NOTICE: Under Supreme Court Rule 367 a party has 21 days after the
filing of the opinion to request a rehearing. Also, opinions are
subject to modification, correction or withdrawal at anytime prior
to issuance of the mandate by the Clerk of the Court. Therefore,
because the following slip opinion is being made available prior to
the Court's final action in this matter, it cannot be considered
the final decision of the Court. The official copy of the following
opinion will be published by the Supreme Court's Reporter of
Decisions in the Official Reports advance sheets following final
action by the Court.
Docket No. 79354--Agenda 10--January 1996.
RALPH E. ARMSTRONG et al., Appellees, v. WALTER F. GUIGLER et
al., Appellants.
Opinion filed October 18, 1996.
JUSTICE McMORROW delivered the opinion of the court:
In this case, we are asked to decide whether the 10-year
statute of limitations for actions on a written contract (735 ILCS
5/13--206 (West 1992)), or the five-year statute of limitations for
"all civil actions not otherwise provided for" (735 ILCS 5/13--205
(West 1992)), applies to a cause of action for breach of an implied
fiduciary duty. A divided appellate court held that the implied
duty at issue here was "created in a written document" and
therefore the longer period of limitations controlled. 273 Ill.
App. 3d 85. We granted leave to appeal (155 Ill. 2d R. 315) and now
reverse the judgment of the appellate court.
Background
On December 31, 1993, plaintiffs, Ralph and Rema Armstrong,
filed a single-count complaint in the circuit court of Peoria
County against the Bob Smith Agency (a real estate brokerage firm),
its owner, and two of its employees. The complaint alleged that
plaintiffs had entered into a written multiple listing agreement
with the Agency for the purpose of selling plaintiffs' property.
Under the terms of the agreement, plaintiffs granted the broker an
irrevocable and exclusive right to advertise and sell certain
parcels of property for the gross amount of $625,000. Plaintiffs
were obligated "to furnish a complete abstract showing good and
merchantable title to the premises, or to furnish a title guaranty
policy and to convey said premises by warranty deed clear of all
encumbrances, except general taxes." In the event of a sale,
plaintiffs were required to pay a broker's commission to be
calculated at 5% of the actual sales price.
The agreement, which originally terminated by its own terms on
November 30, 1983, was later extended by the parties to February
28, 1984. Prior to that date, defendant Russell Smith, a sales
agent for the broker, presented plaintiffs with a written offer to
purchase the property on behalf of himself and certain other
undisclosed individuals. The offer was subject to the condition
that the first mortgagees, the Chillicothe Federal Savings & Loan
and the Security Savings & Loan, modify the current mortgages so as
to grant the buyers a right of assumption. Plaintiffs accepted the
offer and, on December 31, 1983, the parties closed the sale on the
property. The mortgages, however, were never assumed.
According to the complaint, both Smith and another defendant,
Walter Guigler, knew that the buyers did not intend to assume the
mortgages. Guigler, in addition to serving as manager and chief
operating officer of the Chillicothe Federal Savings & Loan, also
worked as a sales agent for the broker. Despite the fact that both
Smith and Guigler owed plaintiffs a "duty of loyalty and fidelity"
as agents under the listing agreement, plaintiffs claimed that
neither defendant disclosed to them the buyers' intention to forgo
the mortgage assumption. Plaintiffs filed suit against defendants
for breach of an implied fiduciary duty, seeking $1 million in
compensatory and punitive damages, respectively. Although
plaintiffs later voluntarily struck their prayer for punitive
damages, which ordinarily are not recoverable for breach of
contract, the complaint in the instant case did not specify the
basis for plaintiffs' claim that they suffered $1 million in
compensatory damages.
