Stone St. Partners, LLC v. City of Chi. Dep't of Admin. Hearings

• Decision Date: 20 May 2014
• Docket Number: No. 1–12–3654.,1–12–3654.
• Citation: 12 N.E.3d 691
• Parties: STONE STREET PARTNERS, LLC, Plaintiff–Appellant, v. The CITY OF CHICAGO DEPARTMENT OF ADMINISTRATIVE HEARINGS, Defendant–Appellee.
• Court: United States Appellate Court of Illinois

12 N.E.3d 691

STONE STREET PARTNERS, LLC, Plaintiff–Appellant

v.The CITY OF CHICAGO DEPARTMENT OF ADMINISTRATIVE HEARINGS, Defendant–Appellee.

No. 1–12–3654.

Appellate Court of Illinois, First District, First Division.

May 20, 2014.

Richard F. Linden, of Law Offices of Richard F. Linden, of Chicago, for appellant.

Stephen R. Patton, Corporation Counsel, of Chicago (Benna Ruth Solomon, Myriam Zreczny Kasper, and Jonathon D. Byrer, Assistant Corporation Counsel, of counsel), for appellee.

OPINION

Justice DELORT delivered the judgment of the court, with opinion.

¶ 1 This case involves a relatively small amount of money, but it provides an opportunity to explore deficiencies in the manner in which the City of Chicago (City) handles in-house adjudication of ordinance violations. Nearly 14 years ago, a City administrative hearing officer fined plaintiff Stone Street Partners, LLC (Stone Street), for building code violations. Stone Street never paid the fine and the City eventually recorded a lien against the subject property. Stone Street did not, however, challenge the fine until over 11 years after the City imposed it, allegedly because it had never been notified of the proceedings in the first place. After an unsuccessful attempt to vacate the fine at the administrative level, Stone Street filed a complaint in the circuit court for administrative review, equitable relief and monetary damages. The circuit court dismissed plaintiff's complaint in full. We affirm in part, reverse in part, and remand for further proceedings.

¶ 2 BACKGROUND

¶ 3 In 1999, a City building inspector found several building code violations in one of plaintiff's buildings. Rather than mailing a notice of violation and a summons for the administrative hearing to plaintiff's registered agent or to its business address, as required by City ordinance, the City sent the notice to the property itself. Although the Chicago Municipal Code does provide for notice to be given to a property owner by posting the summons on the front door of the property, this method is authorized only if notice by mail to the owner's registered agent or primary business address fails. See Chicago Municipal Code § 2–14–074(c) (amended Apr. 29, 1998).

¶ 4 Despite the faulty notice, a person named Keith Johnson appeared at the hearing on Stone Street's behalf. The City has destroyed virtually all of the administrative record, but what remains indicates that Johnson filed a written appearance for Stone Street and presented some exhibits to the hearing officer in response to the notice of violation. The evidence was apparently unpersuasive, as the hearing officer found plaintiff liable for the violations and fined it $1,050. The final administrative judgment was “ registered” with the circuit court in 2004, and in 2009 the City recorded the court's judgment with the Cook County recorder of deeds.¹

¶ 5 Stone Street contends that it had no idea that the 1999 order existed until sometime in 2011. In September of that year, its attorney served a Freedom of Information Act (5 ILCS 140/1 et seq. (West 2010)) request on the City and received a copy of the 1999 order. In October, it filed a motion to vacate and set aside the 1999 order with the City's department of administrative hearings (DOAH), contending that it had never received notice of the 1999 violations. The motion claimed, among other things, that Keith Johnson had never been authorized to represent Stone Street in any capacity, much less a legal one. Stone Street's attorney provided an affidavit identifying Johnson as a nonattorney and a caretaker for a Stone Street manager who had been gravely incapacitated in 1998 and who was no longer involved in the management of the company. The administrative hearing officer, however, found that DOAH lacked jurisdiction to vacate the order. The governing ordinance only allowed it to consider vacating default judgments within 21 days of their entry. Additionally, Johnson's participation meant that Stone Street was not defaulted, but rather lost on the merits.

¶ 6 Stone Street then filed a multicount complaint in the circuit court. One count sought administrative review of the DOAH's 2011 order. Other counts sought a declaratory judgment, quiet title and damages for slander of title.² The City filed a motion to dismiss, which the circuit court granted with prejudice as to all counts. This appeal followed.

¶ 7 ANALYSIS

¶ 8 Normally, vacating judgments after the passage of years is virtually impossible due to the presumptions of validity that apply to the judicial process. However, the City of Chicago made two critical errors in this case which invalidate the judgment. First, the City served the defendant corporation not through its registered agent, as required by City ordinances, but at the property address. Second, the City's administrative hearing officer allowed a nonattorney to appear and litigate the case on behalf of the corporation.

