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Lammert v. Lammert Industries

OPINION FILED MARCH 1, 1977.

EDITH L. LAMMERT, PLAINTIFF-APPELLANT,

v.

LAMMERT INDUSTRIES, INC., ET AL., DEFENDANTS-APPELLEES.



APPEAL from the Circuit Court of Cook County; the Hon. MEL R. JIGANTI, the Hon. RAYMOND K. BERG, and the Hon. EDWARD F. HEALY, Judges, presiding.

MR. JUSTICE STAMOS DELIVERED THE OPINION OF THE COURT:

Plaintiff, Edith L. Lammert, appeals from three orders entered by the circuit court subsequent to the entry of a default judgment in favor of plaintiff and against defendants. The first order appealed from vacated the default judgment pursuant to section 72 of the Civil Practice Act. (Ill. Rev. Stat. 1973, ch. 110, par. 72.) Appeals are also taken from two orders quashing citations to discover assets which proceedings were pending at the time the default judgment was entered. Plaintiff presents the following issues for review: (1) whether the petition filed by defendants pursuant to section 72 was substantially insufficient at law, (2) whether the trial court erred by failing to conduct an evidentiary hearing on the petition, and (3) whether the trial court erred in quashing the citation proceedings. The pertinent facts follow.

In October of 1974, plaintiff filed a verified complaint seeking monetary relief pursuant to a contract entitled "Consultation and Non Competition Agreement" which had been entered into by plaintiff's husband and defendants on February 14, 1969. By the terms of the agreement, plaintiff's husband was employed by defendant Lammert Industries, Inc. (hereinafter "Lammert"), to serve as general manager and consultant to Lammert in its business activities. Compensation for these services was set at $1100 per month for a period of six years. Defendant Nicholas D. Glyptis, a principal officer of Lammert, executed a rider to the foregoing agreement whereby he became a guarantor of the corporation's performance of its obligations pursuant to the terms of the agreement. The agreement further provided that in the event of the death of plaintiff's husband, plaintiff would be entitled to monthly payments of $1100 until the termination of the contract in 1975. It was alleged in the complaint that plaintiff's husband died on July 2, 1969, and that monthly payments in accordance with the terms of the contract had been made to him until the date of his death and thereafter to plaintiff until March 31, 1971, when the payments ceased. Plaintiff prayed for recovery of the remaining payments due under the provisions of the contract.

Defendants were duly served with summons and a copy of the complaint in October of 1974. When neither an appearance nor an answer to the complaint was filed by defendants, plaintiff moved for a default judgment. On December 9, 1974, a default judgment was entered in favor of plaintiff on her verified complaint and against defendants in the amount of $46,620.

On November 3, 1975, defendants filed a petition for relief from judgment and for stay of proceedings. Plaintiff responded by filing an answer to the petition, asserting various affirmative defenses therein. Affidavits were filed in support of both pleadings.

The petition set forth the following allegations and chronology of events: defendants were served with summons in October of 1974; Glyptis, both individually and on behalf of Lammert, engaged the legal services of Ronald Brown to represent defendants in this matter; thereafter, Brown advised Glyptis that he (Brown) was actively representing defendants' interests; at or near the time this action was commenced, an action in chancery for foreclosure relating to the same transactions giving rise to the instant controversy was filed against Lammert and certain other parties; Glyptis, on behalf of Lammert, engaged the services of Brown to represent Lammert in the chancery proceeding; Brown filed an appearance, answer and affirmative defense on behalf of Lammert in the chancery proceeding on or about February 5, 1975; on December 9, 1974, a default judgment in the amount of $46,620 had been entered against defendants in the instant case; after the entry of the default judgment, plaintiff pursued various supplemental proceedings such as filing citations to discover the assets of defendants; on April 22, 1975, a nonwage garnishment summons was served on First Security Bank of Addison inquiring as to whether any assets of Glyptis were in the bank's possession; "immediately" upon learning of this garnishment summons, Glyptis contacted Brown and inquired as to the meaning of this situation, whereupon Brown advised that an error had occurred and that he (Brown) would straighten the matter out in his continuing effort to represent the best interests of defendants; Brown never informed defendants of the default judgment which had been entered against them; "upon examination of the court file" defendants ascertained that no appearance, answer or affirmative defense had been filed on their behalf in the instant case and that the answer and affirmative defense filed on behalf of Lammert in the chancery proceedings had been stricken by order of court and no further pleadings filed; and due to his physical condition, Glyptis was under medical treatment and confined to his home for a period of one year prior to the filing of the petition, rendering it impossible for Glyptis to properly pursue his defense in the instant case or to effectively stay abreast of the lawsuit as it developed. Defendants prayed for a vacature of the default judgment and an order staying all supplemental proceedings.