Defendants moved to dismiss the complaint pursuant to section
2--619(a)(5) of the Code of Civil Procedure (735 ILCS 5/2--
619(a)(5) (West 1992)), arguing that plaintiffs' claim for breach
of fiduciary duty was governed by the five-year statute of
limitations set forth in section 13--205 of the Code (735 ILCS
5/13--205 (West 1992)). This provision, residual by nature, covers
all actions for which no limitations period is otherwise
prescribed. It states in pertinent part:
"[A]ctions on unwritten contracts, expressed or
implied, or on awards of arbitration, or to recover
damages for an injury done to property, real or personal,
or to recover the possession of personal property or
damages for the detention or conversion thereof, and ALL
CIVIL ACTIONS NOT OTHERWISE PROVIDED FOR, shall be
commenced within 5 years next after the cause of action
accrued." (Emphasis added.) 735 ILCS 5/13--205 (West
1992).
Defendants point out that plaintiffs should have discovered the
alleged breach of duty no later than November 24, 1986, the date on
which a judgment of foreclosure was entered against the property.
Defendants urge that the complaint was not filed until seven years
later, on December 28, 1993, and therefore was not filed in the
time prescribed by section 13--205.
Plaintiffs, on the other hand, claim that their cause of
action is governed by the 10-year statute of limitations for
written contracts. 735 ILCS 5/13--206 (West 1992). In contrast to
the general five-year statute of limitation, section 13--206
provides in relevant part:
"[A]ctions on bonds, promissory notes, bills of
exchange, written leases, WRITTEN CONTRACTS, or other
evidences of indebtedness in writing, shall be commenced
within 10 years next after the cause of action accrued
***." (Emphasis added.) 735 ILCS 5/13--206 (West 1992).
Plaintiffs argue that the implied duty of fidelity and loyalty was
as much a part of the written contract as were the terms expressly
stated therein. According to the plaintiffs, because the breach
occurred on December 31, 1983, the date of the closing, the
complaint filed on December 28, 1993, was timely filed.
The circuit court granted defendants' motions to dismiss, and
plaintiffs appealed. On appeal, a majority of the appellate court
reversed the circuit court's decision and remanded the matter for
further proceedings. 273 Ill. App. 3d 85. The court found that "the
law which imposes a fiduciary duty upon an agent becomes a part of
the written contract between the parties even though the duty is
not expressly stated in that contract," and thus the ten-year
period of limitations applied. 273 Ill. App. 3d at 88. We now
reverse the appellate court.
Analysis
The determination of the applicable statute of limitations is
governed by the type of injury at issue, irrespective of the
pleader's designation of the nature of the action. Williams v. Ali,
145 Ill. App. 3d 458, 463 (1986); Weaver v. Watson, 130 Ill. App.
3d 563, 567 (1984). We have long held that "it is the nature of the
plaintiff's injury rather than the nature of the facts from which
the claim arises which should determine what limitations period
should apply." Mitchell v. White Motor Co., 58 Ill. 2d 159, 162
(1974); Handtoffski v. Chicago Consolidated Traction Co., 274 Ill.
282 (1916). Thus, even though isolated allegations in a tort
complaint may speak in terms of a contractual breach, the claim is
not necessarily afforded the longer, 10-year period of limitations
applicable to actions based on written contracts. Schreiber v.
Eastern Airlines, Inc., 38 Ill. App. 3d 556 (1976) (applying
personal injury limitations to coffee burn inflicted by careless
flight attendant despite victim's attempt to frame complaint as
breach of contract). A party simply may not circumvent a shorter
period of limitations, or attempt to breathe new life into a stale
claim, merely by means of artful pleading.
In the present case, defendants argue that the appellate court
erred in holding that plaintiffs' claim qualifies as an "action on
a written contract" within the meaning of section 13--206.
Plaintiffs contend that their complaint comes within the purview of
that statute, even though the fiduciary duty sued upon is not
expressed in a written contract, but rather is implied in law.
Despite their divergent contentions, both parties cite cases from
parol evidence jurisprudence in an attempt to clarify the meaning
of the phrase "action on a written contract." See, e.g., Ames v.
Crown Life Insurance Co., 85 Ill. App. 3d 203 (1980); In re Estate
of Garrett, 24 Ill. App. 3d 895 (1975). Those case, however, are
inapposite to the case at bar.
