                                  Illinois Official Reports

                                          Appellate Court



       West Bend Mutual Insurance Co. v. 3RC Mechanical & Contracting Services, LLC,
                                2014 IL App (1st) 123213




Appellate Court              WEST BEND MUTUAL INSURANCE COMPANY, as Subrogee
Caption                      of ACS Rental Properties, LLC, Plaintiff-Appellant v. 3RC
                             MECHANICAL AND CONTRACTING SERVICES, LLC,
                             Defendant-Appellee.


District & No.               First District, Fourth Division
                             Docket No. 1-12-3213


Rule 23 Order filed          February 6, 2014
Rule 23 Order
withdrawn                    March 14, 2014
Opinion filed                March 20, 2014


Held                         Defendant’s petition under section 2-1401 of the Code of Civil
(Note: This syllabus         Procedure to vacate plaintiff’s default judgment against defendant met
constitutes no part of the   the liberal standards for vacature, and, therefore, where defendant was
opinion of the court but     understandably unaware of the action giving rise to the default
has been prepared by the     judgment due to numerous mistakes, there was no abuse of discretion
Reporter of Decisions        in the trial court’s decision to grant defendant’s petition, especially
for the convenience of       when there was no basis for allowing plaintiff to benefit from a large
the reader.)                 default judgment when defendant had a meritorious defense and no
                             substantial evidence to the contrary was presented by plaintiff.



Decision Under               Appeal from the Circuit Court of Cook County, No. 10-L-12360; the
Review                       Hon. Michael R. Panter, Judge, presiding.

Judgment                     Affirmed.
     Counsel on               Robert Ostojic and Alexander W. Ross, both of Leahy, Eisenberg &
     Appeal                   Fraenkel, Ltd., of Chicago, for appellant.

                              Robert Marc Chemers, Richard M. Waris, Thomas V.P. Draths, and
                              Philip G. Brandt, all of Pretzel & Stouffer, Chtrd., of Chicago, for
                              appellee.




     Panel                    JUSTICE LAVIN delivered the judgment of the court, with opinion.
                              Justices Fitzgerald Smith and Epstein concurred in the judgment and
                              opinion.




                                               OPINION

¶1         This appeal arises from the trial court’s order vacating a default judgment entered against
       defendant 3RC Mechanical and Contracting Services, LLC, pursuant to defendant’s petition
       filed under section 2-1401 of the Code of Civil Procedure (Code) (735 ILCS 5/2-1401 (West
       2010)). On appeal, plaintiff West Bend Mutual Insurance Company, as subrogee of ACS
       Rental Properties, LLC (ACS), contends that the trial court erred in vacating the judgment
       because defendant had sufficient notice of the underlying lawsuit while also arguing that the
       negligence of defendant’s registered agent, attorneys, and insurer did not excuse its inaction.
       We affirm.

¶2                                           BACKGROUND
¶3         On August 3, 2010, defendant filed chapter 7 bankruptcy proceedings with the United
       States Bankruptcy Court, Northern District of Illinois, naming the co-managing partner Frank
       Cassano as the debtor contact and listing a Joliet mailing address (Joliet address). Cassano
       replaced defendant’s former registered agent and attorney, Brian Kocis, who maintained an
       office in Naperville, Illinois (Naperville address). We note that throughout the lawsuit
       plaintiff continuously served notices and motions on defendant in the care of Kocis at the
       Naperville address rather than to Cassano, who was the contact. In addition, defendant
       maintained a business address at its facility in suburban Alsip (Alsip address).
¶4         On October 28, 2010, plaintiff filed a two-count complaint against defendant in the
       circuit court of Cook County (Cook County action) alleging negligence and breach of
       contract claims. Specifically, plaintiff contended that ACS entered into an oral agreement in
       which defendant agreed to lift a house owned by ACS to allow construction of a new
       concrete foundation in exchange for $15,000. The house allegedly fell during the lifting
       project, causing extensive damage. We note that no written contract has yet been produced.
       On November 5, 2010, the Du Page County sheriff served Kocis at the Naperville address



