Downs v. Rosenthal Collins Group

                           ILLINOIS OFFICIAL REPORTS
                                         Appellate Court




             Downs v. Rosenthal Collins Group, L.L.C., 

Appellate Court            MICHAEL A. DOWNS, Individually; and ROSENTHAL COLLINS
Caption                    GROUP, L.L.C., Derivatively By Michael A. Downs, Plaintiffs-
                           Appellees, v. ROSENTHAL COLLINS GROUP, L.L.C., Defendant-
                           Appellant (Dreadnought Partners, L.L.C.; Knot, L.L.C.; J. Roberts
                           Collins; and Leslie Rosenthal, Defendants).



District & No.             First District, Sixth Division
                           Docket Nos. 1-09-0970, 1-09-2091 cons.


Filed                      December 16, 2011
Rehearing denied           January 30, 2012
Held                       In an action arising from plaintiff’s termination from his position as chief
(Note: This syllabus       executive officer of defendant company, the judgment finding that
constitutes no part of     plaintiff owned 2.5% of defendant and awarding him profits from the
the opinion of the court   time of his termination plus prejudgment interest on that award was
but has been prepared      reversed, but the finding that plaintiff did not have additional 4% equity
by the Reporter of         interest was affirmed, since plaintiff did not execute a promissory note for
Decisions for the          the “book value” of the 2.5% interest as required by his employment
convenience of the         agreement, and the evidence did not support plaintiff’s contentions that
reader.)
                           defendant waived the requirement of a note, that there was an oral
                           contract granting plaintiff an additional 4% ownership interest, and that
                           he was entitled to additional compensation based on the doctrine of
                           quantum meruit.
Decision Under             Appeal from the Circuit Court of Cook County, No. 04-CH-11729; the
Review                     Hon. Leroy K. Martin, Judge, presiding.


Judgment                   Reversed in part; affirmed in part.
Counsel on                 Wolin, Kelter & Rosen, Ltd., of Chicago (Jeffrey Schulman and Elizabeth
Appeal                     Schutte, of counsel), for appellant.

                           Sperling & Slater, P.C., of Chicago (Steven C. Florsheim, Daniel A.
                           Shmikler, and Michael G. Dickler, of counsel), for appellee Michael A.
                           Downs.


Panel                      JUSTICE LAMPKIN delivered the judgment of the court, with opinion.
                           Justice Garcia concurred in the judgment and opinion.
                           Presiding Justice R. Gordon concurred in part and dissented in part, with
                           opinion.



                                              OPINION

¶1          Following a bench trial, a declaratory judgment was entered awarding plaintiff, Michael
        Downs, 2.5% equity interest in defendant company, Rosenthal Collins Group, L.L.C. (RCG),
        and the resulting profit/loss distributions since his termination from the company in 2004.
        The court additionally found that plaintiff was entitled to statutory prejudgment interest.1 The
        court, however, concluded that plaintiff did not have an additional 4% equity interest in
        RCG, as claimed by plaintiff.
¶2          On appeal, RCG contends the trial court’s finding that plaintiff owns 2.5% of the
        company and is entitled to the resulting profit/loss distributions was against the manifest
        weight of the evidence because plaintiff failed to execute a promissory note to purchase the
        equity interest as required by the parties’ employment agreement. Additionally, RCG
        contends the trial court erred in calculating the requisite “book value” that plaintiff owed for
        his equity interest. RCG further contends the trial court’s award of prejudgment interest was
        erroneous.
¶3          Plaintiff cross-appeals, contending the trial court erred in concluding he does not own an
        additional 4% of RCG. In the alternative, plaintiff contends he is entitled to damages
        pursuant to the equitable principle of quantum meruit.
¶4          Based on the following, we reverse the judgment of the trial court finding that plaintiff
        owns 2.5% of RCG and awarding him profits since 2004 and going forward. We
        consequently reverse the trial court’s award of prejudgment interest on that award. We,
        however, affirm the trial court’s judgment finding that plaintiff did not obtain an additional
        4% equity interest in the company.


               1
                The court also awarded summary judgment in favor of plaintiff on a claim for severance
        pay and awarded prejudgment interest on that claim. Neither ruling is contested on appeal.

                                                  -2-
¶5                                               FACTS
¶6         In August 1997, plaintiff became the chief executive officer (CEO) of RCG. At that time,
       RCG was a limited partnership with J. Robert Collins and Leslie Rosenthal as its general
       partners. The parties entered an employment agreement on August 1, 1997. The employment
       agreement described plaintiff’s position as having “supervisory responsibility over all day
       to day trading, administrative, operation and financial matters,” while also serving as “the
       senior executive with respect to the trading financial, operational, business development and
       administrative matters of [RCG], subject, however, to the advice and direction of the
       [majority owners].”
¶7         In addition, the employment agreement provided plaintiff with an annual salary of
       $350,000 and the right to purchase, at “book value,” a 2.5% limited partnership interest in
       RCG by executing a promissory note. “Book value” was not defined in the employment
       agreement. It is undisputed, however, that plaintiff never executed a note at “book value” for
       his interest in RCG.2
¶8         The employment agreement contained an integration clause providing:
           “This Agreement constitutes the entire agreement between the parties and contains all
           of the agreements between the parties with respect to the subject matter hereof. This
           agreement supersedes any and all other agreements, either oral or in writing, between the
           parties hereto with respect to the subject matter hereof. No change or modification of this
           Agreement shall be valid unless the same be in writing and signed by the parties hereto.
           No waiver of any provision of this Agreement shall be valid unless in writing and signed
           by the person or party to be charged.”
¶9         According to his testimony at trial, prior to accepting his position at RCG, plaintiff was
       employed elsewhere and was not looking for employment. Plaintiff, however, stated that he
       was induced to accept employment with RCG based on the salary offer and the offer for the
       right to ownership. Plaintiff testified that he had three conversations with Collins in 1997 and
       1998 regarding the execution of a note for his RCG equity interest. Plaintiff testified that he
       offered to execute the requisite note, but Collins declined because the “book value” of RCG
       was “unknown, subjective, and difficult to determine” due to an outstanding receivable owed
       by Rosenthal to the company. Collins disputed the existence of these conversations.
¶ 10       Plaintiff testified that he believed the “book value” at the time he joined RCG in 1997
       was approximately $5 million. Plaintiff’s calculation was based on the fact that Collins had
       $11 million equity in RCG, but Rosenthal owed $6.6 million to the company. According to
       plaintiff, RCG was therefore worth $5 million and 2.5% of that “book value” was
       approximately $125,000. Richard Horgan, RCG’s chief financial officer (CFO), testified
       regarding his opinion of how to calculate “book value,” as did an expert for each party. All


