Goulding v. Ag-Re-Co, Inc.
| Decision Date | 04 August 1992 |
| Docket Number | AG-RE-C,INC,No. 1-90-2984,1-90-2984 |
| Citation | 599 N.E.2d 1094,233 Ill.App.3d 867 |
| Parties | , 175 Ill.Dec. 80 Randall S. GOULDING, Plaintiff-Appellee, v., Alan Zech, Defendants, and Harry Lowrance, d/b/a Ag-Re-Co, Inc., Defendant-Appellant. |
| Court | United States Appellate Court of Illinois |
Robert P. Sheridan, Chicago, for Harry Lowrance, defendant-appellant.
Randall S. Goulding, pro se.
I
On June 4, 1987, Randall S. Goulding ("Goulding"), filed a complaint against Ag-Re-Co, Inc., Alan Zech ("Zech") and Harry Lowrance, d/b/a Ag-Re-Co, Inc., ("Lowrance"), sounding in breach of contract, account stated, and quantum meruit, in which he sought payment of attorney's fees claimed to have been earned in setting up Ag-Re-Co, Inc., and in acting as the corporation's counsel.
All the parties to this suit were also involved as defendants in a class action filed as Kennicott Ridge v. Ag-Re-Co, Inc., which was pending in the United States District Court for the Northern District of Illinois. Court approval of a settlement reached in that case was conditioned upon the parties' reaching a "global" settlement of all of the differences between them, including settlement of the instant case. Thereafter, a tentative settlement was reached between the parties in the case at bar whereby Goulding's malpractice insurance carrier, CNA, was to pay Lowrance $25,000 for the release of his claims against Goulding, and the settlement was subject to its making such payment; and Lowrance was to pay Goulding $40,000 for the release of his claims against Lowrance. These details were memorialized in letters dated February 20 and 21, 1990, from Fred Harbecke, one of Goulding's attorneys 1, to Robert Sheridan, Lowrance's attorney.
On September 14, 1987, Goulding took a voluntary dismissal of the case, believing that he and Lowrance had settled their differences. On March 15, 1988, however, Goulding reinstated his action on the basis that they had failed to effectuate the settlement. On August 11, 1988, a default order was entered against Lowrance on the grounds that he had failed to file a timely appearance, a timely answer and to comply with discovery. On September 9, 1988, Lowrance filed a motion to vacate the default order on the grounds that he had been misled by his counsel that his case was being diligently defended, when in fact it was not. The court granted this motion on September 13, 1988, and on October 13, 1988, Lowrance filed his answer.
Goulding then filed a number of notices to take depositions and for other discovery, none of which was complied with. He then proceeded to file a bevy of "Motion[s] for Entry of Default Judgment, for Sanctions and/or to Compel." The only consequence of these motions relevant to the proceedings at bar is a February 9, 1990 order striking Lowrance's answer and holding him in default. Goulding did not notify Lowrance of either his intention to present his motion to strike and for a default, the actual striking of Lowrance's answer, or the granting of the default order. At the same time and prior thereto, however, the parties were attempting to follow through on the details of the settlement as memorialized in Harbecke's February 20 and 21, 1990 letters to Sheridan. Tom Browne, another of Goulding's attorneys employed by CNA to represent him, had the responsibility of obtaining the $25,000 check from CNA, but Browne's efforts were allegedly hampered by Lowrance's lack of promptness in organizing the corporation which was to be the payee on CNA's check.
Sometime after February 9, 1990, the clerk of the circuit court notified Lowrance of the default order entered against him. On March 8, 1990, Lowrance filed a motion to vacate the order, and on that same day Harbecke sent Sheridan final, unsigned versions of the "Stipulated Settlement Agreement and the Joint and Mutual Release," drafted by Harbecke, requesting that the matter be set for closing on March 12, 1990. When Lowrance brought his receipt of the notice of the default order to Harbecke's attention, Harbecke told Lowrance that he would "direct Mr. Goulding to have the default vacated;" and on March 26, 1990, Goulding did in fact file such a motion. However, Lowrance never pursued his motion to vacate, relying on a statement alleged to have been made by Harbecke that Goulding's motion to vacate had been granted. But neither did Goulding present at any time his motion to vacate to the court; thus the February 9, 1990 order of default was never vacated.
