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Docket No. 89201-Agenda 30-September 2000.

GRACEIA M. VOYLES, Appellee, v. SANDIA MORTGAGECORPORATION, n/k/a Fleet Mortgage Corporation, Appellant.

Opinion filed May 24, 2001.

CHIEF JUSTICE HARRISON delivered the opinion of thecourt:

The plaintiff, Graceia M. Voyles, brought the present actionin the circuit court of Du Page County against the defendant,Sandia Mortgage Corporation (now known as Fleet MortgageCorporation), seeking damages for the defendant's submission ofallegedly inaccurate reports about her to credit reporting agencies.Following a bench trial, the trial judge awarded the plaintiff a totalof $10,000 in damages, finding that the defendant was negligentin submitting certain information to the credit reporting agenciesand in failing to timely correct alleged inaccuracies therein. Thetrial judge denied the plaintiff recovery on several other theoriesof recovery, including defamation, tortious interference withprospective economic advantage, and breach of duty of good faithand fair dealing. The court also denied plaintiff's request forpunitive damages based upon her claim that defendant had actedwilfully. Plaintiff appealed, and defendant cross-appealed.

The appellate court did not disturb the trial court's ruling ofliability on plaintiff's claims for negligent reporting of creditinformation and failure to timely correct alleged inaccuracies;however, in light of its disposition of plaintiff's other claims, theappellate court vacated the trial court's award of damages on thenegligence counts and remanded for hearings on damages relatedthereto. Finding that the defendant had acted intentionally, theappellate court reversed the trial court's judgment in favor of thedefendant on the plaintiff's other claims and remanded the causeto the circuit court for hearings on plaintiff's damages arising fromthose claims as well. 311 Ill. App. 3d 649. We allowed thedefendant's petition for leave to appeal (177 Ill. 2d R. 315(a)), andwe now reverse the judgment of the appellate court and affirm thejudgment of the circuit court.

The facts pertinent to our disposition may be stated briefly. In1976 the plaintiff bought a single-family home in Springfield,financing the purchase with a loan from a local lender, CitizensSavings and Loan Association (Citizens). In 1979, the plaintiffmoved to the Chicago area. Late in 1981 or early in 1982,plaintiff's lawyer, Wayne Golomb, moved into the residence andeventually began making the mortgage payments. Subsequently,Citizens failed and was placed in receivership under theResolution Trust Corporation. The plaintiff's loan wassubsequently sold to another entity, and defendant SandiaMortgage Corporation began servicing the loan in April 1991. Thedefendant soon discovered that the assessment on the property hadincreased, causing the plaintiff's real estate taxes to rise. Becauseof that increase, the escrow that had been established to coverproperty taxes on the property had become insufficient. To makeup for the deficiency, the defendant increased the plaintiff'smonthly mortgage payment from $503 to $582. The increasedpayments were reflected in a mortgage payment booklet sent to theplaintiff in the summer of 1991. Golomb noticed that the requiredmonthly payment had increased and, on August 7, 1991, he sent anote to the defendant questioning the new amount. On August 16,one of the defendant's customer service representatives calledGolomb. A note she made of the conversation stated, "I called Mr.Golomb this a.m. He was very vague, stating that he is sending usthe payments on this mortgage and wants us to send mail tohim-told him to send power of attny [sic] from Mrs. Voyles."Apart from the insufficient escrow, the defendant was alsoconcerned that the property might have been sold by the plaintiffto Golomb, activating the due-on-sale clause in the mortgage.

Notwithstanding the August 16 conversation, Golomb sentdefendant checks in the old amount of $503 in September andOctober for payment of the mortgage-less than the new monthlypayment of $582. The defendant returned those checks with aletter to plaintiff dated October 3, 1991. The defendant explainedthat the loan was delinquent and set forth the total paymentrequired for reinstatement. The defendant recommended that thecorrect amount be paid to reinstate the account and to avoid havingadverse information placed on the plaintiff's credit record. Indefendant's letter, it provided telephone numbers where plaintiffcould request further information or discuss the matter in greaterdetail.

