No. 2--06--1025 Filed: 9-27-07 ______________________________________________________________________________
IN THE
APPELLATE COURT OF ILLINOIS
SECOND DISTRICT ______________________________________________________________________________
MAXIT, INC., ) Appeal from the Circuit Court ) of Du Page County. Plaintiff and Counterdefendant- ) Appellee, ) ) v. ) No. 05--L--1058 ) JOHN VAN CLEVE and KELLEY VAN ) CLEVE, ) ) Honorable Defendants and Counterplaintiffs- ) Robert K. Kilander, Appellants. ) Judge, Presiding. ______________________________________________________________________________
JUSTICE O'MALLEY delivered the opinion of the court:
Defendants and counterplaintiffs (defendants) John and Kelley Van Cleve appeal the judgment
of the circuit court of Du Page County granting plaintiff and counterdefendant (plaintiff) Maxit, Inc.'s
motion for summary judgment and motion for judgment on the pleadings and denying their cross-
motion for summary judgment. The trial court ruled that defendants released plaintiff from
responsibility on a pending workers' compensation claim by signing a "Release of All Claims" that
arose from defendants' claim against plaintiff's underinsured motorist policy. Defendants argue that
the release released only the underinsured motorist claim and did not affect the workers'
compensation claim. We agree and reverse.
On December 21, 2006, John Van Cleve was injured in a automobile accident. Apparently,
another car caused John's vehicle to drive off the road. At the time of the accident, John was No. 2--06--1025
employed by plaintiff and was driving one of plaintiff's trucks during the scope and course of his
employment with plaintiff. The accident caused an injury to John's back.
On May 16, 2002, John filed a workers' compensation claim against plaintiff with the
Industrial Commission, case No. 02--WC--2517. Plaintiff admits that, at the time of the accident, it
was not covered by a workers' compensation insurance policy.
Thereafter, John also made a claim under plaintiff's underinsured motorist insurance policy.
In September 2004, defendants settled the underinsured motorist claim in exchange for a payment of
$800,000. As part of the settlement transaction, defendants signed a document entitled "Release of
All Claims." We reproduce the text of the release in its entirety:
"[1] FOR AND IN CONSIDERATION of the payment to us at this time of the sum
of $800,000, Eight Hundred Thousand Dollars, the receipt of which is hereby acknowledged,
we being of lawful age, do hereby release, acquit and forever discharge Maxit, Inc.,
Transportation Insurance Co, [sic] and their agents, servants, successors, heirs, executors,
insurers, administrators, all other persons, firms, corporations, associations or partnerships
('Releasees') or [sic] and from any and all actions, causes of action, claims, demands,
damages, costs, loss of services, expenses and compensation, on account of, or in any way
growing out of, any and all known and unknown personal injuries and property damage
resulting or to result from an accident that occurred on or about 12/26/2001, and covered by
Underinsured Motorist policy provisions in Policy No. 1035982371.
[2] We hereby declare and represent that the injuries sustained are permanent and
progressive and that recovery therefrom is uncertain and indefinite, and that in making this
release and agreement it is understood and agreed that we rely wholly upon our own
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judgment, belief and knowledge of the nature, extent and duration of said injuries, with the
advice of counsel and that we have not been influenced to any extent whatever in making this
release by any representations or statements regarding said injuries, or regarding any other
matters, made by the persons, firms or corporations who are hereby released, or by any
person or persons representing him or them, or by any physician or surgeon by him or them
employed.
[3] In consideration of the aforesaid payment, John Van Cleve and Kelley R. Van
Cleve agree to indemnify and hold forever harmless, Releasees, their heirs, successors,
administrators, insurers or assigns from and against any and all claims, rights, duties,
obligations, debts, liabilities, liens or causes of action of any kind and nature whether
foreseen, unforeseen, contingent or actual, liquidated or unliquidated that have been or may
hereafter and any time be made or brought against the said Releasees for the purpose of
enforcing a further claim for damage on account of the alleged damages or injury sustained
in consequence of the aforesaid accident.
[4] It is further understood and agreed that this settlement is the compromise of a
doubtful and disputed claim, and that the payment is not to be construed as an admission of
liability on the part of the Releasees, by whom liability is expressly denied.
