Askew Insurance Group, LLC v. AZM Group, Inc. , 2020 IL App (1st) 190179 ( 2020 )

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Appellate Court Date: 2020.10.30
06:28:23 -05'00'
Askew Insurance Group, LLC v. AZM Group, Inc., 2020 IL App (1st) 190179Appellate Court ASKEW INSURANCE GROUP, LLC, Plaintiff-Appellee, v. AZM
Caption GROUP, INC., Defendant-Appellant.
District & No. First District, Sixth Division
No. 1-19-0179
Filed February 7, 2020
Decision Under Appeal from the Circuit Court of Cook County, No. 17-L-7255; the
Review Hon. Daniel J. Kubasiak, Judge, presiding.
Judgment Affirmed.
Counsel on Ankur Shah, of Shah Legal Representation, of Chicago, for appellant.
Appeal
No brief filed for appellee.
Panel JUSTICE CUNNINGHAM delivered the judgment of the court, with
opinion.
Presiding Justice Mikva and Justice Harris concurred in the judgment
and opinion.
OPINION
¶1 Following a default judgment entered against it in the circuit court of Cook County, the
defendant-appellant, AZM Group, Inc. (AZM), filed a petition pursuant to section 2-1401 of
the Code of Civil Procedure (Code) (735 ILCS 5/2-1401 (West 2018)) to vacate the default
judgment. The circuit court denied the petition. AZM now appeals the circuit court’s judgment
denying its 2-1401 petition. For the following reasons, we affirm the judgment of the circuit
court of Cook County.
¶2 BACKGROUND
¶3 In 2014, AZM executed an asset purchase agreement (APA) with the plaintiff-appellee,
Askew Insurance Group, LLC (Askew). The APA addressed AZM’s purchase of Askew. The
terms of the APA included that Askew would continue its current lease agreement for its office
space, from September 1, 2014, to April 30, 2017. There would be a separate sublease
agreement between AZM and Askew (the sublease agreement). AZM would sublease Askew’s
office space, from September 1, 2014, to April 30, 2017. Under the terms of the sublease
agreement, AZM agreed to pay Askew $1300 per month for the rent. Askew would then add
the additional amount to total the monthly rent of $1550, which was then to be paid directly to
the landlord by Askew.
¶4 On July 18, 2017, Askew filed a complaint against AZM alleging breach of contract and
unjust enrichment. Specifically, Askew’s complaint alleged that AZM had failed to pay the
rent under the terms of the sublease agreement, since February 2017.
¶5 On September 29, 2017, AZM’s principal agent, Zelda Matthews (a nonattorney), filed an
appearance and answer pro se on behalf of AZM. The answer claimed that AZM had made the
full rent payments under the terms of the sublease agreement but that the payments were made
directly to the landlord.
¶6 On October 16, 2017, Askew filed a motion for default judgment on its complaint, alleging
that AZM had failed to appear. The record reflects that Askew’s motion was based upon the
principle that corporations, such as AZM, must be represented by counsel in legal proceedings
and cannot grant agents, such as Matthews, the right to represent the corporation through pro se
appearances. Downtown Disposal Services, Inc. v. City of Chicago, 2012 IL 112040, ¶ 17.
Askew’s motion averred: “To date, [AZM] has failed to file an answer or otherwise plead and
is therefore in default.”
¶7 After Askew filed its motion for default judgment, the trial court continued the default
proceedings three different times over the next several months. It can be inferred from the
record that the trial court continued the proceedings numerous times to allow AZM the
opportunity to secure counsel and file a proper appearance. This is especially true considering
that, on the final order continuing the proceedings to February 15, 2018, the trial court
instructed Askew to serve AZM a copy of its motion for default judgment through certified
mail with return receipt requested, pursuant to Illinois Supreme Court Rule 105(b)(2) (eff. Jan.
1, 2018). Still, AZM never filed an appearance or responsive pleading, aside from the improper
pro se appearance previously filed by Matthews.
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¶8 Meanwhile, Askew filed an amended complaint. Its amended complaint added another
breach of contract count. The new breach of contract claim alleged that AZM had failed to
make several payments pursuant to the APA.
¶9 On December 11, 2017, during the period of time that the trial court was continuing the
default proceedings, Askew refiled its motion for default judgment. The motion attached an
affidavit from Askew’s counsel. The affidavit stated that AZM had been properly served on
August 9, 2017, but that, “[t]o date, [AZM] has failed to file an answer or otherwise plead and
is therefore in default.”
¶ 10 On February 15, 2018, the trial court held a hearing on Askew’s motion for default
judgment. As previously noted, AZM still had not filed an appearance by then. The trial court
accordingly granted Askew’s motion and entered a default judgment against AZM.
