Rosewood Care Center, Inc. v. Caterpillar

• Decision Date: 07 July 2006
• Docket Number: No. 3-05-0299.,3-05-0299.
• Citation: 852 N.E.2d 540
• Parties: ROSEWOOD CARE CENTER, INC., Plaintiff-Appellant, v. CATERPILLAR, INC., Defendant-Appellee (Enloe Drugs, LLC., Plaintiff; Betty Jo Cook, Defendant).
• Court: United States Appellate Court of Illinois

852 N.E.2d 540

ROSEWOOD CARE CENTER, INC., Plaintiff-Appellant, v. CATERPILLAR, INC., Defendant-Appellee (Enloe Drugs, LLC., Plaintiff; Betty Jo Cook, Defendant).

No. 3-05-0299.

Appellate Court of Illinois, Third District.

July 7, 2006.

William R. Kohlhase (argued), Miller, Hall & Triggs, Peoria, for Rosewood Care Center, Inc.

Karen L. Kendall, Mark D. Hansen, Brad A. Elward (argued), Greg Rastatter, Heyl, Royster, Voelker & Allen, Peoria, for Caterpillar, Inc.

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. 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, 265 Ill.Dec. 432, 772 N.E.2d 803 (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, 268 Ill.Dec. 531, 778 N.E.2d 1153 (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, 148 Ill.Dec. 345, 560 N.E.2d 942 (1990). We review de novo a dismissal under section 2-619. Prodromos v. Howard Savings Bank, 295 Ill.App.3d 470, 229 Ill.Dec. 718, 692 N.E.2d 707 (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.

"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 statute 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, 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, 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, 120 Ill.Dec. 307, 523 N.E.2d 1218 (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. Wessel 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 County Airport Authority v. Department of Revenue, 358 Ill.App.3d 476, 294 Ill.Dec. 507, 831 N.E.2d 30 (2005) and cases cited therein. Thus, the question squarely before this court is whether the holding in Williams 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...