[5] We further agree that this release shall not be pleaded by us as a bar to any claim
or suit.
[6] The undersigned acknowledge and agree that the aforesaid sum represent the full
amount of damages due them according to the terms of Policy No. 1035982371 and further
agree, in consideration of such payment, upon the Releasees [sic] request, to take such action
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as may be necessary to recover from the owner or operator of such underinsured automobile
the damages suffered by the undersigned. In the event of a recovery, the Releasees shall be
reimbursed out of such recovery to the extent of any payment made to the undersigned; and
in addition, shall be reimbursed for expenses, costs and attorney's fees by it in connection with
such action.
under [sic]
[7] This release contains the ENTIRE AGREEMENT between the parties hereto, and
the terms of this release are contractual and not a mere recital.
[8] We further state that we have carefully read the foregoing release and know the
contents thereof, and we sign the same as our own free act." (Emphases in original.)
Both defendants signed the document. Randall Taradash, defendants' attorney at that time, signed
the document as witness. No other persons signed the document.
In addition to the "Release of All Claims" quoted above, John signed a release with CNA
Insurance Companies, apparently the insurer that provided plaintiff with the underinsured motorist
policy. No explanation appears in the record regarding how or why Transportation Insurance
Company was included in the "Release of All Claims" and why CNA was not. The CNA release was
signed in October 2004, several weeks after the execution of the "Release of All Claims."
John continued to pursue his workers' compensation claim, sending a demand letter to
plaintiff. On September 6, 2005, John and plaintiff entered into a written settlement agreement on
John's workers' compensation claim, which agreement was approved by the Industrial Commission,
now known as the Illinois Workers' Compensation Commission. Under the terms of the workers'
compensation settlement, plaintiff paid John a total of $200,000 over several payments.
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On October 19, 2005, plaintiff filed the complaint at issue in this appeal. In its complaint,
plaintiff alleged that defendants breached the release by continuing to pursue John's workers'
compensation claim after signing the release. Plaintiff alleged that the workers' compensation
settlement and payment of $200,000 was pursuant to its duty to mitigate damages and consistently
asserted that defendants were required by the terms of the release to relinquish further action on
John's workers' compensation claim.
Defendants filed a counterclaim against plaintiff, alleging that plaintiff had fraudulently
induced defendants to execute the "Release of All Claims." Defendants also filed affirmative
defenses.
Eventually, plaintiff filed a motion for summary judgment and a motion for judgment on the
pleadings, contending that the legal effect of the release precluded defendants from maintaining a
counterclaim or affirmative defenses to its complaint. Defendants filed a cross-motion for summary
judgment.
Plaintiff argued that the third paragraph of the "Release of All Claims" released it from any
further obligation it might have under the workers' compensation claim. Defendants argued that the
first paragraph clearly and unambiguously limited the release to the underinsured motorist claim.
Alternatively, defendants contended that the release was ambiguous as a result of the language
pertaining to the underinsured motorist claim in the first and sixth paragraphs of the release.
On September 7, 2006, the trial court heard argument on the motion and cross-motion for
summary judgment and the motion for judgment on the pleadings. On September 11, 2006, the trial
court granted judgment in favor of plaintiff and against defendants. The trial court held:
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"As the damages for which recovery is sought in each venue arise from the same
accident and seek compensation for the same resulting expenses and post-accident condition
of the injured party, the Court finds they must necessarily be identical. Therefore, inclusion
of the discussed phrase renders the Release neither limited nor ambiguous. The document is
clear and unambiguous on its face and therefore subject to enforcement as a matter of law.
It clearly expresses the Defendants' intent to release the Plaintiff ('Releasee') from any further
financial responsibility proximately caused by the accident, and to indemnify Maxit, Inc. for
any subsequent loss that might occur."
The trial court disposed of defendants' contention that adopting plaintiff's construction of the release
frustrated and contravened the Workers' Compensation Act (Act) (820 ILCS 305/1 et seq. (West
2004)):
"Additionally, Defendants argue that by permitting recovery under the Release, this
Court is effectively enforcing a waiver of Defendant's rights under the Workers'
Compensation Act without Commission approval. It is agreed that no such approval was
obtained in this case, and Defendants argues [sic] that enforcing the Release would be
unlawful. Plaintiff counters by asserting that no waiver has occurred and that Defendant was
free to pursue recovery under the Act, as indeed he did. However, Plaintiff argues, in so
doing, the Release obliges Defendants to make good on their indemnification promise. The
Court concurs with Plaintiff.
