Opinion ID: 1980772
Heading Depth: 1
Heading Rank: 5

Heading: Promisee-Based Defenses

Text: Whether Sexton may allege in its counterclaim against Blair a basis for recovery arising from XL Disposal's agreement with Blair turns on whether Sexton did, in fact, step into XL Disposal's shoes in promising to make the monthly payments. To state the question rhetorically: May Sexton, as promisor, assert against Blair, the intended third-party beneficiary, defenses which XL Disposal, the promisee, might have against Blair? (See J. Calamari & J. Perillo, Contracts § 17-12, at 716-17 (3d ed. 1987).) The issue of whether a promisor can assert such defenses has not before arisen in Illinois. This case is even more novel because the defenses were not asserted in response to a claim by the third-party beneficiary as might normally be expected. Nevertheless, the seminal decision is Rouse v. United States (D.C.Cir.1954), 215 F.2d 872. In that case, Bessie Winston had had installed in her home an oil burner which she financed with a promissory note. The United States, through the Federal Housing Administration, guaranteed the note's payment. Winston sold the home to John Rouse. The contract of sale contained a provision obligating Rouse to assume payment of $850 for the oil burner. When Winston defaulted on her promissory note, the United States paid and sued Rouse. One of the defenses Rouse, the promisor, raised against the United States, the third-party beneficiary, was that the oil burner had not been installed satisfactorily, a defense Winston, the promisee, might have asserted. The court held that Rouse could not assert the defense. The court said that whether a promisor could assert a defense against a third-party beneficiary that the promisee might have asserted against the beneficiary depended upon the nature of the obligation undertaken. If a promisor agrees to `discharge whatever liability the promisee is under' to the third-party, then the promisor must be allowed to step into the promisee's shoes to show that the promisee was `under no enforceable liability.' ( Rouse, 215 F.2d at 874, quoting 3 S. Williston, Williston on Contracts § 811A (1936).) But if the promisor only agrees to pay a certain sum of money to the third party, it is immaterial whether the sum is actually owed by the promisee. ( Rouse, 215 F.2d at 874, quoting 3 S. Williston, Williston on Contracts § 811A (1936).) In that situation, the promisor has no basis to assert a defense that the promisee might have enjoyed. The court concluded that a promise to assume amounts is a promise to pay irrespective of the promisee's liability. ( Rouse, 215 F.2d at 874; see also J. Calamari 17-12, at 716 (3d ed. 1987).) Rouse could not assert Winston's defense that the oil burner had not been properly installed because Rouse had but agreed to assume the payment of an $850 sum. Was Sexton's obligation, like Rouse's, one to pay Blair regardless of whether XL Disposal actually owed anything to him or was Sexton's obligation one to discharge a liability running between XL Disposal and Blair? XL Disposal had agreed to pay Blair until such time as it cease[d] to operate both of [its] waste transfer facilities. But the promise was not conditioned merely on XL Disposal's operation of the facilities. The promise to pay Blair continued as long any successor[] or assign[ee] of XL Disposal's interest in the facilities continued to operate them. Sexton was such a successor or assignee of XL Disposal's interest in the Laflin Street facility. And Sexton's promise to Blair was similarly conditionedSexton promised to pay until it cease[d] to operate the Laflin Street facilityreflecting XL Disposal's obligation to Blair. Ignoring, for the moment, that the monthly amounts Sexton and XL Disposal agreed to pay Blair differed, the like conditions make it seem that Sexton did assume XL Disposal's liability at least with respect to the Laflin Street facility. But the condition stated in XL Disposal's obligation to Blair would also seem to undermine the notion that there was any liability for Sexton to assume. The conditiona condition subsequent to the promised payment (J. Calamari & J. Perillo, Contracts § 11-7, at 441-44 (3d ed. 1987); see also Wysocki v. Bedrosian (1984), 124 Ill.App.3d 158, 163, 79 Ill.Dec. 564, 463 N.E.2d 1339)seems to contemplate a single entity's operation of XL Disposal's two waste transfer facilities. XL Disposal promised to pay Blair until: XL [Disposal], its successors and assigns, in whole or part, including successors, assigns, and lessees of all or part of its interest in its said waste transfer facilities, ceases to operate both of said    facilities   . The language can be reasonably read to say that XL Disposal's obligation depended upon the operation of both waste transfer facilities by either XL Disposal or a successor or assign of some or all of its business interests, including waste transfer. The sale of the Laflin Street facility's assets to Sexton would have meant that neither XL Disposal nor such a successor, assign, or lessee operated both facilities. XL Disposal's liability would be discharged with the sale leaving nothing for Sexton to assume. A closer look at the nature of XL Disposal's promise to Blair further shows that XL Disposal's promise to Blair did not represent liability Sexton could assume. XL Disposal said that it was indebted to Blair for past legal services. That reason explained XL Disposal's promise to pay him. But XL Disposal's promise could hardly be said to be based upon a liquidated debt for the actual value of legal services rendered. What amounts Blair was owed were determined only in connection with operation of both waste transfer facilities. If XL Disposal had closed one of its facilities the day after the August 1984 agreement with Blair took effect, XL Disposal's liability for the legal services of Blair would have been completely discharged. That is so regardless of the fact that Blair might have gone undercompensated. If XL Disposal's promise to pay Blair did not represent an independently ascertainable liability of XL Disposal, what liability of XL Disposal could exist for Sexton to assume? Sexton's promise to pay Blair until it ceased operating the Laflin Street facility was its own, separate promise to Blair. That that promise was separate from any liability of XL Disposal is evident in the fact that Sexton, too, controlled the extent of its own obligation. If Sexton had stopped operating the Laflin Street facility one day after the asset sale contract took effect, it would owe Blair no further payments. Finally, there is the matter of the amount of Sexton's promised payments to Blair. Sexton promised to pay roughly half of the amount that XL Disposal had promised to pay Blair. Presumably, that was because Sexton's paymentconnected to only one of the two waste transfer facilitieswould be roughly half of XL Disposal's obligation to Blair in operating both. Sexton's argument would be that it is sufficient to have stepped into only one of XL Disposal's shoes to enable it to assert defenses XL Disposal would be entitled to. Sexton has not directed us to, nor have we found, authority stating that the assumption of only part of a promisee's liability to a third-party entitles a promisor to avail himself of the promisee's defenses. We conclude that Sexton promised no more than to pay Blair the monthly sums independent of whether XL Disposal truly owed Blair anything. Sexton therefore cannot assert defenses which XL Disposal, as promisee, might have asserted based on its relationship with Blair. The trial judge was correct to dismiss the counts of Sexton's counterclaim alleging that XL Disposal's agreement to pay Blair was fraudulent, involved excessive legal fees, was against public policy, or was a perpetual contract.