Case Title: Voyles v. Sandia Mortgage Corp.

Citation: 

Docket Number: 89201

State: illinois

Court: Illinois Supreme Court

Date: 2001-05-24T00:00:00Z

Document:
Docket No. 89201-Agenda 30-September 2000.
GRACEIA M. VOYLES, Appellee, v. SANDIA MORTGAGE
CORPORATION, n/k/a Fleet Mortgage Corporation, Appellant.
Opinion filed May 24, 2001.
	CHIEF JUSTICE HARRISON delivered the opinion of the
court:
	The plaintiff, Graceia M. Voyles, brought the present action
in the circuit court of Du Page County against the defendant,
Sandia Mortgage Corporation (now known as Fleet Mortgage
Corporation), seeking damages for the defendant's submission of
allegedly inaccurate reports about her to credit reporting agencies.
Following a bench trial, the trial judge awarded the plaintiff a total
of $10,000 in damages, finding that the defendant was negligent
in submitting certain information to the credit reporting agencies
and in failing to timely correct alleged inaccuracies therein. The
trial judge denied the plaintiff recovery on several other theories
of recovery, including defamation, tortious interference with
prospective economic advantage, and breach of duty of good faith
and fair dealing. The court also denied plaintiff's request for
punitive damages based upon her claim that defendant had acted
wilfully. Plaintiff appealed, and defendant cross-appealed.
	The appellate court did not disturb the trial court's ruling of
liability on plaintiff's claims for negligent reporting of credit
information and failure to timely correct alleged inaccuracies;
however, in light of its disposition of plaintiff's other claims, the
appellate court vacated the trial court's award of damages on the
negligence counts and remanded for hearings on damages related
thereto. Finding that the defendant had acted intentionally, the
appellate court reversed the trial court's judgment in favor of the
defendant on the plaintiff's other claims and remanded the cause
to the circuit court for hearings on plaintiff's damages arising from
those claims as well. 311 Ill. App. 3d 649. We allowed the
defendant's petition for leave to appeal (177 Ill. 2d R. 315(a)), and
we now reverse the judgment of the appellate court and affirm the
judgment of the circuit court.
	The facts pertinent to our disposition may be stated briefly. In
1976 the plaintiff bought a single-family home in Springfield,
financing the purchase with a loan from a local lender, Citizens
Savings and Loan Association (Citizens). In 1979, the plaintiff
moved to the Chicago area. Late in 1981 or early in 1982,
plaintiff's lawyer, Wayne Golomb, moved into the residence and
eventually began making the mortgage payments. Subsequently,
Citizens failed and was placed in receivership under the
Resolution Trust Corporation. The plaintiff's loan was
subsequently sold to another entity, and defendant Sandia
Mortgage Corporation began servicing the loan in April 1991. The
defendant soon discovered that the assessment on the property had
increased, causing the plaintiff's real estate taxes to rise. Because
of that increase, the escrow that had been established to cover
property taxes on the property had become insufficient. To make
up for the deficiency, the defendant increased the plaintiff's
monthly mortgage payment from $503 to $582. The increased
payments were reflected in a mortgage payment booklet sent to the
plaintiff in the summer of 1991. Golomb noticed that the required
monthly payment had increased and, on August 7, 1991, he sent a
note to the defendant questioning the new amount. On August 16,
one of the defendant's customer service representatives called
Golomb. A note she made of the conversation stated, "I called Mr.
Golomb this a.m. He was very vague, stating that he is sending us
the payments on this mortgage and wants us to send mail to
him-told him to send power of attny [sic] from Mrs. Voyles."
Apart from the insufficient escrow, the defendant was also
concerned that the property might have been sold by the plaintiff
to Golomb, activating the due-on-sale clause in the mortgage.
	Notwithstanding the August 16 conversation, Golomb sent
defendant checks in the old amount of $503 in September and
October for payment of the mortgage-less than the new monthly
payment of $582. The defendant returned those checks with a
letter to plaintiff dated October 3, 1991. The defendant explained
that the loan was delinquent and set forth the total payment
required for reinstatement. The defendant recommended that the
correct amount be paid to reinstate the account and to avoid having
adverse information placed on the plaintiff's credit record. In
defendant's letter, it provided telephone numbers where plaintiff
could request further information or discuss the matter in greater
detail.
