Plaintiff Lacks Capacity to Sue - Is The Judgment Void?

Askew Insurance Group, LLC v. AZM Group, Inc.

2020 IL App (1^st) 190179

by Robert Handley

BURKE & HANDLEY, P.C.

799 Roosevelt Road, Building 6, Suite 108

Glen Ellyn, Illinois 60137

Procedural History

In July, 2017, Askew Insurance Group, LLC filed a Breach of Lease Complaint against AZM Group, Inc. A non-attorney, Zelda Matthews, filed an Appearance, Pro Se on behalf of the Corporation denying the breach and claiming that the rent payments were made. Three weeks later, Plaintiff filed a Motion for Default Judgment claiming that because AZM was a corporation (actually a limited liability company, but that distinction was never addressed), it could not be represented pro se claiming Defendant, “has failed to file an Answer or Otherwise Plead and is therefore in default.”

Over the next several months, the Court continued the hearing on the Motion for Default three different times. The Appellate Court, “inferred from the record” that the Trial Court continued the matter to allow Defendant to get an attorney. On the final Order continuing the matter to February of 2018, the Trial Court instructed Plaintiff to serve Defendant with a copy of its Motion for Default through certified mail with return receipt requested pursuant to Illinois Supreme Court Rule 105(b)(2). Despite that, no Attorney ever filed an Appearance or responsive pleading, aside from the “improper pro se Appearance” filed by Matthews. Therefore, on February 15, 2018, the Trial Court heard Plaintiff’s Motion for Default, granted same, and entered a Default Judgment against Defendant.

Seven months later on September 10, 2018, Defendant, through its Attorneys, filed a Section 2-1401 Petition to Vacate the Default Judgment. The Petition to Vacate alleged that the Default Judgment was based on “certain inaccurate and incorrect representations made” by Plaintiff. Defendant attached an affidavit which alleged that Defendant’s principal had filed an Appearance and an Answer. The Affidavit further stated that the principal never signed the documents upon which Plaintiff’s claim was based. Further, the Defendant alleged that Plaintiff did not have the capacity to sue as it had been dissolved as a corporation in 2015. Defendant argued that because of the dissolution of the corporation, the default judgment was void.

On December 12, 2018, the Trial Court denied Defendant’s Petition to Vacate on what appeared to be a finding that Defendant did not act with due diligence in bringing the Petition to Vacate and had no meritorious defense. Defendant filed a Notice of Appeal on January 25, 2019. Based on the record, it appears that Plaintiff did not participate in the Appeal.

Appellate Court Discussion and Analysis

Justice Cunningham wrote the Opinion, in which Justices Mikva and Harris concurred.

After some discussion as to whether the Notice of Appeal was timely filed, the Appellate Court, on its own Motion, gave Defendant an opportunity to submit a “Motion for Leave to File a Late Notice of Appeal.” After a considerable discussion, the Appellate Court granted Defendant’s Motion and found that it had jurisdiction to consider the Appeal.

Defendant argued that the Trial Court improperly analyzed its 2-1401 Petition under the traditional Section 2-1401 analysis in determining whether there was a meritorious defense and due diligence. Defendant claimed that it also alleged a sub-section (f) argument, which is exempt from the traditional requirements of due diligence and a meritorious defense because the underlying judgment is void. Defendant argued that the Default Judgment was void because Plaintiff submitted “false and/or forged and misleading documentation.” Defendant also alleged that the Default Judgment is void because Defendant was a dissolved corporation and therefore lacked capacity to sue. Alternatively, Defendant argued that the Court erred under the traditional analysis of due diligence and a meritorious defense.

The Court began its analysis by looking at the elements of the “traditional” Petition to Vacate, to wit: (1) the existence of a meritorious defense; (2) due diligence in presenting the defense or claim; and (3) due diligence in filing the Petition. However, the Appellate Court then noted that those elements are irrelevant if the Petition seeks to vacate a void Judgment under 2-1401 subsection (f).

The Appellate Court found that it appeared that the Trial Court denied the Petition to Vacate under the “traditional” Section 2-1401 analysis because its order did not reflect any analysis under subsection (f). But the Appellate Court noted, “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.”

Because Defendant devoted most of its Brief to arguing that the Judgment was void the Court addressed that issue first. In order for a Judgment to be void, the Court must find one of the following: (1) the court lacked jurisdiction - personal or subject matter; (2) the judgment was based on a statute that is facially unconstitutional and therefore void ab inito; or (3) the judgment imposed a sentence that did not conform to a statutory requirement.

The Court found that Defendant did not argue any of those circumstances. Instead, Defendant argued that the Judgment was based on “false and/or forged and misleading documentation to the Trial Court.” The Appellate Court concluded, “This does not render the judgment void, and has no impact on the Trial Court’s jurisdiction over the case.” That challenge should have been brought in a responsive pleading.

Further, Defendant argued that the Default Judgment was void because Plaintiff, a corporation, was dissolved in 2015 and therefore lacked capacity to sue. Defendant cited Michigan Indiana Condominium Association v. Michigan Place, LLC, 2014 Il. App. (1^st) 123764 ¶ 11, where the Court stated, “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.” Nonetheless, the Court stated that even if that were true, the lack of capacity did not render the default judgment void. The case could have been dismissed for lack of capacity, but Defendant never made that argument in the Trial Court.

Under the “traditional” analysis, Defendant also argued that it had proof of a meritorious defense, as well as due diligence in raising the meritorious defense in both the original action and the 2-1401 petition. However, the Appellate Court agreed with the trial court that Defendant failed to meet the requirements. There was never an explanation of why it failed to file a proper appearance and responsive pleading despite the fact it was aware the case was pending from the start. Without a reasonable excuse or an excusable mistake, under the circumstances, Defendant failed to meet its burden.

The takeaway from this case may be that lack of capacity to sue refers to the status of the party, not the court’s jurisdiction. Lack of capacity may result in a dismissal pursuant to section 2-619(a)(2) but it does not render a judgment void.