented the consummation of the transaction. Mr. Horbach seeks rescission of the Agreement and return of the $ 580,000. Mr. Kaczmarek argues that Mr. Horbach's suit is barred by paragraph 11 of the Agreement.

 Rescission

 To state a cause of action for rescission under Illinois law, Mr. Horbach must establish (1) substantial nonperformance or breach of the Agreement by Mr. Kaczmarek, and (2) that the parties can be placed in the status quo ante. Wilkonson v. Yovetich, 249 Ill. App. 3d 439, 618 N.E.2d 1120, 1125, 188 Ill. Dec. 550, 555 (1st Dist. 1993); accord Eager v. Berke, 11 Ill. 2d 50, 54, 142 N.E.2d 36, 38 (1957). "The determination of what constitutes substantial nonpeformance justifying rescission is for the trier of fact." Builders Concrete Co. of Morton v. Fred Faubel & Sons, Inc., 58 Ill. App. 3d 100, 373 N.E.2d 863, 867, 15 Ill. Dec. 517, 521 (3d Dist. 1978).

 Mr. Kaczmarek contends he did his best to negotiate the ancillary agreements and did substantially perform under the Agreement. Mr. Kaczmarek argues that Mr. Horbach was out of the United States from November 18, 1990, to December 3, 1990, and was thus unable to negotiate the ancillary agreements. Further, when Mr. Horbach returned to the country, Mr. Kaczmarek claims that all of the important documents necessary to complete negotiations were in Mr. Horbach's possession. (Pl.'s Exs. G & H). In addition, on December 3, 1990, Jeffrey Gray, Mr. Kaczmarek's counsel, notified Thaddas Alston, Mr. Horbach's counsel, that he wanted to discuss Mr. Kaczmarek's comments on the draft agreements as early as possible. (Pl.'s Ex. H). Mr. Gray also indicates that he phoned Mr. Alston on December 6th and December 7th to receive comments on the draft documents, but received no response. (Pl.'s Ex. M). According to a letter written by Mr. Gray on December 17th, Mr. Alston did not get in touch with Mr. Gray until December 10th, two days before closing, and even then Mr. Alston had not completed discussions concerning the drafts with Mr. Horbach. Id. On December 11th, apparently frustrated by Mr. Horbach's lack of negotiating, Mr. Kaczmarek informed Mr. Horbach that he would no longer negotiate the terms of the ancillary agreements. (Pl.'s Ex. K). The Agreement never closed. *fn2"

 Mr. Kaczmarek has presented evidence that he was ready and willing to negotiate the ancillary agreements and attempted to do so, in good faith, up until the day before closing. On this record, it is premature to declare that Mr. Kaczmarek did not substantially perform under the Agreement.

 Interpretation of Paragraph 11

 Mr. Kaczmarek argues that Mr. Horbach's claim is barred by Paragraph 11 of the Agreement. *fn3" Mr. Kaczmarek relies on the language in Paragraph 11 which states that "[Mr. Horbach] hereby agrees to indemnify, defend and hold [Mr. Kaczmarek]...harmless from and against any and all loss...as a result of any claim by...TyrRee Corporation ("TyrRee") or any of their agents, representatives, affiliates, successors or assigns, arising out of or in connection with any of the following:...(e) the negotiation and execution of this Agreement and the sale of any shares of the common stock of [Shred Pax] to [Mr. Horbach], the consummation of such sale, if at all, or any action in connection therewith...." (Stock Purchase Agreement at 10-11). I have previously found that Mr. Horbach is a successor of rights of TyrRee. Horbach, 915 F. Supp. 18 at 21. Mr. Horbach, however, brings his claim in his individual capacity. The issue is whether Paragraph 11 bars all suits by TyrRee's successors, or whether claims brought in an individual capacity are permissible under Paragraph 11.

 Under Illinois law, "where the sole dispute between the parties concerns the meaning of a contract provision, the threshold issue is whether the contract is ambiguous." Ford v. Dovenmuehle Mortgage, Inc., 273 Ill. App. 3d 240, 651 N.E.2d 751, 754, 209 Ill. Dec. 573, 576 (1st Dist. 1995). This is a matter of law for the court. Pepper Constr. Co. v. Transcontinental Ins. Co., 285 Ill. App. 3d 573, 673 N.E.2d 1128, 1130, 220 Ill. Dec. 707, 709 (1st Dist. 1996). In determining whether a contract provision is ambiguous, "the court must construe the contract as a whole, viewing each part in light of the others." Ford, 651 N.E.2d at 754, 209 Ill. Dec. at 576. "An ambiguity is said to exist in a contract when the contract contains language that is susceptible to more than one reasonable interpretation." Id.

 The language of a contract, however, "is not ambiguous simply because the parties disagree upon its meaning...nor is it ambiguous if the court can determine its meaning without any guide other than a knowledge of the simple facts on which, from the nature of language in general, its meaning depends." Foxfield Realty, Inc. v. Kubala, 287 Ill. App. 3d 519, 678 N.E.2d 1060, 1063, 223 Ill. Dec. 52, 55 (2d Dist. 1997)(citations omitted). "To the extent that a contract is susceptible of two interpretations, one of which makes it fair, customary, and such as prudent persons would naturally execute, while the other makes it inequitable, unusual, or such as reasonable persons would not be likely to ...


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