Rosewood Care Center v. Caterpillar, Inc.

Docket No. 103212.
IN THE
SUPREME COURT
OF
THE STATE OF ILLINOIS
ROSEWOOD CARE CENTER, INC., Appellee, v. CATERPILLAR,
INC., Appellant.
Opinion filed November 1, 2007.
JUSTICE BURKE delivered the judgment of the court, with
opinion.
Chief Justice Thomas and Justices Freeman, Fitzgerald, Kilbride,
Garman, and Karmeier concurred in the judgment and opinion.
OPINION
Plaintiff, Rosewood Care Center, Inc. of Peoria (Rosewood), filed
an action against defendant Caterpillar, Inc., seeking reimbursement
for skilled nursing care services provided to Caterpillar’s employee,
Betty Jo Cook, while she was a patient at Rosewood. Rosewood
alleged in its complaint that Caterpillar had promised to pay for the
care and treatment Rosewood provided to Cook. In response,
Caterpillar moved to dismiss the complaint, arguing that the alleged
promise to pay for Cook’s care was not enforceable because it was
not in writing as required by the Frauds Act (statute of frauds) (740
ILCS 80/1 (West 2004)). The circuit court granted Caterpillar’s
motion and Rosewood appealed.
The appellate court reversed and remanded. 366 Ill. App. 3d 730.
Relying on Williams v. Corbet, 28 Ill. 262 (1862), and Hartley Bros.
v. Varner, 88 Ill. 561 (1878), the appellate court held that a promise
to pay the debt of another is subject to the statute of frauds only if the
debt exists at the time the promise is made. Applying a “preexisting
debt rule,” the appellate court concluded that, because Caterpillar’s
alleged promise to pay for Cook’s care was made before the debt
came into existence, it was not subject to the statute of frauds and the
circuit court erred in dismissing Rosewood’s complaint.
We subsequently granted Caterpillar’s petition for leave to appeal
(210 Ill. 2d R. 315) and now affirm the judgment of the appellate
court, although we do so on different grounds.
BACKGROUND
The following facts are taken from Rosewood’s complaint and
attached exhibits. On October 21, 2001, Cook suffered injuries at
work and was hospitalized from that date until January 30, 2002.
Sometime thereafter, Cook filed a workers’ compensation claim
against Caterpillar.
On January 3, 2002, Caterpillar contacted HSM Management
Services (HSM), the management agent for Rosewood, a skilled
nursing facility. Caterpillar requested that Rosewood admit Cook on
a “managed care basis (fixed rate).” HSM advised Caterpillar that
Rosewood would not admit Cook on those terms.
Shortly thereafter, on January 10, Dr. Norma Just, Caterpillar’s
employee in charge of medical care relating to workers’ compensation
claims, contacted HSM. Just told HSM that Cook had sustained a
work-related injury and was receiving medical care at Caterpillar’s
expense under the workers’ compensation laws. Just requested that
Cook be admitted to Rosewood for skilled nursing care and therapy,
and stated that the cost of Cook’s care would be 100% covered and
paid directly by Caterpillar to Rosewood with a zero deductible and
no maximum limit. Just further advised HSM that Cook had been
precertified for four weeks of care. Just asked that Rosewood send the
bills for Cook’s care to Caterpillar’s workers’ compensation division.
That same day, HSM faxed a letter to Dr. Just confirming their
conversation. In this letter, HSM requested Just to acknowledge that
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she had agreed to (1) a “SNF admission for Cook,” (2) four weeks of
treatment, and (3) the need for further evaluation in connection with
the length of care Cook would require. Just signed the fax,
acknowledging her agreement, and returned it the next day.1
On January 20, “Sue” from Dr. Just’s office telephoned HSM and
confirmed approval for Cook’s transfer from the hospital to
Rosewood. On January 30, Sue reconfirmed, via telephone,
Caterpillar’s authorization for Cook’s care and treatment in
accordance with the January 10 agreement, except that Sue now
advised HSM that Cook was precertified for two weeks of care
instead of the original four weeks.
On January 30, Cook was admitted to Rosewood. Upon her
admission, Cook signed a document entitled “Assignment of Insurance
Benefits” as required by law. In this document, Cook assigned any
insurance benefits she might receive to Rosewood and acknowledged
her liability for any unpaid services.
Caterpillar, through its health-care management company,
continued to orally “authorize” care for Cook and did so on February
8, February 25, March 11, March 21, April 8, April 18, May 16, and
June 4. Cook remained at Rosewood until June 13, 2002. The total of
Rosewood’s charges for Cook’s care amounted to $181,857.