The undisputed facts establish that the Defendant did pursue further payment from
Plaintiff for the same damages under a Workers Compensation action, causing Releasee to
pay an additional $200,000.00 in settlement of that claim. The Court finds Defendants'
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promise to indemnify contained in the September 10, 2004[,] Release to be enforceable under
these circumstances."
The trial court entered judgment in favor of plaintiff and against defendants. Defendants timely
appeal.
On appeal, defendants argue that the trial court should have granted their cross-motion for
summary judgment because, among other reasons, the clear language of the release limited it to the
underinsured motorist claim and because the release was executed without the approval of the
Industrial Commission and, in the absence of Commission approval, is ineffective to release John's
workers' compensation claim. Defendants also argue, in the alternative, that the trial court erred by
granting plaintiff's motion for summary judgment because the existence of material factual issues
should have precluded summary judgment. Last, defendants argue that the trial court should have
denied plaintiff's motion for judgment on the pleadings because they had properly pleaded the
elements comprising their affirmative defenses and counterclaim.
We begin by considering our standard of review. A motion for summary judgment is properly
granted where the pleadings, depositions, admissions, and affidavits establish that no genuine issue
of material fact exists and that the moving party is entitled to judgment as a matter of law. 735 ILCS
5/2--1005 (West 2006); Gaylor v. Village of Ringwood, 363 Ill. App. 3d 543, 546 (2006). When the
parties have filed cross-motions for summary judgment, they believe that the matter presents to the
court no genuine issues of material fact, only questions of law. Gaylor, 363 Ill. App. 3d at 546.
However, the fact that the parties filed cross-motions for summary judgment does not establish the
absence of factual issues sufficient to preclude summary judgment; both the trial court and the
reviewing court may independently determine that a genuine issue of material fact exists despite the
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parties' belief that no factual issue exists. Gaylor, 363 Ill. App. 3d at 547. We review de novo the
trial court's determination on cross-motions for summary judgment. Gaylor, 363 Ill. App. 3d at 547.
Defendants first argue that the plain language of the release demonstrates that they released
only the underinsured motorist claim covered by plaintiff's underinsured motorist insurance and did
not release John's pending workers' compensation claim. Defendants' argument raises an issue of
contract interpretation, the determination of which is a question of law that this court reviews de
novo. Avery v. State Farm Mutual Automobile Insurance Co., 216 Ill. 2d 100, 129 (2005). The
cardinal rule of contract interpretation is to give effect to the intent of the parties. Virginia Surety
Co. v. Northern Insurance Co. of New York, 224 Ill. 2d 550, 556 (2007). The parties' intent is to
be discerned from the language employed in the contract. Virginia Surety, 224 Ill. 2d at 556. If the
contract language is unambiguous, it is to be given its plain and ordinarily understood meaning.
Virginia Surety, 224 Ill. 2d at 556.
With these principles in mind, we review the language of the release along with the parties'
contentions. Defendants contend that the language of the release is clear and unambiguous: it refers
only to the underinsured motorist claim arising from John's December 26, 2001, accident. In
particular, defendants point to paragraph 1 of the release and the language:
"[Defendants] do hereby release, acquit and forever discharge [plaintiff] and their agents,
servants, successors, heirs, executors, insurers, administrators, all other persons, firms,
corporations, associations or partnerships ('Releasees') or [sic] and from any and all actions,
causes of action, claims, demands, damages, costs, loss of services, expenses and
compensation, on account of, or in any way growing out of, any and all known and unknown
personal injuries and property damage resulting or to result from an accident that occurred
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on or about 12/26/2001, and covered by Underinsured Motorist policy provisions in Policy
No. 1035982371."
According to defendants, this language releases claims that satisfy two conditions: (1) they arise from
the December 26, 2001, accident, and (2) they were within the coverage of the CNA underinsured
motorist insurance policy No. 1035982371. The insurance policy did not cover workers'
compensation, because plaintiff admitted that it retained no workers' compensation insurance policy
from any insurer. Thus, defendants conclude, the release does not operate on John's workers'
compensation claim as it does not satisfy both conditions of the release.