In the parol evidence cases, the dispositive question is
whether evidence of oral representations is necessary to establish
the existence of a written contract. If such evidence is required,
then the contract is treated as oral for purposes of the statute of
limitations. In other words, where a party is claiming a breach of
a written contract, but the existence of that contract or one of
its essential terms must be proven by parol evidence, the contract
is deemed oral and the five-year statute of limitations applies.
For example, in Toth v. Mansell, 207 Ill. App. 3d 665 (1990),
the owner of supply company sought to recover monies owed by
defendant under an open account. The owner claimed that certain
invoices and monthly statements established either a written
contract or other evidence of indebtedness. As a result, the owner
argued, the 10-year statute of limitations for written contracts
applied. Ill. Rev. Stat. 1989, ch. 110, par. 13--206, now codified
at 735 ILCS 5/13--206 (West 1994).
In rejecting that argument, the appellate court initially
noted that Illinois courts strictly interpret the meaning of a
"written" contract. It then stated that "[a] contract is considered
written for purposes of the statute of limitations if all essential
terms are reduced to writing and can be ascertained from the
instrument itself." Toth, 207 Ill. App. 3d at 669 (citing Brown v.
Goodman, 147 Ill. App. 3d 935 (1986), and Clark v. Western Union
Telegraph Co., 141 Ill. App. 3d 174 (1986)). Importantly, the court
recognized that if "parol evidence is necessary to make the
contract complete, then the contract must be treated as oral for
purposes of the statute of limitations." Toth, 207 Ill. App. 3d at
669 (citing Clark, 141 Ill. App. 3d 174, Weaver v. Watson, 130 Ill.
App. 3d 563 (1984), Novosk v. Reznick, 323 Ill. App. 544 (1944)).
Applying these principles, the court in Toth reasoned that,
because the invoices and monthly statements did not contain any
promise to pay on the part of the defendant, the "plaintiff must
introduce some parol evidence, whether it be plaintiff's rendering
of statements to defendant, defendant's lack of objection or the
prior dealings between the parties." Toth, 207 Ill. App. 3d at 670-
71. Since resort to parol evidence was necessary to prove
defendant's obligation to pay under the written invoices, the court
concluded that the agreement for payment between the parties was in
fact an oral contract. Consequently, it applied the shorter period
of limitations found in section 13--205.
However, in contrast to Toth and similar cases, e.g., Ames v.
Crown Life Insurance Co., 85 Ill. App. 3d 203 (1980), the case at
bar does not involve the necessity of introducing parol evidence of
oral representations. Rather, the instant case involves an implied,
extracontractual legal duty which arises by virtue of, and as an
incident to, the written contract. Thus, we are not concerned with
oral representations and what effect those representations may have
on a written document for statute of limitation purposes. We are
here concerned with whether a breach of an implied legal duty
qualifies as an action "on a written contract," particularly in the
absence of allegations in plaintiffs' complaint that the contract
itself was breached. Consequently, the parol cases are of limited
value in resolving the issue in the case sub judice. We must
therefore look to other authority to see whether this cause of
action for breach of an implied legal duty constitutes an "action
on a written contract."
Surprisingly, with the exception of those cases involving the
parol evidence rule, courts in this state have had infrequent
occasion to interpret the phrase "action on a written contract."
This is particularly true where the written contract includes
duties implied in law, and the person seeking relief is asserting
a breach of that implied duty. We do note, however, that an
Illinois decision which has previously considered an action based
on breach of an implied fiduciary arising from a written contract
applied the five-year rather than the 10-year period of
limitations. Luminall Paints, Inc. v. La Salle National Bank, 220
Ill. App. 3d 796 (1991). The appellate majority in the case at bar
distinguished Luminall as well as another case, Anderson v. Doss,
133 Ill. App. 2d 798 (1971), on the grounds that "[i]n neither case
was the fiduciary duty implied as a matter of law in a written
agency contract." 273 Ill. App. 3d at 87. While this distinction is
valid as to Anderson, it does not hold true for Luminall. In
Luminall, the fiduciary duty was implied as a matter of law in a
written agreement which terminated a master lease. The plaintiff
there specifically alleged in its breach of fiduciary duty count
that the defendant agreed to act as plaintiff's agent by virtue of
the written termination agreement. Citing section 13--205, the same
provision relied on by defendants in this case, the Luminall court
held that "[i]n Illinois the statute of limitations for breach of
fiduciary duty is five years." Luminall, 220 Ill. App. 3d at 803.