               2
                 Simultaneously, George Spaniak hired plaintiff as CEO of Prime International Trading Ltd.
       (Prime). Spaniak was the principle of Prime and a longtime associate of RCG. Spaniak was
       responsible for connecting plaintiff with RCG. In conjunction with his employment at Prime,
       plaintiff also had the opportunity to purchase a 2.5% equity interest in Prime upon execution of a
       promissory note at “book value,” which he completed when he started his position with Prime.

                                                  -3-
       three witnesses agreed that “book value” is determined based on the equity of all classes of
       members. None of these individuals, however, provided a valuation of the “book value” of
       RCG in 1997 or 2.5% thereof. Horgan did testify that the “book value” of the company when
       it was a limited partnership was calculated based on the total equity of both general and
       limited partners.
¶ 11        In October 1998, the company changed to a limited liability company. RCG’s operating
       agreement contained three classes of members. The general partners under the limited
       partnership became class A members and the limited partners became class C members.
       Collins and Rosenthal were the only class A members, as majority owners and managing
       members. According to the operating agreement, class A members had the sole authority to
       carry out management responsibilities and control the operations of the firm. Plaintiff was
       a nonvoting class C member. As a class C member, plaintiff owned less than one-tenth of 1%
       of RCG. Class C memberships were given in exchange for a $100 capital contribution. The
       operating agreement gave the class A members the sole discretion to make cash distributions
       “in such amounts and at such times” as determined by their unanimous consent. Moreover,
       pursuant to the operating agreement, the class B and C members gave the class A members
       the right to purchase their interests and execute a full assignment of those interests at any
       time provided the class B or C member was given a five-day notice period. Class C members
       did not participate in the management of the firm. Class C members had the ability to
       withdraw their capital at any time.
¶ 12        In 1999, plaintiff received compensation over and above his salary in relation to August
       1997 through the year-end and for 1998. Up until that point, plaintiff received only his salary.
       The parties dispute the character of this compensation. According to plaintiff, the money he
       received was his 2.5% equity distribution for the relevant time. According to Rosenthal, the
       monies were provided as a performance-based bonus and not in relation to any ownership
       interest. Thereafter, the parties agree that plaintiff received a 2.5% distribution through 2002;
       however, Rosenthal maintained that the monies were part of a bonus-based profit-sharing
       allocation, whereas plaintiff considered the distributions to be related to his ownership
       interest.
¶ 13        In late 2001 or early 2002, Collins was absent from RCG for approximately six months
       due to illness. According to plaintiff, his responsibilities at RCG grew as a result, even
       continuing once Collins returned to work. Plaintiff testified that he and Rosenthal verbally
       negotiated an additional 4% ownership interest for a total of 6.5% in relation to his increased
       responsibilities, and he received 6.5% profits thereafter. Rosenthal testified that he agreed
       to the increased percentage, but considered it an increase in profit-sharing allocation and not
       any form of equity in the company.
¶ 14        On January 5, 2004, RCG gave plaintiff notice of his termination. Collins and Rosenthal
       exercised their right and option, as class A members, to purchase plaintiff’s class C
       membership interest for $100. Plaintiff did not cash the check.
¶ 15        Plaintiff filed the underlying lawsuit requesting, in relevant part, a declaratory judgment
       that he held a 6.5% ownership interest in RCG and the entry of an injunction requiring
       defendants to provide him with his share of the profits. In the alternative, plaintiff claimed