Plaintiff, for its part, does not directly respond to defendants' textual analysis and wholly
ignores paragraph 1 of the release. Instead, plaintiff points to paragraph 3 of the release and
emphasizes the fact that it applies to "any and all claims" without reference to the underinsured
motorist coverage. Paragraph 3 of the release provides:
"In consideration of the aforesaid payment, John Van Cleve and Kelley R. Van Cleve
agree to indemnify and hold forever harmless, Releasees, their heirs, successors,
administrators, insurers or assigns from and against any and all claims, rights, duties,
obligations, debts, liabilities, liens or causes of action of any kind and nature whether
foreseen, unforeseen, contingent or actual, liquidated or unliquidated that have been or may
hereafter and any time be made or brought against the said Releasees for the purpose of
enforcing a further claim for damage on account of the alleged damages or injury sustained
in consequence of the aforesaid accident."
Plaintiff also contends that, where such a general release of "any and all claims" is executed at a time
when the parties are aware of the existence of additional claims, the release is usually construed as
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applying to the additional claims as well as the specifically mentioned claim. See Farm Credit Bank
of St. Louis v. Whitlock, 144 Ill. 2d 440, 447 (1991) ("where both parties were aware of an
additional claim at the time of signing the release, courts have given effect to the general release
language of the agreement to release that claim as well"). According to plaintiff, the parties'
possession of full knowledge of the pendency of the workers' compensation claim at the time the
release was executed serves to bring the workers' compensation claim within the scope of the release.
We begin by considering Whitlock, which plaintiff cites for the proposition that the release
should be construed to cover the known, existing workers' compensation claim, but which undercuts
plaintiff's argument that the release is unambiguous and that parol evidence is prohibited. In
Whitlock, the plaintiff bank sought to foreclose on the farm of the defendants' parents. The
defendants had attempted to purchase a new farm, and the bank required that the defendants' parents
sign loan No. 1 and put up their farm as collateral. In order to complete the purchase transaction,
the defendants signed loan No. 2 and put up the property that they were purchasing as collateral. The
two loans were executed at the same time and proceeds from the loans were used to pay off the
parents' farm as well as to purchase the new farm for the defendants. The defendants later defaulted
on loan No. 2. Whitlock, 144 Ill. 2d at 443-44. In order to avoid foreclosure, the defendants
transferred their new land to the bank and executed a release in which the bank agreed to release the
defendants from all claims. After executing the release, the bank sought to foreclose on the parents'
farm. The defendants argued that the release acted as a bar to the foreclosure. Whitlock, 144 Ill. 2d
at 444-45.
The bank argued that the release contained language restricting it to loan No. 2, because there
were references in the release to the real estate mortgaged by loan No. 2, the loan No. 2 transaction
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number was included on the release document, and the release document referred to the original
principal amount of loan No. 2. The defendants argued that other factors indicated that the release
encompassed both loans, including the facts that loan No. 1 was executed by both the defendants and
their parents, loan No. 1 proceeds were used to purchase land for the defendants, the defendants paid
down loan No. 1 in excess of their parents' mortgage payments on the parents' farm, and the bank
suggested the manner of financing and prepared the documents. Whitlock, 144 Ill. 2d at 446.
The court determined that the release was ambiguous, because, while the release made
references only to loan No. 2 and not loan No. 1, the parties were aware that claims might arise from
loan No. 1, and it was not clear if the broad language of the release was intended to include loan No.
1 or to be limited only to loan No. 2. Whitlock, 144 Ill. 2d at 448. The court concluded that the
ambiguity in the agreement required parol evidence to be taken on the parties' intent and that this
factual issue on the parties' intent precluded the entry of summary judgment. Whitlock, 144 Ill. 2d
at 448.
We find Whitlock to be factually similar to this case. Here, as in Whitlock, the release bears
indicia that it is to apply only to claims arising under the underinsured motorist insurance policy and
related to the December 26, 2001, accident. The release language highlighted by plaintiff in
paragraph 3 of the release is, as in Whitlock, very broad and would ordinarily encompass any claims
that were known at the time the parties executed the release. Likewise, as in Whitlock, the release
is not clear on its face whether the parties intended to limit the operation of the release only to claims
arising under the underinsured motorist policy or to John's workers' compensation claim as well. We
need not pursue this line of inquiry further, however, because there is a further piece to the puzzle,
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nonexistent in Whitlock, that tips the construction of the release here unambiguously towards
defendants' interpretation.
