Askew Ins. Grp., LLC v. AZM Grp., Inc.

2020 IL App (1st) 190179

155 N.E.3d 478

440 Ill.Dec. 708

ASKEW INSURANCE GROUP, LLC, Plaintiff-Appellee,

v.AZM GROUP, INC., Defendant-Appellant.

No. 1-19-0179

Appellate Court of Illinois, First District, SIXTH DIVISION.

FEBRUARY 7, 2020

Ankur Shah, of Shah Legal Representation, of Chicago, for appellant.

No brief filed for appellee.

JUSTICE CUNNINGHAM delivered the judgment of the court, with opinion.

¶ 1 Following a default judgment entered against it in the circuit court of Cook County, the defendant-appellant, AZM Group, Inc., (AZM), filed a petition pursuant to section 2-1401 of the Code of Civil Procedure (Code) ( 735 ILCS 5/2-1401 (West 2018) ) to vacate the default judgment. The circuit court denied the petition. AZM now appeals the circuit court's judgment denying its 2-1401 petition. For the following reasons, we affirm the judgment of the circuit court of Cook County.

¶ 2 BACKGROUND

¶ 3 In 2014, AZM executed an asset purchase agreement (APA) with the plaintiff-appellee, Askew Insurance Group, LLC (Askew). The APA addressed AZM's purchase of Askew. The terms of the APA included that Askew would continue its current lease agreement for its office space, from September 1, 2014, to April 30, 2017. There would be a separate sublease agreement between AZM and Askew (the sublease agreement). AZM would sublease Askew's office space, from September 1, 2014, to April 30, 2017. Under the terms of the sublease agreement, AZM agreed to pay Askew $1300 per month for the rent. Askew would then add the additional amount to total the monthly rent of $1550, which was then to be paid directly to the landlord by Askew.

¶ 4 On July 18, 2017, Askew filed a complaint against AZM alleging breach of contract and unjust enrichment. Specifically, Askew's complaint alleged that AZM had failed to pay the rent under the terms of the sublease agreement, since February 2017.

¶ 5 On September 29, 2017, AZM's principal agent, Zelda Matthews (a nonattorney), filed an appearance and answer pro se on behalf of AZM. The answer claimed that AZM had made the full rent payments under the terms of the sublease agreement but that the payments were made directly to the landlord.

¶ 6 On October 16, 2017, Askew filed a motion for default judgment on its complaint, alleging that AZM had failed to appear. The record reflects that Askew's motion was based upon the principle that corporations, such as AZM, must be represented by counsel in legal proceedings and cannot grant agents, such as Matthews, the right to represent the corporation through pro se appearances. Downtown Disposal Services, Inc. v. City of Chicago , 2012 IL 112040, ¶ 17, 365 Ill.Dec. 684, 979 N.E.2d 50. Askew's motion averred: "To date, [AZM] has failed to file an answer or otherwise plead and is therefore in default."

¶ 7 After Askew filed its motion for default judgment, the trial court continued the default proceedings three different times over the next several months. It can be inferred from the record that the trial court continued the proceedings numerous times to allow AZM the opportunity to secure counsel and file a proper appearance. This is especially true considering that, on the final order continuing the proceedings to February 15, 2018, the trial court instructed Askew to serve AZM a copy of its motion for default judgment through certified mail with return receipt requested , pursuant to Illinois Supreme Court Rule 105(b)(2) (eff. Jan. 1, 2018). Still, AZM never filed an appearance or responsive pleading, aside from the improper pro se appearance previously filed by Matthews.

¶ 8 Meanwhile, Askew filed an amended complaint. Its amended complaint added another breach of contract count. The new breach of contract claim alleged that AZM had failed to make several payments pursuant to the APA.

¶ 9 On December 11, 2017, during the period of time that the trial court was continuing the default proceedings, Askew refiled its motion for default judgment. The motion attached an affidavit from Askew's counsel. The affidavit stated that AZM had been properly served on August 9, 2017, but that, "[t]o date, [AZM] has failed to file an answer or otherwise plead and is therefore in default."

¶ 10 On February 15, 2018, the trial court held a hearing on Askew's motion for default judgment. As previously noted, AZM still had not filed an appearance by then. The trial court accordingly granted Askew's motion and entered a default judgment against AZM.

¶ 11 On September 10, 2018, AZM filed a section 2-1401 petition to vacate the default judgment entered against it on February 15, 2018.¹ The crux of AZM's section 2-1401 petition alleged that the default judgment was predicated on "certain inaccurate and incorrect representations made" by Askew. AZM attached an affidavit from Matthews, which stated that she had filed an appearance and answer. The affidavit further stated that Matthews never signed the version of the APA attached to Askew's amended complaint. AZM's section 2-1401 petition also argued that Askew did not have the capacity to sue, as it had dissolved as a corporation in 2015.