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     with a summons and plaintiff’s complaint. Kocis failed to notify Cassano or any of
     defendant’s managing partners.
¶5       On February 4, 2011, plaintiff, upon learning of defendant’s bankruptcy proceeding, filed
     a motion requesting that the bankruptcy court lift the automatic stay with respect to plaintiff’s
     action against defendant. Plaintiff specifically contended that defendant had an insurance
     policy at the time of the alleged house-lifting incident and defendant’s policy covered the
     claim. Plaintiff served its motion upon defendant’s bankruptcy attorneys and trustee. The
     bankruptcy court then entered an order allowing the automatic stay to be lifted.
¶6       On February 16, 2011, a case management conference was held in the Cook County
     action, and no one appeared on behalf of defendant. The trial court entered an order granting
     a continuance until April 18, 2011, and stated that it would enter a default judgment against
     defendant if it failed to appear. The court also required plaintiff to serve notice and a motion
     for default judgment to defendant by certified mail. Furthermore, the court required a copy of
     the order to be sent to each party by his counsel within 10 days. Plaintiff served a copy of the
     notice and motion for default on defendant through certified mail at the Naperville address,
     and it was signed for by Kocis’s assistant. In addition, on March 21, 2011, plaintiff sent a
     facsimile of the order to defendant’s insurer. Kocis again failed to send any documentation to
     defendant, its bankruptcy attorneys, trustee or Cassano.
¶7       On April 18, 2011, plaintiff filed a motion for default judgment, and the trial court set a
     hearing for May 5, 2011. Remaining consistent, plaintiff sent a copy of the motion though
     certified mail to defendant at its Naperville address. On May 5, 2011, defendant failed to
     appear at the hearing, and the trial court entered a default judgment against defendant
     requiring plaintiff to serve a copy of the order on defendant by certified mail. The record
     indicates that the post office made three unsuccessful attempts to deliver the certified letter to
     the Alsip address. On June 30, 2011, the circuit court entered a default judgment against
     defendant in the amount of $80,286.59. In July, the certified letter was finally returned to
     plaintiff marked “Return to Sender; Unclaimed; Unable to Forward.” In late August 2011,
     Cassano learned of the default order and subsequent judgment and notified defendant’s
     insurer.
¶8       In November 2011, defendant’s insurer retained counsel and thereafter filed a petition to
     vacate the May 5 default order and the June 30 judgment pursuant to section 2-1401. On
     January 10, 2012, defendant withdrew its original petition, filing the current section 2-1401
     petition in its place. In an attached affidavit, Cassano stated that (1) defendant and ACS did
     not have any agreement to perform the house-lifting services; (2) he first learned of the
     lawsuit in late August 2011; (3) he was defendant’s primary contact person following its
     bankruptcy petition; (4) Kocis never advised Cassano of the Cook County action; and (5)
     Cassano never received copies of the February 16 or May 5 default orders. Plaintiff filed a
     response brief arguing that defendant failed to show the extraordinary circumstances
     necessary that would excuse defendant’s lack of due diligence and failure to appear.
     Defendant filed a response brief and a second Cassano affidavit, in which Cassano stated that
     defendant did not perform house-lifting services and that neither defendant nor its agents
     refused certified mailings from plaintiff.
¶9       On June 22, 2012, the circuit court granted defendant’s petition to vacate the May 5 order
     of default and the June 30 judgment. Specifically, the court noted that the main issue was
     whether defendant exercised due diligence, and the court determined that a “collection of

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       mistakes” kept defendant’s managers “in the dark” until default was entered. The court
       stated, “while not the highest possible diligence, all section 2-1401 requires is that diligence
       be due.” The court concluded that defendant’s meritorious defense and efforts in presenting
       the claim met the “liberal standard for vacature under section 2-1401.”