Rosewood billed Caterpillar on a monthly basis on February 12,
March 11, April 15, May 14, June 10, and July 15. Caterpillar never
objected to the bills being sent to it for Cook’s care, nor did it ever
advise Rosewood that treatment was not authorized. However,
Caterpillar ultimately refused to pay for services rendered to Cook.
Rosewood filed an amended complaint against both Caterpillar
and Cook. Relevant here, count III of Rosewood’s complaint stated
a claim for breach of contract against Caterpillar, count IV a claim for
promissory estoppel, and count V a claim for quantum meruit. In
connection with the promissory estoppel claim, Rosewood averred
that, prior to Cook’s admission, Caterpillar had, in the past, requested,
authorized, and approved care and treatment at Rosewood for other
injured employees and had paid for the services. Rosewood averred
1
Rosewood does not contend that this letter satisfies the writing
requirement of the statute of frauds.
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that it only admitted Cook based on Caterpillar’s promise. Rosewood
further averred that it would not have admitted Cook without
Caterpillar’s promise to pay.
Caterpillar moved to dismiss the breach of contract count (count
III) and the promissory estoppel count (count IV), pursuant to section
2–619(a)(7) of the Code of Civil Procedure (735 ILCS 5/2–619(a)(7)
(West 2004)). Caterpillar argued that these claims were barred
because its alleged agreement to take responsibility for the cost of
Cook’s care was not in writing, as required by the statute of frauds.
Caterpillar also filed a motion to strike count V, the quantum meruit
claim.
On April 4, 2005, the trial court granted Caterpillar’s motion to
dismiss the breach of contract and promissory estoppel counts, finding
that the statute of frauds applied and, thus, barred Rosewood’s claims.
Thereafter, the trial court granted Caterpillar’s motion to strike the
quantum meruit count. In a subsequent order, the trial court held,
pursuant to Supreme Court Rule 304(a), that there was no just reason
to delay appeal of its order dismissing the breach of contract and
promissory estoppel counts, as well as its order striking the quantum
meruit count.
On appeal, the appellate court reversed and remanded. 366 Ill.
App. 3d 730. Relying on Williams v. Corbet, 28 Ill. 262 (1862), and
Hartley Bros. v. Varner, 88 Ill. 561 (1878), the appellate court
concluded that the statute of frauds is only applicable when the
promise to pay the debt of another is made after the obligation of the
principal has been incurred. In other words, the debt must preexist the
promise. Here, it was alleged that Caterpillar made its promise to pay
Rosewood prior to the time Cook was admitted and, thus, Cook had
no preexisting debt. The appellate court acknowledged that several
appellate decisions seemed to be at odds with Williams and Hartley
Bros., and that the preexisting-debt rule had been abandoned by other
jurisdictions and legal authorities. Nevertheless, the appellate court
concluded that principles of stare decisis required it to follow
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Williams and Hartley Bros. and found the trial court erred in
dismissing Rosewood’s complaint on this basis.2
Justice Lytton specially concurred to “discuss the general and
widely recognized trend to abandon the preexisting debt requirement.”
366 Ill. App. 3d at 735 (Lytton, J., specially concurring). Justice
Lytton noted that Illinois’ statute of frauds does not contain a
preexisting-debt requirement, and concluded that the timing of the
promise should not limit the statute’s application. However, Justice
Lytton agreed that the court was bound by stare decisis to apply the
preexisting-debt rule. We thereafter granted Caterpillar’s petition for
leave to appeal (210 Ill. 2d R. 315(a)).
ANALYSIS
I. Preexisting Debt Rule
The first issue, raised by Caterpillar, is whether the appellate court
erred in holding that the preexisting debt rule takes this case out of the
statute of frauds. Caterpillar contends that the appellate court erred in
applying the preexisting debt rule because the rule is not supported by
the statutory language nor is it commensurate with the purposes
underlying the statute of frauds. We agree.
The statute of frauds provides in relevant part:
“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 action shall be
brought, or some memorandum or note thereof, shall be in
2
2
With respect to Rosewood’s promissory estoppel and quantum meruit
counts, the appellate court held that the statute of frauds bars all claims at
law and in equity and, thus, “[p]romissory estoppel cannot be applied to
allow recovery where the statute of frauds bars the contract claim.” 366 Ill.