AZM argued that the February 15, 2018, default judgment was accordingly void.

¶ 12 In response, Askew claimed that AZM "intentionally refused to show up to Court for [sic ] in the underlying matter at any time" and "also failed to adhere to every single deadline that the Court issued." Askew also argued that AZM's petition failed to satisfy the due diligence and affidavit requirements for a section 2-1401 petition.

¶ 13 On December 12, 2018, following a hearing, the trial court denied AZM's section 2-1401 petition. The trial court noted that section 2-1401 petitions must allege a meritorious defense to the original action and must show that the petition was brought with due diligence. The order stated that "AZM has presented no evidence or arguments as to why it failed to file this petition until September 10, 2018, nearly seven months [after the default judgment entered against it]." The order further stated:

"Matthews' affidavit sets forth no explanation to show that AZM acted with due diligence in bringing this petition. Matthews' affidavit also alleges that Matthews never signed or initialed the version of the APA attached to [Askew's] filings. Yet there are no allegations concerning AZM's actual alleged liability for the damages sought by Askew, and that affidavit does not expressly deny any other facts in the pleadings. AZM has presented no affidavit or evidence supporting any meritorious defense as to Askew's claims. Accordingly, AZM has failed to meet its burden in setting forth a legally sufficient section 2-1401 petition to vacate."

¶ 14 AZM filed a notice of appeal on January 25, 2019, challenging the trial court's December 12, 2018, order denying its section 2-1401 petition.

¶ 15 ANALYSIS

¶ 16 In its brief, AZM asserts that it filed a timely notice of appeal in the circuit court on January 11, 2019, pursuant to Illinois Supreme Court Rule 303(a)(1) (eff. July 1, 2017) ("[t]he notice of appeal must be filed with the clerk of the circuit court within 30 days after the entry of the final judgment appealed from"). AZM claims that its January 11, 2019, notice of appeal was rejected by the circuit court because it had been submitted in the same envelope as a motion to stay and the system was unable to process it. So, AZM claims that it refiled its notice of appeal on January 25, 2019.

¶ 17 However, there was nothing in the record, such as the rejection notice from the circuit court of Cook County or an error message on a computer print-out, to indicate that AZM attempted to file a notice of appeal on January 11, 2019. Neither was there a sworn affidavit by AZM's counsel. Thus, there was nothing to substantiate AZM's argument that it attempted to file a timely notice of appeal on January 11, 2019.

¶ 18 Accordingly, on this court's own motion on November 21, 2019, we gave AZM an opportunity to submit "a motion for leave to file a late notice of appeal which includes proof of good cause for its failure to file a timely notice of appeal" pursuant to Illinois Supreme Court Rule 9(d)(1) (eff. Dec. 12, 2018). Following this court's order, on December 2, 2019, AZM filed a "Verified Motion for Appellate Court to Accept Appellant's Attempted January 11, 2019 or in the Alternative Appellant's January 25, 2019 Notices of Appeal."

¶ 19 AZM's motion alleges that its notice of appeal filed on January 11, 2019, was rejected by the circuit court but that AZM did not learn of the rejection until January 25, 2019. Notably, AZM still has not attached any evidence in support of its assertion that it attempted to file its notice of appeal on January 11, 2019. Nonetheless, since its motion is verified by its counsel, we accept this as the equivalent of a sworn statement provided under oath and, thus, will entertain the motion. See 735 ILCS 5/2-605 (West 2018) ; Ringgold Capital IV, LLC v. Finley , 2013 IL App (1st) 121702, ¶ 20, 373 Ill.Dec. 235, 993 N.E.2d 541. Since AZM's counsel has now sworn, under oath, that AZM filed a notice of appeal on January 11, 2019, and that it was rejected by the circuit court for technical reasons, we conclude that AZM has now established proof of good cause for its failure to file a timely notice of appeal, pursuant to Rule 9(d)(1). Accordingly, we grant AZM's motion and find that we have jurisdiction to consider this appeal.

¶ 20 Turning to the merits of the appeal, AZM presents the following sole issue for resolution: whether the trial court erred in denying its section 2-1401 petition. AZM argues that the trial court improperly analyzed its section 2-1401 petition under the traditional section 2-1401 analysis, which involves determining whether there is a meritorious defense and due diligence. AZM claims that it filed its section 2-1401 petition under subsection (f), which is exempt from the traditional section 2-1401 requirements and instead only required the trial court to determine whether the...