Litigation Law Roundup

Sharp  Thinking

No. 90    Perspectives on Developments in the Law from The  Sharp Law Firm, P.C.   May 2013

Insufficient Efforts Void Publication Service

            Insufficient efforts to locate and serve the defendant before seeking and effecting publication service may be attacked by that defendant even after judgment by default has been entered, a panel in the Appellate Court’s Third District has ruled.

            In American Chartered Bank v. USMDS, Inc., 2013 IL App (3d) 120397, the plaintiff had filed an affidavit for publication in the customary form but the defendant later moved to set aside the resulting judgment on the grounds that the plaintiff’s due inquiry and due diligence allegations were not true.  The appeals panel said the defendant may so attack the publication affidavit and that the trial court should have held an evidentiary hearing on the issue.

            “When service on a defendant does not comply with the statute, the court lacks jurisdiction and a default judgment entered against the defendant is void,” the court said.  “Due inquiry and due diligence are statutory prerequisites for service by publication. . . . ‘(T)he law “requires an honest and well-directed effort to ascertain the whereabouts of a defendant by an inquiry as full as circumstances can permit,”’” it said, citing previous cases.

            The court also rejected the plaintiff’s arguments that its service on the Illinois Secretary of State (SOS) supported the judgment.  In so ruling, the court said that inability to serve at the corporation’s registered office is insufficient to support SOS service when the plaintiff with minimal effort could have determined an address at which the defendant was likely to receive actual notice.

            In USMDS, defendant alleged that at the time plaintiff sought to use substitute service, it in fact knew both the working address for the corporation and the home of its key official, as plaintiff had financed both of those locations and its loan officer had even been to the official’s home.  Though those allegations appear to have been significant, the points of law handed down apparently may be applied in less egregious circumstances.

Seventh Circuit Issues Opinion on Vacating Default

            The Seventh Circuit Court of Appeals recently issued a helpful opinion on vacation of default judgments due to alleged “mistake, inadvertence . . . or excusable neglect” of a registered agent under Federal Rule of Bankruptcy Procedure 9024 and Federal Rule of Civil Procedure 60(b)(1).

            In In re Canopy Fin., Inc., 708 F.3d 934 (7th Cir. 2013), a bankruptcy trustee had served summons and a complaint to avoid fraudulent transfers upon the registered agent of the alleged transferee, and then received a default judgment when the defendant did not respond.  After the trustee started seizing property, the transferee moved to set aside the judgment.

            Noting the lack of specificity in the transferee’s motion, the court dealt with a variety of hypotheticals:

► If the documents did not reach the agent, then the transferee’s inaction was excusable.

► If the agent received the documents but did not send them on, whether the neglect was excusable would depend in part on whether the transferee contracted and paid for a competent service.  “If it was trying to get by on the cheap, it must bear the consequences.” 

► If documents were misaddressed by the agent, or properly addressed but lost in transit between the agent and the transferee, whether the neglect was excusable could depend on what kind of service the agent promised to provide.  “Did [transferee] require the agent to use a service with a tracking number . . . ?  If [transferee] paid the agent only to send documents by ordinary mail, and not to use a trackable shipment (or electronic delivery . . .), it must accept responsibility.” 

► If the documents reached the transferee’s mailroom and were misrouted, despite its use of ordinary care, that might establish excusable neglect, the court said.  However, if transferee failed to tell the agent who within its administrative office should receive the papers, or supplied the agent with an incorrect name, it was responsible and “could not use Rule 60(b)(1) to get another chance.” 

►  If the documents came to the designated recipients, who filed them away without action, the transferee “must accept the consequences,” the court said.

Family Member Need Not Live At Abode To Accept Service There

            A defendant’s family member is not required to reside in the defendant’s household in order to accept service of process under the “abode” service statute (735 ILCS 5/2-203(a)(2)), a panel in the Appellate Court’s First District has ruled. 

          In Central Mort. Co. v. Kamarauli, 2012 IL App (1st) 112353, service was made on defendant’s mother, who was at defendant’s abode but lived elsewhere.  Relying on a 1994 statutory amendment, the panel said that was good enough.  Under the amended statute, it said, “the process server can leave the summons with either a family member or a person who lives in the household.  There is no requirement that the family member reside in the defendant’s household to accept the summons” (court’s emphasis). 

Failure to Reference Employee Status Doesn’t Void Service

            Failure of an original process return to recite that the individual process server was an employee of an approved detective firm does not void the service or resultant judgment where a supplemental affidavit shows that the process server in fact was so employed, another panel of the Appellate Court has ruled. 

            In Deutsche Bank Nat’l T. Co. v. Akbulut, 2012 IL App (1st) 112978, the court distinguished cases where the server was not so employed and said the trial court was entitled to rely upon the supplemental affidavit in refusing to quash the service. 

Deputy May Sign Clerk’s Name to Summons

            A summons is not invalid because the name of the Circuit Clerk is signed by a deputy, a panel in the Appellate Court’s Second District has ruled. 

            In Deutsche Bank Nat’l T. Co. v. Gryc, 2012 IL App (2d) 111015, defendant attempted to seize upon a deputy’s signing of the clerk’s name to invalidate the summons, judgment and foreclosure sale, but the panel extended Nat’l City Bank v. Majerczyk, 2011 IL App. (1st) 110640, to cover handwritten signatures of the clerk’s name placed upon the summons by a deputy acting under the authority of the clerk.

                                                                        John T. Hundley, jhundley@lotsharp.com, 618-242-0246

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