App. 3d at 735. However, because the appellate court concluded the statute
of frauds does not apply in the instant case, the court held that the trial court
erred in dismissing these counts as well. Before this court, Rosewood does
not challenge the appellate court’s holding that the statute of frauds bars all
claims at law and in equity, i.e., that, if applicable, the statute of frauds
would bar its promissory estoppel and quantum meruit claims.
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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).
This section of the statute is known as the surety provision (72 Am.
Jur. 2d Statute of Frauds §4, at 536 (2001)), and has remained
unchanged in all material respects since its enactment in Illinois in
1819.
When interpreting this statute, we recall that the fundamental rule
of statutory construction is to ascertain and give effect to the
legislature’s intent. People v. Pack, 224 Ill. 2d 144, 147 (2007). The
language of the statute is the best indication of legislative intent, and
we give that language its plain and ordinary meaning. Pack, 224 Ill. 2d
at 147. We may not depart from the plain language of the statute by
reading into it exceptions, limitations, or conditions that conflict with
the express legislative intent. Town & Country Utilities, Inc. v. Illinois
Pollution Control Board, 225 Ill. 2d 103, 117 (2007). “[A] court
should not attempt to read a statute other than in the manner in which
it was written.” Ultsch v. Illinois Municipal Retirement Fund, No.
102232, slip op. at 7 (August 2, 2007).
In general, the statute of frauds provides that a promise to pay the
debt of another, i.e., a suretyship agreement, is unenforceable unless
it is in writing. However, there is nothing in the plain language of the
statute of frauds to indicate that for a writing requirement to apply,
the debt must exist prior to the time the promise to pay is made. The
term “debt” is not limited or qualified in any way. Under the principles
of construction set forth above, we do not find that the statute’s
application depends on whether the debt exists before the promise is
made. To do so would read conditions into the statute that are not
there. The plain language of the statute does the not require that a
debt exist before a promise is made for the promise to fall within the
statute.
Nor does the purpose underlying the statute of frauds require or
support a preexisting debt rule. The statute of frauds “was adopted to
give greater security to property; to guard against false contracts, set
on foot by fraud and supported by perjury.” Hite v. Wells, 17 Ill. 88,
90 (1855). In Eddy v. Roberts, 17 Ill. 505 (1856), we further stated:
“The plain object of the statute is to require higher and more
certain evidence to charge a party, where he does not receive
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the substantial benefit of the transaction, and where another is
primarily liable to pay the debt or discharge the duty; and
thereby to afford greater security against the setting up of
fraudulent demands, where the party sought to be charged is
another than the real debtor, and whose debt or duty, on
performance of the alleged contract by such third person,
would be discharged.” Eddy, 17 Ill. at 506.
More certain evidence is required when one promises to pay the
debt of another because “[t]here is *** a temptation for a promisee,
in a case where the real debtor has proved insolvent or unable to pay,
to enlarge the scope of the promise, or to torture mere words of
encouragement and confidence into an absolute promise.” Davis v.
Patrick, 141 U.S. 479, 487-88, 35 L. Ed. 826, 828, 12 S. Ct. 58, 59
(1891).
The concerns underlying the statute of frauds apply no matter
when the debt was created–whether before the promise was made or
after. A false contract “set on foot by fraud” can arise at any time.
Indeed, as Justice Lytton noted below, “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.” 366 Ill. App. 3d at 736 (Lytton, J.,
specially concurring).
Moreover, numerous authorities have recognized that there is no
preexisting-debt rule. In D’Wolf v. Rabaud, 26 U.S. (1 Pet.) 476, 7 L.
Ed. 227 (1828), the United States Supreme Court stated:
“Whether by the true intent of the statute, it was to extend
to cases where the collateral promise, (so called,) was a part
of the original agreement, and founded on the same
consideration moving at the same time between the parties; or,
whether it was confined to cases, where there was already a
subsisting debt and demand, and the promise was merely
founded upon a subsequent and distinct undertaking; might, if
the point were entirely new, deserve very grave attention. But
it has been closed within very narrow limits by the course of
the authorities, and seems scarcely open for general
examination; at least in those states where the English
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authorities have been fully recognised and adopted in
practice.” D’Wolf, 26 U.S. (1 Pet.) at 499-500, 7 L. Ed. at
237.
See also 4 C. Brown, Corbin on Contracts §15.5, at 265 (rev. ed.
1997) (noting there is no preexisting-debt rule); R. Lord, Williston on
Contracts §22:14, at 276-77 (4th ed. 1999) (“it is settled 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”).
