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Richer v. Morehead
Citations: 798 F.3d 487; 2015 U.S. App. LEXIS 14032; 61 Bankr. Ct. Dec. (CRR) 102; 2015 WL 4731360Docket: No. 14-2618
Court: Court of Appeals for the Seventh Circuit; August 11, 2015; Federal Appellate Court
The appeal involves a contract interpretation dispute between the Richers and Morehead regarding an Equity Participation Agreement executed on November 25, 2005. Morehead filed an unsecured claim of $945,000 in the Richers' bankruptcy proceedings, which the Richers contested, asserting that Morehead's interest was limited to a share of the net proceeds from the sale of a property, which had not occurred. The bankruptcy judge upheld Morehead’s claim, a decision confirmed by the district court, leading to the Richers’ appeal. The Equity Participation Agreement allowed Morehead to pay $700,000 for an 8 percent share of the net proceeds from any future sale. It included a 'Conversion Option' enabling Morehead to convert his interest to a demand note, effective 180 days from the conversion date. If executed on the anniversary of the agreement, the note’s value would increase to $945,000 due to interest. Morehead attempted to exercise the conversion option via a certified letter sent on November 24, 2009, one day before the anniversary date, which the Richers argued was invalid since the letter should have been sent on November 25. However, the agreement indicates that the option is exercised by providing notice specifying the conversion date, which could be on or after the letter's date. Thus, the Richers' interpretation is countered by the agreements' language and reasoning, suggesting that notification could precede the anniversary date but not follow it. This interpretation reflects both the contractual language and practical considerations regarding the timing of the notice. If November 25 is a holiday, a letter mailed that day would lack a postmark, complicating the determination of its mailing date. Morehead’s interpretation of the Equity Participation Agreement is deemed more plausible than that of the Richers, establishing Morehead as the prevailing party. The bankruptcy court's finding that Morehead complied with the conversion option terms is upheld. Additionally, the parties consented to having the bankruptcy judge, not an Article III judge, decide issues of Illinois common law, which is valid given the absence of a requirement for express consent in the Constitution. Implied consent suffices, especially as the parties are sophisticated business entities with legal representation. Alternatively, any objections to the bankruptcy court's jurisdiction over the contract claim were forfeited since the parties did not raise such objections during litigation. The court’s decision is affirmed.