¶ 11 On September 10, 2018, AZM filed a section 2-1401 petition to vacate the default judgment
entered against it on February 15, 2018. 1 The crux of AZM’s section 2-1401 petition alleged
that the default judgment was predicated on “certain inaccurate and incorrect representations
made” by Askew. AZM attached an affidavit from Matthews, which stated that she had filed
an appearance and answer. The affidavit further stated that Matthews never signed the version
of the APA attached to Askew’s amended complaint. AZM’s section 2-1401 petition also
argued that Askew did not have the capacity to sue, as it had dissolved as a corporation in
2015. AZM argued that the February 15, 2018, default judgment was accordingly void.
¶ 12 In response, Askew claimed that AZM “intentionally refused to show up to Court for [sic]
in the underlying matter at any time” and “also failed to adhere to every single deadline that
the Court issued.” Askew also argued that AZM’s petition failed to satisfy the due diligence
and affidavit requirements for a section 2-1401 petition.
¶ 13 On December 12, 2018, following a hearing, the trial court denied AZM’s section 2-1401
petition. The trial court noted that section 2-1401 petitions must allege a meritorious defense
to the original action and must show that the petition was brought with due diligence. The order
stated that “AZM has presented no evidence or arguments as to why it failed to file this petition
until September 10, 2018, nearly seven months [after the default judgment entered against it].”
The order further stated:
“Matthews’ affidavit sets forth no explanation to show that AZM acted with due
diligence in bringing this petition. Matthews’ affidavit also alleges that Matthews never
signed or initialed the version of the APA attached to [Askew’s] filings. Yet there are
no allegations concerning AZM’s actual alleged liability for the damages sought by
Askew, and that affidavit does not expressly deny any other facts in the pleadings.
AZM has presented no affidavit or evidence supporting any meritorious defense as to
Askew’s claims. Accordingly, AZM has failed to meet its burden in setting forth a
legally sufficient section 2-1401 petition to vacate.”
¶ 14 AZM filed a notice of appeal on January 25, 2019, challenging the trial court’s December
12, 2018, order denying its section 2-1401 petition.
1
A section 2-1401 petition seeks to vacate or void a judgment more than 30 days after the judgment
has been entered. 735 ILCS 5/2-1401 (West 2018).
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¶ 15 ANALYSIS
¶ 16 In its brief, AZM asserts that it filed a timely notice of appeal in the circuit court on January
11, 2019, pursuant to Illinois Supreme Court Rule 303(a)(1) (eff. July 1, 2017) (“[t]he notice
of appeal must be filed with the clerk of the circuit court within 30 days after the entry of the
final judgment appealed from”). AZM claims that its January 11, 2019, notice of appeal was
rejected by the circuit court because it had been submitted in the same envelope as a motion to
stay and the system was unable to process it. So, AZM claims that it refiled its notice of appeal
on January 25, 2019.
¶ 17 However, there was nothing in the record, such as the rejection notice from the circuit court
of Cook County or an error message on a computer print-out, to indicate that AZM attempted
to file a notice of appeal on January 11, 2019. Neither was there a sworn affidavit by AZM’s
counsel. Thus, there was nothing to substantiate AZM’s argument that it attempted to file a
timely notice of appeal on January 11, 2019.
¶ 18 Accordingly, on this court’s own motion on November 21, 2019, we gave AZM an
opportunity to submit “a motion for leave to file a late notice of appeal which includes proof
of good cause for its failure to file a timely notice of appeal” pursuant to Illinois Supreme Court
Rule 9(d)(1) (eff. Dec. 12, 2018). Following this court’s order, on December 2, 2019, AZM
filed a “Verified Motion for Appellate Court to Accept Appellant’s Attempted January 11,
2019 or in the Alternative Appellant’s January 25, 2019 Notices of Appeal.”
¶ 19 AZM’s motion alleges that its notice of appeal filed on January 11, 2019, was rejected by
the circuit court but that AZM did not learn of the rejection until January 25, 2019. Notably,
AZM still has not attached any evidence in support of its assertion that it attempted to file its
notice of appeal on January 11, 2019. Nonetheless, since its motion is verified by its counsel,
we accept this as the equivalent of a sworn statement provided under oath and, thus, will
entertain the motion. See 735 ILCS 5/2-605 (West 2018); Ringgold Capital IV, LLC v. Finley,
2013 IL App (1st) 121702, ¶ 20. Since AZM’s counsel has now sworn, under oath, that AZM
filed a notice of appeal on January 11, 2019, and that it was rejected by the circuit court for
technical reasons, we conclude that AZM has now established proof of good cause for its
failure to file a timely notice of appeal, pursuant to Rule 9(d)(1). Accordingly, we grant AZM’s
motion and find that we have jurisdiction to consider this appeal.