                                                 -4-
       defendants breached the employment agreement where he performed all of his obligations
       under the contract except for executing the note, performance of which was waived by
       defendants, yet defendants failed to provide plaintiff his contractual equity.
¶ 16       The trial court ultimately concluded that plaintiff held a 2.5% ownership interest in RCG
       and was entitled to profit/loss distributions since his employment in 1997 and on a going-
       forward basis. The court, however, expressly found that RCG did not waive its right to a note
       for the “book value” of the ownership interest. As a result, the court determined that the
       parties should be placed in the position they would have been had the note been executed in
       1997. The court’s decision was based on witness testimony, finding “the parties entered into
       a contract. And that contract called for Mr. Downs to possess two and a half percent of an
       interest in the business, provided he executed a note and paid book value. It appears *** that
       on several occasions, Mr. Downs attempted to do so and was thwarted in his efforts by the
       actions of the defendant.” The decision was further based on the 2.5% distributions that RCG
       paid plaintiff “early on in their relationship,” which were “consistent with [plaintiff’s]
       ownership in the business.”
¶ 17       The court provided:
               “And I don’t believe it is fair–equitable that the defendants should rely upon their
           failure to supply Mr. Downs with the information that he requested and rely upon that
           as a basis to deny that he owns two and a half percent.
               Though it is true, he never executed the note, he never paid the defendants for the two
           and a half percent, I believe that his lack of performance was attributable to the
           impossibility of performing. And that impossibility was as a result of the conduct of the
           defendants. And I don’t think, therefore, that he should be penalized for that.
               So I am of the opinion and it is my finding today that Mr. Downs does, in fact own
           two and a half percent. He should be awarded two and a half percent. I also, in that same
           vein, gentlemen, I reject the idea that the defendants, however, have waived receiving
           payment from the two and a half percent because of their actions. I think that what the
           Court ought to do is attempt to put the parties where they should have been, had the
           transaction been consummated the way it should have been consummated.
               So, therefore, I think it only equitable that Mr. Downs compensate, pay to the
           defendant, as was contemplated in their agreement, the two and a half percent of book
           value as it existed in 1997 when Mr. Downs first went to work for RCG.”
       The court noted that it begrudgingly was forced to accept plaintiff’s “book value” of the
       company as of 1997 because “the Court isn’t allowed to speculate” and it “didn’t hear
       anything from defendants as to what the value was in 1997.”
¶ 18       In regard to plaintiff’s claim for an additional 4% interest, the trial court concluded there
       was no “meeting of the minds” between the parties where material elements of the contract
       were missing and, therefore, no contract was formed. As a result, the court denied plaintiff’s
       claim for an additional 4% ownership interest in RCG despite recognizing that plaintiff did
       receive an additional 4% “distribution.”



                                                 -5-
¶ 19                                           DECISION
¶ 20                                  I. 2.5% Ownership Interest
¶ 21        RCG contends the trial court erred in holding that plaintiff had a 2.5% ownership interest
       in the company where he failed to comply with the terms of the parties’ employment
       agreement by not performing the condition precedent, i.e., executing a note, in order to
       obtain an ownership interest. Plaintiff accepts that the execution of the note was a condition
       precedent. “A condition precedent is a condition which must be performed before there is
       formation of a contract binding on the parties.” Wasserman v. Autohaus on Edens, Inc., 

, 

 (1990). Plaintiff contends the evidence supported the
       trial court’s finding where RCG waived the condition precedent.
¶ 22        The parties dispute the question presented on appeal and the applicable standard of
       review. RCG contends the question is one of contract interpretation; therefore, we must apply
       the de novo standard to the question of law. See Quake Construction, Inc. v. American
       Airlines, Inc., 

, 

 (1990). Plaintiff, instead, contends the
       question before us is one of fact because the trial court made factual determinations to
       support its ultimate conclusion that plaintiff was an owner of RCG. See 

 Plaintiff,
       therefore, contends the trial court’s finding is subject to deference, such that it may not be
       overturned unless it is against the manifest weight of the evidence. Lozman v. Putnam, 

, 

 (2008). We conclude that the initial question, namely,
       whether plaintiff obtained an ownership interest in RCG pursuant to the terms of the
       employment agreement, is one requiring the interpretation of the parties’ contract. Therefore,
       we begin by reviewing the trial court’s decision de novo. Dallas v. Chicago Teachers Union,
       

, 

 (2011).
¶ 23        The main objective of contract interpretation is to ascertain the intention of the parties.
       Thompson v. Gordon, 

, 

 (2011). In order to do so, a court
       must look to the language of the contract as a whole, taken in context. 

 Where the terms
       are unambiguous, a court must apply the language as written, given its plain, ordinary, and
       popular meaning. 

¶ 24        The parties do not allege the employment agreement was ambiguous. We, therefore, must
       turn to the express language of the contract to ascertain the parties’ intent. At issue is the
       provision within the employment agreement that provides plaintiff with a right to purchase
       equity in RCG. The provision stated: “In addition to the base salary ***, concurrent with the
       execution of this agreement, Employee shall be entitled to acquire, at book value, a 2.5%
       limited partnership interest in [RCG] ***. The acquisition of the aforementioned interests
       shall be funded through a note.” Consequently, the employment agreement explicitly
       provided that, in order for plaintiff to receive a 2.5% equity interest in RCG, he was required
       to execute a note for the “book value” of that interest. There is no dispute that plaintiff failed
       to execute a note for the “book value” of RCG. “A court will not interpret a contract in a
       manner that would nullify or render provisions meaningless, or in a way that is contrary to
       the plain and obvious meaning of the language used. [Citation.] Further, when parties agree
       to and insert language into a contract, it is presumed that it was done purposefully, so that
       the language employed is to be given effect.” Thompson, 

. The parties


                                                  -6-
       agreed on the language of the employment agreement. Plaintiff, therefore, agreed that, as a
       condition precedent to obtaining his ownership interest, he was required to provide a note
       to RCG for 2.5% of the company’s “book value.” Plaintiff did not comply with the terms of
       the agreement and, consequently, did not purchase an ownership interest in RCG.
¶ 25       The parties included an integration clause in the employment agreement such that it
       superseded any and all prior contracts, oral or written, and any changes to the agreements or
       waivers thereof had to be in writing. “Where parties to a contract include an integration
       clause, ‘they are explicitly manifesting their intention to protect themselves against
       misinterpretations which might arise from extrinsic evidence.’ [Citation.] Thus, in
       interpreting the contract, the court examines the language of the contract alone, without
       considering extrinsic evidence of prior negotiations.” L.D.S., LLC v. Southern Cross Food,
       Ltd., 

