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American Reserve Corp. v. Holland

OPINION FILED JANUARY 23, 1980.

AMERICAN RESERVE CORPORATION, PLAINTIFF,

v.

ROBERT L. HOLLAND ET AL., DEFENDANTS AND COUNTERPLAINTIFFS-APPELLANTS. — (ALLEN SCHOENEMAN, D/B/A ALLEN SCHOENEMAN AND CO., DEFENDANT-APPELLEE.)



APPEAL from the Circuit Court of Cook County; the Hon. RAYMOND K. BERG, Judge, presiding.

MR. PRESIDING JUSTICE PERLIN DELIVERED THE OPINION OF THE COURT:

This is an appeal from an order entered by the circuit court of Cook County vacating a default judgment. An appeal is also taken from the same order which dismissed the counterclaims upon which the default judgment had been entered. The dispositive issue presented for review is whether the trial court abused its discretion when it entered an order vacating the default judgment.

For reasons hereinafter set forth, we reverse.

On May 25, 1973, American Reserve Corporation (hereinafter referred to as American Reserve), an insurance company, issued a homeowners policy insuring the home of Robert and Flora Holland. *fn1 On January 1, 1974, a fire occurred at the Holland residence. The following day, as the Hollands were attempting to salvage some of their personal possessions, Lee Sandor, who identified himself as an agent for Allen Schoeneman, approached them. Sandor informed the Hollands that certain "board up" services were required by law, and that it was therefore necessary for them to sign a document for such services. The document purportedly authorized Schoeneman to "adjust" the insurance claim (for the fire loss) with the insurance company for a 10 percent fee. *fn2 Sandor also represented to the Hollands that as a result of Schoeneman's services they would recover more money from the insurance company.

On September 16, 1973, American Reserve issued a homeowners policy insuring the home of Daisy Scott and Celestine Cook, mother and daughter. *fn3 On March 3, 1974, a fire occurred at the Scott-Cook residence. As Scott and Cook stood outside their home watching the fire department attempt to extinguish the fire, an agent for Schoeneman approached them. *fn4 The agent informed Scott and Cook that certain "board up" services were required by law and that it was therefore necessary for them to sign a document for such services. This document, like the document signed by the Hollands, purportedly authorized Schoeneman to "adjust" the insurance claim (for the fire loss) with the insurance company for a 10 percent fee. Scott signed the document without having been informed by the agent that the document authorized Schoeneman to "adjust" the insurance claim.

Schoeneman's occupation as a "public fire adjuster" consists in part of soliciting homeowners of fire damaged property to subscribe to his "services." *fn5 The services he purports to perform consist of the representation of homeowners who are claimants under their homeowners insurance policies. Schoeneman assesses a 10 percent contingency fee for these services which include the appraisal of losses, the examination of insurance policies to ascertain the terms and coverage thereof, and other matters pertinent to the "adjusting" of claims.

Pursuant to the documents signed by the Hollands and by Scott, Schoeneman purportedly performed the above described services and claimed a 10-percent interest in each of the insurance policy proceeds. *fn6 However, in each instance the mortgage company had secured liens in excess of 90% of the insurance proceeds. It appears that Schoeneman contended that he was entitled to his fee regardless of the secured liens of the mortgage company. As a result of these conflicting claims by Schoeneman and the mortgage company, Schoeneman refused to endorse the insurance proceeds drafts and the funds remained undistributed.

On February 22, 1977, American Reserve filed two complaints for interpleader, one concerning the insurance proceeds under the Hollands' policy and the other concerning the insurance proceeds under the Scott-Cook policy. These cases were consolidated on August 30, 1977. On September 6, 1977, Scott and Cook filed a counterclaim against Schoeneman. On October 7, 1977, the Hollands also filed a counterclaim against Schoeneman. Schoeneman filed no answer or other responsive pleadings within the time allowed by law, and on November 10, 1977, the Hollands, Scott and Cook (hereinafter referred to as the homeowners) filed a motion for a default judgment. On November 21, 1977, the trial court granted Schoeneman 10 days within which to file his responsive pleadings. No such pleadings were filed, and on December 19, 1977, pursuant to notice, a judgment of default was entered against Schoeneman for failure to answer or otherwise plead. *fn7

On January 23, 1978, Schoeneman moved to vacate the default judgment entered December 19, 1977. The homeowners opposed Schoeneman's motion and filed a memorandum in support of their position. On February 1, 1978, the trial court granted Schoeneman's motion to vacate the default judgment and further granted him leave to file his motion to strike and dismiss the counterclaims of the homeowners. *fn8 On May 15, 1978, the trial court denied Schoeneman's motion to strike and dismiss the counterclaims of the homeowners and granted Schoeneman 14 days within which to answer or otherwise plead to the counterclaims.

On August 8, 1978, Schoeneman still had not filed an answer or other responsive pleading, and the homeowners filed a second motion for default judgment with a memorandum in support thereof. Schoeneman requested and was granted 14 days to respond to the motion. The matter was set for a hearing on August 24, 1978. Schoeneman filed no response to the motion for default judgment and failed to appear on August 24, 1978. On August 24, 1978, the trial court adjudged Schoeneman to be in default for "failure to plead" and ordered that the "proveup on damages" be scheduled for August 30, 1978. This matter was continued until October 12, 1978, at which time the trial court entered judgments in the amount of $4,723.52 for Scott and Cook, and $7,361.07 for the Hollands. *fn9

On November 28, 1978, Schoeneman's attorney received from the homeowners' attorney a copy of the default judgment. The envelope was postmarked November 24, 1978, and the accompanying letter dated November 21, 1978. The letter stated in part:

"Over five weeks have past since Judge Berg entered the judgment order against your client, Allen Schoeneman. * * * A copy of that order is enclosed."

On January 12, 1979, Schoeneman filed a motion to substitute attorneys and a petition to vacate the default judgment entered October 12, 1978. The homeowners did not file a response. On February 6, 1979, the trial court granted Schoeneman's motion to vacate the default judgment and dismissed, on the merits, the counterclaims of the homeowners. *fn10

The homeowners first contend that the trial court erred in granting Schoeneman's petition to vacate the default judgment entered by the trial court on October 12, 1977. Schoeneman argues that the trial court did not abuse its discretion ...


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