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PRS Inter. v. Shred Pax (Ill. S.Ct.)

Docket No. 84438-Agenda 23-May 1998.

P.R.S. INTERNATIONAL, INC., Appellee, v. SHRED PAX CORPORATION, Appellant.

Opinion filed October 22, 1998.

JUSTICE McMORROW delivered the opinion of the court:

This case involves the question of whether a party's failure to respond to a request for admission pursuant to Supreme Court Rule 216 (134 Ill. 2d R. 216) results in a judicial admission even where the requested admission relates to "ultimate facts" or to "legal conclusions." Defendant served requests for admissions on plaintiff, and plaintiff did not deny or object to the requests. Based on this failure to respond, defendant moved to have the requests be deemed admitted. The trial court granted that motion. Defendant then moved for summary judgment, and the trial court granted that motion. Plaintiff appealed, and the appellate court reversed. The appellate court found that certain of the requests were improper because they related to "ultimate facts"; that others were improper because they related to "legal conclusions"; and that the remaining requests, even if deemed admissions, did not support an award of summary judgment. 292 Ill. App. 3d 956. We reverse.

BACKGROUND

The following facts are of record in the case at bar. On April 18, 1990, the parties to this appeal entered into a contract which provided that plaintiff, P.R.S. International, Inc. (PRS), would purchase from defendant, Shred Pax Corporation (Shred Pax), "[o]ne pyrolysis system, including shredders and conveyers as a turnkey operation." The shredders would shred rubber tires, and the pyrolysis machine would burn the shredded tires, converting them to carbon black, which is a substance used in a variety of products. The contract provided that PRS was to make a down payment of $269,460, followed by seven monthly payments of $78,592.50 each, a payment of $39,296.25 in the eighth month, and a final payment of "$39,296.25 net 30 after approval of the shredding system."

Under the terms of the contract, Shred Pax was to begin its performance by delivering a tire shredder within seven working days of its receipt of the down payment. Shred Pax was obligated to deliver the pyrolysis system "eight to ten months after receipt of down payment." The contract also provided that "[a]pproval of installation [was] to be on site at P.R.S. International" at an address in Plymouth, Florida. PRS made the down payment on April 17, 1990. It eventually made all of the payments required under the contract, except the final payment of $39,296.25, by January 1991. Shred Pax had delivered all of the equipment, except the pyrolysis machine, to the Florida site prior to January 1991.

For reasons that are unclear, PRS moved its Florida operation to Illinois. It obtained a lease for a site in South Beloit, Illinois, in May 1991, and ceased its operations in Florida during the middle of 1991. Sometime thereafter, PRS began shredding tires, soliciting to buy tires, and preparing for delivery of the pyrolysis machine at the South Beloit site. According to Winfried Kaczmarek, the president of PRS in 1990 and 1991, Shred Pax's president, Al Kaczmarek, Winfried's brother, repeatedly assured PRS that the machine would be delivered by December 1991. In November 1991, three PRS representatives, including Winfried Kaczmarek, Pat Sreenan, and Richard Goetz, went to Shred Pax's property in Wood Dale, Illinois, to check on the progress of the pyrolysis machine. They found only parts, but not an entire machine. Shred Pax claims that it had subcontracted for the construction of the machine, though PRS claims that Al Kaczmarek refused to say where the machine was being built. At that November 1991 meeting, the PRS representatives indicated to Shred Pax that they would like Shred Pax to find another buyer for the machine, and suggested that Shred Pax advertise to find a buyer.

In January 1992, Patrick Sreenan wrote to Shred Pax and inquired as to whether Shred Pax had advertised the PRS pyrolysis machine for sale, as the parties had discussed in their November 1991 meeting. Discussing the sale of the machine, Sreenan explained that "[y]ou can appreciate that I am very anxious to reduce my already considerable losses as it relates [sic] to this company ***." Within a week, Al Kaczmarek replied by letter on behalf of Shred Pax. He stated that Shred Pax was willing to ship the machine anywhere PRS desired. He also indicated that Shred Pax desired prompt payment of the remaining $39,296.25, which it claimed was due in February 1991. In a February 1992 letter, Sreenan stated that, under the terms of the contract, he believed that the final payment was not due until the pyrolysis machine was delivered. He stated that PRS could not afford to have a representative fly with Kaczmarek to see all of the parts of the machine because PRS was "broke and [had] considerable indebtedness." In conclusion, Sreenan said that PRS had been misinformed about the number of pyrolysis systems in operation when it ordered the system, and that it would like to be reimbursed "for all monies paid in connection with the pyrolysis system, less ten percent for any inconvenience we may have caused you by way of storage." In an April 24 letter, Sreenan stated that Al Kaczmarek had been told of the move to Illinois in June 1990, and had never told PRS that a change in the eventual location of the machine would require alterations to the machine. The parties apparently continued to exchange correspondence through the remainder of 1992.