¶ 10                                            ANALYSIS
¶ 11        Plaintiff contends that the trial court erred in vacating the judgment because defendant
       had sufficient notice of the lawsuit and the negligence of defendant’s registered agent,
       attorneys, and/or insurer did not excuse defendant’s inaction. Section 2-1401 of the Code
       establishes a comprehensive, statutory procedure that allows for the vacature of a final
       judgment older than 30 days. 735 ILCS 5/2-1401(a) (West 2010); S.I. Securities v. Powless,
       403 Ill. App. 3d 426, 430 (2010). The statute further requires that its petitioner support its
       petition with affidavits or other appropriate showing as to matters not of record. 735 ILCS
       5/2-1401(b) (West 2010). To be entitled to relief under section 2-1401, the petitioner must
       affirmatively set forth specific factual allegations supporting each of the following elements:
       “(1) the existence of a meritorious defense or claim; (2) due diligence in presenting this
       defense or claim to the circuit court in the original action; and (3) due diligence in filing the
       section 2-1401 petition for relief.” Smith v. Airoom, Inc., 114 Ill. 2d 209, 220-21 (1986). Our
       review of a section 2-1401 petition is two-tiered: “(1) the issue of a meritorious defense is a
       question of law and subject to de novo review; and (2) if a meritorious defense exists, then
       the issue of due diligence is subject to abuse of discretion review.” Cavalry Portfolio
       Services v. Rocha, 2012 IL App (1st) 111690, ¶ 10.
¶ 12        In addition, we initially observe that with respect to the third element for section 2-1401
       relief, the parties do not dispute that the present 2-1401 petition was timely filed within the
       requisite two-year statutory period and thus defendant exhibited the diligence in filing the
       petition. See 735 ILCS 5/2-1401(c) (West 2010). The two remaining issues involve the first
       and second elements, whether defendant had a meritorious defense and acted with due
       diligence.
¶ 13        Plaintiff contends that defendant’s meritorious defense is immaterial and insufficient. We
       disagree. A meritorious and substantial defense, such as must be shown in support of an
       application to set aside a default judgment, is one that raises questions of law deserving
       investigation or a real controversy as to the essential facts. Halle v. Robertson, 219 Ill. App.
       3d 564, 568-69 (1991). In this case, there was an essential question of fact as to whether a
       valid contract existed between ACS and defendant. Cassano’s affidavits dispute plaintiff’s
       claim that ACS and defendant entered into an oral agreement to lift the home in question for
       the construction of a new foundation. Cassano clearly stated that defendant did not enter into
       a contract with ACS and that he never authorized any construction project where the home
       was located. Moreover, plaintiff has provided no written instrument in the record on appeal
       or facts to support the existence of any contract. This suggests the existence of a meritorious
       defense.
¶ 14        Therefore, the only remaining issue is defendant’s alleged lack of due diligence. Due
       diligence requires that the section 2-1401 petitioner have a reasonable excuse for failing to
       act within the appropriate time but does not afford a litigant a remedy whereby he may be
       relieved of the consequences of his own mistake or negligence. Hirsch v. Optima, Inc., 397
       Ill. App. 3d 102, 110 (2009). Specifically, the petitioner must show that his failure to defend

