Rosewood Care Center v. Caterpillar

• Decision Date: 01 November 2007
• Docket Number: No. 103212.,103212.
• Citation: 877 N.E.2d 1091,226 Ill.2d 559
• Parties: ROSEWOOD CARE CENTER, INC., Appellee, v. CATERPILLAR, INC., Appellant.
• Court: Illinois Supreme Court

877 N.E.2d 1091

226 Ill.2d 559

ROSEWOOD CARE CENTER, INC., Appellee, v. CATERPILLAR, INC., Appellant.

No. 103212.

Supreme Court of Illinois.

November 1, 2007.

Timothy L. Bertschy, Karen L. Kendall, Brad A. Elward, Mark D. Hansen and Gregory J. Rastatter, of Heyl, Royster, Voelker & Allen, Peoria, for appellant.

William R. Kohlhase, of Miller, Hall & Triggs, Peoria, for appellee.

OPINION

Justice BURKE delivered the judgment of the court, with 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, 304 Ill.Dec. 290, 852 N.E.2d 540. 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 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 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, 304 Ill.Dec. 290, 852 N.E.2d 540. 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 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, 304 Ill.Dec. 290, 852 N.E.2d 540 (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 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, 308 Ill.Dec. 735, 862 N.E.2d 938 (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, 308 Ill.Dec. 735, 862 N.E.2d 938. We may not depart from...