Despite the foregoing, the appellate court nonetheless concluded
that a debt must exist before a promise is made for the promise to fall
within the statute of frauds. The appellate court, relying on Williams
and Hartley Bros., concluded that these two cases “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.” 366 Ill. App. 3d at 734. Thus, according to the appellate
court, Williams and Hartley Bros. hold that, if the debt does not exist
at the time of the promise, the promise does not fall within the statute
of frauds. A careful reading of the cases, however, shows they do not
establish such a rule.
In Williams, Corbet delivered cattle to Caldwell. Corbet sought to
recover the cost of the cattle from Williams, who allegedly had
promised to pay for them. A judgment was entered in favor of Corbet
following a jury trial. On appeal, this court affirmed. The court noted
that Caldwell parted with the cattle only upon Williams’ promise and
undertaking, and that the consideration passed from Williams to
Corbet. Further, the court noted that Williams was the person to
whom the credit was given. From this, the court concluded that
Williams’ promise was not a suretyship, “and therefore not within the
statute of frauds.” Williams, 28 Ill. at 263.
After concluding that the promise did not fall within the statute of
frauds, this court noted:
“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.
That would be a promise ‘to answer for the debt, default or
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miscarriage of another,’ and within the statute. So if the credit
be not, at the time of the contract, given to the promisor.”
(Emphasis added.) Williams, 28 Ill. at 263.
The court went on to note that there had been conflicting testimony
regarding the nature of Williams’ promise, but that it was within the
jury’s province to resolve the conflict and the jury had done so,
finding that Williams’ promise did not create a suretyship.
Accordingly, the trial court’s judgment was affirmed.
Clearly, Williams does not hold that, in every instance where a
debt does not exist at the time of the promise, the promise will, as a
matter of law, fall outside the statute of frauds. Had Williams believed
the timing of the promise to be the sole determining factor, there
would have been no reason for the court to consider anything other
than the timing of the promise in determining whether it fell within the
statute. The court, however, did not limit its analysis in this way.
Similarly, if Williams had relied on the preexisting-debt rule, there
would have been no logical reason for the court to defer to the jury’s
determination as to whether a suretyship had been created. Credibility
determinations would have been irrelevant if the timing of the promise
was the dispositive factor. Given the analysis undertaken in Williams,
it is clear that the court did not rely solely on the timing of the promise
in determining whether it fell within the statute of frauds.
The second case relied on by the appellate court below, Hartley
Bros., also does not employ a preexisting-debt rule to determine the
applicability of the statute of frauds. In that case, Reubottom, who
was Varner’s employee, owed $8 or $9 to Hartley for goods he had
received on credit. Later, Varner went to Hartley’s store, at which
time Hartley advised Varner that the store would not give Reubottom
any more goods on credit. Varner then told Hartley that, if the store
would give Reubottom goods, Varner would see that Hartley was
paid. Hartley subsequently provided Reubottom with additional goods
totaling $160.91. Hartley sought to recover the costs of the goods
from Varner. After a jury trial, the circuit court entered judgment in
favor of Varner. On appeal, Varner urged this court to affirm the trial
court judgment, arguing that his promise fell within the statute of
frauds. Citing only to Williams, and without any analysis, this court
concluded that Varner’s promise did not fall within the statute.
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As Caterpillar noted at oral argument before this court, Hartley
Bros. does not discuss the timing of the promise in relation to the
creation of the debt. Hartley Bros. simply cited Williams and
concluded that the promise fell outside the statute of frauds. The case
does not support the conclusion that a preexisting-debt rule exists in
Illinois.
As one court has stated, “Lesson Number One in the study of law
is that general language in an opinion must not be ripped from its
context to make a rule far broader than the factual circumstances
which called forth the language.” Federal Deposit Insurance Corp. v.
O’Neil, 809 F.2d 350, 354 (7th Cir. 1987). Based on a careful
examination of the language in Williams and Hartley Bros., we
conclude these cases do not establish a preexisting-debt rule. Thus,
contrary to the appellate court’s reasoning, stare decisis concerns are
not present in this case.
Accordingly, based on the plain language of the statute of frauds
and its underlying purpose, we hold there is no preexisting-debt rule
in Illinois.
II. “Main Purpose” or “Leading Object” Rule
Rosewood argues that, even if the appellate court erred in relying
on the preexisting-debt rule, the court was correct when it reversed
the circuit court’s ruling granting Caterpillar’s motion to dismiss.