	Golomb sent a check for only $503 in November 1991. On
November 7, 1991, he sent a letter to defendant cautioning
defendant against further contact with the plaintiff/mortgagor,
stating his opinion that the last payment on the loan had been
rejected without cause, and threatening suit.
	On December 17, 1991, the defendant, by its assistant vice-president, James Duran, sent Golomb a letter informing him that
the payments for August, September, October, and November
were due and that plaintiff owed a total of $2,328. Duran again
offered to answer any questions about the account.
	Early in January 1992, Golomb sent the defendant two checks
totaling the amount due. One was an insurance company check
payable to the defunct Citizens Savings & Loan for $1,669.50,
which had been issued as compensation for certain repairs on the
home; the second check was Golomb's personal check for the
balance. In response, the defendant returned both checks to
Golomb, stating that it could not accept the insurance company
check because Citizens was listed as the payee; the defendant
further explained that even if the defendant were designated the
payee, defendant could not accept the check until repairs to the
property were completed, repair bills were paid in full with copies
thereof submitted to defendant, executed and notarized lien
waivers were completed by each contractor involved, and Golomb
signed an insurance claim affidavit.
	Golomb responded by sending the defendant his personal
check for $582, representing the correct monthly payment due in
late January. The next week, Golomb sent a check for $1,669.50.
Because a balance of $658.50 remained, however, the defendant
returned the checks to Golomb, stating that the entire amount due
would have to be paid to avoid default. The defendant reiterated
that concern in a letter to the plaintiff on February 4, 1992,
explaining that it would not accept less than the full amount due
and that it would institute foreclosure proceedings if it did not
receive full payment. At the same time, the defendant referred the
matter to its foreclosure department. Later that month, Golomb
sent the defendant a letter stating that he would not make any
further payments on the loan.
	As a result of this ongoing dispute, defendant informed two
credit reporting agencies, TRW and Trans Union, of the status of
the plaintiff's mortgage and of the initiation of foreclosure
proceedings. Reports issued by those companies reflected that
foreclosure proceedings had been instituted and that the last
payment had been received in July 1991. Golomb ultimately paid
the arrearage and, as the defendant's records indicate, defendant
then reinstated the mortgage "out of foreclosure" effective June 3,
1992.
	As noted earlier, the plaintiff did not occupy the Springfield
house but was instead living in the Chicago area, in Naperville. In
March 1992, the plaintiff attempted to refinance the mortgage on
her house in Naperville, and she submitted an application to
Citibank, the original lender on that property. In the course of
processing the plaintiff's application, Citibank obtained credit
reports on the plaintiff from the two credit reporting agencies.
Those reports stated that plaintiff's mortgage on the Springfield
property was in foreclosure. In June of 1992, after receiving full
payment, the defendant notified Citibank that the Springfield
mortgage was no longer delinquent. Thereafter, Golomb supplied
Citibank with additional information required by Citibank to
complete plaintiff's application. That information was not related
to the controversy between plaintiff and defendant. Citibank
ultimately denied the plaintiff' application for a new loan on the
Naperville property for a reason unrelated to credit reporting: the
plaintiff was no longer employed. Citibank concluded that
plaintiff's credit status was "satisfactory."
	In September 1992, the plaintiff initiated the present action
against the defendant in the circuit court of Du Page County. The
plaintiff alleged that the defendant was negligent in reporting
information about her to the credit agencies and in failing to
promptly correct falsely reported information. The trial court
originally ruled for the defendant, granting summary judgment for
the defendant on the ground that the plaintiff could not establish
that the defendant's conduct proximately caused the plaintiff's
injury: Citibank's denial of the plaintiff's application for
refinancing. In an appeal from that ruling, the appellate court
reversed the circuit court judgment and remanded the cause for
further proceedings, finding the existence of several questions of
material fact that precluded entry of summary judgment. Voyles v.