In a letter from Al Kaczmarek to Sreenan, dated January 5, 1993, Kaczmarek wrote that Shred Pax had delivered "all shredder items," that only the pyrolysis machine remained to be delivered, and that PRS had failed to make the final payment due under the contract. Kaczmarek also claimed that PRS owed Shred Pax for various storage costs and other unspecified "unpaid invoices." Sreenan responded by letter dated January 18 that the last payment was not due until delivery of the pyrolysis machine, that he was unaware of any unpaid invoices, and that there had been no agreement as to storage costs. Sreenan again stated his desire to find another buyer for the machine, because, he said, "it is my desire to be completely disassociated with anything to do with tire shredding and/or burning." Sreenan asked Kaczmarek to state the minimum amount he would pay for a mutual release from the contract. Sreenan suggested that Shred Pax pay $250,000. In a March 3 letter, Al Kaczmarek wrote to Sreenan, stating that: (1) the contract required delivery in Florida, and PRS had "broken that contract" by relocating to Illinois; (2) Shred Pax had incurred additional expenses related to the machine, had sought reimbursement from PRS, and PRS had not responded to those requests; (3) the pyrolysis machines were "sitting around and [could] not be finished in total because [Shred Pax did not] know in which state they will go, what water hook up it is and if there are cooling towers required as the information from Florida to Illinois was never answered." Kaczmarek "demanded" that PRS "put a payment in our hand and you take this pyrolysization system complete or incomplete." He expressed frustration with having to store the machine for a period of time, as well as with PRS's failure to specify a delivery site, its failure to make the final payment under the contract, and its failure to pay additional expenses incurred by Shred Pax. He stated that PRS had 30 days to pay what it owed to Shred Pax and take delivery.

The record also contains various submissions from the parties regarding the environmental requirements for a pyrolysis system. According to the affidavit of Richard Goetz, he and Sreenan obtained a permit from the City of South Beloit for the operation of a tire shredding and pyrolysis operation. According to the affidavit of Winfried Kaczmarek, PRS made "initial contact" with the Illinois Environmental Protection Agency and was told that the pyrolysis system would be tested for emissions after it was put into operation. The affidavit states that neither Shred Pax nor Al Kaczmarek ever requested a permit for the construction or installation of a pyrolysis system in South Beloit. It also states that Shred Pax never indicated that delivery and installation of the system could not or would not occur before government permits were obtained. Finally, it states that no permit is required for tire pyrolysis because it does not emit any toxic gases or pollutants. Shred Pax submitted the affidavit of John Yates, who identifies himself as a registered professional engineer experienced in the environmental field. In the affidavit, Yates states that the Illinois Administrative Code required PRS to obtain a construction permit from the Illinois Environmental Protection Agency before the pyrolysis system was installed. The interrogatories exchanged by the parties also refer to the environmental permits required for the construction and installation of a pyrolysis system. Plaintiff's response to defendant's first set of interrogatories states that, as of February 1991, PRS could legally take delivery of a pyrolysis operation without any permits.

In August 1995, PRS filed the case at bar against Shred Pax, alleging a breach of contract based on Shred Pax's failure to deliver the pyrolysis machine. In the course of discovery in the case, on April 20, 1995, Shred Pax served on PRS a set of requests for admissions, pursuant to Supreme Court Rule 216. The requested admissions included the following:

"6. Shred Pax delivered to PRS the shredding system and other equipment required by the contract other than the pyrolysis system.

7. PRS accepted, approved, and used the shredding system and other equipment delivered by Shred Pax.

8. PRS failed to pay Shred Pax $898,200.

9. Prior to February, 1991, PRS ceased doing business at the Florida location referred to in Exhibit A-2 [the contract] attached hereto.

10. As of February, 1991, PRS did not possess all of the permits required by applicable federal, state, and municipal laws for delivery, installation, or operation of the pyrolysis system at any location in the United States.

11. As of February, 1991, PRS did not have a location in the United States with the permits required to take delivery of the pyrolysis system.

12. As of February, 1991, possession of the pyrolysis system was of no benefit to PRS.

13. PRS never obtained all of the permits required by applicable federal, state, and municipal law for delivery, installation, or operation of the pyrolysis system at any location in the United States.

