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NORMAN v. KAL

March 2, 1982

HAROLD G. NORMAN, JR., PLAINTIFF,
v.
DARWIN P. KAL, DEFENDANT.



The opinion of the court was delivered by: McGARR, Chief Judge.

MEMORANDUM OPINION AND ORDER

In 1974, an Illinois limited partnership was organized that included plaintiff Harold G. Norman ("Norman") and defendant Darwin P. Kal ("Kal") as limited partners, as well as two other general partners. At all relevant times, Norman was a Florida resident, while Kal resided in Illinois. The purpose of the partnership was to develop a residential apartment building. Financing for this project was provided by a Massachusetts trust company, which demanded a letter of credit from the partnership as a requirement for issuing the construction loan. A $75,000 letter of credit was obtained from a Florida bank, and it was guaranteed by all the partners. Unfortunately for these litigants, the construction project went into default. The Massachusetts company then drew down on the letter of credit.

In 1975, the Florida bank sued on the guaranty of the letter of credit in a Florida state court. In that lawsuit, Norman crossclaimed against Kal for contribution on the amount guaranteed to the bank. Although Kal was served with copies of the pleadings, he never appeared or answered. Norman obtained an order of default against Kal on the crossclaim in June, 1976. On November 15, 1976, Norman executed a promissory note for $90,489.00 in favor of the Florida bank as a full discharge of his obligations under the guaranty. In April, 1978, Norman obtained a final judgment against Kal in the amount of $45,244.83.

Shortly thereafter, Norman attempted to register this judgment in a Cook County Circuit Court. Kal admitted the existence of the Florida judgment, but pleaded the Florida court's lack of personal jurisdiction over him as a defense. The circuit court rejected this argument and entered summary judgment against Kal. However, this judgment was reversed on appeal. Norman v. Kal, 88 Ill. App.3d 81, 43 Ill.Dec. 316, 410 N.E.2d 316 (1st Dist. 1980). The appellate court agreed that the Florida court did not have either in personam or long arm jurisdiction over Kal, and consequently the default judgment on the crossclaim between Norman and Kal was invalid.

On February 9, 1981, Norman filed the instant equitable action for contribution against Kal. The defendant has moved for an order of summary judgment against Norman on the grounds that this suit is barred either by the applicable statute of limitations or by the doctrine of laches. For the reasons hereinafter stated, the motion is denied.

Since the court's jurisdiction in this case is premised on the diversity of residence of the litigants, the court must decide this controversy as though it were an Illinois state court. Klaxon Co. v. Stentor Electric Manufacturing Co., 313 U.S. 487, 496, 61 S.Ct. 1020, 1021, 85 L.Ed. 1477 (1941). Kal argues that Norman's cause of action arose in Florida on November 14, 1976, and under Illinois' "borrowing" statute, Ill.Rev.Stat. ch. 83, § 21 (1979), it is barred by a four year Florida statute of limitations, Fla.Stat. § 95.11(3)(k). Section 21 provides that "[w]hen a cause of action has arisen in a state . . . out of this state, . . . and, by the laws thereof, an action thereon cannot be maintained by reason of the lapse of time, an action thereon shall not be maintained in this state."

Norman agrees that his right of action arose in Florida and it is the type of claim controlled by Florida's four year statute of limitations. However, Norman disputes the remainder of Kal's allegations on several grounds. Initially, Norman maintains that under Illinois law, the pertinent statute of limitations for common law claims is deemed a procedural question, and therefore Illinois law, rather than Florida law, governs. Although the cases relied on by Norman support that broad proposition, they are inapposite to the present cause. Neither opinion involved section 21 because the foreign statute of limitations in those cases was longer than the Illinois version; section 21 is only operative where, as here, the foreign statute is of shorter duration than Illinois' statute. See 1962 Ill.L.F. 452.

Norman next argues that section 21 is inapplicable to this case for two reasons. First, plaintiff states that Kal's argument was previously rejected in Cook v. Britt, 81 Ill. App.3d 674, 290 N.E.2d 908 (1st Dist. 1972). Second, Norman contends that section 21 only applies to cases involving nonresidents of Illinois. Coan v. Cessna Aircraft, 53 Ill.2d 526, 293 N.E.2d 588 (1973).