Sandia Mortgage Co., No. 2-94-0158 (1995) (unpublished order
under Supreme Court Rule 23). On remand, the plaintiff added a
further claim to her action, alleging the breach of an implied duty
of good faith and fair dealing, and seeking an award of punitive
damages. After the bench trial was conducted, but before the judge
issued his ruling, the plaintiff added yet another count, alleging
tortious interference with prospective business advantage. Also,
the plaintiff argued that the negligent-reporting counts should be
construed as defamation claims.
	The trial judge ultimately awarded the plaintiff a total of
$10,000 in compensatory damages on the two negligence counts,
agreeing with the plaintiff that the defendant had issued false or
inaccurate credit reports without exercising due care. The judge
ruled against the plaintiff, however, on the counts alleging breach
of an implied duty of good faith and fair dealing and tortious
interference with prospective business advantage. The judge found
that the defendant's conduct was not intentional. The trial court
also rejected the plaintiff's defamation claims, concluding that she
had failed to prove special damages.
	Both parties appealed. The appellate court disagreed with the
trial judge's finding that the defendant had not acted intentionally.
The appellate court believed that the defendant had "embarked on
a course of action to force plaintiff into foreclosure by raising her
monthly payments with no notice and then arbitrarily and
capriciously refusing plaintiff's tender of amounts owing." 311 Ill.
App. 3d at 656. The appellate court entered judgment for the
plaintiff on the counts rejected by the trial judge: breach of the
duty of good faith and fair dealing, tortious interference with
prospective economic advantage, and defamation. As previously
noted, the appellate court vacated the award of damages on the
negligence counts and remanded the cause to the circuit court for
reconsideration of the plaintiff's damages on all counts. 311 Ill.
App. 3d at 661.
	The defendant first argues that the appellate court erred in
recognizing an independent cause of action in tort for the alleged
breach of an implied duty of good faith and fair dealing arising
from a contract. For the reasons that follow, we decline to
recognize the cause of action in the circumstances of this case.
	Until the decision below, appellate court panels which had
squarely addressed the question had consistently refused to
recognize an independent tort for breach of the implied duty of
good faith and fair dealing in a contract. See, e.g., Harris v. Adler
School of Professional Psychology, 309 Ill. App. 3d 856, 860-61
(1999); Coleman v. Madison Two Associates, 307 Ill. App. 3d 570,
578 (1999); Guardino v. Chrysler Corp., 294 Ill. App. 3d 1071,
1080 (1998); Northern Trust Co. v. VIII South Michigan
Associates, 276 Ill. App. 3d 355, 367 (1995); Anderson v. Burton
Associates, Ltd., 218 Ill. App. 3d 261, 267 (1991); Carlson v.
Carlson, 147 Ill. App. 3d 610, 614 (1986).
	In Cramer v. Insurance Exchange Agency, 174 Ill. 2d 513
(1996), this court considered an analogous question arising in the
insurance context. In that case, this court refused to recognize an
independent action in tort for breach of an implied covenant of
good faith and fair dealing, stating that the claim would be proper
only in the narrow context of cases involving an insurer's
obligation to settle with a third party who has sued the
policyholder. Discussing the requirement of good faith and fair
dealing implicit in all contracts, this court explained:
		"This principle ensures that parties do not try to take
advantage of each other in a way that could not have been
contemplated at the time the contract was drafted or to do
anything that will destroy the other party's right to receive
the benefit of the contract. [Citations.] This contractual
covenant is not generally recognized as an independent
source of duties giving rise to a cause of action in tort.
[Citations.]" Cramer, 174 Ill. 2d  at 525.
	As we have noted, Cramer recognized an exception to that
rule. This court stated in Cramer that a separate action in tort
would remain available when an insurer breaches its duty to settle
an action brought against the insured by a third party. The court
reasoned that in that setting the insured relies on the insurer for
defense of the action, yet the insurer's interest in defeating the
claim may conflict with the insured's interest in avoiding a
judgment that exceeds the amount of the policy limits. The policy
does not spell out the insurer's duty to settle, however, and
therefore tort law remains an appropriate ground on which to
evaluate the insurer's conduct. Cf. Cramer, 174 Ill. 2d  at 525-26.
Cramer distinguished duty-to-settle cases from actions by an
insured against its insurer arising from the insurance contract. The
court noted, in the latter context, "The policyholder does not need
a new cause of action to protect him from insurer misconduct
where an insurer refuses to pay. The policyholder has an explicit
contractual remedy." Cramer, 174 Ill. 2d  at 526.
