Bank v. Earth Foods Inc.

• Citation: 939 N.E.2d 487,238 Ill.2d 455,345 Ill.Dec. 644
• Decision Date: 21 October 2010
• Docket Number: No. 107682.,107682.
• Parties: JPMORGAN CHASE BANK, N.A., Appellant,v.EARTH FOODS, INC., et al. (Leonard S. DeFranco, Appellee).
• Court: Supreme Court of Illinois

238 Ill.2d 455
939 N.E.2d 487
345 Ill.Dec. 644

JPMORGAN CHASE BANK, N.A., Appellant,
v.
EARTH FOODS, INC., et al. (Leonard S. DeFranco, Appellee).

No. 107682.

Supreme Court of Illinois.

Oct. 21, 2010.

[939 N.E.2d 488]

James M. Crowley, Christopher S. Fowler, of Crowley & Lamb, P.C., Gary Feinerman, Andrianna Kastanek, of Sidley Austin, LLP, all of chicago, for appellant.

[939 N.E.2d 489]

William P. Danna, of Western Springs (Robert G. Black, of Naperville, of counsel), for appellee.

[345 Ill.Dec. 646 , 238 Ill.2d 458] OPINION Justice KILBRIDE delivered the judgment of the court, with opinion.

In this appeal, we address whether section 1 of the Sureties Act (740 ILCS 155/1 (West 2000)) is applicable to guarantors. JPMorgan Chase Bank (Bank) filed suit against Earth Foods, Inc., for breach of contract, and against Michael Jarvis, Theodore L. Petrovich, and Leonard S. DeFranco as guarantors of a defaulted loan. DeFranco sought protection under section 1 of the Sureties Act.

The circuit court of Kane County granted summary judgment in favor of the Bank on the ground that DeFranco was a guarantor, not a surety, concluding that the Sureties Act was inapplicable. The appellate court affirmed in part, reversed in part, and remanded, finding that the term “surety,” as used in the Sureties Act, encompasses both a surety and a guarantor. 386 Ill.App.3d 316, 325 Ill.Dec. 671, 898 N.E.2d 718.

We allowed the Bank's petition for leave to appeal. 210 Ill.2d R. 315. We now affirm in part and reverse in part the judgment of the appellate court and remand the cause to the trial court for further proceedings.

I. BACKGROUND

In 2001, the Bank extended a line of credit to Earth Foods, Inc. The three co-owners of Earth Foods, Michael [238 Ill.2d 459] Jarvis, Theodore Petrovich, and Leonard DeFranco, all personally guaranteed the loan. DeFranco was then vice president of Earth Foods. On April 3, 2003, DeFranco sent the Bank a letter warning that Earth Foods was depleting the inventory that was to serve as collateral for the loan and demanding the Bank take action. Earth Foods stopped making payments to the Bank in February 2004. On April 23, 2004, the Bank sent a notice of default and demand for payment.

On June 9, 2004, the Bank filed suit against Earth Foods and the three co-owners who guaranteed the note. DeFranco moved to dismiss the claim against him but did not dispute that he had agreed, as “guarantor,” to pay all amounts owed by Earth Foods in the event of Earth Foods' default. Nonetheless, DeFranco's answer claimed an affirmative defense on the ground he was protected under section 1 of the Sureties Act (740 ILCS 155/1 (West 2000)). DeFranco claimed his guaranty obligation was discharged under the Sureties Act because the Sureties Act “applies to guarantors as well as sureties” and “[t]he law places no distinction” between guarantors and sureties. DeFranco maintained that the Bank was estopped from seeking payment from him because he notified the Bank that Earth Foods was operating at a financial loss.

On May 4, 2006, the Bank filed a motion for summary judgment against DeFranco. In his response to the Bank's motion for summary judgment, DeFranco stated, “The issue is not whether or not Mr. DeFranco understood the guaranty at the time that he signed it. The real issue is whether the bank is precluded from collecting on the guarantee.” (Emphasis omitted.) The circuit court granted the Bank's motion for summary judgment, holding that the Sureties Act does not extend to guarantors.

The appellate court reversed, holding that guarantors may seek protection under the Sureties Act. [238 Ill.2d 460] 386 Ill.App.3d 316, 325 Ill.Dec. 671, 898 N.E.2d 718. The appellate court recognized that the relevant

[345 Ill.Dec. 647 , 939 N.E.2d 490]

question here is the meaning of the word “ surety” in section 1 of the Sureties Act. The appellate court acknowledged that the term “surety” has two meanings. The court explained that “surety” “is sometimes used to refer to any situation in which a person agrees to be liable for the debt of another, whether the liability is primary as a surety or secondary as a guaranty, and it is sometimes used to refer strictly to a surety who is primarily liable.” 386 Ill.App.3d at 321, 325 Ill.Dec. 671, 898 N.E.2d 718. The court further acknowledged that the terms “surety” and “ guarantor” have distinct meanings but found, however, that the distinction appears largely academic. 386 Ill.App.3d at 321–22, 325 Ill.Dec. 671, 898 N.E.2d 718. The court also relied on the policy it discerned as underlying the Act—to compel diligence by a creditor to make certain a surety is protected against loss—applies equally to sureties and to guarantors and on its belief that the word “surety” is used in the Act without any words of limitation or explanation. 386 Ill.App.3d at 322–23, 325 Ill.Dec. 671, 898 N.E.2d 718. The court ultimately determined that the legislature's use of the word “surety” was intended “in its general sense.” 386 Ill.App.3d at 323, 325 Ill.Dec. 671, 898 N.E.2d 718. In reaching its decision, the appellate court relied on a case from the United States Court of Appeals for the First Circuit, Continental & Commercial Nat. Bank of Chicago v. Cobb, 200 F. 511 (1st Cir. 1912), interpreting section 1 of the Sureties Act as applying to guarantors. The appellate court therefore remanded the cause for further proceedings to determine whether DeFranco could benefit from the Act, given the facts of this case. 386 Ill.App.3d at 324, 325 Ill.Dec. 671, 898 N.E.2d 718.

