The Journal of The DuPage County Bar Association

Back Issues > Vol. 20 (2007-08)

Follow The Money: The Partial Payment Doctrine and Unwritten Contracts 
by Ronald D. Menna, Jr.

T he partial payment doctrine provides that the applicable statute of limitation will commence when either a partial payment (of principal and/or interest) or a new promise to pay has been made regardless of whether the contractual claim is already barred by the statute of limitations.1 While this doctrine is codified only for written contracts, Illinois courts have also applied it to unwritten contracts. Based upon the language of the statutes of limitations contained in the Code of Civil Procedure2 and Illinois’ legislative and common law history, this author believes the line of cases applying the doctrine to unwritten contracts is an incorrect interpretation of Illinois law.

The partial payment doctrine for written contracts is codified in Code of Civil Procedure section 13-206, as follows:

"Sec. 13-206. Ten year limitation. Except as provided in Section 2-725 of the ‘Uniform Commercial Code’, actions 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; but if any payment or new promise to pay has been made, in writing, on any bond, note, bill, lease, contract, or other written evidence of indebtedness, within or after the period of 10 years, then an action may be commenced thereon at any time within 10 years after the time of such payment or promise to pay."3

No such language is contained in Code of Civil Procedure section 13-205, which applies to unwritten contracts, and which provides:

"Sec. 13-205. Five year limitation. Except as provided in Section 2-725 of the ‘Uniform Commercial Code’, approved July 31, 1961, as amended, and Section 11-13 of ‘The Illinois Public Aid Code’, approved April 11, 1967, as amended, actions 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."4

The language currently contained in § 13-206 (and highlighted above) was added by our Legislature to the Limitations Act in 1872.5 Prior to that time the Limitations Act was silent as to whether partial payments, or promises to pay, extended the statute of limitations for either written or unwritten contracts.6 Moreover, prior to 1872, Illinois Courts had routinely held that a partial payment or new promise extended the statute of limitations for both written and unwritten contracts.7 It appears that no case has ever discussed the 1872 changes in the Limitations Act or whether they have effected the application of the partial payment doctrine to unwritten contracts.

The cardinal rule of statutory interpretation is to ascertain and give effect to the intent of the legislature.8 The plain language of the statute is the best indicator of this intent and undefined statutory terms should be given their ordinary meaning.9 The statute must be evaluated as a whole, considering each part or section in connection with every other part or section.10 When the Legislature amends a statute after it has been interpreted by the Courts, the presumption is that the Legislature acted with that knowledge.11 Moreover, when the Legislature amends a statute, the presumption is that the amendment was enacted to change the law.12 Based upon these well established principles, the effect of the 1872 amendment to the Limitations Act was to eliminate the partial payment doctrine as applied to unwritten contracts.

Despite this seemingly simple application of well settled principals, Illinois’ Courts after 1872 continued to apply the partial payment doctrine to unwritten contracts. To date, this issue has been raised only in Ludwig v. Huck,13 which involved an attempt to enforce two judgments that had been rendered twelve years earlier. In Ludwig, the defendant raised the statute of limitations defense and the plaintiff, to defeat it, raised the claim of extension by verbal promise. The plaintiff raised the issue of the language differences in the statutes of limitations relating to written and unwritten contracts. The Appellate Court found that this distinction was immaterial, as there can be no parol promise to revive a dormant judgment. The Appellate Court elected not to address the differences in the statutes caused by the 1872 Amendments. To date, no other Illinois Court has addressed or even noted this issue.

In the first post-1872 case to address the statue of limitations for unwritten contracts, Crum v. Higold,14 the only issue considered by the Appellate Court was whether payments on an account for an unwritten contract for the provision of medical services revived the statute of limitations. The Appellate Court found no extension of the statute of limitation because there was no proof that "the payments made within five years [of the filing of the suit] were made upon old items nor that there was in a single instance any knowledge or recognition of an indebtedness greater than would be liquidated by payment then made." Importantly, the Court neither discussed the language of the Limitations Act itself nor of the 1872 amendment. Rather, the Court assumed, without discussion or citation, that the partial payment doctrine still applied to unwritten contracts. Thus, Crum can not serve as a basis to apply the partial payment doctrine to unwritten contracts.15

The doctrine was next discussed by the Illinois Supreme Court in Miller v. Cinnamon,16 a suit between a brother and sister for the value of personal services rendered pursuant to an unwritten contract, which raised the question of whether the trial court’s failure to allow jury instructions on the partial payment doctrine constituted reversible error. The Supreme Court held that:

"These instructions asked by the defendant told the jury that, if they believed from the evidence in this case that the plaintiff rendered services for the defendant more than five years before the beginning of this suit …, and that since that time there had been no new promise or express promise on the part of defendant to pay for such services, or any unqualified admission by him that the debt therefor was due and unpaid, the plaintiff could not recover for such services rendered more than five years before the beginning of the suit."