Luminall notwithstanding, plaintiffs urge this court to uphold
the appellate majority and apply the 10-year statute of limitations
solely on the grounds that the implied fiduciary duty arose from a
written document. We decline plaintiffs' invitation. To adopt such
a simplistic and formulaic approach would elevate form over
substance, and in the process would undermine the court's
obligation to look behind the allegations in a complaint to
discover the true character of plaintiffs' cause of action.
Mitchell v. White Motor Co., 58 Ill. 2d 159, 162 (1974). Moreover,
the fact that the origin of a cause of action may ultimately be
traced to a writing has never been sufficient, standing alone, to
automatically warrant application of the period of limitations
governing written contracts. For example, in Rozny v. Marnul, 43
Ill. 2d 54 (1969), this court rejected plaintiffs' contention that
the 10-year statute of limitations should govern an action for
tortious misrepresentation even though a land surveyor's guarantee
of accuracy was in writing. In reaching its decision, this court
stressed that "to hold the written contract statute of limitations
applicable to this action[] would be incompatible with our emphasis
upon the fact that the basis of liability affirmed herein is NOT
contractual in nature." (Emphasis in original.) Rozny, 43 Ill. 2d
at 69. See also Cooper v. United Development Co., 122 Ill. App. 3d
850, 858 (1984) (applying the all-inclusive five-year period of
limitations to a breach of an implied warranty of habitability over
plaintiffs' contention that the 10-year period controlled); Sabath
v. Mansfield, 60 Ill. App. 3d 1008, 1015 (1978) ("[a] suit for
fraud committed in the breach of a written contract is governed by
the five year statute applicable to all other civil actions not
otherwise provided for").
Since the mere existence of a writing does not always, or in
all circumstances, mandate application of the 10-year statute of
limitations, the question remains as to what constitutes "an action
on a written contract" within the meaning of section 13--206. 735
ILCS 5/13--206 (West 1992). The essence of any contractual action
is found in the agreement's promissory language. Thus, it is only
where liability emanates from a breach of a contractual obligation
that the action may be fairly characterized as "an action on a
written contract." The focus of the inquiry is on the nature of the
liability and not on the nature of the relief sought. Mitchell v.
White Motor Co., 58 Ill. 2d 159, 162 (1974). It is irrelevant
whether the aggrieved party seeks monetary damages, specific
performance, rescission or restitution. As long as the gravamen of
the complaint rests on the nonperformance of a contractual
obligation, section 13--206 applies.
By way of contrast, where a party advances a breach of a duty
that arises by operation of the law, the action is no longer
contractual in nature, but delictual. Stated otherwise, a claim for
a breach of a legal duty, as opposed to a breach of a contractual
promise, is in essence an action ex delicto. The difference between
the two breaches lies, in historical terms, in the distinction
between an action in assumpsit and an action in case. See, e.g.,
Fidelity Trust Co. v. Poole, 136 Ill. App. 266, 273 (1907) ("For a
breach of the duty an agent owes to his principal, the action may
be in assumpsit for the breach of the implied promise, or in case
for the breach of the implied duty").
Although a party may often proceed under either contract
theory or tort theory upon the same set of facts (Board of
Education of Community Consolidated School District No. 54 v. Del
Bianco & Associates, Inc., 57 Ill. App. 3d 302, 306 (1978)), it
does not follow that the contract action and the tort action merge
into a single cause. Consequently, a party may not file suit based
on one theory, and then procedurally defend against a statute of
limitations challenge by claiming a different theory in order to
benefit from a longer statute of limitations which is applicable to
a cause of action which is different from that filed by plaintiff.