	Cramer, as well as the line of appellate cases previously cited,
would thus bar the plaintiff's tort action here for breach of the
implied covenant of good faith and fair dealing. The appellate
court below, however, believed that Cramer was distinguishable
on the ground that it involved an action under the Illinois
Insurance Code, which contains a statutory remedy for the insured
in that case. The appellate court theorized that in the absence of a
remedy provided by the legislature, the courts of this state are free
to impose a duty of good faith and fair dealing based in tort law.
	Although Cramer involved section 155 of the Insurance Code
(215 ILCS 5/155 (West 1994)), the opinion's rationale was not
confined to that context. The court's description of the covenant
of good faith and fair dealing as a rule of construction, rather than
an independent source of tort liability, was not limited to the area
of insurance law, and is as apt here as it is in other circumstances.
Moreover, this court's analysis in Cramer made clear that,
irrespective of a statutory remedy, the existence of a contractual
remedy would have made the tort theory unnecessary. Cramer,
174 Ill. 2d  at 526-27.
	In this case, the plaintiff had recourse to both her specified
remedies under the parties' contract and traditional tort remedies
which she in fact sought to employ but failed to prove. A cause of
action for violation of a duty of good faith and fair dealing would,
as a practical matter, add little to this or any plaintiff's remedial
repertoire. As the appellate court's own analysis of this issue
suggests, the requisite evidence for plaintiff to prevail on the tort
claims is less than that which the appellate court would have
required for a showing that defendant violated a duty of good faith
and fair dealing:
		"Defendant's conduct was intentional and outrageous. In
the future, in order to state a claim for bad faith, a
defendant's conduct would have to be similarly egregious
and outrageous." 311 Ill. App. 3d at 656.
	First, we do not agree that defendant intended to create the
credit controversy; nor do we believe the reporting of the dispute
wrongful. Moreover, we do not believe it advisable to recognize
a cause of action for violation of a duty of good faith and fair
dealing in the factual context of this case; nor do we see a need to
expand the reach of the limited cause of action acknowledged by
Cramer in duty-to-settle cases. "It is plaintiff's burden, in urging
this court to create new rights of action or expand existing ones,
to persuade the court of the need for such new or expanded rights."
Zimmerman v. Buchheit of Sparta, Inc., 164 Ill. 2d 29, 39 (1994).
We are not persuaded.
	The defendant also challenges the appellate court's
determinations that the plaintiff may recover for defamation and
for tortious interference with prospective business expectations.
The appellate court concluded that the defendant's actions in
relating the impending foreclosure of the plaintiff's property to the
credit reporting agencies were intentional and wrongful.
	An underlying element common to both the defamation claim
and the tortious interference claim, as pleaded by the plaintiff, is
the assumption that the defendant wrongfully declared the
plaintiff's mortgage to be delinquent for nonpayment of the higher
amounts, because the defendant had initially failed to provide the
plaintiff with an explanation for the monthly increase in her
mortgage payments. In essence, the plaintiff maintained that the
defendant could not increase the payments without first providing
an explanation for the increase. Accordingly, the plaintiff believed
that payment of less than was required by the new payment
booklet did not constitute a delinquency and therefore could not
provide grounds for an adverse report to the credit reporting
agencies.
	We do not agree with the premise of the plaintiff's argument
that the defendant was required first to provide an explanation for
the increased payment. The defendant provided the necessary
notice by sending a new payment booklet showing the increased
amount of the monthly payments. That was all that the mortgage
agreement required. It provided:
		"If the amount of the Funds held by Lender shall not be
sufficient to pay taxes, assessments, insurance premiums
and ground rents as they fall due, Borrower shall pay to
Lender any amount necessary to make up the deficiency
within thirty days after notice from Lender to Borrower
requesting payment thereof."
The required notice in this case was given when the defendant sent
the plaintiff the new payment booklet showing the increased
amount of each payment. Although it certainly would have been
helpful for the defendant to have given the borrower an
explanation for the increase when the new payment booklet was
sent, the defendant's failure to do so did not excuse the plaintiff's
subsequent refusal to make the required payments-payments the
plaintiff does not now contest, and conceded were required.
