American Reserve Corp. v. Holland

• Decision Date: 23 January 1980
• Docket Number: No. 79-542,79-542
• Citation: 80 Ill.App.3d 638,35 Ill.Dec. 965,400 N.E.2d 102
• Parties: , 35 Ill.Dec. 965 AMERICAN RESERVE CORPORATION, Plaintiff below, v. Robert L. HOLLAND, Flora Holland, Celestine Cook and Daisy Scott et al., Defendants-Counterplaintiffs/Appellants, v. Allen SCHOENEMAN, d/b/a Allen Schoeneman and Co., Defendant/Appellee.
• Court: United States Appellate Court of Illinois

Page 102

400 N.E.2d 102

80 Ill.App.3d 638, 35 Ill.Dec. 965

AMERICAN RESERVE CORPORATION, Plaintiff below, v. Robert L. HOLLAND, Flora Holland, Celestine Cook and Daisy

Scott et al., Defendants-Counterplaintiffs/Appellants, v. Allen SCHOENEMAN, d/b/a Allen Schoeneman and Co., Defendant/Appellee.

No. 79-542.

Appellate Court of Illinois, First District, Second Division.

Jan. 23, 1980.

Robert K. Mayer, Chicago, for defendants-counterplaintiffs-appellants.

Charles G. Levy, Chicago, for defendant-appellee.

PERLIN, Presiding Justice:

This is an appeal from an order entered by the circuit court of Cook County vacating a default judgment. An appeal is also taken from the same order which dismissed the counterclaims upon which the default judgment had been entered. The dispositive issue presented for review is whether the trial court abused its discretion when it entered an order vacating the default judgment.

For reasons hereinafter set forth, we reverse.

On May 25, 1973 American Reserve Corporation (hereinafter referred to as American Reserve), an insurance company, issued a homeowners policy insuring the home of Robert and Flora Holland. ¹ On January 1, 1974 a fire occurred at the Holland residence. The following day, as the Hollands were attempting to salvage some of their personal possessions, Lee Sandor, who identified himself as an agent for Allen Schoeneman, approached them. Sandor informed the Hollands that certain "board up" services were required by law, and that it was therefore necessary for them to sign a document for such services. The document purportedly authorized Schoeneman to "adjust" the insurance claim (for the fire loss) with the insurance company for a ten percent fee. ² Sandor also represented to the Hollands that as a result of Schoeneman's services they would recover more money from the insurance company.

On September 16, 1973 American Reserve issued a homeowners policy insuring the home of Daisy Scott and Celestine Cook, mother and daughter. ³ On March 3, 1974 a fire occurred at the Scott-Cook residence. As Scott and Cook stood outside their home watching the fire department attempt to extinguish the fire, an agent for Schoeneman approached them. ⁴ The agent informed Scott and Cook that certain "board up" services were required by law and that it was therefore necessary for them to sign a document for such services. This document, like the document signed by the Hollands, purportedly authorized Schoeneman to "adjust" the insurance claim (for the fire loss) with the insurance company for a ten percent fee. Scott signed the document without having been informed by the agent that the document authorized Schoeneman to "adjust" the insurance claim.

Schoeneman's occupation as a "public fire adjuster" consists in part of soliciting homeowners of fire damaged property to subscribe to his "services." ⁵ The services he purports to perform consist of the representation of homeowners who are claimants under their homeowners insurance policies. Schoeneman assesses a ten percent contingency fee for these services which include the appraisal of losses, the examination of insurance policies to ascertain the terms and coverage thereof, and other matters pertinent to the "adjusting" of claims.

Pursuant to the documents signed by the Hollands and by Scott, Schoeneman purportedly performed the above described services and claimed a ten percent interest in each of the insurance policy proceeds. ⁶ However, in each instance the mortgage company had secured liens in excess of 90% of the insurance proceeds. It appears that Schoeneman contended that he was entitled to his fee regardless of the secured liens of the mortgage company. As a result of these conflicting claims by Schoeneman and the mortgage company, Schoeneman refused to endorse the insurance proceeds drafts and the funds remained undistributed.

On February 22, 1977 American Reserve filed two complaints for interpleader, one concerning the insurance proceeds under the Hollands' policy and the other concerning the insurance proceeds under the Scott-Cook policy. These cases were consolidated on August 30, 1977. On September 6, 1977 Scott and Cook filed a counterclaim against Schoeneman. On October 7, 1977 the Hollands also filed a counterclaim against Schoeneman. Schoeneman filed no answer or other responsive pleadings within the time allowed by law, and on November 10, 1977 the Hollands, Scott and Cook (hereinafter referred to as the homeowners) filed a motion for a default judgment. On November 21, 1977 the trial court granted Schoeneman ten days within which to file his responsive pleadings. No such pleadings were filed, and on December 19, 1977, pursuant to notice, a judgment of default was entered against Schoeneman for failure to answer or otherwise plead. ⁷

On January 23, 1978 Schoeneman moved to vacate the default judgment entered December 19, 1977. The homeowners opposed Schoeneman's motion and filed a memorandum in support of their position. On February 1, 1978 the trial court granted Schoeneman's motion to vacate the default judgment and further granted him leave to file his motion to strike and dismiss the counterclaims of the homeowners. ⁸ On May 15, 1978 the trial court denied Schoeneman's motion to strike and dismiss the counterclaims of the homeowners and granted Schoeneman 14 days within which to answer or otherwise plead to the counterclaims.

