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Wells For Use of Rainwater v. Braxton

APRIL 20, 1967.

NORVAL W. WELLS AND SAMUEL E. WELLS FOR THE USE OF CATHERINE L. RAINWATER, INDIVIDUALLY AND AS ADMINISTRATOR OF THE ESTATE OF WILLIE A. RAINWATER, DECEASED, ROWENA ANNABELLE SECRIST, EDNA B. HARRIS, AS ADMINISTRATOR OF THE ESTATE OF CLAUDE WILLIAM HARRIS, DECEASED, CLAUDE W. HARRIS, AND CHARLES HARRIS, A MINOR, PLAINTIFFS-APPELLANTS,

v.

LEE BRAXTON, ET AL., DEFENDANTS-APPELLEES.



Appeal from the Circuit Court of Cook County; the Hon. HAROLD G. WARD, Judge, presiding. Affirmed.

MR. PRESIDING JUSTICE SULLIVAN DELIVERED THE OPINION OF THE COURT.

Rehearing denied June 5, 1967.

This is an appeal from orders quashing the service of process upon defendants Braxton, Ewen, Jones and Keith, and transferring the case as to the rest of the defendants from Macon to Cook County. The orders recited that three of these defendants, Ewen, Jones and Keith, were not amenable to process by Illinois under section 17 of the Illinois Civil Practice Act, (Ill Rev Stats 1963, c 110, par 17), and that return of service upon Braxton failed to meet the requirements of section 16 of that act.

Braxton, a North Carolina resident, was allegedly president of Pioneer Auto Insurance Company (Pioneer), and Ewen, Jones and Keith, Kentucky residents, were allegedly directors of Republic Casualty Insurance Company (Republic). According to Ewen, Jones and Keith, as set out in affidavits filed by them, they were directors of Republic from May, 1955, to January, 1956. Plaintiff Norval Wells was an insured under a policy issued by Pioneer. Republic later assumed control of Pioneer.

Plaintiffs contend that Ewen, Jones and Keith are amenable to suit in Illinois in that they were transacting business in Illinois, they committed torts in Illinois, and they contracted to insure persons, property or risks in Illinois; that the technical requirements of section 16 of the Civil Practice Act are not jurisdictional and, therefore, the defect in return of service upon Braxton does not invalidate that service; that defendant Braxton failed to file a required affidavit specifying the alleged deficiencies of the return and the portion of the statute violated; and that Macon County is the place where the transaction out of which this suit arose occurred and is the proper place for trial.

Plaintiff, Norval Wells, was the insured under an automobile insurance policy issued in September, 1954, in Cook County by Pioneer. His son Samuel was an additional insured under that policy. On March 17, 1955, while driving in Macon County, Samuel was involved in a three-car collision in which two persons were killed and three were severely injured. Suits arising out of that accident were brought in Macon County by the injured and the administrators of the decedents against Samuel Wells. Judgments were rendered for those plaintiffs well in excess of the insurance policy limits (50,000/100,000). These judgments are still unsatisfied.

Pioneer was an Alabama reciprocal authorized to do business in Illinois from April, 1954 to June 6, 1955. Its Illinois attorney-in-fact was a Delaware corporation with its principal office in Chicago, Illinois. It also maintained an office in Alton, Illinois, through which plaintiff purchased his policy. About the same time that Pioneer lost its authorization to do business in Illinois, it was taken over by Republic, a Kentucky corporation authorized to do business in Illinois from July 19, 1955, to September 2, 1956. Policies issued by Pioneer were taken over by Republic and thereafter, business was transacted under the name Pioneer, Division of Republic, through Republic's Louisville, Kentucky office. Republic was placed in the hands of a Kentucky liquidator September 2, 1956.

The same people who had controlled Pioneer took over the control of Republic and Republic's stock was held by a dummy corporation controlled by one Paul Temple.

At the time of the accidents, the insurance companies hired John Dyar, a Macon County, Illinois attorney, and Lynch Adjusting Company to act for them in handling the defense of the suits. Dyar sought to settle them but was given authority to settle for a maximum of only $7,000. Many letters were exchanged between the Illinois representatives and Pioneer wherein the company agreed to confer with Dyar about settlement; however, no such conference occurred. By the time the judgments were rendered the company was unable to pay because the funds had been depleted.

Plaintiffs brought this suit in Macon County for the use of their judgment creditors (plaintiffs in the cases arising out of the auto accidents). The complaint listed the defendants and gave their respective titles. Included were officers, directors, the companies, and the attorney Dyar. Numerous acts were allegedly committed by these defendants, including the issuance of the policy while the company was insolvent and the concealment of said insolvency from the plaintiffs, negligence and bad faith in failure to properly negotiate and settle the claims against Wells when it was known to all that there was no good defense to the suit, and mismanagement of company funds and investments which caused the insolvency of the companies.

It was further charged that defendants were negligent in allowing Paul Temple to obtain control of the companies. Temple had a history of insurance company management which included the bankruptcy of the three companies with which he had been associated. He had gone through bankruptcy personally twice, and had been indicted on charges of making false statements to government boards and violating war fraud laws. On the former charge he pleaded no contest; on the latter he pleaded guilty. In addition, Temple was a known alcoholic. However, there was no allegation that the defendants in this appeal had knowledge of these facts.

Defendants, Ewen, Jones and Keith, filed a motion to quash service upon them accompanied by affidavits stating that they were never Illinois residents, that they served as directors of Republic for a seven-month period (May, 1955-January, 1956), that they were never in Illinois to transact any business for Republic, and that at no time did they personally contract to insure any person, property or risk located in Illinois. Braxton appeared specially stating by affidavit that he was not an Illinois resident and the return of service upon him did not comply with the requirements of the Civil Practice Act section regarding service of nonresidents.

The court in Macon County ordered the quashing of summons, service and return upon the four defendants in this appeal. Two other defendants had moved for a change of venue on the ground that the transactions involved did not occur in Macon County, but that the proper court was one in Cook County. The Macon County court also granted this motion, and the cause was transferred to Cook County. After a final order was entered as to the remaining defendants in Cook County, this appeal was taken.

Plaintiffs first contend that defendants Ewen, Jones and Keith are amenable to suit in Illinois. The legislature has provided that certain acts are bases for nonresidents' submission to the jurisdiction of the Illinois courts. ...


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