The Supreme Court held that it was reversible error not to give these jury instructions. In so doing, it held that the jury should have determined "whether or not any payments were made with such intention as would constitute, or amount to, a new promise [to pay]." The Supreme Court assumed without discussion that the partial payment doctrine applied to unwritten contracts, citing Crum.17 Again, there was no explanation for why the partial payment doctrine applied to the five-year statute of limitations after the change made in 1872.

The Illinois Supreme Court next addressed the issue in Kreiling v. Northrup18, a mandamus action seeking to compel the commissioners of the Mason and Tazwell Special Drainage District to alter, repair or modify its drainage system to allow sufficient drainage for the petitioners’ property. After a bench trial, the trial court granted the writ of mandamus.19 The Appellate Court affirmed, finding that a part performance by the commissioners resulted in a waiver of the statute of limitations.20 The Illinois Supreme Court affirmed, finding:

"From all of these exhibits it would seem that the commissioners recognize the rights of the petitioners for the relief sought, and had recognized these rights by taking steps to do the work necessary to grant the relief. They were required to furnish the lands of the district with adequate drainage, and, while the owners might become estopped by laches or acquiescence from securing their rights, yet the evidence shows that the owners were continually demanding relief and the commissioners were recognizing the justness of the claim, and taking steps to supply additional drainage. Under such circumstances the right was not barred by the statute of limitations, and the court committed no error in so holding."21

Thus, the Supreme Court without citation to either the statute or other authority held that part performance could remove the statute of limitations’ bar.

The doctrine was next discussed in Berry v. Berry,22 which involved a verbal agreement for a loan between a father and son. When the father passed away nine years after the loan was made, only one year’s interest had been paid and there had been no payment of principal. The executor’s final report stated that it was not advisable to sue the son, but sought the court’s permission to withhold from the son’s distribution the amount of principal and interest owed. The son objected and the county court sustained the objection. The circuit court reversed. The Appellate Court affirmed the circuit court, first holding that the loan was not a valid inter vivos gift. It then held that the statute of limitation was revived when the son delivered to the Administrator the amounts of certificates of deposit which the son made in an account in his father’s name during the father’s lifetime. Significantly, the Appellate Court relied solely upon cases involving the revival of written contracts.23 Thus, once again, there was no discussion of the distinction created by the Legislature’s codification of partial payment doctrine for written contracts only.

The closest any court has come to discussing the 1872 changes to the statute of limitations was in In re Chapman’s Estate,24 in which the Appellate Court discussed whether a written promise to pay was necessary to revive a written contract. The Court held that:

"A number of cases are cited by counsel for the claimant in support of their contention that Olsen’s testimony was sufficient to prove a new promise, but an examination of them discloses that they involve either oral contracts or written contracts executed prior to 1872, when no written promise was necessary. In Horner v. Starkey, 27 Ill. 13 [1861], an oral promise was held to be sufficient, but at that time, the note being dated November 14, 1838, a written promise was not required by the statute; in Whiteman v. McFarland, 68 Ill.App. 295 [(2nd Dist. 1896)], which was a suit for money paid [all before 1872], and where there was no written contract, the court held an oral promise was sufficient; that a written promise to pay the barred debt was necessary only where the original promise was in writing; in Pinney v. Smith, 136 Ill.App. 129 [1st Dist. 1907)], which was a suit on an oral contract [where the statute of limitations was not an issue], the court held that an oral promise was sufficient; in Quinlan v. Thompson, 152 Ill.App. 275 [(1st Dist. 1909)], which was a suit on an open account, the court held that an oral promise was sufficient."

Thus, the Court recognized that the 1872 amendments changed the law with respect to reviving written contracts but did not specifically address how the amendments changed the doctrines application to unwritten contracts. It relied upon cases which discussed unwritten contracts but which did not recognize or analyze the changes made in 1872.

The issue of whether a promise to pay tolled the statue of limitations was discussed in Truscon Steel Co. of Canada v. Biegler,25 in which the plaintiff was seeking to enforce a judgment it had obtained five years and two months before filing suit. In the intervening years, the defendant had made two verbal promises to pay the judgment. The Court initially noted that actions to enforce foreign judgments are "civil actions" subject to the five-year limitation. The Court then noted that "It is also the law that a promise of a debtor to his creditor that he will pay the debt takes the case out of the 5-Year Statute of Limitations. Abdill v. Abdill, 292 Ill [231,] 231-34, 126 N.E. 543, 544 [(1920)]."26 However, the five-year statue of limitations was not applicable to the promise in Abdill. There, in 1891, that plaintiff transferred mineral rights to the defendant pursuant to a deed which expressly stated consideration of $7,000. 27 This amount was never paid. In 1914, plaintiff was offered $16,000 for the mineral rights. When he told the defendant about the offer, the defendant promised to pay plaintiff that sum. Within five-years of this promise, plaintiff sued to recover the $16,000. As such, the statute of limitations was not a bar in that case. Moreover, in holding that an "absolute acknowledgement of the continuance of the debt and a promise to pay it is sufficient" to toll the statute, the Abdill Court relied upon cases which were either decided before the 1872 Amendments28 or which did not, in turn rely on any case so holding.29