According to Rosewood, Caterpillar’s promise falls outside the statute
of frauds pursuant to the “main purpose” or “leading object” rule.
Under this rule, when the “main purpose” or “leading object” of the
promisor/surety is to subserve or advance its own pecuniary or
business interests, the promise does not fall within the statute. P.
Alces, Law of Suretyship and Guaranty §4:19 (1996). As section 11
of Restatement (Third) of Suretyship & Guaranty states:
“A contract that all or part of the duty of the principal
obligor to the obligee shall be satisfied by the secondary
obligor is not within the Statute of Frauds as a promise to
answer for the duty of another if the consideration for the
promise is in fact or apparently desired by the secondary
obligor mainly for its own economic benefit, rather than the
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benefit of the principal obligor.” Restatement (Third) of
Suretyship & Guaranty §11(3)(c), at 42 (1996).
See also Restatement (Second) of Contracts §116, at 299 (1981).
The reason for the “main purpose” or “leading object” rule has
been explained:
“Where the secondary obligor’s main purpose is its own
pecuniary or business advantage, the gratuitous or sentimental
element often present in suretyship is eliminated, the likelihood
of disproportion in the values exchanged between secondary
obligor and obligee is reduced, and the commercial context
commonly provides evidentiary safeguards. Thus, there is less
need for cautionary or evidentiary formality than in other
secondary obligations.” Restatement (Third) Suretyship &
Guaranty §11, Comment to Subsection (3)(c), at 49-50
(1996).
See also Restatement (Second) of Contracts §116, Comment a, at 299
(1981); 72 Am. Jur. 2d Statute of Frauds §134, at 658 (2001) (“Cases
sometimes arise in which, although a third party is the primary debtor,
the promisor has a personal, immediate, and pecuniary interest in the
transaction, and is therefore himself a party to be benefited by the
performance of the promisee. In such cases the reason which underlies
and which prompted this statutory provision fails, and the courts will
give effect to the promise”).
This court has employed the “main purpose” or “leading object”
rule on two occasions. In Clifford v. Luhring, 69 Ill. 401 (1873), this
court cited Nelson v. Boynton, 3 Metc. (Mass.) 396, 400 (1841), the
case which first established the rule. In Clifford, we stated: “where the
leading object of the undertaker is to promote some interest of his
own, the promise is not within the statute, although its effect is to
release or suspend the debt of another.” Clifford, 69 Ill. at 402.
Next, in Borchsenius v. Canutson, 100 Ill. 82 (1881), citing
Clifford, we concluded that the defendant’s promise fell outside the
statute because the promise “inured directly to [her] benefit.”
Borchsenius, 100 Ill. at 93.
More recently, our appellate court employed the rule in
Schwartzberg v. Dresner, 107 Ill. App. 3d 318 (1982), holding:
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“The provisions of the statute apply to promises, the main
purposes of which are to assume or guarantee the debt of
another, and they do not apply to cases in which credit is
extended to the promisor, or to cases in which the object or
the promise is to promote some interest, purpose or advantage
of the promisor.” Schwartzberg, 107 Ill. App. 3d at 324.
It is clear from the cases cited above that the “main purpose” or
“leading object” rule, as set out in the Restatements, has been a part
of Illinois law since 1873. We note that the majority of jurisdictions
have adopted this rule as well. 4 C. Brown, Corbin on Contracts
§16.1, at 314-15 (1997). See, e.g., New Economy Capital, LLC v.
New Markets Capital Group, 881 A.2d 1087 (D.C. App. 2005);
Cocco v. Schmitz, 103 S.W.3d 403 (Mo. App. 2003); Trans-Gear,
Inc. v. Lichtenberger, 128 Ohio App. 3d 504, 715 N.E.2d 608 (1998);
UCSF-Stanford Health Care v. Hawaii Management Alliance
Benefits & Services, Inc., 58 F. Supp. 2d 1162 (D. Haw. 1999); Wolff
Ardis, P.C. v. Kimball Products, Inc., 289 F. Supp. 2d 937 (W.D.
Tenn. 2003).
Applying this rule in the case at bar, Caterpillar denies that the
“main purpose” for its alleged promise to Rosewood was to promote
its own interest. Caterpillar also denies that it received any benefit
from the agreement. Alternatively, Caterpillar argues that we should
remand this cause for further proceedings to determine the “main
purpose” or “leading object” of its promise.