John's injury occurred during the scope and course of his employment with plaintiff, resulting
in a claim against plaintiff under the Act, and not under plaintiff's underinsured motorist insurance
policy. Thus, the Act governs John's workers' compensation claim. Section 23 of the Act provides:
"No employee, personal representative, or beneficiary shall have power to waive any
of the provisions of this Act in regard to the amount of compensation which may be payable
to such employee, personal representative or beneficiary hereunder except after approval by
the Commission and any employer, individually or by his agent, service company or insurance
carrier who shall enter into any payment purporting to compromise or settle the compensation
rights of an employee, personal representative or beneficiary without first obtaining the
approval of the Illinois Workers' Compensation Commission as aforesaid shall be barred from
raising the defense of limitation in any proceedings subsequently brought by such employee,
personal representative or beneficiary." 820 ILCS 305/23 (West 2004).
It has been long settled that an employer may not ignore this provision of the Act and enter into a
settlement with its employee without the approval of the Illinois Workers' Compensation
Commission. Zurich General Accident & Liability Insurance Co. v. Industrial Comm'n, 325 Ill. 452,
456-57 (1927). The release (and settlement with defendants) of John's workers' compensation claim,
therefore, is not effective in the absence of the approval of the Commission.
This legal bar to settlement and release of the workers' compensation claim has ramifications
in the interpretation of the release. Illinois law is clear: a contractual provision that violates public
policy as expressed in statutory law is unenforceable and void. Crossroads Ford Truck Sales, Inc.
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v. Sterling Truck Corp., 341 Ill. App. 3d 438, 445 (2003); see also Schweihs v. Davis, Friedman,
Zavett, Kane & MacRae, 344 Ill. App. 3d 493, 501 (2003); Lo v. Provena Covenant Medical Center,
342 Ill. App. 3d 975, 984-85 (2003). Because of this, we cannot say that the parties intended that
the release include the workers' compensation claim, as that intention would be unlawful,
unenforceable, and void. Instead, we must construe a contractual provision, if possible, in such a way
that it does not violate public policy and renders the contract enforceable, rather than unenforceable.
Schweihs, 344 Ill. App. 3d at 501; Lo, 342 Ill. App. 3d at 984-85. In order for the release to be valid
and enforceable, rather than unenforceable and void, then, we must conclude that the language of the
release did not include within its scope John's pending workers' compensation claim. Thus, despite
the potential ambiguity of the language of the release (see Whitlock, 144 Ill. 2d at 448), there is only
one construction that renders the release valid and enforceable. Accordingly, we hold that the trial
court erred by holding that the release encompassed John's workers' compensation claim, because that
result violates the public policy of the State as embodied in the Act. Instead, the only interpretation
of the release that does not violate public policy is the one that excludes John's workers'
compensation claim from the scope of the release. This construction means that defendants are
entitled to prevail, as a matter of law, on their cross-motion for summary judgment and we reverse
the judgment of the trial court.
We note that defendants raise a number of other contentions in addition to their argument
about the construction of the release. Specifically, defendants raise contentions that plaintiff lacked
standing to pursue the claim, that the trial court did not have jurisdiction over the claim, that there
was a lack of consideration for the release, and that plaintiff's claim was affirmatively barred by the
voluntary payment doctrine. Additionally, defendants contend, in the alternative, that factual issues
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should have been found to preclude the entry of summary judgment. Defendants further argue that
their affirmative defenses all stated proper claims for relief that should not have been susceptible to
dismissal pursuant to section 2--615 of the Code of Civil Procedure (735 ILCS 5/2--615 (West
2004)). Our resolution of the interpretation of the release, however, obviates defendants' other
contentions and we need not address them.
For the foregoing reasons, the judgment of the circuit court of Du Page County is reversed
and the cause remanded for further proceedings consistent with this opinion.
Reversed and remanded.
BYRNE and GILLERAN JOHNSON, JJ., concur.
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