Am. Chartered Bank v. USMDS, Inc.

• Decision Date: 22 March 2013
• Docket Number: No. 3–12–0397.,3–12–0397.
• Citation: 987 N.E.2d 818,2013 IL App (3d) 120397,370 Ill.Dec. 52
• Parties: AMERICAN CHARTERED BANK, Plaintiff–Appellee, v. USMDS, INC., Defendant–Appellant, and Stillwater Homeowners Association, Unknown Owners and Nonrecord Claimants, Defendants.
• Court: United States Appellate Court of Illinois

2013 IL App (3d) 120397

987 N.E.2d 818

370 Ill.Dec. 52

AMERICAN CHARTERED BANK, Plaintiff–Appellee,

v. USMDS, INC., Defendant–Appellant,andStillwater Homeowners Association, Unknown Owners and Nonrecord Claimants, Defendants.

No. 3–12–0397.

Appellate Court of Illinois,

Third District.

March 22, 2013.

Paul D. Nordini (argued), Nordini & Thompson, LLP, Naperville, for appellant.

Peter Kowels, Noah Weininger, and Daniel H. Olswang (argued), Hauselman, Rappin & Olswang, Chicago, for appellee.

OPINION

Justice O'BRIEN delivered the judgment of the court, with opinion.

[370 Ill.Dec. 54]¶ 1 Plaintiff American Chartered Bank filed a foreclosure action against defendant USMDS, Inc., and served USMDS through the Illinois Secretary of State and by publication. The trial court entered a default judgment against USMDS, which USMDS thereafter moved to vacate, arguing that the trial court lacked jurisdiction because service of process was improper. The trial court denied USMDS's motion to vacate and its subsequent motion to reconsider the denial. USMDS appealed. We reverse and remand.

¶ 2 FACTS

¶ 3 Plaintiff American Chartered Bank (ACB) issued a mortgage and promissory note to defendant USMDS, Inc., in February 2006. USMDS defaulted on the loan in September 2010. In February 2011, ACB filed a foreclosure complaint naming as defendants USMDS, Stillwater Homeowners Association, and unknown owners and nonrecord claimants. USMDS is the only party to this appeal. A summons issued to USMDS, care of defendant James Gentile, its registered agent, president and owner, at a Chicago address, and to Stillwater Homeowners Association at a Bolingbrook address. Affidavits of special process servers attested that Stillwater was successfully served and that service on USMDS was attempted at its Chicago address but was unsuccessful. An affidavit of due and diligent search regarding the process server's attempts to locate USMDS indicated that after “diligent search and inquiry by affiant, the residence of the subject person is unknown to the affiant.” The affidavit set forth that a directory assistance search indicated no telephone listing for USMDS; the Secretary of State records showed USMDS was dissolved on September 10, 2010; and service was attempted at the registered office but USMDS had not occupied the space for several months per the current occupant.

¶ 4 Process was served on the Secretary of State and an affidavit of compliance for service on the Secretary of State was filed pursuant to section 5.25 of the Business Corporation Act of 1983(Act) (805 ILCS 5/5.25 (West 2010)). The affidavit established that the Secretary of State was served because USMDS had been dissolved and that a copy of service was mailed to USMDS at its Chicago address. An affidavit for service by publication was also filed, which stated that an alternative address for USMDS was not located through a skip trace; that service would be by publication “to avoid jurisdictional issues”; and that upon diligent inquiry, the residence of USMDS could not be ascertained and its last known address was unknown. The notice by publication was printed in regional papers in April and May 2011 and a copy of the notice was mailed to the Chicago address of USMDS. The copy was returned as undeliverable.

¶ 5 ACB moved for a judgment of foreclosure and sale, which the trial court granted by default on October 19, 2011. In January 2012, USMDS filed a motion to vacate the default judgment under section 2–1301(g) of the Code of Civil Procedure (Code) (735 ILCS 5/2–1301(g) (West 2010)). In its motion, USMDS alleged that it did not receive notice of publication; the same parties were involved in other pending lawsuits; the same attorneys were involved in the other pending actions; the parties in those actions were personally served, including Gentile, USMDS's registered agent; and USMDS had good and meritorious defenses to the foreclosure complaint. Gentile's affidavit was attached to the motion in which he attested to the allegations in the motion. A hearing on the motion to vacate was held. USMDS argued that substitute service by publication was improper because ACB did not engage in a diligent inquiry to personally serve it. The trial court denied the motion to vacate. The property was subsequently sold by sheriff's sale to ACB, which submitted the high bid of $430,590.