Whether the “main purpose” or “leading object” of the promisor
is to promote a pecuniary or business advantage to it is generally a
question for the trier of fact. 9 R. Lord, Williston on Contracts
§22:20, at 308 (4th ed. 1999). In making this determination, the
following factors may be considered: “prior default, inability or
repudiation of the principal obligor; forbearance of the creditor to
enforce a lien on property in which the promisor has an interest or
which he intends to use; equivalence between the value of the benefit
and the amount promised; lack of participation by the principal obligor
in the making of the surety’s promise; a larger transaction to which the
suretyship is incidental.” Restatement (Second) of Contracts §116,
Comment b, at 300 (1981). See also Restatement (Third) of
Suretyship & Guaranty §11, Comment to Subsection (3)(c) (1996);
P. Alces, Law of Suretyship & Guaranty, §4:20 (1996). The crux of
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this inquiry is the reason the promisor made the promise, i.e., the
impetus for the promise. See Davis, 141 U.S. at 488, 35 L. Ed. at
829, 12 S. Ct. at 60 (“there is a marked difference between a promise
which, without any interest in the subject-matter of the promise in the
promisor *** and that which, though operating upon the debt of a
third party, is also and mainly for the benefit of the promisor”).
Here, a decision on what was Caterpillar’s “main purpose” or
“leading object” in making the promise cannot be made based on the
allegations in the complaint. What is required is evidence from which
one can ascertain whether the reason for Caterpillar’s promise was in
fact or apparently desired by Caterpillar mainly for its own advantage.
The determination must be made by the trier of fact based on evidence
to be presented by the parties. Since genuine issues of material fact
exist, this precludes dismissal of Rosewood’s complaint. Carroll v.
Paddock, 199 Ill. 2d 16, 22 (2002). Accordingly, this cause must be
remanded for further proceedings to determine the “leading object” or
“main purpose” of Caterpillar’s promise.
III. Whether a Suretyship Was Created in This Case
Rosewood makes a final argument for why Caterpillar’s promise
is not within the statute of frauds. Rosewood argues that no
suretyship was created by Caterpillar’s promise. According to
Rosewood, Caterpillar contracted directly with Rosewood, became
liable for its own commitment, and received benefits as a result.
A suretyship exists when one person undertakes an obligation of
another person who is also under an obligation or duty to the
creditor/obligee. Restatement (First) of Security §82 (1941).
Specifically, “[a] contract is not within the Statute of Frauds as a
contract to answer for the duty of another unless the promisee is an
obligee of the other’s duty, the promisor is a surety for the other, and
the promisee knows or has reason to know of the suretyship relation.”
Restatement (Second) of Contracts §112, at 292 (1981). Moreover:
“Where promises of the same performance are made by
two persons for a consideration which inures to the benefit of
only one of them, the promise of the other is within the
Statute of Frauds as a contract to answer for the duty of
another, whether or not the promise is in terms conditional on
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default by the one to whose benefit the consideration inures,
unless
(a) the other is not a surety for the one to whose
benefit the consideration inures; or
***
(c) the promisee neither knows nor has reason to
know that the consideration does not inure to the benefit
of both promisors.” Restatement (Second) of Contracts
§113, at 295-96 (1981).
See also Restatement (Third) of Suretyship & Guaranty §11(2)(a), at
41 (1996). The question of whether a surety contract exists, the terms
and conditions of any such contract, and the parties’ intent are
questions to be determined by the trier of fact. See Howard A. Koop
& Associates v. KPK Corp., 119 Ill. App. 3d 391, 400 (1983).
The question of whether Caterpillar’s promise was a suretyship or
not, like the question regarding Caterpillar’s “main purpose” or
“leading object,” cannot be determined on the basis of allegations in
Rosewood’s complaint. This question is a factual one to be made
based on evidence to be presented by the parties. Accordingly, this
issue must also be resolved by the circuit court on remand.
CONCLUSION
There is no preexisting-debt rule in Illinois. Moreover, the “main
purpose” or “leading object” rule has been and is the rule for
determining whether a promise to pay the debt of another is removed
from the statute of frauds. We further hold that whether a suretyship
was created and a determination of the “main purpose” or “leading
object” of Caterpillar’s promise are fact questions. As a result, we
affirm the appellate court’s judgment that the trial court improperly
dismissed Rosewood’s complaint. We remand this cause to the circuit
court for further proceedings consistent with this opinion.
Appellate court judgment affirmed;
cause remanded.
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