. Accordingly, plaintiff’s testimony regarding the
       negotiations of the terms of his employment, namely, that he left his prior employment
       because of the ability to become an owner of RCG, is extrinsic evidence with no relevance.
       Further, it is undisputed that the terms of the employment agreement were not modified in
       writing nor that either party waived those terms in writing.
¶ 26       Notwithstanding, plaintiff argues that RCG waived the condition precedent through the
       actions and deeds of Collins and Rosenthal, resulting in him obtaining the 2.5% ownership
       interest. Primarily, plaintiff relies on three conversations taking place after the parties entered
       the agreement during which Collins advised him that Collins was unable to ascertain the
       “book value” of the company and, therefore, failed to provide plaintiff with the requisite
       amount for the note. Plaintiff additionally argues that RCG’s actions supported a finding of
       waiver where plaintiff continually received 2.5% distributions on a yearly basis.3
¶ 27       We recognize that “[a] party to a contract may waive performance of a condition
       precedent by the other party where the condition precedent is intended for the benefit of the
       waiving party.” Catholic Charities of the Archdiocese of Chicago v. Thorpe, 

, 

 (2000). Waiver may be established by conduct demonstrating
       that strict compliance with the contractual provision will not be required. Whalen v. K mart
       Corp., 

, 

 (1988). An implied waiver of a right may
       be shown when the conduct of the person against whom waiver is asserted is inconsistent
       with any intention other than to waive the right. 

¶ 28       The potential for waiver of a condition precedent through actions or deeds involves a
       question of fact to which we defer to the trial court. Sosin v. Hayes, 

, 

 (1994). We will not overturn the judgment of the trial court unless it
       is against the manifest weight of the evidence. 

 A trial court’s judgment is against the
       manifest weight of the evidence when an opposite conclusion is apparent or when the
       findings appear unreasonable, arbitrary, or not based on the evidence. Lozman, 

.
¶ 29       We conclude the evidence supported the trial court’s finding that RCG did not waive its
       right to a note for 2.5% of the “book value” of the company. We, however, conclude the trial


               3
                   Up until 2002, when he began receiving 6.5% distributions.

                                                    -7-
       court’s finding that plaintiff obtained 2.5% ownership interest without complying with the
       condition precedent was inherently inconsistent with the finding of nonwaiver and, therefore,
       was against the manifest weight of the evidence. Evidence supporting the finding that RCG
       did not waive its right to receive the note at “book value” cannot also support a finding that
       RCG provided plaintiff with his 2.5% ownership interest without first obtaining the note.
       Because the court determined that RCG’s actions and deeds did not demonstrate an intent
       to waive performance of the condition precedent, the employment agreement required
       plaintiff to execute the note prior to receiving his equity interest. It is undisputed that
       plaintiff did not execute the note; therefore, based on the evidence, plaintiff is not entitled
       to 2.5% equity of RCG.
¶ 30       The record demonstrates the trial court’s findings were based on the fact that plaintiff had
       received 2.5% distributions since 1997, that RCG failed to provide plaintiff with the “book
       value” for his interest, and that RCG’s actions created an impossibility for plaintiff to
       perform the condition precedent. We discuss the evidence related to those findings in turn.
¶ 31       RCG began paying plaintiff the disputed 2.5% in 1999. At that time, plaintiff was given
       a bonus for his services with RCG beginning in 1997 and then was paid 2.5% through 2002,
       when he began receiving 6.5% until his termination in 2004. The evidence demonstrated that
       the additional 2.5% compensation was an annual profit sharing bonus and not an ownership
       payout. Other employees were similarly compensated and there was no dispute that they were
       nonowners. The trial testimony demonstrated that plaintiff’s distributions were included in
       RCG’s monthly financial statements designated as “profit distribution.” Distributions made
       to other nonowners were also included in these statements and were designated as such.
¶ 32       RCG was a limited liability company for the majority of the time at issue. There is no
       dispute that the operating agreement named only Collins and Rosenthal as class A members
       and, therefore, majority owners and managing members of RCG. Plaintiff was a nominal
       owner as a class C member. Plaintiff’s class C nominal ownership did not afford him the
       benefits and burdens commonly inured as a result of ownership. Distributions do not
       necessarily create ownership. Ownership, instead, provides a member with company profits,
       but also requires the owner to contribute to the company’s expenses and liabilities. There was
       no evidence showing plaintiff was treated as a class A member; rather, plaintiff concedes he
       was a class C member. Plaintiff did not purchase his 2.5% ownership interest. Further, there
       was no evidence demonstrating that plaintiff was liable for the expenses or operating costs
       of RCG. Tellingly, the operating agreement was signed by Collins and Rosenthal and was
       not signed by plaintiff as an owner. The operating agreement provided class A members with
       the right to authorize distributions, which Collins and Rosenthal did to plaintiff as well as
       other members based on performance and various agreements with Collins and Rosenthal.
       The operating agreement did not provide plaintiff with 2.5% ownership interest or 2.5% of
       the liabilities of the company, and plaintiff unquestionably did not have 2.5% voting rights
       for member decisions.
¶ 33       Rosenthal did testify, “anybody that got a profit allocation, got a profit allocation on what
       we called up and down, which means that they shared both in profits and losses.” Horgan
       clarified, however, that all class C members could be responsible for losses in the event of
       a catastrophic incident wherein the capital contributions of the class C members could be