By affidavit in support of the petition, Glyptis stated, in pertinent part, that he was informed by Brown on numerous occasions prior to the date on which the default judgment was entered that Brown had filed an appearance on behalf of defendants and was defending defendants in this lawsuit; that a neurological condition required Glyptis to rely upon counsel to attend to defendants' affairs and defend against this action; that subsequent to being served with summons, Glyptis "received notice of other actions being taken by Plaintiff herein, including a Nonwage Garnishment," whereupon Glyptis consulted Brown and was advised that an error had occurred and that Brown would rectify the situation; that on or about October 10, 1975, Glyptis learned of other developments in this case, whereupon he engaged new counsel, Barry Padnos, to investigate the situation; and that upon being apprised of the default judgment entered against defendants, Glyptis retained Padnos and his associate who then filed the section 72 petition. Affiant further stated that a meritorious defense was available to defendants against plaintiff's claims. He alleged that the personal services contract upon which this suit is predicated was executed in conjunction with the acquisition by Glyptis of the assets of Lammert and Mann Corporation. As a result of this acquisition, defendants planned to market a product previously manufactured by Lammert and Mann Corporation. Affiant alleged that had plaintiff's husband not made certain material misrepresentations concerning the quality of the product, defendants would neither have acquired the assets of Lammert and Mann Corporation nor entered into the consultation agreement. As a second defense to plaintiff's claims, it was alleged that plaintiff's husband, as a fiduciary of Lammert pursuant to the consultation agreement, breached the contract by failing to reveal to defendants the fraudulent labeling of the product which misrepresented the quality of the product.

A second affidavit was filed in support of the petition wherein Glyptis' physician stated that Glyptis had been undergoing medical treatment for a terminal illness as an out-patient in his home for a period of 2 1/2 years.

By her answer to the petition, plaintiff admitted that certain procedural developments and court rulings had transpired in both this case and the chancery proceedings. However, plaintiff claimed to be without sufficient knowledge to assess the correctness of Glyptis' statements regarding Glyptis' retention of and conversations with counsel. Plaintiff requested strict proof as to when defendants first ascertained that no answer and defense had been filed on their behalf. Plaintiff enumerated the various supplemental proceedings initiated by her subsequent to the entry of the default judgment, including the commencement of a citation proceeding against Glyptis' wife on or about October 10, 1975.

The answer also set forth a summary of the proceedings in the chancery action. It was alleged that on December 17, 1974, Brown filed a petition to consolidate the instant case with the chancery proceeding. An order was entered by the circuit court in the chancery action acknowledging defendants' desire to consolidate the two cases and granting defendants in the chancery action an extension of time to January 17, 1975, to plead to the complaint. Brown filed an answer and affirmative defense on behalf of Lammert on February 5, 1975. Plaintiff in the foreclosure suit then filed a request to admit facts and genuineness of documents on March 4. Two days later, a default judgment was entered in favor of plaintiff against all defendants to that action except Lammert. When Lammert failed to respond in timely manner to the request served upon it, Lammert thereby admitted the matters of fact and the genuineness of the documents relevant to the claim for foreclosure. This chain of events culminated in the entry of a summary decree of foreclosure and sale on June 10, 1975.

Plaintiff concluded her answer to the section 72 petition by advancing four affirmative defenses. Plaintiff contended that defendants are chargeable with the knowledge of their attorney; that the allegations of fact contained in the petition failed to establish either the exercise of due diligence by defendants in filing the petition or the existence of an excusable mistake occasioning the delay in filing the petition; that the petition failed to establish a meritorious defense to plaintiff's claims; and that the defenses raised by defendants were waived by defendants' failure to comply with certain notice provisions contained in the contract by which defendants acquired the assets of Lammert and Mann Corporation.

Also before the trial court when it considered the petition was the affidavit of one of plaintiff's attorneys, William Nosek. Nosek stated that he was called by Padnos on September 11, 1975. Padnos related to affiant that he was considering representing Glyptis and consequently he sought more information concerning the case. Affiant summarized the events which had occurred to date. Padnos called Nosek again on the following day and requested affiant to postpone a scheduled citation proceeding. Affiant had no further contact with Padnos until they appeared at a citation hearing on October 27, 1975.

A hearing was held on the section 72 petition on November 10, 1975. Contrary to plaintiff's arguments, the trial court ruled that the facts alleged in the petition and supporting affidavits were uncontroverted, rendering an evidentiary hearing on the petition unnecessary. The court considered only the date on which Glyptis retained the services of Padnos to be in dispute. By affidavit, Glyptis placed this date around October 10, while Nosek's affidavit indicates that the date of retention must have occurred on or before their initial conversation on September 11. The court did not believe that this one discrepancy necessitated an evidentiary hearing on the petition.

Also during the hearing, the court was advised that Brown had failed to respond to a subpoena ordering his appearance at this proceeding. Counsel for plaintiff ...


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