Golomb sent a check for only $503 in November 1991. OnNovember 7, 1991, he sent a letter to defendant cautioningdefendant against further contact with the plaintiff/mortgagor,stating his opinion that the last payment on the loan had beenrejected without cause, and threatening suit.

On December 17, 1991, the defendant, by its assistant vice-president, James Duran, sent Golomb a letter informing him thatthe payments for August, September, October, and Novemberwere due and that plaintiff owed a total of $2,328. Duran againoffered to answer any questions about the account.

Early in January 1992, Golomb sent the defendant two checkstotaling the amount due. One was an insurance company checkpayable to the defunct Citizens Savings & Loan for $1,669.50,which had been issued as compensation for certain repairs on thehome; the second check was Golomb's personal check for thebalance. In response, the defendant returned both checks toGolomb, stating that it could not accept the insurance companycheck because Citizens was listed as the payee; the defendantfurther explained that even if the defendant were designated thepayee, defendant could not accept the check until repairs to theproperty were completed, repair bills were paid in full with copiesthereof submitted to defendant, executed and notarized lienwaivers were completed by each contractor involved, and Golombsigned an insurance claim affidavit.

Golomb responded by sending the defendant his personalcheck for $582, representing the correct monthly payment due inlate January. The next week, Golomb sent a check for $1,669.50.Because a balance of $658.50 remained, however, the defendantreturned the checks to Golomb, stating that the entire amount duewould have to be paid to avoid default. The defendant reiteratedthat concern in a letter to the plaintiff on February 4, 1992,explaining that it would not accept less than the full amount dueand that it would institute foreclosure proceedings if it did notreceive full payment. At the same time, the defendant referred thematter to its foreclosure department. Later that month, Golombsent the defendant a letter stating that he would not make anyfurther payments on the loan.

As a result of this ongoing dispute, defendant informed twocredit reporting agencies, TRW and Trans Union, of the status ofthe plaintiff's mortgage and of the initiation of foreclosureproceedings. Reports issued by those companies reflected thatforeclosure proceedings had been instituted and that the lastpayment had been received in July 1991. Golomb ultimately paidthe arrearage and, as the defendant's records indicate, defendantthen reinstated the mortgage "out of foreclosure" effective June 3,1992.

As noted earlier, the plaintiff did not occupy the Springfieldhouse but was instead living in the Chicago area, in Naperville. InMarch 1992, the plaintiff attempted to refinance the mortgage onher house in Naperville, and she submitted an application toCitibank, the original lender on that property. In the course ofprocessing the plaintiff's application, Citibank obtained creditreports on the plaintiff from the two credit reporting agencies.Those reports stated that plaintiff's mortgage on the Springfieldproperty was in foreclosure. In June of 1992, after receiving fullpayment, the defendant notified Citibank that the Springfieldmortgage was no longer delinquent. Thereafter, Golomb suppliedCitibank with additional information required by Citibank tocomplete plaintiff's application. That information was not relatedto the controversy between plaintiff and defendant. Citibankultimately denied the plaintiff' application for a new loan on theNaperville property for a reason unrelated to credit reporting: theplaintiff was no longer employed. Citibank concluded thatplaintiff's credit status was "satisfactory."

In September 1992, the plaintiff initiated the present actionagainst the defendant in the circuit court of Du Page County. Theplaintiff alleged that the defendant was negligent in reportinginformation about her to the credit agencies and in failing topromptly correct falsely reported information. The trial courtoriginally ruled for the defendant, granting summary judgment forthe defendant on the ground that the plaintiff could not establishthat the defendant's conduct proximately caused the plaintiff'sinjury: Citibank's denial of the plaintiff's application forrefinancing. In an appeal from that ruling, the appellate courtreversed the circuit court judgment and remanded the cause forfurther proceedings, finding the existence of several questions ofmaterial fact that precluded entry of summary judgment. Voyles v.Sandia Mortgage Co., No. 2-94-0158 (1995) (unpublished orderunder Supreme Court Rule 23). On remand, the plaintiff added afurther claim to her action, alleging the breach of an implied dutyof good faith and fair dealing, and seeking an award of punitivedamages. After the bench trial was conducted, but before the judgeissued his ruling, the plaintiff added yet another count, allegingtortious interference with prospective business advantage. Also,the plaintiff argued that the negligent-reporting counts should beconstrued as defamation claims.