                                                 -8-
       made available to creditors. Accordingly, the loss component was in line with plaintiff’s
       responsibility as a class C member and not a result of obtaining equity interest. Moreover,
       there was no evidence demonstrating plaintiff was responsible for losses over and above his
       class C membership. In addition, Rosenthal testified that, in the event of the sale of the
       company, he and Collins planned to provide plaintiff as well as other members a percentage
       of the profits; however, the operating agreement did not provide the class C members with
       the ability to participate in the sale of the company. Tellingly, the profit distribution to
       plaintiff upon the sale of the company was discretionary.
¶ 34       The trial court’s ruling that RCG did not necessarily demonstrate an intent to provide
       plaintiff with 4% equity by giving of an additional 4% in distributions from 2002 until 2004
       further supports our decision related to the disputed 2.5%. Specifically, the trial court said:
           “[Plaintiff puts] forth the proposition that there is an oral contract between the plaintiff,
           Mr. Downs, and RCG by way of a conversation that Mr. Downs had with Mr. Rosenthal
           regarding this four percent. Plaintiff also points out that subsequent to this conversation,
           the plaintiff began to receive distributions in the amount of six and a half percent interest
           in the business.
               And I must say, gentlemen, that I don’t agree. I think there are some material facts
           missing from a contract. I got the opportunity to listen to Mr. Rosenthal testify. And I
           came away convinced that the parties failed to have a meeting of the minds, if you will.
           I believe that the parties walked away from that meeting with two different ideas of what
           was to take place. And so I just–I just don’t see or sense that there was truly a contract
           formed by the conversation that these gentlemen had.”
¶ 35       Simply stated, the issuance of 2.5% distributions to plaintiff did not demonstrate plaintiff
       was in fact a 2.5% equity owner of RCG. The trial court’s equitable decision to the contrary
       was against the manifest weight of the evidence where the facts, as concluded by the court,
       did not demonstrate that RCG waived the condition precedent required by the parties’
       employment agreement.
¶ 36       Moreover, RCG’s failure to provide plaintiff with an accurate “book value” of the
       company did not establish evidence of ownership. There is nothing in the employment
       agreement showing that it was RCG’s burden to provide the “book value” to plaintiff. The
       employment agreement merely required plaintiff to execute a note in the amount of 2.5% of
       the “book value” of the company in order to obtain the same interest. “Book value” was left
       undefined. Even giving deference to the trial court’s credibility finding regarding the three
       conversations between plaintiff and Collins during which plaintiff attempted to execute a
       note, nothing Collins said barred plaintiff from executing that note in the appropriate amount.
       Plaintiff testified:
               “Q. And why didn’t you give a note for book value for your two and a half percent
           interest in RCG?
               A. I attempted–I can recall three separate occasions I approached Mr. Collins about
           the execution of a note, and for various reasons he said it wasn’t necessary.
               Q. What was the first time you approached Mr. Collins about the note?
               A. Shortly after I came over–I approached him and–said, Bob, I’d like to take care

                                                 -9-
           of this. There’s an open issue in the book. And he said–it’s really hard to determine the
           book value–I think the term was it’s not science, it’s art. And then he shared with me, in
           terms of the receivable, he had a substantial receivable due from Mr. Rosenthal that
           would affect the valuation of the company, in terms of book value; and he wanted
           to–essentially, he said, that’s my responsibility, I got to take care of that. And he also
           made reference that there was [sic] some additional amounts owed to him personally by
           Mr. Rosenthal, and he was trying to figure out how to handle those.
                Q. Was that the only time you and Mr. Collins discussed the topic of you giving a
           note for your two and a half percent equity interest in RCG?
                A. No. I had another conversation with him in 1998. Early 1998 I approached him
           again, ‘cause I felt that, essentially, I owed Bob money. The interest came out of his side
           of the allocation and–I wanted to pay my bills–I said, Bob, you know, I’d like to settle
           this out, get this behind us–And he said, hey, focus on making money, focus on doing a
           good job. That’s enough for me, don’t worry about it.
                Q. Did you have any other discussions with him about executing a note for you equity
           interest?
                A. As we got down to the end of 1998, we were going to essentially dole out the
           partner allocations–And I was going to give Bob the opportunity, if he felt that he was
           entitled to a note or whatever he felt that he was appropriate, I just wanted to make sure
           that I was forthright, in terms of coming to him and asking.
                Q. What did he say?
                A. Once again, he said don’t, you know don’t worry about it. I think he said you can
           buy me lunch as a response.
                Q. Did you buy him lunch?
                A. Yes, I did.”
¶ 37       Plaintiff’s own testimony reveals that, although he offered to provide payment for the
       ownership interest, nothing Collins said demonstrated that he would be given the ownership
       interest without execution of the note. The conversations merely demonstrate Collins’ failure
       to give the “book value.” Nothing prevented plaintiff from obtaining the accurate “book
       value” by other means, especially when obtaining that information was the key to becoming
       an owner of the company. The “book value” was ascertainable. Horgan, the CFO, testified
       that he reported the “book value” on monthly financial documents. Plaintiff testified that his
       definition of “book value” was based on the outstanding money Rosenthal owed the
       company and the amount of equity Collins had in RCG. These figures could have been found
       when plaintiff had the conversations with Collins. Plaintiff admitted as much when he
       testified that “from a purely accounting standpoint” he had an idea of the “book value” at the
       time of the conversations with Collins. The bottom line is plaintiff knew that he had an
       obligation to pay 2.5% of the “book value” of RCG in order to obtain the same in equity
       interest, and he took advantage of Collins’ lackadaisical approach when plaintiff inquired
       into providing the requisite note. There is no testimony that plaintiff even actually tendered
       a note to Collins or that Collins refused the tender. Plaintiff cannot, and has not, argued that
       as a result of the conversations he thought that Collins’ offer to perform well and buy lunch