See, e.g., Handtoffski v. Chicago Consolidated Traction Co., 274
Ill. 282 (1916) (plaintiff unsuccessfully attempted to avoid
shorter period of limitations by amending his action in case to an
action in assumpsit); Halleck v. County of Cook, 264 Ill. App. 3d
887 (1994) (court rejected plaintiff's attempt to characterize
claim for retaliatory discharge as "contractual" in nature in order
to claim benefit of longer period of limitations). This appears to
be what has happened in the case at bar: plaintiffs' complaint
alleged a cause of action for breach of an implied fiduciary duty
based upon certain purported misrepresentations made by defendants,
but plaintiffs' response to defendants' motion to dismiss claimed
a different theory, i.e., breach of a written sales agency
agreement.
Contrary to plaintiffs' argument on appeal, a review of the
allegations in the complaint reveals that plaintiffs do not seek
damages for defendants' failure to perform the contractual duties
in the listing agreement. Rather, plaintiffs claim that defendants,
in their legal status as agents, breached a general duty to
disclose all material information, resulting in a compensable
injury to plaintiffs. Specifically, paragraph 18 of the complaint
alleges in pertinent part:
"a. Defendants failed to disclose to Plaintiffs that
the individual businessmen Buyers of the Property were
not assuming the first mortgage loans at Chillicothe
Federal Savings and Loan Association and Security Savings
and Loan Association.
b. Defendants Walter F. Guigler and Russell V. Smith
misrepresented to the Plaintiffs that the first mortgage
loans at Chillicothe Federal Savings and Loan and
Security Savings and Loan Association were being assumed
by the individual businessmen buyers when, in fact, such
loans were not being assumed by the Buyers."
We note that the only difference between subparagraphs (a) and
(b) is that the latter includes the conclusory allegation of active
misrepresentation and further limits the charge to defendants
Guigler and Smith. It is clear that plaintiffs do not seek recovery
for any damages resulting from the nonperformance of contractual
obligations. To the contrary, plaintiffs are asserting a breach of
an implied fiduciary duty based on defendants' failure to disclose
that the buyers chose not to assume the mortgages. However, the
alleged agreement providing the buyers with a right to assume the
mortgages was oral and never reduced to writing or made a part of
the real estate listing agreement. Consequently, plaintiffs claim
is not itself an action on a written contract, but is collateral to
the contract. Although a written contract may have given birth to
a duty to disclose, that fact alone is not dispositive. As seen in
other contexts, although a cause of action's lineage may be traced
to a writing does not necessarily mean that section 13--206 is
implicated.
A breach of an implied fiduciary duty is not an action ex
contractu simply because the duty arises by legal implication from
the parties' relationship under a written agreement. In fact, a
fiduciary relationship is founded on the substantive principles of
agency, contract and equity. Kinzer v. City of Chicago, 128 Ill. 2d
437, 445 (1989). It is precisely because a fiduciary relationship
is an amalgamation of various aspects of legal jurisprudence that
a purely contractual statute of limitations is inapplicable to a
breach thereof. Consequently, only the five-year statute of
limitations for all civil actions not otherwise provided for is
truly consonant with the distinctive characteristics of this cause
of action, regardless of the fact that, in this case, the fiducial
relationship arose from a written contract.
The Seventh Circuit Court of Appeals recently alluded to the
unique character of the fiduciary duty in holding that the five-
year statute of limitations governed a breach of implied fiduciary
duty under Illinois law. Havoco of America, Ltd. v. Sumitomo Corp.
of America, 971 F.2d 1332 (7th Cir. 1992). The Havoco court
stated:
"[A] plain reading of the two statutes of limitations
demonstrates that the district court correctly applied
the five-year limitations period. The ten-year
limitations period in section 13--206 applies only to
actions on written contracts or other written evidence of
indebtedness; a breach of fiduciary duty claim is not
such an action. Section 13--205 applies to all torts,
actions on oral contracts, and `all civil actions not
otherwise provided for.' A breach of fiduciary duty claim
is an action `not otherwise provided for' in the Illinois
statutes of limitations." Havoco, 971 F.2d at 1337.