The trial judge ultimately awarded the plaintiff a total of$10,000 in compensatory damages on the two negligence counts,agreeing with the plaintiff that the defendant had issued false orinaccurate credit reports without exercising due care. The judgeruled against the plaintiff, however, on the counts alleging breachof an implied duty of good faith and fair dealing and tortiousinterference with prospective business advantage. The judge foundthat the defendant's conduct was not intentional. The trial courtalso rejected the plaintiff's defamation claims, concluding that shehad failed to prove special damages.

Both parties appealed. The appellate court disagreed with thetrial judge's finding that the defendant had not acted intentionally.The appellate court believed that the defendant had "embarked ona course of action to force plaintiff into foreclosure by raising hermonthly payments with no notice and then arbitrarily andcapriciously refusing plaintiff's tender of amounts owing." 311 Ill.App. 3d at 656. The appellate court entered judgment for theplaintiff on the counts rejected by the trial judge: breach of theduty of good faith and fair dealing, tortious interference withprospective economic advantage, and defamation. As previouslynoted, the appellate court vacated the award of damages on thenegligence counts and remanded the cause to the circuit court forreconsideration of the plaintiff's damages on all counts. 311 Ill.App. 3d at 661.

The defendant first argues that the appellate court erred inrecognizing an independent cause of action in tort for the allegedbreach of an implied duty of good faith and fair dealing arisingfrom a contract. For the reasons that follow, we decline torecognize the cause of action in the circumstances of this case.

Until the decision below, appellate court panels which hadsquarely addressed the question had consistently refused torecognize an independent tort for breach of the implied duty ofgood faith and fair dealing in a contract. See, e.g., Harris v. AdlerSchool of Professional Psychology, 309 Ill. App. 3d 856, 860-61(1999); Coleman v. Madison Two Associates, 307 Ill. App. 3d 570,578 (1999); Guardino v. Chrysler Corp., 294 Ill. App. 3d 1071,1080 (1998); Northern Trust Co. v. VIII South MichiganAssociates, 276 Ill. App. 3d 355, 367 (1995); Anderson v. BurtonAssociates, Ltd., 218 Ill. App. 3d 261, 267 (1991); Carlson v.Carlson, 147 Ill. App. 3d 610, 614 (1986).

In Cramer v. Insurance Exchange Agency, 174 Ill. 2d 513(1996), this court considered an analogous question arising in theinsurance context. In that case, this court refused to recognize anindependent action in tort for breach of an implied covenant ofgood faith and fair dealing, stating that the claim would be properonly in the narrow context of cases involving an insurer'sobligation to settle with a third party who has sued thepolicyholder. Discussing the requirement of good faith and fairdealing implicit in all contracts, this court explained:

"This principle ensures that parties do not try to takeadvantage of each other in a way that could not have beencontemplated at the time the contract was drafted or to doanything that will destroy the other party's right to receivethe benefit of the contract. [Citations.] This contractualcovenant is not generally recognized as an independentsource of duties giving rise to a cause of action in tort.[Citations.]" Cramer, 174 Ill. 2d at 525.

As we have noted, Cramer recognized an exception to thatrule. This court stated in Cramer that a separate action in tortwould remain available when an insurer breaches its duty to settlean action brought against the insured by a third party. The courtreasoned that in that setting the insured relies on the insurer fordefense of the action, yet the insurer's interest in defeating theclaim may conflict with the insured's interest in avoiding ajudgment that exceeds the amount of the policy limits. The policydoes not spell out the insurer's duty to settle, however, andtherefore tort law remains an appropriate ground on which toevaluate the insurer's conduct. Cf. Cramer, 174 Ill. 2d at 525-26.Cramer distinguished duty-to-settle cases from actions by aninsured against its insurer arising from the insurance contract. Thecourt noted, in the latter context, "The policyholder does not needa new cause of action to protect him from insurer misconductwhere an insurer refuses to pay. The policyholder has an explicitcontractual remedy." Cramer, 174 Ill. 2d at 526.

