Court Opinion

ID: 3139875
Source: CourtListenerOpinion
Date Created: 2015-10-22 17:50:17.506395+00
Date Added: 2024-06-11T12:47:04.833293
License: Public Domain

No. 3-05-0299
_________________________________________________________________
filed July 7, 2006.
                                IN THE

                                           APPELLATE COURT OF ILLINOIS

                                           THIRD DISTRICT

                                           A.D., 2006

ROSEWOOD CARE CENTER, INC.,         ) Appeal from the Circuit Court
                                    ) of the 10th Judicial Circuit,
       Plaintiff-Appellant,    ) Tazewell County, Illinois,
                                    )
       v.                           )
                                    ) No. 03-L-174
CATERPILLAR, INC.,                   )
                                    )
       Defendant-Appellee        )
                                    ) Honorable
(Enloe Drugs, LLC., Plaintiff;      ) Stuart P. Borden,
Betty Jo Cook, Defendant).       )Judge, Presiding.
_________________________________________________________________

JUSTICE HOLDRIDGE delivered the opinion of the court:
_________________________________________________________________

       Plaintiff Rosewood Care Center (Rosewood) filed suit against Caterpillar, Inc.,

seeking payment for services it provided to Caterpillar employee Betty Jo Cook while she

was a patient at Rosewood. Plaintiff sought reimbursement based on Caterpillar=s alleged

promise to pay. Caterpillar filed a motion to dismiss, arguing that the Statute of Frauds

barred Rosewood=s suit. The trial court found that the Statute of Frauds did indeed bar

Rosewood=s suit and dismissed the complaint. We hold that, under the current state of the

law, the Statute of Frauds does not bar Rosewood=s suit. We therefor reverse and remand

to the circuit court for further proceedings.
       Betty Jo Cook was employed by Caterpillar. In October 2001, she alleged that she

suffered an injury while on the job. She then filed a claim for workers= compensation

benefits against Caterpillar.

       Cook=s injury required hospitalization and nursing home care.         According to

Rosewood=s complaint, Caterpillar contacted Rosewood and sought Cook=s admission to

the skilled nursing facility on a managed care (fixed rate) basis. Through it=s agent, HSM

Management Services, Rosewood refused to admit Cook on that basis.           On January 10,

2002, Dr. Norma Just, a physician in charge of the medical care related to workers=

compensation claims of Caterpillar employees, requested that Cook be admitted to

Rosewood. Rosewood claims that during negotiations, Dr. Just promised that Caterpillar

would pay the cost of Cook=s care in full. Dr. Just=s statements and assurances were not

reduced to writing.

       On that same day, HSM faxed a letter to Dr. Just confirming Dr. Just=s authorization

of Cook=s admission. The letter stated that Caterpillar agreed to four weeks of treatment

and that any future evaluation of Cook=s length of stay would be determined by her treating

Rosewood physician. Dr. Just signed the letter and returned it on January 11, 2002.

       Rosewood admitted Cook to its skilled nursing facility on January 30, 2002. Cook

remained at Rosewood and received treatment and care through June 13, 2002. During

her stay, Cook incurred medical and pharmaceutical charges in the amount of $181,857.

Rosewood demanded that Caterpillar pay Cook=s expenses, and Caterpillar refused.

       Rosewood filed suit against Cook and Caterpillar.        Among other things, the

complaint alleged that Caterpillar authorized Cook=s treatment and that it admitted Cook in

reliance on Caterpillar=s promise to pay for Cook=s expenses while she was at the facility.

                                            2
Therefore, Caterpillar was responsible for the various charges Cook incurred during her

stay. Rosewood sought recovery from Caterpillar based on theories of breach of contract,

promissory estoppel and quantum meruit. Caterpillar moved to dismiss the complaint

pursuant to sections 2-615 and 2-619 of the Code of Civil Procedure (Code) (735 ILCS 5/2-

615, 2-619 (West 2004)). Among other arguments, Caterpillar claimed that the statute of

frauds barred Rosewood=s claims since the alleged agreement to pay Cook=s bills was not

in writing. The trial court found that the statute applied and dismissed all three counts

against Caterpillar pursuant to section 2-619 of the Code.