In Cook, a Georgia plaintiff effected substitute service of process on an Illinois defendant pursuant to a Georgia statute. Subsequently, the Georgia Supreme Court declared the statute unconstitutional, and the suit between those litigants was dismissed. The plaintiff then sued the defendant in Illinois, but the suit was dismissed as time-barred. On appeal, the plaintiff asserted her right to refile the action within one year of a dismissal, as provided in Ill.Rev.Stat. ch. 83, § 24a (1965). The defendant countered that section 21 barred the suit. The appellate court ruled that fundamental fairness and basic justice required that the claim be tried and decided on the merits rather than disposed of on a procedural technicality. The court observed that the plaintiff bad rightfully relied on the presumptively constitutional Georgia statute, and that she should not be held responsible for not knowing the statute would be declared unconstitutional. Finally, the court held that section 21 did not apply because the Georgia action was filed in apt time.

It is obvious that the Cook decision is not apposite to the case at bar. The apparent holding of Cook is that a suit initiated in a forum with jurisdiction over the defendant tolls the forum's statute of limitations even though the court may lose jurisdiction due to a change in the law. That unusual situation is not present here; the Florida court was without jurisdiction over Kal ab initio. Norman v. Kal, 88 Ill. App.3d 81, 43 Ill.Dec. 316, 410 N.E.2d 316 (1st Dist. 1980). Additionally, the element of good faith reliance on a jurisdictional statute later declared unconstitutional — which motivated the Cook court to allow the plaintiff to continue with her lawsuit — is absent here. Thus, the Cook opinion has no bearing on this suit.

To this, Kal responds that the court's subsequent decision in Haughton v. Haughton, 76 Ill.2d 439, 31 Ill.Dec. 183, 394 N.E.2d 385 (1979), undercuts the rationale of Coan. The Haughton court held that the portion of section 18 which limits its application to Illinois residents violated the federal and state equal protection clauses. The court stated that to be lawful, a classification "must be reasonable, not arbitrary, and must rest upon some ground of difference having a fair and substantial relation to the object of the legislation, so that all persons similarly circumstanced shall be treated alike." Id. at 445, 31 Ill.Dec. 183, 394 N.E.2d at 388 (citations omitted). The court was unable to discern any rational basis or legitimate state interest served by denying the plaintiff the benefit of the statute's tolling effects solely because both parties were nonresidents.

The court cannot accept Kal's position that Haughton undercuts Coan. First, Haughton never mentioned the Coan decision, nor did it imply that Coan was being overruled, an unlikely result in view of the short span of time between the decisions. Second, the Haughton court struck down the denial of section 18 tolling to nonresidents because there was no rational basis or legitimate state interest for the classification. The Coan opinion, however, provided ample justification for the refusal to apply section 21 to cases involving nonresidents, as previously detailed. The Coan court's reconciliation of sections 18 and 21 seems to be rational and apparently serves the legitimate state interest of avoiding a conflict between two state statutes. Finally, the court is reluctant to extend Illinois law into areas where it is not unquestionably meant to extend. See McKenna v. Ortho Pharmaceutical Corp., 622 F.2d 657, 662 (3d Cir.), cert. denied, 449 U.S. 976, 101 S.Ct. 387, 66 L.Ed.2d 237 (1980); Goranson v. Kloeb, 308 F.2d 655, 656-57 (6th Cir. 1962). Haughton considered only section 18; Coan dealt with the relationship between sections 18 and 21. To accept Kal's argument would be to inject the holding of Haughton into a different setting. Since the two opinions are not irreconcilable, it cannot be confidently said that Haughton overrules Coan.

Since Kal resides in Illinois, this case does not solely involve nonresident parties. Therefore, under Coan, section 21 is inapplicable, and Florida law is not relevant. Hence, the court must turn to Illinois law to ascertain the appropriate statute of limitations. A five year statutory period for bringing actions on unwritten contracts, express or implied, codified in Ill.Rev.Stat. ch. 83, ยง 16 (1979), has been held to govern actions for contribution. Harris v. Buder, 326 Ill. App. 471, 62 N.E.2d 131 ...


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