Cramer, as well as the line of appellate cases previously cited,would thus bar the plaintiff's tort action here for breach of theimplied covenant of good faith and fair dealing. The appellatecourt below, however, believed that Cramer was distinguishableon the ground that it involved an action under the IllinoisInsurance Code, which contains a statutory remedy for the insuredin that case. The appellate court theorized that in the absence of aremedy provided by the legislature, the courts of this state are freeto impose a duty of good faith and fair dealing based in tort law.

Although Cramer involved section 155 of the Insurance Code(215 ILCS 5/155 (West 1994)), the opinion's rationale was notconfined to that context. The court's description of the covenantof good faith and fair dealing as a rule of construction, rather thanan independent source of tort liability, was not limited to the areaof insurance law, and is as apt here as it is in other circumstances.Moreover, this court's analysis in Cramer made clear that,irrespective of a statutory remedy, the existence of a contractualremedy would have made the tort theory unnecessary. Cramer,174 Ill. 2d at 526-27.

In this case, the plaintiff had recourse to both her specifiedremedies under the parties' contract and traditional tort remedieswhich she in fact sought to employ but failed to prove. A cause ofaction for violation of a duty of good faith and fair dealing would,as a practical matter, add little to this or any plaintiff's remedialrepertoire. As the appellate court's own analysis of this issuesuggests, the requisite evidence for plaintiff to prevail on the tortclaims is less than that which the appellate court would haverequired for a showing that defendant violated a duty of good faithand fair dealing:

"Defendant's conduct was intentional and outrageous. Inthe future, in order to state a claim for bad faith, adefendant's conduct would have to be similarly egregiousand outrageous." 311 Ill. App. 3d at 656.

First, we do not agree that defendant intended to create thecredit controversy; nor do we believe the reporting of the disputewrongful. Moreover, we do not believe it advisable to recognizea cause of action for violation of a duty of good faith and fairdealing in the factual context of this case; nor do we see a need toexpand the reach of the limited cause of action acknowledged byCramer in duty-to-settle cases. "It is plaintiff's burden, in urgingthis court to create new rights of action or expand existing ones,to persuade the court of the need for such new or expanded rights."Zimmerman v. Buchheit of Sparta, Inc., 164 Ill. 2d 29, 39 (1994).We are not persuaded.

The defendant also challenges the appellate court'sdeterminations that the plaintiff may recover for defamation andfor tortious interference with prospective business expectations.The appellate court concluded that the defendant's actions inrelating the impending foreclosure of the plaintiff's property to thecredit reporting agencies were intentional and wrongful.

An underlying element common to both the defamation claimand the tortious interference claim, as pleaded by the plaintiff, isthe assumption that the defendant wrongfully declared theplaintiff's mortgage to be delinquent for nonpayment of the higheramounts, because the defendant had initially failed to provide theplaintiff with an explanation for the monthly increase in hermortgage payments. In essence, the plaintiff maintained that thedefendant could not increase the payments without first providingan explanation for the increase. Accordingly, the plaintiff believedthat payment of less than was required by the new paymentbooklet did not constitute a delinquency and therefore could notprovide grounds for an adverse report to the credit reportingagencies.

We do not agree with the premise of the plaintiff's argumentthat the defendant was required first to provide an explanation forthe increased payment. The defendant provided the necessarynotice by sending a new payment booklet showing the increasedamount of the monthly payments. That was all that the mortgageagreement required. It provided:

"If the amount of the Funds held by Lender shall not besufficient to pay taxes, assessments, insurance premiumsand ground rents as they fall due, Borrower shall pay toLender any amount necessary to make up the deficiencywithin thirty days after notice from Lender to Borrowerrequesting payment thereof."

The required notice in this case was given when the defendant sentthe plaintiff the new payment booklet showing the increasedamount of each payment. Although it certainly would have beenhelpful for the defendant to have given the borrower anexplanation for the increase when the new payment booklet wassent, the defendant's failure to do so did not excuse the plaintiff'ssubsequent refusal to make the required payments-payments theplaintiff does not now contest, and conceded were required.

