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R.w. Sawant & Co. v. Allied Programs

OPINION FILED FEBRUARY 21, 1986.

R.W. SAWANT & COMPANY ET AL., APPELLANTS,

v.

ALLIED PROGRAMS CORPORATION, APPELLEE.



Appeal from the Appellate Court for the First District; heard in that court on appeal from the Circuit Court of Cook County, the Hon. Harold A. Siegan, Judge, presiding.

CHIEF JUSTICE CLARK DELIVERED THE OPINION OF THE COURT:

R.W. Sawant & Company (Sawant) brought an action in the circuit court of Cook County alleging breach of contract and fraudulent misrepresentation against a number of defendants, including Ben Kozloff, Inc. (Kozloff), and Allied Programs Corporation (Allied), a New York corporation. Kozloff then filed a third-party complaint against a number of parties, including Allied. Sawant and Kozloff separately served Allied with service of process in New York. After an order of default and a default judgment were entered against Allied and in favor of Sawant and an order of default was entered against Allied and in favor of Kozloff, Allied filed a special and limited appearance and a motion to quash the service of summons.

The circuit court found that Allied had used improper procedure and had sufficient contacts with Illinois to justify jurisdiction. Therefore, the court struck the defendant's special and limited appearance and denied its motion to quash. Allied appealed and the appellate court reversed (130 Ill. App.3d 71). We granted Sawant and Kozloff's petition for leave to appeal (94 Ill.2d R. 315).

Sawant is a company headquartered in Bombay, India, which exports seafood; whereas, Kozloff is an Illinois corporation which imports seafood. Sawant and Kozloff entered into an agreement whereby Sawant would supply Kozloff with a large quantity of its goods. Because such imports must be inspected by the Federal Food and Drug Administration (FDA) and pass FDA standards before they are allowed into this country, Sawant and Kozloff discussed obtaining a rejection-risk insurance policy to insure against losses if the FDA would reject any or all of the shipments of seafood that were contemplated.

Pursuant to these discussions Kozloff contacted the Chicago office of Bayly, Martin and Fay, Inc. (BMF), an insurance broker, in an attempt to obtain the insurance. BMF was unable to arrange for the insurance through domestic insurers so BMF's New York office contacted Allied, a New York corporation licensed as an excess line broker. Allied subsequently arranged for about 15 European insurers to underwrite the risk.

After the insurance was obtained, Allied sent a binder confirmation to BMF's New York office listing Kozloff as the assured. BMF's New York office subsequently sent a cover letter and the binder confirmation to its Chicago office. The cover letter stated:

"Enclosed is Allied Program's Binder Confirmation on Ocean and Rejection Insurance for Ben Kozloff, Inc. which may be presented. If you wish you can prepare a BMF Binder statement indication [sic] the same conditions.

Also enclosed is our invoice [number] in the amount of $9,162.00 representing the deposit premium as calculated * * *."

As stated in the cover letter quoted above, BMF sent a premium statement to Kozloff on a BMF invoice. Kozloff subsequently wrote a check for this amount to BMF's New York office. BMF's New York office then issued a check to Allied.

The FDA refused to allow several of Sawant's shipments of seafood to enter the country. Kozloff filed claims for these shipments with BMF's New York office, which then notified Allied, and Allied drew checks on its account payable to Kozloff. Allied sent these checks to BMF's New York office, and that office forwarded the checks to BMF's Chicago office, which in turn forwarded the checks to Kozloff.

When several claims were not paid, Sawant, as a third-party beneficiary of the insurance agreement, sued Kozloff, BMF and the European insurers. On December 21, 1981, Sawant amended its complaint and named Allied as a defendant. After being served with summons in New York in June 1982, Allied took no action, and an order of default was entered against it on August 11, 1982. A default judgment was later entered on October 13, 1982.

Kozloff filed a third-party complaint against Allied and several other parties on July 9, 1982, and served Allied in New York. Allied took no action, and on October 12, 1982, an order of default was entered against Allied and in favor of Kozloff.

On December 1, 1982, Allied filed a special and limited appearance and a motion to quash the service of summons of Sawant and Kozloff. The circuit court struck Allied's special and limited appearance and denied its motion to quash, finding that Allied had not used proper procedure, had not diligently ...


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