Because a fiduciary relationship is unique in nature, as
explained above, we find the reasoning of the court in Havoco to be
persuasive. That same reasoning also leads us to reject plaintiffs'
contention that the appellate court correctly relied on Economy
Fuse & Manufacturing Co. v. Raymond Concrete Pile Co., 111 F.2d 875
(7th Cir. 1940), and Schiro v. W.E. Gould & Co., 18 Ill. 2d 538
(1960). In Economy, a property owner sued a contractor for breach
of an agreement to install concrete piles for use as building
supports. The owner alleged that the contractor held itself out to
the public "as possessing expert knowledge, skill and experience in
such work and as constantly furnishing to its clientele material
and workmanship suited to the purpose for which it might be
intended." Economy, 111 F.2d at 876. Elsewhere in the complaint,
the owner repeated the allegation that the contractor agreed to
install the piles in a workmanlike manner. Significantly, the owner
sued for breach of contract for failure to perform the contract.
The contractor, by way of confession and avoidance, raised the
statute of limitations for actions on unwritten contracts, claiming
that the parties' written agreement never explicitly spoke in terms
of a workmanlike performance. According to the contractor, those
counts in the complaint sounding in contract should be governed by
the five-year statute of limitations. The court of appeals rejected
this argument, holding that performance in a workmanlike manner was
implied in the contract as a result of parties' contractual intent.
Accordingly, the court applied the 10-year statute of limitations
for written contracts.
What distinguishes Economy from the present case is the fact
that the plaintiff there specifically sued for breach of contract
based upon the nonperformance of a contractual obligation.
Plaintiffs in the case at bar elected not to sue for breach of
contract, but chose instead to file a suit for breach of an implied
fiduciary duty. Moreover, the duty to perform in a workmanlike
manner is solely a contractual promise. A fiduciary duty, on the
other hand, is an extracontractual, legal duty which often arises
even in the absence of a contract. The fact that both duties may
arise by implication in the context of written contract is the only
similarity between the two. That similarity, though, is irrelevant
in determining which statute of limitations should apply to
specific facts.
Likewise, Schiro merely involved the failure on the part of
the defendant to construct a sewer system in accordance with the
then existing City Code of Chicago. This court simply held that the
code violations were tantamount to a breach of contract even though
the construction contract was silent as to the code's requirements.
Schiro, 18 Ill. 2d at 546. We fail to see, however, how this
court's holding in Schiro advances plaintiffs' proposition that a
claim for breach of an implied fiduciary duty constitutes an action
on a written contract for purposes of the statute of limitations.
Indeed, Schiro does not even discuss the issue.
Finally, applying the five-year statute of limitations for
"all civil actions not otherwise provided for" to the case at bar,
we note that although defendants did not support their section 2--
619 motions to dismiss with either a copy of the judgment of
foreclosure or an affidavit in compliance with Supreme Court Rule
191(a) (134 Ill. 2d R. 191(a)), plaintiffs apparently do not
dispute that on May 1, 1986, Chillicothe Federal obtained a
judgment by confession against plaintiffs as to one parcel, and
that on November 24, 1986, Security Savings obtained a judgment of
foreclosure against a second parcel. At a minimum, plaintiffs
should have discovered the purported breach of fiduciary duty as of
May 1, 1986. The complaint, however, was not filed until December
28, 1993, well beyond the time allotted by section 13--205. Thus,
the action is not timely.
We hold that the cause of action filed by plaintiffs is
independent of and only incidental to the written contract. For the
foregoing reasons, we hold that the residual, five-year statute of
limitations applies to the breach of an implied fiduciary duty
alleged in the case at bar. Accordingly, we reverse the decision of
the appellate court and affirm the circuit court's ruling.
Appellate court judgment reversed;
circuit court judgment affirmed.
CHIEF JUSTICE BILANDIC, dissenting:
I strongly disagree with the majority opinion affirming the
dismissal of the plaintiffs' complaint on statute of limitations
grounds. The plaintiffs' action is clearly one for breach of a
written contract and, thus, is governed by the 10-year statute of
limitations established in section 13--206 of the Code of Civil
Procedure.