On August 8, 1978 Schoeneman still had not filed an answer or other responsive pleading, and the homeowners filed a second motion for default judgment with a memorandum in support thereof. Schoeneman requested and was granted 14 days to respond to the motion. The matter was set for a hearing on August 24, 1978. Schoeneman filed no response to the motion for default judgment and failed to appear on August 24, 1978. On August 24, 1978 the trial court adjudged Schoeneman to be in default for "failure to plead" and ordered that the "proveup on damages" be scheduled for August 30, 1978. This matter was continued until October 12, 1978 at which time the trial court entered judgments in the amount of $4,723.52 for Scott and Cook, and $7,361.07 for the Hollands. ⁹

On November 28, 1978 Schoeneman's attorney received from the homeowners' attorney a copy of the default judgment. The envelope was postmarked November 24, 1978 and the accompanying letter dated November 21, 1978. The letter stated in part:

"Over five weeks have past since Judge Berg entered the judgment order against your client, Allen Schoeneman. * * * A copy of that order is enclosed."

On January 12, 1979 Schoeneman filed a motion to substitute attorneys and a petition to vacate the default judgment entered October 12, 1978. The homeowners did not file a response. On February 6, 1979 the trial court granted Schoeneman's motion to vacate the default judgment and dismissed, on the merits, the counterclaims of the homeowners. ¹⁰

The homeowners first contend that the trial court erred in granting Schoeneman's petition to vacate the default judgment entered by the trial court on October 12, 1977. Schoeneman argues that the trial court did not abuse its discretion when it granted his petition to vacate such default judgment.

Section 72 of the Civil Practice Act (Ill.Rev.Stat.1977, ch. 110, par. 72) provides a procedure for obtaining relief from final orders, judgments and decrees after the passing of 30 days from the date of the entry thereof. A motion to vacate a default judgment pursuant to section 72 is addressed to the equitable powers of the court which entertains the petition. (Elfman v. Evanston Bus Co. (1963), 27 Ill.2d 609, 190 N.E.2d 348; Lammert v. Lammert Industries, Inc. (1st Dist.1977), 46 Ill.App.3d 667, 4 Ill.Dec. 922, 360 N.E.2d 1355.) Whether the petition should be granted lies within the sound discretion of the court and depends upon the facts and equities presented. (Chase v. Cummingham (1st Dist.1978), 64 Ill.App.3d 54, 56, 21 Ill.Dec. 92, 381 N.E.2d 27; Lammert, 46 Ill.App.3d at 673, 4 Ill.Dec. 922, 360 N.E.2d 1355; Goldman v. Checker Taxi Company (1st Dist.1967), 84 Ill.App.2d 318, 320, 228 N.E.2d 177.) This court is justified in disturbing the judgment of the trial court only when it finds that the discretion vested in the trial court has been abused. Chase, 64 Ill.App.3d at 56, 21 Ill.Dec. 92, 381 N.E.2d 27; Lammert, 46 Ill.App.3d at 673, 4 Ill.Dec. 922, 360 N.E.2d 1355; George F. Mueller & Sons, Inc. v. Ostrowski (1st Dist.1974), 19 Ill.App.3d 973, 977, 313 N.E.2d 684.

To warrant relief under section 72, a party must plead and prove facts sufficient to justify relief. (Lammert, 46 Ill.App.3d at 673, 4 Ill.Dec. 922, 360 N.E.2d 1355; In re Estate of Wayne (1971), 133 Ill.App.2d 565, 273 N.E.2d 720.) The quantum of proof necessary to sustain a section 72 petition is a preponderance of the evidence. (Lammert, 46 Ill.App.3d at 673, 4 Ill.Dec. 922, 360 N.E.2d 1355; McKinnon v. Yellow Cab Co. (1st Dist.1975), 31 Ill.App.3d 316, 317, 333 N.E.2d 659.) When seeking relief from a default judgment, the petition must affirmatively set forth facts showing both the existence of a meritorious defense and the exercise of due diligence on the part of the petitioner in presenting the defense to the lawsuit as well as presenting the section 72 petition. (Esczuk v. Chicago Transit Authority (1968), 39 Ill.2d 464, 236 N.E.2d 719; Lammert, 46 Ill.App.3d at 673, 4 Ill.Dec. 922, 360 N.E.2d 1355.) It is essential that both elements, meritorious defense and due diligence, be shown since the purpose of a section 72 proceeding is to bring facts not appearing of record to the attention of the trial court which, if known to the court at the time the judgment was entered, would have prevented its rendition. (Lammert, at 673-674, 4 Ill.Dec. 922, 360 N.E.2d 1355; Akers v. Christen (4th Dist.1973), 11 Ill.App.3d 369, 296 N.E.2d 774.) Accordingly, the petitioner must show that his failure to defend was the result of an excusable...