¶ 20 Turning to the merits of the appeal, AZM presents the following sole issue for resolution:
whether the trial court erred in denying its section 2-1401 petition. AZM argues that the trial
court improperly analyzed its section 2-1401 petition under the traditional section 2-1401
analysis, which involves determining whether there is a meritorious defense and due diligence.
AZM claims that it filed its section 2-1401 petition under subsection (f), which is exempt from
the traditional section 2-1401 requirements and instead only required the trial court to
determine whether the underlying judgment is void. And AZM avers that the February 15,
2018, default judgment is, in fact, void because Askew submitted “false and/or forged and
misleading documentation.” AZM further asserts that the default judgment is void because
Askew dissolved as a corporation in 2015 and thereafter lacked the capacity to sue. In the
alternative, AZM argues that the court erred in denying its section 2-1401 petition under the
traditional analysis because AZM did show due diligence and a meritorious defense.
¶ 21 Section 2-1401 of the Code provides a statutory procedure whereby, under certain
conditions, trial courts may vacate or modify a final judgment, in both civil and criminal
proceedings, more than 30 days after the judgment has been entered. 735 ILCS 5/2-1401 (West
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2018); Warren County Soil & Water Conservation District v. Walters, 2015 IL 117783, ¶ 31.
Under a traditional section 2-1401 analysis, to be entitled to relief from a final judgment, the
petition must set forth specific factual allegations supporting each of the following elements:
(1) the existence of a meritorious defense, (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. Warren County Soil & Water Conservation District, 2015 IL 117783, ¶ 37.
However, a section 2-1401 petition is exempt from these requirements if it seeks to vacate a
void judgment pursuant to subsection (f): “Nothing contained in this [s]ection affects any
existing right to relief from a void order or judgment, or to employ any existing method to
procure that relief.” 735 ILCS 5/2-1401(f) (West 2018); Sarkissian v. Chicago Board of
Education, 201 Ill. 2d 95, 104 (2002). The question of whether relief should be granted lies
within the sound discretion of the trial court, and a reviewing court will reverse the trial court’s
ruling only if it constitutes an abuse of discretion. Stolfo v. KinderCare Learning Centers, Inc.,
2016 IL App (1st) 142396, ¶ 22. On the other hand, when a section 2-1401 petition presents a
“purely legal challenge to a judgment,” such as a claim that the underlying judgment is void,
the standard of review is de novo. (Internal quotation marks omitted.) Id.¶ 22 We initially address AZM’s argument that the trial court applied an improper section 2-
1401 analysis. AZM’s section 2-1401 petition alleged that the February 15, 2018, default
judgment is void and requested that the judgment be vacated pursuant to subsection (f). The
petition argued, in the alternative, that the judgment should be vacated under a traditional
section 2-1401 analysis because AZM “acted with diligence in light of the obvious defenses
available.” Clearly, the trial court’s order applied the traditional section 2-1401 analysis and
denied AZM’s petition on the basis that it did not show due diligence or a meritorious defense.
Accordingly, the trial court’s order does not reflect an analysis under subsection (f), to
determine whether the default judgment is void. It is well settled that we can affirm the trial
court on any basis appearing in the record, whether or not the trial court relied on that basis in
reaching its decision. Taylor, Bean, & Whitaker Mortgage Corp. v. Cocroft, 2018 IL App (1st)
170969, ¶ 60. Our review and analysis conclude that AZM’s petition fails under both a
traditional section 2-1401 analysis and a subsection (f) analysis.
¶ 23 As AZM devotes most of its brief to arguing that its section 2-1401 petition should have
been granted because the default judgment is void pursuant to subsection (f), we address that
argument first. Only the most fundamental defects warrant declaring a judgment void. People
v. Price, 2016 IL 118613, ¶ 30. Our supreme court has recognized only three circumstances in
which a judgment will be deemed void: (1) where the judgment was entered by a court that
lacked personal or subject-matter jurisdiction, (2) where the judgment was based on a statute
that is facially unconstitutional and void ab initio, and (3) where the judgment imposed a
sentence that did not conform to a statutory requirement. Id. ¶ 31. AZM does not argue that the
February 15, 2018, default judgment is void under any of these circumstances. Instead, AZM
claims that the default judgment is void because Askew submitted “false and/or forged and
misleading documentation to the trial court.” This does not render the judgment void, and it
has no impact on the trial court’s jurisdiction over the case. See LVNV Funding, LLC v. Trice,
2015 IL 116129, ¶ 39 (a void judgment is one entered by a court without jurisdiction). The
proper vehicle to challenge Askew’s pleadings under the theory asserted by AZM would have
been a responsive pleading, alleging that Askew’s pleadings contained fraudulent information.