Even a cursory analysis of the plaintiffs' complaint reveals
that it raises a cause of action for breach of a written contract.
The contract is a standardized "Multiple Listing Service" agreement
entered into between the plaintiffs and defendant Russell Smith, a
real estate agent for defendant Bob Smith Agency. By virtue of the
listing contract, defendants Smith and the Bob Smith Agency became
agents of the plaintiffs in connection with the sale of the
plaintiffs' property. Under the express terms of the contract, the
plaintiffs agreed to pay a 5% commission to the defendants if the
property was sold during the term of the contract, and the
defendants obligated themselves to list the property with the
Peoria multiple listing service and to use diligence in procuring
a purchaser. The defendants' duty to the plaintiffs under the
contract, however, did not end there. Implied as a matter of law
into that contract was that the defendant agents owed the
plaintiffs a fiduciary duty to disclose all material facts
regarding the sale of the plaintiffs' property and to act with
loyalty and fidelity. This implied term was as much a part of the
listing contract as if it had been expressly stated therein. Schiro
v. W.E. Gould & Co., 18 Ill. 2d 538 (1960); Economy Fuse & Mfg. Co.
v. Raymond Concrete Pile Co., 111 F.2d 875 (7th Cir. 1940).
It was this fiduciary duty which the plaintiffs' complaint
charged was breached by the defendants. The complaint set forth
factual allegations establishing the defendants' breach. According
to the complaint, Smith, purporting to act as the plaintiffs' sales
agent, submitted a proposal to purchase the plaintiffs' property on
behalf of himself and several other undisclosed buyers. The
proposal, which the plaintiffs ultimately accepted, included an
agreement that the undisclosed buyers would assume the plaintiffs'
mortgage on the property. Both Smith and another agent, Walter
Guigler, who was also the chief operating officer of the bank
holding the plaintiffs' mortgages, knew that the buyers had no
intention of assuming the mortgage. The plaintiffs, unaware of this
secret intent, consummated the sale. Pursuant to the terms of the
contract, the defendants were paid a real estate commission
exceeding $18,000. Agents Smith and Guigler and the owner of the
Bob Smith Agency each received a portion of this commission. These
facts, if true, clearly allege a breach of the defendants'
fiduciary duty to the plaintiffs implied in the listing agreement.
The majority, however, concludes that the plaintiffs' cause of
action is not an "action on a written contract" and is therefore
barred by the five-year statute of limitations found in section 13-
-205 of the Code. The precise rationale for the majority decision
is unclear. Several portions of the opinion suggest that the
majority's ultimate conclusion rests upon a finding that the
plaintiffs' complaint did not adequately allege a cause of action
for breach of contract. For example, the majority claims that "a
review of the allegations in the complaint reveals that plaintiffs
do not seek damages for defendants' failure to perform the
contractual duties in the listing agreement." Slip op. at 9.
The majority does not accurately characterize the allegations
of the plaintiffs' complaint. The plaintiffs' complaint clearly
sought to impose liability on the defendants for breach of a duty
arising out of the listing contract. The contract was attached to
the complaint as an exhibit, obviously to satisfy the Code of Civil
Procedure's requirement that, where a claim is founded upon a
written instrument, a copy of the writing must be attached to the
pleading or recited therein. 735 ILCS 5/2--606 (West 1992).
Paragraph 17 of the complaint alleges that "[p]ursuant to the
Listing Contract as agents of Plaintiffs, Defendants had a duty to
disclose to Plaintiffs all material facts regarding the sale of
Plaintiffs' Property, and a duty of loyalty and fidelity."