                                                -10-
       were acceptable substitutes to purchasing the ownership interest. Rather, plaintiff’s testimony
       reveals that his attempts to perform his portion of the contract were limited to the three
       conversations and if Collins “didn’t want to receive payment” then plaintiff was “thankful.”
¶ 38        Furthermore, the trial court’s finding excusing plaintiff’s performance of the condition
       precedent on the basis of impossibility was erroneous. At the outset, we acknowledge
       plaintiff’s argument that the trial court did not apply the doctrine of impossibility, but, rather,
       used the term “in its lay sense.” Our review of the record and the context within which the
       term was used, however, leads us to conclude that the trial court was applying the doctrine
       of impossibility as a legal principle. The trial court said, “I believe that [plaintiff’s] lack of
       performance was attributable to the impossibility of performing. And that impossibility was
       as a result of the conduct of the defendants.” (Emphasis added.)
¶ 39        Impossibility of performance is a contractual doctrine excusing performance “where
       performance is rendered objectively impossible due to destruction of the subject matter of
       the contract or by operation of law.” YPI 180 N. LaSalle Owner, LLC v. 180 N. LaSalle II,
       LLC, 

, 

 (2010) (citing Leonard v. Autocar Sales &
       Service Co., 

, 

 (1945)). “Impossibility of performance, as a
       ground for rescission of a contract, refers to those factual situations where one party to a
       contract finds that the purposes for which a contract was made have become impossible to
       perform on one side.” 30 Samuel Williston & Richard A. Lord, A Treatise on the Law of
       Contracts § 77:95, at 593 (4th ed. 2004). The doctrine “does not apply to excuse performance
       ‘as long as it lies within the power of the promisor to remove the obstacle of performance.’
       [Citation.]” YPI 180 N. LaSalle Owner, LLC, 

. Rather, application of the
       doctrine “requires that the circumstances creating the impossibility were not and could not
       have been anticipated by the parties, that the party asserting the doctrine did not contribute
       to the circumstances, and that the party demonstrate that it has tried all practical alternatives
       available to permit performance.” Illinois-American Water Co. v. City of Peoria, 

, 

 (2002). Impossibility in the contractual sense is defined
       as “[a] fact or circumstance that excuses performance because *** the method of delivery
       or payment has failed.” Black’s Law Dictionary 824 (9th ed. 2009). Moreover, the doctrine
       is applied only in narrow circumstances “ ‘due in part to judicial recognition that the purpose
       of contract law is to allocate the risks that might affect performance and that performance
       should be excused only in extreme circumstances.’ ” YPI 180 N. LaSalle Owner, LLC, 

 (quoting Kel Kim Corp. v. Central Markets, Inc., 

 (N.Y.
       1987)).
¶ 40        The doctrine of impossibility was not applicable in the case before us. There was no
       destruction of the subject matter of the contract. See, e.g., Parker v. Arthur Murray, Inc., 

, 

 (1973) (after the plaintiff suffered injuries
       rendering him incapable of continuing dance lessons, the court ruled he was entitled to
       recovery of the prepaid sums). Rather, as previously discussed, it was within plaintiff’s
       power to ascertain the “book value” for his equity interest; plaintiff contributed to his failure
       to execute the note by not attempting to do so beyond merely mentioning on three occasions
       that he had an open obligation. See American National Bank in De Kalb v. Richoz, 

, 

 (1989) (although the defendants were prevented from

                                                  -11-
       selling the property on which they held four outstanding notes to the plaintiff because the
       plaintiff had changed the locks to the property, the doctrine of impossibility did not excuse
       the defendants from performing their obligation to repay the notes because the property was
       not an essential element to the parties’ contract). This was not a situation where Collins
       prevented plaintiff from executing the requisite note or refused to accept a tendered note. See
       Lukasik v. Riddell, Inc., 

, 

 (1983) (the plaintiff was
       entitled to retirement benefits even though he did not work until the age of 65 as required by
       the condition precedent where the plaintiff continued to work for the defendant as promised
       until he was fired by the defendant, thus preventing him from performing the condition
       precedent of remaining an employee until the age of 65); Barrows v. Maco, Inc., 

, 

 (1981). Here, there was no failure of delivery of payment
       because there was no actual attempt at delivering payment.
¶ 41        Additionally, the trial court’s conclusion that plaintiff’s “lack of performance was
       attributable to the impossibility of performing” is legally inconsistent with its finding that
       defendant did not waive its right to the note. The trial court concluded that the actions of
       Collins and Rosenthal did not demonstrate an intent to waive plaintiff’s requirement to
       execute a note for the book value of the equity interest at issue. Importantly, plaintiff
       conceded at trial that he was capable of generating the “book value”; therefore, it was not
       impossible for him to perform his portion of the contract. The trial court’s ruling that the
       same actions upon which it found no waiver somehow created an impossibility of
       performance is legally inconsistent. See generally Mrowca v. Chicago Transit Authority, 

, 

 (2000) (legally inconsistent verdicts must be set aside
       and a new trial granted). Simply stated, the evidence did not demonstrate impossibility.
¶ 42        Contrary to plaintiff’s assertion, the facts of this case are distinguishable from those in
       Wasserman. In Wasserman, the appellate court concluded that a manager of a car dealership
       was entitled to his shareholder status pursuant to the terms of the parties’ oral contract where
       he provided the requisite capital for his percentage of ownership interest and the defendants
       accepted the payment and filed documents reporting the capital and issuance of the
       equivalent shares. The Wasserman court found that the execution of a written agreement
       restricting transfer of the shares was not a condition precedent of the issuance of the shares
       to the plaintiff but, rather, merely was a “buy-sell” agreement negotiated between the parties.
       In the alternative, the court determined that the defendants waived any condition precedent
       by accepting the payment and issuing the stock and were, therefore, estopped from denying
       the benefits of shareholder status to the plaintiff where the defendants’ actions prevented the
       execution of the written “buy-sell” agreement. Wasserman, 