¶ 6 In February 2012, additional counsel for USMDS filed a general and co-counsel appearance. USMDS thereafter filed a motion to reconsider the denial of its motion to vacate and set aside the sale, arguing that the trial court lacked jurisdiction “due to imperfect service of summons” and that ACB did not satisfy the requirements for service by publication. Attached to the motion was another affidavit from Gentile, who attested that he financed his commercial and personal properties through ACB; he and the loan officer were former friends; the loan officer had been to Gentile's home and knew where his office was located; ACB had caused a receiver to be appointed for USMDS in the other pending cases to operate the rentals in the building where Gentile's office was located; the bank files included his personal address; and he had been served with summons as a USMDS agent or officer in another Will County case where ACB was the plaintiff and represented by the same attorney as in the instant action. A hearing took place on the motion to reconsider. USMDS argued both forms of substitute service were invalid because ACB failed to satisfy the due inquiry requirements necessary to obtain substitute service. The trial court found that “service on the corporation was proper” and denied the motion to reconsider. It also approved the sheriff's report of sale. USMDS appealed.

¶ 7 ANALYSIS

¶ 8 The issue on appeal is whether the trial court erred when it denied USMDS's motions to vacate and to reconsider its judgment of foreclosure. USMDS asserts that the trial court failed to require ACB to demonstrate “due inquiry” in attempting personal service on it, which it argues is a necessary prerequisite for substitute service, and that due to insufficient service, the trial court lacked jurisdiction over it. USMDS submits that ACB could have effectuated personal service with minimal diligence because the whereabouts of USMDS's registered agent and its office were known to ACB, its counsel and its process servers. USMDS argues that the trial court erred in denying its motions to vacate the foreclosure order and to reconsider its denial of the motion to vacate.

¶ 9 Before we address the substantive issues, we must determine several waiver claims raised by ACB. It first argues that USMDS waived any objections to jurisdiction by filing a responsive pleading seeking to vacate the judgment of foreclosure before objecting to jurisdiction.

¶ 10 A court acquires jurisdiction over a party through a summons or by voluntary appearance. GMB Financial Group, Inc. v. Marzano, 385 Ill.App.3d 978, 984, 326 Ill.Dec. 81, 899 N.E.2d 298 (2008) (quoting Rockdale Cable T.V. Co. v. Spadora, 97 Ill.App.3d 754, 758, 53 Ill.Dec. 171, 423 N.E.2d 555 (1981)). An order entered by a court that lacks personal jurisdiction is void and may be attacked at any time. GMB Financial Group, Inc., 385 Ill.App.3d at 984, 326 Ill.Dec. 81, 899 N.E.2d 298 (quoting Sarkissian v. Chicago Board of Education, 201 Ill.2d 95, 103, 267 Ill.Dec. 58, 776 N.E.2d 195 (2002)). A party contesting jurisdiction on the ground of insufficiency of service of process must object by filing a motion to dismiss or a motion to quash service of process prior to filing any other pleading other than for an extension of time to answer or otherwise appear. 735 ILCS 5/ 2–301(a) (West 2010). If the party objecting to jurisdiction files a responsive pleading or motion, “that party waives all objections to the court's jurisdiction over the party's person.” 735 ILCS 5/2–301(a–5) (West 2010). We review questions of jurisdiction de novo. National City Bank v. Majerczyk, 2011 IL App (1st) 110640, ¶ 2, 357 Ill.Dec. 658, 963 N.E.2d 1056.

¶ 11 We regard Cardenas Marketing Network, Inc. v. Pabon, 2012 IL App (1st) 111645, 361 Ill.Dec. 887, 972 N.E.2d 680, as instructive on this matter. In Cardenas, the defendant's first pleading was a combined motion objecting to the plaintiff's motion to assess damages, seeking to vacate the default judgment, and moving to dismiss. Cardenas, 2012 IL App (1st) 111645, ¶ 25, 361 Ill.Dec. 887, 972 N.E.2d 680. The reviewing court considered that in spite of the defendant's reliance on federal cases and statutes, it “clearly objected to personal jurisdiction” in the motion and found the defendant's motion complied with section 2–301 of the Code. Cardenas, 2012 IL App (1st) 111645, ¶ 26, 361 Ill.Dec. 887, 972 N.E.2d 680. USMDS filed its initial motion under section 2–1301 of the Code. It premised its argument on the trial court's lack of jurisdiction over it and expressly challenged service by publication. It did not assert any argument other than contesting service of process. Like the defendant in Cardenas, USMDS “clearly objected to jurisdiction.” Accordingly, we find that USMDS sufficiently complied with section 2–301 of the Code and did not waive its objection to jurisdiction on that basis.

¶ 12 ACB also argues that USMDS waived its challenge to the validity of service of process on the Secretary of State by not raising the issue before the trial court or on appeal.

¶ 13 Issues cannot be raised for the first time in the trial court in a motion to reconsider and issues raised for the first time in a motion to reconsider cannot be raised on appeal. Caywood v. Gossett, 382 Ill.App.3d 124, 134, 320 Ill.Dec. 542, 887 N.E.2d 686 (2008). On appeal, issues not argued are considered waived and “shall not” be raised in the reply brief, oral argument or a petition for rehearing. Ill. S.Ct. R. 341(h)(7) (eff. July 1, 2008). However, where a party has argued an issue “clearly enough”...