	As the defendant correctly notes, falsity is an element of the
plaintiff's defamation claim. Krasinski v. United Parcel Service,
Inc., 124 Ill. 2d 483, 490 (1988). To recover on a claim of
defamation, plaintiff must prove that the statement or publication
was false. Troman v. Wood, 62 Ill. 2d 184, 198 (1975); Wynne v.
Loyola University, 318 Ill. App. 3d 443, 451 (2000); Vickers v.
Abbott Laboratories, 308 Ill. App. 3d 393, 400 (1999). The
plaintiff cannot, however, establish that the defendant's reports to
the credit agencies were false. The reports stated simply and
correctly, "Foreclosure proceeding started, Account last paid on
7/91." These reports were accurate: the plaintiff was delinquent in
her mortgage. By that time, the plaintiff and her tenant had not
made a full payment on the mortgage since the preceding July.
Moreover, the defendant had taken steps within its own
organization to initiate the foreclosure process. Because the reports
were accurate, the plaintiff's action for defamation must fail.
	The plaintiff argues, however, that truth is an affirmative
defense and that the defendant failed to plead it in a timely
manner. As we have noted, decisions of this court have reached
the opposite conclusion, characterizing falsity as an element of the
defamation plaintiff's cause of action. See Krasinski, 124 Ill. 2d 
at 490; Troman, 62 Ill. 2d  at 198. Even if truth were an affirmative
defense, however, the defendant's assertion of it would be
considered timely in the circumstances of this case. The plaintiff
did not raise her defamation claim until she filed her written
closing argument, a number of months after the conclusion of the
trial. Therein, the plaintiff characterized the counts alleging the
defendant's negligence in reporting the delinquency to the credit
agencies as claims for defamation. The defendant had no earlier
opportunity to formally raise the defense, though it has
consistently argued that the report it made to the credit agencies
was truthful and accurate. Given these circumstances, even if we
were to adopt the plaintiff's pleading requirement, we would
consider the defendant's assertion of the defense to be timely.
	The appellate court also concluded that the plaintiff is entitled
to recover on her claim of tortious interference with prospective
business advantage. We believe that this theory, too, is unavailing.	The elements of this cause of action are well established:
			"To state a cause of action for intentional interference
with prospective economic advantage, a plaintiff must
allege (1) a reasonable expectancy of entering into a valid
business relationship, (2) the defendant's knowledge of
the expectancy, (3) an intentional and unjustified
interference by the defendant that induced or caused a
breach or termination of the expectancy, and (4) damage
to the plaintiff resulting from the defendant's
interference." Anderson v. Vanden Dorpel, 172 Ill. 2d 399, 406-07 (1996).
	We believe that the plaintiff's claim in this case founders on
the third element, the requirement that she show an intentional and
unjustified interference by the defendant. The interference alleged
by the plaintiff in the present case involved the allegedly false
reports the defendant made to the credit agencies. As we have
stated, however, those reports were accurate and proper, and
therefore they cannot represent an unjustified interference with the
plaintiff's prospective business expectancy.
	We note in passing that ignorance of the basis for the increase
in payments, though perhaps an initial source of controversy
between defendant and Golomb, does not appear to have sustained
the dispute-a dispute, we might add, that defendant repeatedly
offered to resolve if plaintiff would only bring the account current
by payment of the full amount owed. The defendant's actions do
not support the appellate court's conclusion that defendant set out
to "force plaintiff into foreclosure." See 311 Ill. App. 3d at 656.
The circuit court's determination that defendant's conduct was not
intentional is certainly not against the manifest weight of the
evidence.
	Finally, we note that at oral argument the defendant asked this
court to reinstate the circuit court judgment, which awarded the
plaintiff $10,000 on her negligence claims. Apparently, the
defendant no longer wishes to challenge the trial judge's findings
on those counts, and we need not discuss them separately.
	For the reasons stated, the judgment of the appellate court is
reversed, and the judgment of the circuit court of Du Page County
is affirmed.
Appellate court judgment reversed;
circuit court judgment affirmed.
	JUSTICE THOMAS took no part in the consideration or
decision of this case.