14. PRS never had a location in the United States with the permits required to take delivery of the pyrolysis system.

15. After February, 1991, possession of the pyrolysis system was of no benefit to PRS.

16. PRS never requested in writing that Shred Pax deliver the pyrolysis system to PRS at a particular location on a particular date.

17. PRS never requested that Shred Pax deliver the pyrolysis system to PRS at a particular location on a particular date.

18. PRS refused to take delivery of the pyrolysis system.

19. PRS requested that Shred Pax sell the pyrolysis system to someone else.

20. Shred Pax had the pyrolysis system ready for delivery in February, 1991, and thereafter.

21. PRS repudiated the parties' contract by refusing to take delivery of the pyrolysis system or by requesting that Shred Pax sell the pyrolysis system to someone else.

22. PRS breached the parties' contract by (1) repudiating the parties' contract, by refusing to take delivery of the pyrolysis system or by requesting that Shred Pax sell the pyrolysis system to someone else, (2) by failing to pay Shred Pax $39,296.25 when due, or (3) failing to obtain all of the permits required by the applicable federal, state, and municipal law for delivery, installation, or operation of the pyrolysis system at any location in the United States."

PRS never responded to these requests for admissions. On February 20, 1996, Shred Pax filed a motion to deem certain facts admitted. In that motion, Shred Pax pointed out that PRS had been served with requests for admissions 10 months earlier and had neither replied nor objected, and that, under Supreme Court Rule 216(c), facts are deemed admitted if a party is served with a request to admit and fails to object or reply within 28 days. In a July 24, 1996, hearing, PRS offered no reason for its failure to respond to the requests to admit, though it attempted to tender responses to Shred Pax at the hearing. The trial court found no good cause for PRS's delay in responding to the requests for admission, and granted the motion to deem certain facts admitted.

On the basis of those admissions, as well as certain other evidence, Shred Pax moved for summary judgment on August 12, 1996. The other submissions consisted mainly of the correspondence between Sreenan and Al Kaczmarek, as well as the Yates affidavit. The trial court granted the motion for summary judgment. The appellate court reversed the award of summary judgment. 292 Ill. App. 3d 956. The appellate court held that a party's failure to respond to a request for admission should not be deemed an admission if the request relates to "disputed ultimate facts," which are defined as "any contested facts needed to establish one's case or defense," or to "legal conclusions." 292 Ill. App. 3d at 963-64. In so holding, the appellate court recognized, but declined to follow, the contrary decision in People v. Mindham, 253 Ill. App. 3d 792 (1993), in which the court held that a failure to respond to a Rule 216 request constitutes an admission, even if the request relates to an ultimate fact. Instead, the appellate court in the case at bar held that such requests to admit ultimate facts or legal conclusions are beyond the intended scope of Rule 216, which the court held is intended to "obviate the difficulty involved regarding proof of evidence that is incontrovertible." 292 Ill. App. 3d at 964. The court found that Shred Pax's requests that PRS admit that it refused to take delivery (paragraph 18 of the request), and that it failed to obtain the necessary permits for the system (paragraphs 10, 11, 13, and 14), related to ultimate facts and thus were improper. In addition, the court found that the requests that PRS admit that it repudiated the contract (paragraph 21) and breached the contract (paragraph 22) related to "legal conclusions," and thus were also improper. The court did not find grounds for a summary judgment award in the other requested admissions, and accordingly reversed the trial court's judgment and remanded the cause for further proceedings. We granted defendant's petition for leave to appeal to this court. 166 Ill. 2d R. 315.

ANALYSIS

In deciding this appeal, we are faced with two distinct issues. The first question concerns which, if any, of defendant's requests for admissions should be deemed admissions as a result of plaintiff's failure to respond or object to those requests. The resolution of this issue depends on whether each request was proper under Rule 216. The second issue is whether, after setting aside any improper requests for admissions, the remaining admissions provide adequate support for the trial court's award of summary judgment for defendant. We review both questions de novo, because they are, respectively, a question of law (In re Estate of Rennick, 181 Ill. 2d 395, 404-05 (1998)) and an appeal of an order granting summary judgment (Outboard Marine Corp. v. Liberty Mutual Insurance Co., 154 Ill. 2d 90, 102 (1992)). We begin by reviewing the propriety of the admissions requested by defendant.

Supreme Court Rule 216 states in relevant part:

"Rule 216. Admission of Fact or of Genuineness of Documents

(a) Request for Admission of Fact. A party may serve on any other party a written request for the admission by the latter of the truth of any specified relevant fact set forth in the request.