                                STANDARD OF REVIEW

       A section 2-619 motion to dismiss admits all well-pleaded facts in the complaint

together with all reasonable inferences that can be drawn from those facts in the plaintiff's

favor (Redwood v. Lierman, 331 Ill. App. 3d 1073 (2002)), and it raises other defects or

defenses that bar the claim (Krilich v. American National Bank & Trust Co. of Chicago, 334
Ill. App. 3d 563 (2002)). The trial court must consider whether the defendant presented

facts constituting an affirmative defense that would defeat the plaintiff's cause of action.

Prodromos v. Poulos, 202 Ill. App. 3d 1024 (1990). We review de novo a dismissal under

section 2-619. Prodromos v. Howard Savings Bank, 295 Ill. App. 3d 470 (1998).

                                        ANALYSIS

                                    I. Statute of Frauds

       The Frauds Act (statute of frauds) (740 ILCS 80/1 (West 2004)) provides that,

absent certain exceptions, an oral promise to answer for the debt of another is

unenforceable unless in writing.

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       "No action shall be brought, *** whereby to charge the defendant upon any

       special promise to answer for the debt, default or miscarriage of another

       person ***, unless the promise or agreement upon which such an action shall

       be brought, or some memorandum or note thereof, shall be in writing, and

       signed by the party to be charged therewith, or some other person thereunto

       by him lawfully authorized." 740 ILCS 80/1 (West 2004).

       In this case, both parties agree that the faxed letter which was signed by Dr. Just

and returned to Rosewood on January 11, 2002, is insufficient to support the promise

Rosewood seeks to enforce. Thus, the question we must consider is whether Caterpillar=s

oral promise to pay Cook=s debt constitutes a special promise to answer for the debt of

another within the meaning of the statue of frauds and is therefore unenforceable.

       Rosewood contends that the statute of frauds does not bar the enforcement of

Caterpillar=s promise to pay Cook=s expenses because it was not a "special" promise under

the statute. First, Rosewood argues that there was no pre-existing debt, that is, Caterpillar

made its promise to Rosewood before Rosewood provided goods and services to Cook.

Second, Rosewood maintains that Caterpillar=s promise to pay for Cook=s stay was not a

special promise because it promoted Caterpillar=s own interests in satisfying its obligation

under the Workers= Compensation Act (Act) (820 ILCS 305/8(a) (West 2004)).

       In the late 1800's, the Illinois supreme court held in two separate cases that the

statute of frauds was only applicable if the promise to pay the debt of another was made

after the obligation of the principal debtor had been incurred. Williams v. Corbet, 28 Ill. 262

(1862); Hartley Brothers v. Varner, 88 Ill. 561 (1878). Oral promises made prior to the

obligation of the principal debtor had been incurred were enforceable. In the instant matter,

                                              4
Rosewood correctly notes that Caterpillar made its promise to pay Cook=s expenses before

she was admitted and before she incurred any debt. Thus, Rosewood maintains, the

statute of frauds is inapplicable to the instant matter under Williams and Hartley Brothers.

We agree.

       In Williams, Corbert agreed to deliver cattle to Caldwell, but only after Williams made

an oral promise to Corbert to pay Corbert for the cattle. Corbert delivered the cattle to

Caldwell. When Williams refused payment, Corbert brought suit against Williams who

plead the statute of frauds as a defense. Our supreme court held that the statute of frauds

did not protect Williams, reasoning:

              "That [Williams] was the person to whom the credit was given,

              is clear, and that fact makes the undertaking original and not

              collateral, and therefore not within the statute of frauds. The

              whole was one single bargain, and [Williams=] promise was

              incorporated into the contract and became an essential part of

              it. It is not at all like a case where the contract is executed, and

              the promise to pay made after the debt was created; such a

              promise in such a case must, to be binding, be in writing."

              Williams, 28 Ill. at 263.

       In Hartley Brothers, the brothers operated a general store. Reubottom owed $8.00

on his account and the brothers refused to extend any more credit to Reubottom. Varner

then told the brothers that, if they would extend further credit to Reubottom, he (Varner)

would see to it that the brothers were paid. When Reubottom=s account reached $160.91

the brothers demanded payment from Varner, who refused. Citing its decision in Williams,

                                               5
our supreme court again held that the statute of frauds did not bar recovery. Hartley

Brothers, 88 Ill. at 563.