The issue of a partial payment tolling the five year statute was last discussed in St. Francis Medical Center v, Vernon,30 in which a hospital was suing upon a two count claim for account stated and for breach of contract. The defendants filed a motion to dismiss asserting that the account stated claim was barred by the five year statue and the complaint was dismissed by the trial court. On appeal, the hospital argued that the statute was tolled by the defendants’ partial payments. The Appellate Court held that "It is clear that part payment of a debt tolls the statute of limitations such that it commences to run from the date of last payment."31 However, the case relied upon by the Appellate Court, Department of Mental Health v. Mitchell32, does not support this proposition. The Department of Mental Health Court was interpreting the statute of limitation then found at § 12-12 of the Mental Health Code.33 Moreover, the cases it referred to either decided the issue based upon written contracts34 or cited no authority.35 Significantly, the Appellate Court also found that the parties’ relationship was governed by a written contract.36 Any discussion of the five year statute was obiter dicta.

Thus, despite opportunities to do so, our courts have never addressed the effect of the 1872 changes to the Limitations Act. It seems apparent that the Legislature decided to allow the use of the partial payment doctrine for written contracts, but not for unwritten ones. Therefore, the Appellate and Supreme Court should, when next presented with this issue, declare the demise of the partial payment doctrine for unwritten contracts and the other causes of action found in § 13-205 of the Code of Civil Procedure.37

1 For this defense to the statute of limitations, it is the party asserting it who has the burden of proof. Hopkins v. Loeber, 329 Ill.App. 423, 429, 69 N.E.2d 104, 107 (1st Dist. 1946). Further, "[f]or a partial payment of a debt to revive a debt barred by the statute of limitations the debtor must have had full knowledge of the items barred and have recognized the validity of the charges. Tucker v. Tucker, 316 Ill.App. 671[, 45 N.E.2d 558] (1st Dist. 1942)(abstract). In addition, the partial payment must have been specifically identified with a particular debt at the time it was made. Bonamer v. Mahanna, 339 Ill.App. 277[, 89 N.E.2d 747] (1st Dist. 1950)(abstract)." Brooks v. Knox Electrical Construction Co., Inc., No. 86-C-7475, 1986 WL 15117, at *2 (N.D. Ill. December 19, 1986).

2 735 ILCS 5/13-101, et seq.

3 735 ILCS 5/13-206 (emphasis added).

4 735 ILCS 5/13-205.

5 Laws, 1871-72, p. 142, §§ 12, 15-16, 24.

6 Laws, 1859, 2nd Sess., p. 45, §§ 1, 2, 5.

7 See, e.g., Lowery v. Gear, 32 Ill. 383 (1863)(partial payment on written note); Mellick v. De Seelhorst, 1 Ill. 221 (1844)(promise to pay on written promissory note); Keener v. Crull, 19 Ill. 189 (1857)(promise to pay on unwritten agreement).

8 Comprehensive Community Solutions, Inc. v. Rockford School District No. 205, 216 Ill.2d 455, 473, 837 N.E.2d 1, 231-32 (2005).

9 Comprehensive Community Solutions, 216 Ill.2d at 473-74, 837 N.E.2d at 231-32.

10 Bruso v. Alexian Brothers Hospital, 178 Ill.2d 445, 451-52, 687 N.E.2d 1014, 1016 (1997).

11 Morris v. William L. Dawson Nursing Center, Inc., 187 Ill.2d 494, 499, 719 N.E.2d 715, 718 (1999); Bruso, 178 Ill. 2d at 458, 687 N.E.2d at 1019.

12 Garibaldi v. Applebaum, 194 Ill.2d 438, 451, 742 N.E.2d 279, 286 (2000).

13 45 Ill.App. 651 (4th Dist. 1892).

14 32 Ill.App. 282 (3rd Dist. 1889).

