Business Law and the Regulation of Business 11th Edition by Richard Mann, Barry Roberts

تمرين 31

FACTS On January 3, 2002, Caterpillar contacted HSM Management Services (HSM), the management agent for Plaintiff, Rosewood Care Center, Inc. (Rosewood), a skilled nursing facility. Caterpillar requested that Rosewood admit Betty Jo Cook, an employee of Caterpillar, 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 percent 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. 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. 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.
The plaintiff filed an action against Caterpillar seeking reimbursement for the services provided to Cook while she was a patient at Rosewood. 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 statute of frauds. The trial court granted Caterpillar's motion for summary judgment and Rosewood appealed. The appellate court reversed and remanded.
DECISION Judgment of the appellate court affirmed and remanded.
OPINION Burke, J. 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. ***
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The plain object of the statute is to require higher and more certain evidence to charge a party, where he does not receive 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. [Citation.]***
II. ''MAIN PURPOSE'' OR ''LEADING OBJECT'' RULE
*** 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. [Citation.] As section 11 of the 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 benefit of the principal obligor. [Citation.]
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. [Citations.]
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It is clear *** 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. [Citations.]
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. [Citation.] ***
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. *** The determination must be made by the trier of fact based on evidence to be presented by the parties. ***
III. WHETHER A SURETYSHIP WAS CREATED IN THIS CASE
*** 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. [Citation.] 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.'' [Citation.] ******
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.
INTERPRETATION When the ''main purpose'' or ''leading object'' of the surety is to advance its own pecuniary or business interests, the promise does not fall within the statute.
CRITICAL THINKING QUESTION Should the contracts of a surety have to be in writing? Explain.