       Williams and Hartley Brothers together stand directly for the proposition that the

statute of frauds is applicable, in matters of surety, only where the promise to pay the debt

of another was made after the obligation of the principal debtor had been incurred. See

also, Ricci v. Reed, 169 Ill. App. 3d 1062 (1988) (for statute of frauds to apply, there must

be an existing debt at the time of the alleged guarantor=s promise); and Publishers

Advertising Associates, Inc. v. Wessell Co., Inc., 747 F.2d 1076, 1080 (7th Cir. 1980) (in

applying the Illinois statute of frauds, for the statute to be applicable, there must be an

existing debt at the time of the alleged guarantor=s assurances).

       It is well-settled that when our supreme court has declared law on any point, only it

can modify or overrule its previous decisions, and all lower courts are bound to follow

supreme court precedent until such precedent is changed by the supreme court. See

generally, DuPage Couty Airport Authority v. Department of Revenue, 358 Ill. App. 3d 476

(2005) and cases cited therein. Thus, the question squarely before this court is whether

the holding in Willaims and Hartley Brothers have been modified or overruled by our

supreme court.

       Our review of supreme court precedent leads us to conclude that Williams and

Hartley Brothers are still good law. Our research revealed no supreme court decision

overruling or modifying the holding articulated in those two decisions. Several decisions of

the appellate court would seem to be at odds with Williams and Hartley Brothers, but to the

extent they conflict with supreme court precedent, they cannot be followed. See, Brown &

Shinitzky Chartered v. Dentinger, 118 Ill. App. 3d 517 (1983); Swartzberg v. Dreszner, 107

                                             6
Ill. App. 3d 318 (1982). We also recognize that the holding articulated in Williams and

Hartley Brothers has been abandoned by other jurisdictions and commentators. See,

Kossick v. United Fruit Co., 166 F. Supp. 571 (S.D.N.Y. 1958), judgment rev=d on other

grounds, 365 U.S. 731 (1981); See also, Restatement (Second) of Contracts section 116,

Reporter=s Note, at 301 (1981)(section stating that enforceable promise to pay debt of

another must be in writing based upon former section 184, but limitation in former section

184 to an antecedent debt is eliminated). However, until our supreme court abandons the

holding articulated in Williams and Hartley Brothers, we are bound to follow it. Accordingly,

we find that the promise falls outside the statute of frauds, and the trial court was in error in

dismissing the complaint on that basis.

                       II. Quantum Meruit and Promissory Estoppel

       Rosewood also claims that the trial court erred in dismissing its quantum meruit and

promissory estoppel counts. We note that these counts were dismissed based only upon

the statute of frauds. Under Illinois law, the statute of frauds acts to bar all claims at law

and in equity. Edens View Realty & Inventory Inc., v. Heritage Enterprises, Inc., 87 Ill. App.
3d 480 (1980). Promissory estoppel cannot be applied to allow recovery where the statute

of frauds bars the contract claim. Peoria Associates Ltd. Partnership v. Best Buy Co., 995
F. Supp. 823 (N.D. Ill. 1997); Dickens v. Quincy College Corp., 245 Ill. App. 3d 1055

(1993). Since the statute of frauds does not apply to this case, the trial court erred in

dismissing Rosewood=s remaining counts.

                                        CONCLUSION

       The judgment of the circuit court of Tazewell County is reversed and remanded for

further proceedings consistent with this ruling.

                                               7
       Reversed and remanded.

       BARRY, J., concurs, and LYTTON, J., specially concurs.

JUSTICE LYTTON specially concurs:

_________________________________________________________________

                                              I.

       I write separately to discuss the general and widely recognized trend to abandon the

pre-existing debt requirement. Since the decisions in Williams v. Corbet, 28 Ill. 262 (1862)

and Hartley Brothers v. Varner, 88 Ill. 561 (1878) were decided in the mid 1800's, the law

on the applicability of the statute of frauds has seen significant change. As noted by the

majority, today it is generally agreed that a "special promise" within the statute may be

made prior to or simultaneously with the creation of the principal obligation, and may be

offered as an inducement to the creditor to enter into a contract with the principal debtor.

Brown & Shinitzky Chartered v. Dentinger, 118 Ill. App. 3d 517 (1983); Evans v. Owens, 30
Ill. App. 2d 114 (1961) (citing Laughlin v. Dalton, 200 Ill. App. 342 (1916)); 9 R. Lord,

Williston on Contracts '22:14, at 276-77 (4th ed. 1999); but cf. Publishers Advertising

Associates, Inc., 747 F.2d 1076, and Ricci v. Reed, 169 Ill. App. 3d 1062 (1988) (for

statute of frauds to apply, there must be an existing debt at time of the alleged guarantor=s

promise).