II. ANALYSIS

We review the appellate court's reversal of the circuit court's grant of summary judgment in favor of the Bank. Summary judgment is appropriate only when “the pleadings, depositions, and admissions on file, together with [238 Ill.2d 461] the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law.” 735 ILCS 5/2–1005(c) (West 2000). We review de novo the propriety of a circuit court's grant of summary judgment. Williams v. Manchester, 228 Ill.2d 404, 417, 320 Ill.Dec. 784, 888 N.E.2d 1 (2008).

Whether the circuit court properly granted summary judgment in favor of the Bank turns on the interpretation of section 1 of the Sureties Act (740 ILCS 155/1 (West 2000)). We review de novo an issue of statutory construction. Boaden v. Department of Law Enforcement, 171 Ill.2d 230, 237, 215 Ill.Dec. 664, 664 N.E.2d 61 (1996).

A. Statutory Construction of Section 1 of the Sureties Act

Our primary objective in construing a statute is to ascertain and give effect to the intent of the legislature. MidAmerica Bank, FSB v. Charter One Bank, FSB, 232 Ill.2d 560, 565, 329 Ill.Dec. 1, 905 N.E.2d 839 (2009). The plain language of a statute is the most reliable indication of legislative intent. DeLuna v. Burciaga, 223 Ill.2d 49, 59, 306 Ill.Dec. 136, 857 N.E.2d 229 (2006). “[W]hen the language of the statute is clear, it must be applied as written without resort to aids or tools of interpretation.” DeLuna, 223 Ill.2d at 59, 306 Ill.Dec. 136, 857 N.E.2d 229. The statute should be read as a whole and construed “so that no term is rendered superfluous or meaningless.” In re Marriage of Kates, 198 Ill.2d 156, 163, 260 Ill.Dec. 309, 761 N.E.2d 153 (2001). We do not depart from the plain language of a statute by reading into it exceptions, limitations

[345 Ill.Dec. 648 , 939 N.E.2d 491]

or conditions that conflict with the legislative intent. Harrisonville Telephone Co. v. Illinois Commerce Comm'n, 212 Ill.2d 237, 251, 288 Ill.Dec. 121, 817 N.E.2d 479 (2004).

The Bank contends that the appellate court erred in looking to the “popularly understood” meaning of “surety,” as opposed to its meaning in 1874, when the Sureties Act was enacted. Conversely, DeFranco contends that the Bank has waived or forfeited its argument that the term “surety” must be interpreted in light of its [238 Ill.2d 462] meaning at the time the Sureties Act was enacted in 1874.

The Bank's argument that the term “surety” must be interpreted in light of its meaning at the time the Sureties Act was enacted involves canons of statutory construction. Canons of statutory construction cannot be forfeited because they are not arguments. They are the principles that guide this court's construction of statutes. Canons of statutory construction are utilized in every statutory construction case whether a party raises them or not. To hold that canons of statutory construction are subject to forfeiture would mean that this court's construction of a particular statute could change from case to case depending on whether a party cited a particular cannon. This obviously cannot be so. Accordingly, we reject DeFranco's argument that the Bank waived or forfeited its contention that the term “surety” must be interpreted in light of its meaning at the time the Sureties Act was enacted in 1874.

This court has long recognized the fundamental rule of statutory construction that “ ‘[s]tatutes are to be construed as they were intended to be construed when they were passed.’ ” O'Casek v. Children's Home & Aid Society of Illinois, 229 Ill.2d 421, 441, 323 Ill.Dec. 2, 892 N.E.2d 994 (2008), quoting People v. Boreman, 401 Ill. 566, 572, 82 N.E.2d 459 (1948). Additionally, we look to the well-known meaning of statutory terms at the time the law was passed. People v. Bailey, 232 Ill.2d 285, 290, 328 Ill.Dec. 22, 903 N.E.2d 409 (2009), citing Case v. Los Angeles Lumber Products Co., 308 U.S. 106, 115, 60 S.Ct. 1, 7, 84 L.Ed. 110, 119 (1939). See also 2A N. Singer, Sutherland on Statutory Construction § 46:04, at 152–53 (6th ed. 2000) (“if the term utilized [in a statute] has a settled legal meaning, the courts will normally infer that the legislature intended to incorporate the established meaning”). Moreover, “statutes in derogation of common law are to be strictly construed and nothing is to be read into such [238 Ill.2d 463] statutes by...