¶ 9 The court below dismissed all of Stone Street's claims on a motion to dismiss filed pursuant to section 2–619 of the Illinois Code of Civil Procedure (735 ILCS 5/2–619 (West 2010) ). A section 2–619 motion to dismiss admits all well-pleaded facts as true, along with all reasonable inferences that can be gleaned from those facts. Porter v. Decatur Memorial Hospital, 227 Ill.2d 343, 352, 317 Ill.Dec. 703, 882 N.E.2d 583 (2008). When ruling on a section 2–619 motion to dismiss, a court must interpret all pleadings and supporting documents in the light most favorable to the nonmoving party. Id. We review section 2–619 dismissals de novo. Id.

¶ 10 Putting the pieces to this puzzle together requires us to review the background of municipal ordinance adjudications in some depth. Through a series of enactments over the last 20 years or so, our legislature has facilitated the removal of ordinance enforcement hearings from the judiciary to the local administrative level. See generally Matthew W. Beaudet, Adjudication of Ordinance Violations, in Municipal Law § 9.1 (Ill. Inst. for Cont. Legal Educ. 2012). The underlying statute establishing in-house administrative adjudication, and raising their judgments to the dignity of court judgments, was the result of Public Act 90–516, sponsored by then-state senator Barack Obama. Pub. Act 90–516 (eff. Jan. 1, 1998). When discussing the legislation, he declared that its purpose was to “give these administrative adjudication processes some teeth” and that litigating the cases through regular courts was “overburden[ing]” them. 90th Ill. Gen. Assem., Senate Proceedings Mar. 19, 1997, at 114 (statements of Senator Obama). The process has been so successful that the City of Chicago has established a large central hearing facility that rivals Illinois county courthouses in its size and case volume. See City of Chicago Administrative Hearings, available at http://www.cityofchicago. org/city/en/depts/ah/supp_info/hearing_location.html (last visited Mar. 5, 2014.)

¶ 11 Despite the fact that circuit court judges do not preside, and the rules of evidence may be relaxed, defendants in these hearings are still entitled to due process of law. It is well-settled that “[a] fair hearing before an administrative agency includes the opportunity to be heard, the right to cross-examine adverse witnesses, and impartiality in ruling upon the evidence.” Abrahamson v. Illinois Department of Professional Regulation, 153 Ill.2d 76, 95, 180 Ill.Dec. 34, 606 N.E.2d 1111 (1992) ; see also Waicekauskas v. Burke, 336 Ill.App.3d 436, 438, 271 Ill.Dec. 62, 784 N.E.2d 280 (2002) (invalidating municipal adjudication process on due process grounds).

¶ 12 Section 2–14–074(c) of the Chicago Municipal Code requires that notices to corporate defendants for administrative hearings against them must be sent to the address of the corporation's registered agent. Chicago Municipal Code § 2–14–074(c) (amended Apr. 29, 1998). There is no dispute that, in this case, the City sent the notice to the property address and not to the registered agent. Accordingly, the service was not accomplished by any of the various manners authorized by the governing ordinance. To pass constitutional muster, notice in administrative proceedings need only be “reasonably calculated, under all the circumstances, to apprise [the respondents] of the pendency of the action and afford them an opportunity to present their objections.” (Internal quotation marks omitted.) Horn v. City of Chicago, 860 F.2d 700, 704 (7th Cir.1988). However, although administrative proceedings may relax formalities which apply in courts of record, and notice to a defendant may be accomplished by many different means, the City has imposed limitations on itself, and it is required to follow its own ordinances. See 5 Eugene McQuillin, Municipal Corporations § 15.28, at 174–75 (3d rev. ed.1996). As an administrative agency created by ordinance, the DOAH may act only in accordance with the power conferred on it by the City council. See, e.g., Pearce Hospital Foundation v. Illinois Public Aid Comm'n, 15 Ill.2d 301, 307, 154 N.E.2d 691 (1958).

¶ 13 Although service of the notice of hearing must be sent to the registered agent, the City notes that no similar requirement applies to service of the order. Accordingly, the City claims, its transmission of the 1999 order to Stone Street's business address was sufficient. However, it is well established that a “defendant's actual knowledge that an action is pending or that service has been attempted is not the equivalent of service of summons and would not relieve the plaintiff of its burden or vest the court with jurisdiction.” Equity Residential Properties Management Corp. v. Nasolo, 364 Ill.App.3d 26, 35, 301 Ill.Dec. 467, 847 N.E.2d 126 (2006).

¶ 14 We must therefore turn to the question of whether Stone Street waived any objection to service through Johnson's participation at the hearing. Johnson was a nonattorney who worked as a caretaker for a gravely ill corporate officer....