       The history of the concept of a preexisting debt, in itself, discloses that it is not a

deep-rooted doctrine, but a legal device used at the turn of the 20th century to reach a

desired conclusion or to avoid a seeming wrong. Restatement (Second) of Contracts '116,

                                              8
Comment a, at 300 (1981). However, the language of the statute contains no preexisting

debt requirement. It does not distinguish between an antecedent debt and a debt created

subsequent to the promise. See 740 ILCS 80/1 (West 2004). Based on the statute=s plain

language, a promise to answer for the default or miscarriage of another comes within its

purview without regard to the time when promise was made. Kossick v. United Fruit Co.,

166 F. Supp. 571 (S.D.N.Y. 1958), judgment rev=d on other grounds, 365 U.S. 731 (1961);

see also Restatement (Second) of Contracts '116, Reporter=s Note, at 301 (1981) (section

stating that enforceable promise to pay debt of another must be in writing is based on

former '184, but limitation in former '184 to an antecedent debt is eliminated).

       Furthermore, the policy underlying the statute of frauds urges the conclusion that its

application should not be limited to cases in which the original debt preexisted the promise

to pay it. The object of the statute is to require higher and more certain evidence to charge

a third-party with a debt when that third party does not receive the substantial benefit of the

transaction. The statute is meant to provide greater security against fraudulent demands

which, if met, would discharge the original debtor. Eddy v. Roberts, 17 Ill. 505 (1856).

Those protections and safeguards are necessary whether the promise was made "prior to

or simultaneously with the creation of the principal debt," or "offered as an inducement to

the creditor to enter into a contract with the debtor." See 9 R. Lord, Williston on Contracts

'22:14, at 277 (4th ed. 1999). If anything, the promisor should be entitled to greater

protection where the debt is incurred after the promise is made. Promisors of a preexisting

debt are aware of the amount of debt and can prepare for the likelihood of liability.

Promisors who agree to pay a debt that has yet to arise may be exposed to limitless

liability. The timing of the promise should not limit the statute=s application. I therefore

                                              9
believe that Caterpillar=s oral promise to pay should fall within the statute of frauds

regardless of when it was made.

                                             II.

       Thus, I agree with Brown & Shinitzky Chartered that an oral contract to guarantee

the debt of another violates the statute of frauds and is unenforceable unless it is founded

upon a new and independent consideration passing between the newly contracting parties

and independent of the underlying debt. Brown & Shinitzky Chartered, 118 Ill. App. 3d 517.

However, determining whether an oral promise is a special promise within the statute or

whether the promise is independent of the underlying debt is not easily accomplished.

       Historically, courts adopted a basic test to analyze whether an oral promise to pay

constituted a special promise within the Statute.       If the promise was original and

independent of a debt or liability of another person, it was not within the statute. If the

promise was collateral, the statute applied. McKinney v. Armstrong, 97 Ill. App. 208 (1901);

Lake View Hospital Ass=n & Training School For Nurses v. Nicholson, 202 Ill. App. 205

(1916). Only a collateral promise fell within the meaning of the term "special" promise as

used in the Statute. Bonner & Marshall Co. v. Hansell, 189 Ill. App. 474 (1914).

       The terms original and collateral do not appear anywhere in the statute and have

been used by courts more as a convenient mode of expression rather than a meaningful

interpretation. The use of these terms precedes the statute. They were part of the

terminology applicable to a common law action of debt. Bullen v. Morrison, 98 Ill. App. 669

(1901). An original promise would give rise to an action of debt; "whereas a collateral

promise, though it might be a binding contract upon which assumpsit would lie because a

detriment had been incurred by the plaintiff at the defendant=s request, could not be the

                                            10
basis of debt." 9 R. Lord, Williston on Contracts '22:6, at 248 (4th ed. 1999). Using these

terms in a statute of frauds analysis, while convenient, is not very helpful.

       More recently, courts recognized the difficulty in determining whether a promise is

original or collateral and have attempted to define a more useful test. See Publishers

Advertising Associates, Inc., 747 F.2d 1076; Swartzberg v. Dreszner, 107 Ill. App. 3d 318

(1982). Some Illinois appellate courts have noted that the question is to be determined "not

from the particular words used, but from all of the circumstances of the transaction." Ricci,
169 Ill. App. 3d at 1066; Publishers Advertising Associates, Inc., 747 F.2d at 1079.