Paragraph 18 describes the manner in which the defendants breached
the contract, stating: "In violation of the Listing Contract and
the duties owed by Defendants to Plaintiffs as Plaintiffs' agents,
Defendants failed to disclose all material facts regarding the sale
of the Property and failed to perform their duties of loyalty and
fidelity to the plaintiffs." That paragraph then goes on to detail
the particular breaches at issue, stating that "[s]uch breach under
the Listing Contract includes the following:" (1) the failure to
disclose that the buyers did not intend to assume the mortgage; (2)
the active misrepresentation that such assumption would occur; and
(3) the failure to disclose that Guigler was to receive 25% of the
sales commission. In view of these explicit allegations, I am
bewildered by the majority's claim that the plaintiffs' complaint
"do[es] not seek damages for defendants' failure to perform the
It is evident that the plaintiffs have sued the defendants for
breach of the written listing contract. Absent the listing
contract, there is no agency relationship and the defendants have
no independent obligation to act in good faith and with loyalty to
the plaintiffs. It is the written contract alone which created the
agency relationship from which the implied contractual obligations
flow. It is true that an implied fiduciary duty can arise even
absent a written contract. However, that is not the situation in
this case. Here, the implied contractual obligations flow solely
from the written listing contract that created the agency
relationship between the plaintiffs and the defendants. Because the
plaintiffs' cause of action clearly emanates from breach of a duty
arising from a written contract, the 10-year limitations period
applicable to actions on written contracts should govern.
Although it is unclear, the majority opinion may also rest
upon an alternative finding that breach of an implied, rather than
express, contractual term will always be governed by the five-year
limitations period. Such a conclusion, however, is inconsistent
with our courts' prior holdings. In Schiro v. W.E. Gould & Co., 18
Ill. 2d 538 (1960), this court determined that contracts are not
limited to the terms expressly set out in a writing. Rather, the
law existing at the time and place of making the contract
necessarily forms a part of the written contract, as though
expressly incorporated therein. Schiro, 18 Ill. 2d at 544.
Consequently, the defendants' duty to disclose material facts
relating to the sale of the plaintiffs' property was incorporated
into the listing contract as fully as if expressly stated therein.
Our courts have also held that a cause of action is not removed
from the 10-year limitations period governing written contracts
simply because the action arises from an implied legal duty
incorporated into the written contract. Board of Education of
Community Consolidated School District No. 54 v. Del Bianco &
Associates, Inc., 57 Ill. App. 3d 302 (1978); Stanley v. Chastek,
34 Ill. App. 2d 220 (1962); see also Economy Fuse & Mfg. Co. v.
Raymond Concrete Pile Co. (7th Cir. 1940), 111 F.2d 875. The
rationale underlying these rules is that the parties to the
contract would have expressed that which the law implies " `had
they not supposed that it was unnecessary to speak of it because
the law provided for it.' " Schiro v. W.E. Gould & Co., 18 Ill. 2d
538, 544 (1960), quoting 12 Ill. L. & Prac. Contracts §154, at 399
(1983). Thus, the 10-year limitations period governing actions on
written contracts applies to the present action even though the
contractual duty breached is an implied term in the written
contract, rather than a term expressly set out in the writing..
In closing, I note that this is the second time this court has
deprived the plaintiffs of a remedy for the fraud and deceit
practiced upon them by various defendants involved in the sale of
the plaintiffs' property. In a prior case, the plaintiffs obtained
a $1,133,000 judgment against the Resolution Trust Corporation, as
receiver of Chillicothe Federal Savings & Loan Association, based
on the savings and loan's fraudulent misrepresentations to the
plaintiffs. One of the principal actors in the misrepresentation
was one of the defendants in this action, Walter F. Guigler, who
was the chief operating officer for the savings and loan at the
time the plaintiffs sold their property. This court ultimately
reversed the judgment for the plaintiffs, finding that the receiver
of a failed savings and loan association enjoyed immunity under the
D'Oench doctrine and its statutory codification, 12 U.S.C. §1823(e)
(1994). Armstrong v. Resolution Trust Corp., 157 Ill. 2d 49 (1993)
(Armstrong I). The plaintiffs filed the present action shortly
after this court entered its order in Armstrong I. The majority
opinion improperly deprives the plaintiffs of their opportunity to
obtain redress from the defendants who not only breached the
fiduciary duties that formed the very essence of the written
listing contract, but also accepted a substantial commission for
allegedly performing those duties in accordance with that contract.
For the foregoing reasons, I respectfully dissent.
JUSTICES HARRISON and NICKELS join in this dissent.