Bank of Commerce v. Hoffman
829 F.3d 542
7th Cir.2016Background
- Kenneth Hoffman executed three loan-related obligations to Country Bank: a $1.5M TIF note (Hoffman not personally liable), a $9M Fyre Lake loan (Hoffman co-guarantor for $900,000), and a $157,300 promissory note with his wife secured by three Milan parcels.
- Country Bank failed in October 2011; the FDIC became receiver and later assigned its interests to Bank of Commerce; all three Hoffman obligations were in default by that time.
- In 2012 the FDIC and Hoffmans signed a settlement: the FDIC accepted deeds to the three Milan lots in exchange for releasing the Hoffmans from liabilities; the written release included both specific language referencing the Milan properties/$157,300 loan and broad general release language covering “any and all” liabilities.
- Less than three months later the FDIC sued Hoffman to collect on his $900,000 guarantee of the Fyre Lake loan; Hoffman asserted the 2012 release discharged that guarantee as well.
- The district court found the settlement ambiguous but, applying extrinsic/parol evidence and Illinois construction rules, held the release applied only to the $157,300 loan and entered summary judgment for Bank of Commerce; Hoffman appealed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the 2012 settlement and release discharged Hoffman’s $900,000 personal guarantee on the Fyre Lake loan | Hoffman: the release’s broad language discharges all liabilities, including the Fyre Lake guarantee | Bank of Commerce/FDIC: specific release language limits the release to the $157,300 loan secured by the Milan properties; general language must be read in light of the specific | Release limited to the $157,300 loan; guarantee not released |
| Whether the contract is ambiguous and requires extrinsic evidence | Hoffman: broader reading of general-release language supports his claim | Bank: specific provisions and negotiating context show parties intended to release only the Milan-note debt | Contract is ambiguous on its face; extrinsic evidence and construction rules apply |
| Whether extrinsic/parol evidence creates a genuine factual dispute precluding summary judgment | Hoffman: subjective belief / assertions that the release included the guarantee | Bank: Hoffman’s own testimony and negotiation history show he sought release only of the $157,300 loan; no contrary material facts | No genuine dispute; Hoffman’s testimony undermines his post hoc broader claim |
| Proper rule of construction when specific and general release language conflict | Hoffman: general language controls | Bank: specific terms govern same-subject ambiguities | Under Illinois law, specific provision controls; general release read in light of the specific release applies only to the $157,300 loan |
Key Cases Cited
- Spierer v. Rossman, 798 F.3d 502 (7th Cir. 2015) (summary judgment standard and appellate review de novo)
- AM Int'l, Inc. v. Graphic Mgmt. Assocs., Inc., 44 F.3d 572 (7th Cir. 1995) (if contract permits only one interpretation, its plain meaning controls)
- Bourke v. Dun & Bradstreet Corp., 159 F.3d 1032 (7th Cir. 1998) (ambiguous contract language construed against a single plain meaning when multiple reasonable meanings exist)
- Freeport-McMoRan, Inc. v. K N Energy, Inc., 498 U.S. 426 (U.S. 1991) (jurisdiction that exists at commencement is not divested by subsequent events)
- Countryman v. Industrial Comm’n, 292 Ill.App.3d 738 (Ill. App. 1997) (where general release conflicts with specific language on same subject, the specific provision controls)
- Trade Ctr., Inc. v. Dominick’s Finer Foods, Inc., 304 Ill.App.3d 931 (Ill. App. 1999) (Illinois construction preference for interpretations that are fair, customary, and prudent)