       Courts from other jurisdictions have stated that the intention of the parties controls

and should be ascertained from the words of the promise and the situation of the parties,

as well as all of the circumstances surrounding the transaction. Eilertsen v. Weber, 255 P.
2d 150 (Or. 1953); Landmark Savings Bank, F.S.B. v. Weaver-Bailey Contractors, Inc., 739
S.W.2d 166 (Ark. 1987).

       Perhaps the most common test for distinguishing promises that fall within the statute

is the "leading object" or "main purpose" rule. Swartzberg, 107 Ill. App. 3d 318; Power

Entertainment, Inc. v. National Football League Properties, 151 F.3d 247 (5th Cir. 1998);

Restatement (Second) of Contracts '116 (1981); see also Clifford v. Luhring, 69 Ill. 201

(1873) (making an early, general reference to the application of the leading object test).

Under the "leading object" rule, a promise to pay the debt of another falls within the statute

of frauds unless the main purpose of the promisor is to gain some advantage, or promote

some interest or purpose of his own, and not to become a mere guarantor or surety of

another=s debt. Swartzberg, 107 Ill. App. 3d 318. A slight or indirect possible advantage to

promisors is insufficient to defeat the statute=s application. The expected advantage must

                                             11
justify the conclusion that the promisors= main purpose in making the promise is to advance

their own interests. Restatement (Second) of Contracts '116, Comment b, at 300 (1981).

In other words, unless promisors receive valuable consideration that moves directly to

themselves, as distinguished from being benefitted by a consideration moving to the

original debtor, the promise is within the statute. 9 R. Lord, Williston on Contracts '22:20

(4th ed. 1999); Murto v. McKnight, 28 Ill. App. 238 (1888); Emerson v. Slater, 63 U.S. 28

(1859). As a practical matter, a promisor=s advantage must be served in a straightforward

way in order for the leading object rule to apply. Graybar Electric Co. v. Sawyer, 485 A.2d
1384 (Me. 1985).

       While these various tests are all supported by authority, the leading object rule is the

most meaningful and effective way of determining whether a promise is within the statute of

frauds. I would follow the trend toward categorizing a promise as either collateral or original

by application of the leading object rule. 9 R. Lord, Williston on Contracts '22:11, '22:20

(4th ed. 1999).

       Rosewood argues that the statute of frauds does not apply in this case because the

main purpose of Caterpillar=s promise was to promote its own interests. Rosewood claims

that Caterpillar received a direct, substantial benefit because the goods and services

furnished by Rosewood met Caterpillar=s statutory obligation under the Workers=

Compensation Act to provide treatment required due to Cook=s work related injury. See

820 ILCS 305/8(a) (West 2004)).

       Under section 305/8(a) of the Act, employers are required to provide and pay for all

the "necessary medical services" required, limited to that which is "reasonably required" to

treat the "accidental injury." 820 ILCS 305/8(a) (West 2004). Rosewood=s assumption that

                                              12
Caterpillar is obligated to pay for Cook=s services is based on two legal conclusions: first,

that Cook suffered a work-related accidental injury; and second, that the services Cook

received were necessary and reasonably required.                However, Cook=s workers

compensation claim is still pending, and Caterpillar=s obligation to pay for Cook=s services is

still in dispute. Any possible advantage to Caterpillar has not yet materialized and cannot

defeat the statute=s application.

       Implicit in Rosewood=s argument is that, in consideration for Caterpillar=s payment,

Rosewood could release Caterpillar from its obligation under the Act. However, Rosewood

is legally incapable of providing such consideration. Cook, as the injured worker, is the only

person entitled to receive the workers= compensation benefits, and the Act expressly

prohibits the assignment of those payments. See 820 ILCS 305/21 (West 2004). Thus, no

consideration would flow between Caterpillar and Rosewood.

       Without sufficient consideration from Rosewood, it is difficult to conclude that

Caterpillar=s main purpose in making the oral agreement was to promote its own pecuniary

interests. See generally Graybar Electric Co., 485 A.2d 1384. Accordingly, the promise

violates the statute of frauds and is unenforceable. Using this analysis, I would conclude

that the trial court properly dismissed Rosewood=s complaint.

                                              III.

       However, since our supreme court has not reexamined its analysis in Williams and

Hartley Brothers since they were decided more than one hundred and twenty-five years

ago, I must reluctantly agree with the majority. Under the current state of the law, the

statute of frauds does not bar Rosewood=s suit.

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