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       against the lawsuit was the result of an excusable mistake and that under the circumstances
       he acted reasonably, and not negligently, when he failed to initially resist the judgment.
       Smith, 114 Ill. 2d at 222. In determining the reasonableness of the excuse offered by the
       petitioner, all of the circumstances attendant upon entry of the judgment must be considered,
       including the conduct of the litigants and their attorneys. Ameritech Publishing of Illinois,
       Inc. v. Hadyeh, 362 Ill. App. 3d 56, 60 (2005). Although a party is generally bound by the
       negligence of his legal counsel, a court may refuse to impute such negligence to the client
       who seeks to vacate a default judgment when mitigating circumstances are present. Id.
¶ 15        Plaintiff contends that personal service to Kocis at the Naperville address was a proper
       means of notice, because Kocis was defendant’s registered agent. See 735 ILCS 5/2-205
       (West 2010) (a private corporation may be served by leaving a copy of the process with its
       registered agent or any officer or agent of the corporation found anywhere in the state).
       While we agree that the Du Page County sheriff properly served Kocis with a summons and
       plaintiff’s complaint, the record suggests that Kocis’s relationship as defendant’s registered
       agent was estranged at the time of service and that Cassano in fact had replaced Kocis.
       Defendant filed for bankruptcy more than two months before the Cook County complaint
       was filed with Cassano listed as the debtor’s contact. Plaintiff was clearly aware of the
       bankruptcy proceeding, and it was reasonable for plaintiff to have anticipated that roles of
       certain agents would be altered. See Smith, 114 Ill. 2d at 222 (the court must consider all of
       the circumstances attendant upon the entry of the judgment including the conduct of the
       respondent and its attorneys). While we concede that as an attorney Kocis was negligent in
       failing to notify defendant, the record does not make clear when Kocis was acting as
       defendant’s attorney, and even if he were, there are mitigating circumstances present and we
       cannot hold defendant liable for Kocis’s failures. See Leavens, Armiros & Ross, Ltd. v.
       English, 203 Ill. App. 3d 16, 20 (1990). Defendant, unaware of the Cook County action, was
       in the midst of the liquidation of its business and acted reasonably under the circumstances.
       Thus, we will not disturb the judgment of the trial court and impute Kocis’s negligence to
       defendant.
¶ 16        Plaintiff also contends that it properly provided notice to defendant’s bankruptcy
       attorneys, trustee, and insurer. While it does give us pause that none of these individuals
       directly informed defendant about any knowledge they may have had concerning the Cook
       County action, in our review of the matter, we must defer to the trial court. See Rocha, 2012
       IL App (1st) 111690, ¶ 10. Based on the totality of the circumstances, we do not believe the
       trial court abused its discretion. See Hadyeh, 362 Ill. App. 3d at 60 (a petitioner’s lack of
       diligence may be deemed to result from an excusable mistake in light of the totality of the
       circumstances). In addition, there were some missteps on plaintiff’s side. For instance,
       plaintiff continuously sent notices to the Naperville address even though defendant failed to
       make an appearance. The May 5 default order was also sent to defendant at its Alsip address,
       as opposed to being sent in care of Cassano as directed. The Alsip facility had been closed
       for more than a year, and no one intentionally refused to accept service, as plaintiff claimed.
       The post office also indicated that the date of delivery was 48 days after the default order had
       been entered. See Skrypek v. Mazzocchi, 227 Ill. App. 3d 1, 9 (1992) (where the plaintiff did
       not notify defendant that a default judgment had been entered until two months after its entry,
       the court concluded the defendant was not given immediate notice as required by section
       2-1302(a) of the Code and considered it a factor in determining whether the defendant


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       exercised due diligence). Based on the conduct of both parties, the trial court’s conclusion
       that any lack of due diligence on defendant’s part was an excusable mistake is eminently
       reasonable. Cf. Genesis & Sons, Ltd. v. Theodosopoulos, 223 Ill. App. 3d 276, 280 (1991) (a
       default judgment may be vacated even though the requirement of due diligence has not been
       fully satisfied based on the conduct of the parties).
¶ 17       Accordingly, the trial court found that because of this collection of mistakes defendant
       was understandably unaware of the Cook County action and we therefore find no abuse of
       discretion in its findings. We agree with the trial court that the section 2-1401 petition meets
       the liberal standard for vacature under section 2-1401. See Smith, 114 Ill. 2d at 227;
       Electrical Wholesalers, Inc. v. Silverstein, 47 Ill. App. 3d 689, 692 (1977). Moreover, one of
       the guiding principles in the administration of a section 2-1401 petition invokes the equitable
       powers of the court, which should prevent the enforcement of a judgment when it would be
       unfair, unjust, or unconscionable. See Rockford Financial Systems, Inc. v. Borgetti, 403 Ill.
       App. 3d 321, 330 (2010). Here, there is no basis in law or equity to allow plaintiff to benefit
       from a large default judgment when defendant has a meritorious defense and plaintiff fails to
       present any substantial evidence to the contrary.

¶ 18                                      CONCLUSION
¶ 19      Based on the foregoing, we affirm the judgment of the circuit court of Cook County.

¶ 20      Affirmed.




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