15 Similar holdings applying the doctrine to unwritten contracts, and other causes of action subject to the five-year statute of limitation, without discussion or citation to any authority are found in Miller v. Cinnamon, 61 Ill.App. 429 (2nd Dist. 1895), aff’d, 168 Ill. 447, 48 N.E. 45 (1897)(breach of unwritten contract); Whiteman v. McFarland, 68 Ill.App. 295 (2nd Dist. 1896)(suit for money paid); Kreiling v. Northrup, 116 Ill.App. 448 (3rd Dist. 1904), aff’d, 215 Ill. 195, 199-200, 74 N.E. 123 (1905)(petition for a writ of mandamus); Quinlan v. Thompson, 152 Ill.App. 275 (1st Dist. 1909)(suit on open account); Swift’s Estate v. Swift, 267 Ill.App. 224 (1st Dist. 1932), appeal denied (executor’s claim for verbal loan); Tucker v. Tucker, 316 Ill.App. 671, 45 N.E.2d 558 (1st Dist. 1942)(abstract)(executor’s suit on open account).

16 168 Ill. 447, 48 N.E. 45 (1897).

17 48 N.E. at 46-48.

18 74 N.E. 123 (1905).

19 74 N.E. at 123.

20 116 Ill.App. 448, 450-52 (3rd Dist. 1904).

21 74 N.E. at 124-25.

22 238 Ill.App. 507 (3rd Dist. 1925).

23 238 Ill.App. 507 (3rd Dist. 1925), citing, Stein v. Kaun, 244 Ill. 32 (1910)(written note and mortgage); Macfarland v. Utz, 175 Ill.App. 525 (1st Dist. 1912)(same).

24 248 Ill.App. 12 (1st Dist. 1928).

25 306 Ill.App. 180, 28 N.E.2d 623 (1st Dist. 1940).

26 28 N.E.2d at 623-624.

27 292 Ill. at 233, 126 N.E. at 544 ("[T]he plaintiff for an expressed consideration of $7,000, conveyed to [defendant] all coal and minerals under the surface of 160 acres of land owned by the plaintiff ….").

28 292 Ill. at 233, 126 N.E. at 544, citing Mellick v. De Seelhorst, 1 Ill. 221 (1844); Keener v. Crull, 19 Ill. 189 (1857); Horner v. Starkey, 27 Ill. 13 (1861); Sennott v. Horner & Hypes, 30 Ill.429 (1863)(suit on a note); and Wooters v. King, 54 Ill. 343 (1870)(refusal to give instruction on five year statue of limitation was proper).

29 292 Ill. at 233, 126 N.E. at 544, citing O’Hara v. Murphy, 196 Ill. 599, 603, 63 N.E. 1081 (1902)("We do not understand the rule of law to be that, before a new promise can avail to renew a debt barred by the statute the attention of the debtor must be called to the fact that the debt is barred. Nor can it be said that a debt barred by the statute is not a legal debt. It is not enforceable if the debtor plead the statute, but the statute does not make it illegal. If it were illegal, it would not be a consideration for a new promise. A new promise is sufficient although the amount to be paid is not fixed. Schmidt v. Pfau, 114 Ill. 494, 2 N.E. 522 [(1885)]."). In Schmidt, the debt was acknowledged and the Court determined the admissibility of evidence and the propriety of a jury instruction on the statute. 114 Ill. at 497, 2 N.E. at 522-23.

30 217 Ill.App.3d 287, 576 N.E.2d 1230 (5th Dist. 1991)

31 217 Ill.App.3d at 289, 576 N.E.2d at 1231, citing Department of Mental Health v. Mitchell, 25 Ill.App.3d 988, 991, 324 N.E.2d 94, 96 (5th Dist.1975).

32 25 Ill.App.3d 988, 324 N.E.2d 94 (5th Dist.1975)

33 Ill.Rev.Stat. 1963, ch. 91 ½, sec. 12-12.

34 25 Ill.App.3d at 991, 324 N.E.2d at 96, citing Walker v. Warner, 176 Ill. 16, 53 N.E. 594 (1899)(mortgage and note); and Meyer v. Kramer, 350 Ill.App. 102, 111 N.E.2d 852 (2nd Dist. 1953)(trust deed).

35 25 Ill.App.3d at 991, 324 N.E.2d at 96, citing In re Estate of Swift, 267 Ill.App. 224 (1st Dist. 1932).

36 217 Ill.App.3d at 289-90, 576 N.E.2d at 1231-32.

37 735 ILCS 5/13-205.

Ronald D. Menna, Jr. is a principal of Fischel & Kahn, Ltd., Chicago, IL, where he concentrates in commercial litigation and appellate practice. He received his J.D. from the University of Illinois College of Law and his B.A. in Economics and Political Science from the University of the South. He is admitted to practice in Illinois, the Seventh Circuit, and Northern District of Illinois and is also a member of the Federal Trial Bar. Mr. Menna served as an appellate law clerk to Justice Michael Bilandic after graduating from law school. He is also a member of the Milton Township Committee on Youth.


 
 
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