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But AZM never filed a responsive pleading. 2 See Warren County Soil & Water Conservation
District, 2015 IL 117783, ¶ 38 (a section 2-1401 petition is not intended to relieve a litigant of
the consequences of its own mistake or negligence).
¶ 24 We note that some of the “false and/or forged and misleading documentation” that AZM
discusses in its appellate brief relates to proof of service, yet AZM never alleged that the trial
court lacked jurisdiction due to improper service. Besides, that argument would fail, as AZM
clearly had notice of the case because the trial court required Askew to serve its motion for
default judgment through certified mail with return receipt requested. Further proof of AZM’s
knowledge of the case from its inception is the effort by its principal agent, Matthews, to file
a pro se appearance and answer on its behalf. However, as asserted by Askew in its motion for
default judgment, under Illinois law, corporations (such as AZM) must be represented by
counsel in legal proceedings and cannot grant agents (such as Matthews) the right to represent
the corporation through pro se appearances. Downtown Disposal Services, Inc., 2012 IL
112040, ¶ 17. Consequently, Matthews’s appearance could not and did not constitute an
appearance for AZM. It did, however, confirm that AZM was aware of the pending lawsuit.
¶ 25 AZM also argues that the February 15, 2018, default judgment is void because Askew
dissolved in 2015 and thereafter lacked the capacity to sue. See Michigan Indiana
Condominium Ass’n v. Michigan Place, LLC, 2014 IL App (1st) 123764, ¶ 11 (the dissolution
of a corporation is, in legal effect, the same as the death of a natural person, and so a dissolved
corporation could not sue or be sued). Even assuming arguendo that this is true, this does not
render the default judgment void. Instead, cases are dismissed for lack of capacity to sue when
the defendant files a responsive pleading in the form of a motion to dismiss pursuant to section
2-619(a)(2) of the Code. See 735 ILCS 5/2-619(a)(2) (West 2018); A Plus Janitorial Co. v.
Group Fox, Inc., 2013 IL App (1st) 120245, ¶ 15 (the capacity to sue refers to the status of the
party, not the court’s jurisdiction). As we have noted, AZM did not file a responsive pleading
to Askew’s complaint. AZM’s proper course of action, under the theory that it now seeks to
advance, should have been the filing of a responsive pleading to dismiss the lawsuit pursuant
to section 2-619 of the Code on the ground that Askew no longer existed as a corporate entity
and therefore could not bring a lawsuit. That would have been the appropriate response and
would have provided the trial court the proper vehicle for dismissing Askew’s complaint. This
was not done. Thus, the default judgment entered against AZM is not void, and AZM’s section
2-1401 petition fails on that ground.
¶ 26 AZM argues, in the alternative, that the trial court should have granted its section 2-1401
petition under a traditional section 2-1401 analysis, which determines if the petitioner has
shown proof of a meritorious defense, as well as due diligence in raising the meritorious
defense in both the original action and the section 2-1401 petition. Warren County Soil &
Water Conservation District, 2015 IL 117783, ¶ 37. We agree with the trial court that AZM
failed to meet these requirements. As noted by the trial court, AZM’s section 2-1401 petition
merely alleged that Askew had filed forged and misleading documents. At no time did AZM
explain in its section 2-1401 petition why it failed to file a proper appearance and responsive
pleading, although it was aware of the lawsuit from its inception. That would have been the
time at which it could have properly raised the arguments it sought to raise after the fact. It
also did not explain why it took seven months to file the section 2-1401 petition. Therefore,
2
Matthews, AZM’s principal agent, filed a pro se answer and appearance.
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AZM cannot be said to have demonstrated diligence in raising a meritorious defense. See Smith
v. Airoom, Inc., 114 Ill. 2d 209, 222 (1986) (due diligence requires the section 2-1401 petitioner
to have a reasonable excuse for failing to act within the appropriate time; specifically, the
petitioner must show that its failure to respond appropriately to 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).
¶ 27 In sum, AZM’s section 2-1401 petition fails to meet its burden under both a traditional
section 2-1401 analysis and a subsection (f) analysis. Accordingly, we affirm the trial court’s
judgment denying AZM’s section 2-1401 petition.
¶ 28 CONCLUSION
¶ 29 For the foregoing reasons, we affirm the judgment of the circuit court of Cook County.
¶ 30 Affirmed.
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