As the defendant correctly notes, falsity is an element of theplaintiff's defamation claim. Krasinski v. United Parcel Service,Inc., 124 Ill. 2d 483, 490 (1988). To recover on a claim ofdefamation, plaintiff must prove that the statement or publicationwas false. Troman v. Wood, 62 Ill. 2d 184, 198 (1975); Wynne v.Loyola University, 318 Ill. App. 3d 443, 451 (2000); Vickers v.Abbott Laboratories, 308 Ill. App. 3d 393, 400 (1999). Theplaintiff cannot, however, establish that the defendant's reports tothe credit agencies were false. The reports stated simply andcorrectly, "Foreclosure proceeding started, Account last paid on7/91." These reports were accurate: the plaintiff was delinquent inher mortgage. By that time, the plaintiff and her tenant had notmade a full payment on the mortgage since the preceding July.Moreover, the defendant had taken steps within its ownorganization to initiate the foreclosure process. Because the reportswere accurate, the plaintiff's action for defamation must fail.

The plaintiff argues, however, that truth is an affirmativedefense and that the defendant failed to plead it in a timelymanner. As we have noted, decisions of this court have reachedthe opposite conclusion, characterizing falsity as an element of thedefamation plaintiff's cause of action. See Krasinski, 124 Ill. 2dat 490; Troman, 62 Ill. 2d at 198. Even if truth were an affirmativedefense, however, the defendant's assertion of it would beconsidered timely in the circumstances of this case. The plaintiffdid not raise her defamation claim until she filed her writtenclosing argument, a number of months after the conclusion of thetrial. Therein, the plaintiff characterized the counts alleging thedefendant's negligence in reporting the delinquency to the creditagencies as claims for defamation. The defendant had no earlieropportunity to formally raise the defense, though it hasconsistently argued that the report it made to the credit agencieswas truthful and accurate. Given these circumstances, even if wewere to adopt the plaintiff's pleading requirement, we wouldconsider the defendant's assertion of the defense to be timely.

The appellate court also concluded that the plaintiff is entitledto recover on her claim of tortious interference with prospectivebusiness advantage. We believe that this theory, too, is unavailing. The elements of this cause of action are well established:

"To state a cause of action for intentional interferencewith prospective economic advantage, a plaintiff mustallege (1) a reasonable expectancy of entering into a validbusiness relationship, (2) the defendant's knowledge ofthe expectancy, (3) an intentional and unjustifiedinterference by the defendant that induced or caused abreach or termination of the expectancy, and (4) damageto the plaintiff resulting from the defendant'sinterference." Anderson v. Vanden Dorpel, 172 Ill. 2d399, 406-07 (1996).

We believe that the plaintiff's claim in this case founders onthe third element, the requirement that she show an intentional andunjustified interference by the defendant. The interference allegedby the plaintiff in the present case involved the allegedly falsereports the defendant made to the credit agencies. As we havestated, however, those reports were accurate and proper, andtherefore they cannot represent an unjustified interference with theplaintiff's prospective business expectancy.

We note in passing that ignorance of the basis for the increasein payments, though perhaps an initial source of controversybetween defendant and Golomb, does not appear to have sustainedthe dispute-a dispute, we might add, that defendant repeatedlyoffered to resolve if plaintiff would only bring the account currentby payment of the full amount owed. The defendant's actions donot support the appellate court's conclusion that defendant set outto "force plaintiff into foreclosure." See 311 Ill. App. 3d at 656.The circuit court's determination that defendant's conduct was notintentional is certainly not against the manifest weight of theevidence.

Finally, we note that at oral argument the defendant asked thiscourt to reinstate the circuit court judgment, which awarded theplaintiff $10,000 on her negligence claims. Apparently, thedefendant no longer wishes to challenge the trial judge's findingson those counts, and we need not discuss them separately.

For the reasons stated, the judgment of the appellate court isreversed, and the judgment of the circuit court of Du Page Countyis affirmed.

Appellate court judgment reversed;

circuit court judgment affirmed.

JUSTICE THOMAS took no part in the consideration ordecision of this case.