. In
       comparison, the instant case indisputably involves a condition precedent that was not
       complied with by plaintiff and does not involve principles of estoppel where plaintiff
       received a salary as compensation for his performance of the employment agreement and was
       not entitled to a 2.5% equity interest unless he complied with the condition precedent of
       purchasing that interest at “book value.”
¶ 43        We do not come to our decision lightly. The judge, however, misapplied the law.
       Moreover, we are mindful that plaintiff was a sophisticated business person. He had a law
       degree and was a certified public accountant with decades of experience in the industry, who

                                                -12-
       left a self-described excellent job to join RCG and Prime as the CEO of both companies.
       Plaintiff entered into a contract that plainly stated he was required to execute a note for the
       “book value” of 2.5% of the company in order to obtain that percentage of ownership
       interest. Plaintiff could have contracted for countless other terms to protect himself from the
       situation at issue, but he did not. See generally Midwest Builder Distributing, Inc. v. Lord
       & Essex, Inc., 

, 

 (2007) (sophisticated parties are
       capable of bargaining for explicit contract terms). Plaintiff accepted the plain terms as
       written and gambled that he would receive an ownership interest despite failing to execute
       the note because of the relationship he enjoyed with Collins. Although the annual 2.5%
       distributions give the specter of ownership where the percentage of ownership at issue
       matched the distributions, as we stated previously, the distributions in and of themselves did
       not establish ownership. The trial court seemingly agreed when it refused to find that plaintiff
       obtained the additional 4% ownership despite receiving an additional 4% in profit
       distributions.
¶ 44        Because we have found plaintiff was not a 2.5% owner of RCG, we conclude plaintiff
       was not entitled to 2.5% profit/loss distributions since 2004 and, consequently, was not
       entitled to prejudgment interest on that award. We, therefore, need not address those
       arguments.

¶ 45                              II. Additional 4% Ownership Interest
¶ 46        In his cross-appeal, plaintiff contends the trial court erred in concluding the parties did
       not have an oral contract granting plaintiff an additional 4% ownership interest in RCG. In
       the alternative, plaintiff contends he is entitled to damages pursuant to the doctrine of
       quantum meruit.
¶ 47        Whether parties intended to enter into a contract is a question of fact left to the trial court
       unless it is against the manifest weight of the evidence. Seymour v. Williams, 

, 

 (1993).
¶ 48        Plaintiff testified that in 2002 he had a series of brief conversations with Rosenthal in
       which plaintiff requested a 4% increase equity distribution for his increased obligations that
       began when Collins went on sick leave. Plaintiff also requested a 1.5% profit distribution for
       two employees, Maureen Downs and Horgan. Plaintiff threatened that, if he and the other
       two employees did not receive the increased interest, he would take Maureen and Horgan and
       RCG customers to a competing company. Rosenthal testified that he agreed to provide the
       increased distributions, but that they were “profit sharing” distributions and not equity. All
       three distributions were recorded on the company’s monthly profit distribution schedules
       without any indication of ownership or indication regarding the nature of the distributions.
       It is undisputed that Maureen and Horgan were not equity owners of RCG.
¶ 49        “For an oral contract to be valid and enforceable, its terms must be definite and
       consistent. [Citation.] When it appears that the language used or the terms proposed are
       understood differently by the parties, there is no meeting of the minds and no contract exists.
       [Citation.]” Martin v. State Farm Mutual Automobile Insurance Co., 

, 

 (2004). When confronted with an unresolvable ambiguity in a purported

                                                  -13-
       contract, a court may conclude that the contract does not exist. People v. Cherry Valley
       Public Library District, 

, 

 (2005).
¶ 50       The trial court concluded that, after hearing the witness testimony and reviewing the
       transcripts,4 the parties did not have a meeting of the minds as to the character of the
       additional 4%. The court recognized that subsequent to the conversation at issue plaintiff
       began receiving an additional 4% in distributions; however, the court concluded that no
       contract was formed because the parties did not agree on the character of the compensation.
       Based on the evidence presented, we do not find that the trial court’s judgment was against
       the manifest weight of the evidence.
¶ 51       Plaintiff contends, in the alternative, that he is entitled to additional compensation
       pursuant to the doctrine of quantum meruit. Plaintiff argues that he would not have
       performed the additional services for profit participation because he was interested in
       growing his equity participation. Plaintiff maintains that the additional compensation he
       received was inadequate for the additional services he rendered.
¶ 52       Plaintiff raised this equitable theory for the first time before this court. Issues not raised
       before the trial court are waived on appeal. Greenwich Insurance Co. v. RPS Products, Inc.,
       

, 

 (2008). Plaintiff argues that it could not have raised
       the equitable theory because he assumed the trial court would have concluded that the parties
       had a contract for the 4% equity interest. We disagree. Plaintiff could have raised the theory
       in the alternative as he has on appeal or could have asserted it in a motion to reconsider.
       Waiver, however, is a restriction on the parties and not on this court. Catholic Charities of
       Archdiocese of Chicago, 

.
¶ 53       Plaintiff received 4% additional compensation in the form of profit distributions for his
       additional services from 2002 until 2004. Specifically, the 4% increase provided plaintiff
       with an additional $520,000 in compensation. Quantum meruit compensates for services
       rendered. Bernstein & Grazian, P.C. v. Grazian & Volpe, P.C., 

,
       

 (2010). Recovery is given for the reasonable value of services not
       gratuitously rendered and to which the defendant benefits. 