On April 4, 1990, Harbecke sent Sheridan a letter expressing his discontent that the settlement negotiations were not progressing, stating that Sheridan and his client had been uncooperative in attempting to settle, and suggesting that Goulding "may be correct in his assertion that no settlement will ultimately result." Harbecke ended the letter with the admonition that, "if we do not conclude this settlement on or before April 18, 1990, * * * my client's offer be [sic ] and is hereby withdrawn." By facsimile sent to Harbecke on April 23, 1990, Sheridan stated that he had received a message from Goulding "calling [off] our deal." On April 24, 1990, Goulding appeared pro se in circuit court regarding the February 9, 1990 default order, and without giving notice to Lowrance, proved-up damages in the amount of $77,615.95.
Nevertheless, even after April 24, 1990, without Goulding's yet notifying Lowrance of the entry of the default judgment, Browne and Harbecke continued negotiations with Lowrance. As Browne testified at the section 2-1401 hearing, he and Harbecke were still holding out the possibility of settlement: they would "twist the arms of Mr. Goulding, if necessary." 2 By this time Browne had obtained CNA's check for $25,000, and forwarded it to Harbecke, who attempted to contact Sheridan on May 2, 1990, via facsimile, to arrange an exchange of payments. Harbecke indicated that Sheridan had until May 4, 1990, to tender Lowrance's $40,000. Sheridan, however, alleged that he did not receive the May 2 facsimile because he was ill and therefore out of the office until May 7, 1990, and when he returned to work on that day, he discovered that he had received a facsimile dated May 4, 1990, from Harbecke which stated that "all settlement [sic ] is deemed to be null and void." Thereafter, Goulding refused to settle with Lowrance for less than $78,000, the approximate amount of the default judgment. It was not until May 29, 1990, however, that Harbecke returned to Sheridan, unsigned by Goulding and initially unsigned by Lowrance, the signature pages of the "Stipulations to Dismiss" which Sheridan had drafted; and it was not until June 1, 1990, more than 30 days after the fact, that Goulding notified Browne and Sheridan that a default judgment had been entered against Lowrance. Harbecke himself had been aware of the judgment since "sometime at the end of, very end of April."
On June 25, 1990, Lowrance filed a Section 2-1401 (Ill.Rev.Stat.1989, ch. 110, par. 2-1401) verified petition, claiming that he had been "duly diligent in the presentation of this petition insofar as he was given no notice of [the] entry [of the default judgment], and further that the fact of its entry was concealed from him until more than 30 days after its entry * * * " and that he had good defenses thereto. Goulding filed his response on June 28, 1990, and after numerous intervening motions, the court heard testimony on July 17 and 24, 1990. After considering the briefs filed by the parties, as well as the evidence, the trial court denied the petition, but gave no reasons for its ruling. Lowrance filed a timely notice of appeal.
Moreover, Airoom, 114 Ill.2d at 221, 102 Ill.Dec. 368, 499 N.E.2d 1381.
Lowrance contends that the trial court abused its discretion in denying him relief inasmuch as he has meritorious defenses to the underlying action. He states in his section 2-1401 petition that he was never an officer, shareholder or director of Ag-Re-Co, Inc., and thus is neither liable for the corporation's debt nor capable of being sued in the name of the corporation. Although Goulding brought his action against "Harry Lowrance d/b/a Ag-Re-Co, Inc.," as well as against Ag-Re-Co, Inc., the default judgment was obtained against Lowrance only.
A corporation is a legal entity, separate and distinct from its shareholders, officers and directors, and generally must be sued in its own name and not in the name of its shareholders, officers or directors. (Stap v. Chicago Aces Tennis Team, Inc. (1978), 63 Ill.App.3d 23, 27, 20 Ill.Dec. 230, 379 N.E.2d 1298.) It is possible, however, to disregard a corporate entity and impose liability upon those real parties in interest by using the equitable doctrine of "piercing the corporate veil." In order to "pierce the corporate veil" there must be (1) "unity of interest and ownership [such] that the separate personalities of the corporation and the individual no longer exist; and (2) circumstances * * * [such] that adherence to the fiction of separate corporate existence would sanction a fraud or promote injustice." (Stap, 63 Ill.App.3d at 27...
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