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(c) Admission in the Absence of Denial. Each of the matters of fact and the genuineness of each document of which admission is requested is admitted unless, within 28 days after service thereof, the party to whom the request is directed serves upon the party requesting the admission either (1) a sworn statement denying specifically the matters of which admission is requested or setting forth in detail the reasons why he cannot truthfully admit or deny those matters or (2) written objections on the ground that some or all of the requested admissions are privileged or irrelevant or that the request is otherwise improper in whole or in part. If written objections to a part of the request are made, the remainder of the request shall be answered within the period designated in the request. A denial shall fairly meet the substance of the requested admission. If good faith requires that a party deny only a part, or requires qualification, of a matter of which an admission is requested, he shall specify so much of it as is true and deny only the remainder. Any objection to a request or to an answer shall be heard by the court upon prompt notice and motion of the party making the request.

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(e) Effect of Admission. Any admission made by a party pursuant to request under this rule is for the purpose of the pending action and any action commenced pursuant to the authority of section 13-217 of the Code of Civil Procedure [citation] only. It does not constitute an admission by him for any other purpose and may not be used against him in any other proceeding." 134 Ill. 2d R. 216.

The first issue before us relates to the effect of a party's failure to respond to a request to admit. Rule 216(c) states that any matter of fact of which admission is requested shall be deemed admitted unless denied within 28 days of service of the request. The appellate court in the case at bar held that this rule did not apply to "ultimate facts and conclusions of law." Specifically, the court held that the trial court should not have considered as admissions ultimate facts or conclusions of law contained in defendant's request to admit, to which plaintiff did not respond. The appellate court reasoned that the purpose of Rule 216 is to allow admissions to undisputed facts, and not to provide parties with a means of proving their entire case. Defendant claims that the appellate court's ruling is contrary to the language of Rule 216 and our prior decisions.

The principles by which we construe Supreme Court Rules are well settled. As we recently stated:

"In interpreting a supreme court rule, we apply the same principles of construction that apply to a statute. [Citation.] Our goal is to ascertain and give effect to the intention of the drafters of the rule. [Citation.] The most reliable indicator of intent is the language used, which should be given its plain and ordinary meaning. [Citation.] Where the language is clear and unambiguous, we must apply the language used without further aids of construction. [Citation.]" In re Estate of Rennick, 181 Ill. 2d at 404-05.

In Bright v. Dicke, 166 Ill. 2d 204, 210 (1995), we stated, with regard to Rule 216, "[t]he rules of court we have promulgated are not aspirational. They are not suggestions. They have the force of law, and the presumption must be that they will be obeyed and enforced as written." Bright, 166 Ill. 2d at 210. Rule 216 allows requests for the admission "of the truth of any specified relevant fact set forth in the request." (Emphasis added.) 134 Ill. 2d R. 216(a). The rule plainly allows requests for admission of any fact which is relevant, and ultimate facts fall within this broad category.

The language of Rule 216 is also clear with respect to the effects of failing to respond to a request for admission. The rule provides that "[e]ach of the matters of fact *** of which admission is requested is admitted unless, within 28 days after service thereof, the party to whom the request is directed" denies the matters of which admission is requested or objects on the ground "that some or all of the requested admissions are privileged or irrelevant or that the request is otherwise improper in whole or in part." 134 Ill. 2d R. 216(c). Therefore, when a fact is properly included in a request to admit, and the served party does not respond or object to the request, that fact is deemed admitted. Again, whether a fact is an "ultimate" fact is irrelevant for purposes of this rule. The key question is whether a requested admission deals with a question of fact. Accordingly, requests for legal conclusions are improper; however, requests for admissions of factual questions which might give rise to legal conclusions are not improper. For example, a party's conduct pursuant to a contract, including what actions that party did or did not take, would be a factual question properly included in a request to admit. However, whether that conduct amounts to a material breach is a legal rather than a factual question, and thus is not appropriate for a request to admit. In subsequent filings, the other party may refer to that party's conduct under the contract and argue that it amounts to a breach, but the language of Rule 216 refers only to factual issues. Therefore, requests under Rule 216 must be limited to questions of fact.

PRS argues that this result is contrary to the purpose of Rule 216. PRS contends that the purpose of Rule 216 is limited to "obviat[ing] the difficulty involved regarding proof of evidence that is incontrovertible." 292 Ill. App. 3d at 964. We disagree. Although requests to admit are often classified as a discovery device and treated as such in practice (Bright, 166 Ill. 2d at 208), "the purpose of admissions is not to discover facts but rather to establish some of the material facts in a case without the necessity of formal proof at trial." Requests to admit are "a device by which `to separate the wheat from the chaff' " and are "intended to circumscribe contested factual issues in the case so that issues which are disputed might be clearly and succinctly presented to the trier of facts." 23 Am. Jur. 2d