 There is no dispute that
       plaintiff was compensated for the additional services he rendered beginning in 2002. Plaintiff
       fails to cite to any authority demonstrating that the doctrine of quantum meruit entitles him
       to compensation in perpetuity. We, therefore, reject plaintiff’s quantum meruit claim.

¶ 54                                   CONCLUSION
¶ 55      We conclude that the judgment of the trial court finding that plaintiff owns 2.5% of RCG
       and awarding him profits on a going-forward basis was against the manifest weight of the


               4
                 Contrary to plaintiff’s assertion, the court was not required to determine which party’s
       characterization of the distribution was correct in order to make a credibility determination. After
       assessing the credibility of the parties, the court concluded that neither was on the same page. In its
       oral ruling, the trial judge said, after reviewing Downs’ testimony, that he did not agree with Downs’
       opinion regarding the formation of a contract for the additional 4% and that, after hearing
       Rosenthal’s testimony, he was convinced that the parties did not have a mutual agreement.

                                                   -14-
       evidence and must be reversed. We consequently reverse the trial court’s award of
       prejudgment interest on that award. We, however, affirm the trial court’s judgment finding
       that plaintiff did not obtain an additional 4% equity interest in the company.

¶ 56       Reversed in part; affirmed in part.

¶ 57       PRESIDING JUSTICE ROBERT E. GORDON, concurring in part, and dissenting in
       part:
¶ 58       I concur with the portion of the majority’s opinion that affirms the trial court’s finding
       that the parties did not have an oral contract to grant plaintiff an additional 4% ownership
       interest in RCG. Supra ¶¶ 46-51. I also concur, for the reasons stated by the majority, with
       the majority’s denial of plaintiff’s cross-appeal based on the doctrine of quantum meruit.
       Supra ¶¶ 51-53.
¶ 59       However, I must respectfully dissent, for the reasons explained below, from the portion
       of the majority’s opinion that reverses the trial court’s finding that plaintiff had a 2.5%
       ownership interest.
¶ 60       As the majority observes, this is an issue about waiver. Supra ¶ 28. Waiver is established
       by the conduct of the parties. Supra ¶ 28. It is a question of fact, and an appellate court can
       overturn a trial court’s finding of waiver only if it is against the manifest weight of evidence.
       Supra ¶ 28. There was certainly evidence here to support the trial court’s finding of waiver,
       so it was not against the manifest weight. Supra ¶¶ 29-37 (where the majority discusses the
       evidence and explains why it did not find the evidence as persuasive as the trial court did).
¶ 61       The trial court did list–as only one of its reasons supporting waiver–that plaintiff did not
       execute the note because defendants made it “impossible,” or thwarted him, and thus waived
       the necessity of executing the note at that time. It is clear that the trial court is using the word
       “impossible” in the lay sense rather than as an attempt to invoke the formal, legal doctrine
       of impossibility. That is why the trial court made no reference to the requirements or
       elements of this legal doctrine. The fact that this doctrine is also known by other names, such
       as the doctrine of impracticability and the doctrine of commercial frustration, makes it more
       likely that the word may be used in a lay sense. Pancoe v. Singh, 

       (2007) (using the terms “impossibility” and “impracticability” interchangeably in a
       discussion of the doctrine); Illinois-American Water Co. v. City of Peoria, 

 (2002) (discussing the very “similar” doctrines of “commercial frustration” and
       “impossibility”).
¶ 62       Plaintiff makes this very argument, that the trial court used the word “impossible” in a
       lay sense, and the majority rejects this argument by stating that its review of the record
       convinced it that the trial court was referring to the doctrine–in other words, that the majority
       found support for the doctrine in the record. Supra ¶ 38. But then the majority goes on to find
       no support for the doctrine in the record, which is the very reason to think that the trial court
       was not using it.
¶ 63       Given our standard of review, I cannot reverse based on these facts. As the majority


                                                  -15-
       observed, the question of whether actions waived a condition precedent is a question of fact,
       and we will not overturn the trial court’s factual finding unless it is against the manifest
       weight of the evidence. Supra ¶ 28. A finding is against the manifest weight of the evidence
       only when the opposite conclusion is readily apparent or when the finding appears to be
       unreasonable, arbitrary, or not based on the evidence. Vancura v. Katris, 

       (2010). “This deferential standard is grounded in the reality that the circuit court is in a
       superior position to determine and weigh the credibility of the witnesses, observe the
       witnesses’ demeanor, and resolve conflicts in their testimony.” People v. McDonough, 

 (2010).
¶ 64        Here, the trial court listened to plaintiff’s testimony and believed him that there were
       conversations between him and Collins that there was no need to execute the note at that
       moment. Supra ¶¶ 9, 16, 36. In essence, according to Collins, it would be better to wait until
       the whole debt situation with Rosenthal was cleared up. Supra ¶¶ 9, 16, 36. If you accept
       plaintiff’s testimony, as the trial court did, then the trial court’s ruling makes perfect sense.
       Since there was only a waiver of performance at that time, the trial court found both that
       plaintiff received the 2.5% ownership interest and that he had to perform now.
¶ 65        For the above reasons, I would affirm the trial court’s ruling in its entirety.




                                                 -16-