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O'connell v. Pharmaco





Appeal from the Circuit Court of Champaign County; the Hon. Donald R. Parkinson, Judge, presiding.


Rehearing denied July 3, 1986.

Defendant Roger R. Larson appeals from a judgment entered against him in his personal capacity in a citation proceeding originated by the plaintiffs against the defendant Pharmaco, Inc. On appeal, Larson contends (1) that the trial court lacked both subject matter and personal jurisdiction over him, (2) that there was no evidence to support the trial court's conclusion that defendant held any assets of the judgment debtor, (3) that the judgment must be reversed because all necessary parties have not been joined, and (4) that the trial court erred in the calculation of interest due on the judgment.

The record before us reflects a lengthy chronology of events. On March 15, 1979, a default judgment was entered in favor of plaintiffs and against defendant Pharmaco, Inc., on plaintiffs' complaint for forcible entry and detainer. Damages were awarded in the amount of $34,384. Supplementary proceedings were begun by the plaintiffs in 1983, by service of a citation upon "PHARMACO, INC., c/o Roger Larson-Corporate Officer." Roger Larson initially appeared by counsel on November 21, 1983, and requested a continuance because of his ill health. The continuance was granted and Larson again appeared pro se at the rescheduled hearing on December 7, 1983. The court ordered that the citation be heard in the presence of a court reporter as by deposition and that Larson produce documents at such deposition pursuant to notice.

On January 5, 1984, a hearing was held. Larson appeared pro se and orally moved to quash the citation on the ground that some of the plaintiffs were former directors of the defendant corporation and had the opportunity to examine the records of the corporation without his having to produce them. The motion was denied. A second oral motion to quash the citation based on a stipulation to dismiss a Federal lawsuit was also denied.

A citation by deposition was subsequently taken. After a hiatus of over one year, on January 24, 1985, a hearing was held on plaintiffs' motion to supplement evidence. Larson again appeared, pro se.

At the January 24, 1985, hearing Larson testified on examination by counsel for the plaintiffs that he had been chairman of the board and chief executive officer of the now dissolved Pharmaco Corporation. Larson claimed that Pharmaco became insolvent December 31, 1978, three months prior to the entry of the default judgment against it. Larson acknowledged, however, that in May of 1982, a Federal patent infringement lawsuit filed by Pharmaco against various defendants was settled in Pharmaco's favor for $600,000. Although Larson maintained that the money obtained from this settlement was deposited for Pharmaco's benefit, he acknowledged receipt of $580,000 of the settlement. The remaining $20,000 had been retained by a bank in settlement of a corporate debt.

As to his entitlement to those funds, Larson further testified that pursuant to an agreement with Pharmaco, ratified by the board of directors, he was to receive half of any settlement of the patent infringement suit contingent upon his paying attorney fees in that lawsuit. Plaintiffs stipulated that such a contract existed.

With regard to the remaining $280,000, Larson maintained that he had been awarded a default judgment against Pharmaco in the amount of $218,000 plus interest and that subsequent to this 1982 judgment Larson took an assignment from Pharmaco of the remaining proceeds from the settlement in satisfaction. Larson acknowledged drafting the assignment but claimed the board of directors of Pharmaco subsequently ratified his actions.

Upon this testimony plaintiffs maintained that Larson had in his control $280,000 in assets which were rightfully those of Pharmaco. Plaintiffs then asked that the court order Larson to account for the funds received from the corporation. Larson objected contending that the board had ratified the assignment of proceeds. When asked by the trial court whether these actions were recorded by the board, Larson responded, "I don't have them. This was a citation to discover assets. It isn't a lawsuit. I'm not on trial, Pharmaco is."

The trial court then ordered Larson to destroy no records of the defendant corporation without permission of the court and further ordered him to preserve them in their present condition. Larson was also required to account for all sums received from Pharmaco. The cause was continued to February 21, the date Larson was ordered to file the accounting. Larson continued to protest that the citation proceeding was not a "bona fide" lawsuit and, in any event, was against Pharmaco, not him.

On February 21, 1985, a subsequent hearing was held. Larson appeared by counsel and filed a written motion to quash service or to dismiss with prejudice. Attached to the motion was a copy of a citation issued by the clerk of the circuit court of Champaign County on December 18, 1984, and addressed to: "Pharmaco, Inc. c/o ROGER LARSON-Registered Agent & Corp. Officer." Plaintiffs, the day earlier, had filed a motion for leave to file a creditor's bill naming, as additional parties to the citation proceeding, Larson and his wife. The court continued these motions and a subsequent hearing was held on April 1, 1985, on defendant's motion to quash or dismiss. No transcript of any proceedings on that day appears of record on appeal. The parties were directed, and both filed, written memoranda directed to the motion to quash or dismiss. On June 4, 1985, at a subsequent hearing, defendant's motion to quash or dismiss was denied. No transcript of any proceedings occurring on that day appears of record.

We are thus required to glean the basis for the motion to quash and dismiss solely from the motion, supporting affidavit and memorandum filed by Larson. In substance, Larson argued that the original summons issued in the forcible entry and detainer action was a summons commonly employed in a "small claims" action and, that because of this defect, if a valid underlying judgment to the citation proceedings existed, the amount of the judgment was limited to $1,000, the small claims award limitation in effect in 1979. (See 87 Ill.2d R. 281.) Alternatively, Larson maintained that at the time of the default he may not have been the registered agent of Pharmaco. As we have indicated, the trial court denied this motion. In addition to plaintiffs' motion to add additional parties, plaintiffs petitioned for issuance of an injunction pursuant to sections 2-1402(d)(1) and (2) of the Code of Civil Procedure (Ill. Rev. Stat. 1983, ch. 110, pars. 2-1402(d)(1), (2)). Plaintiffs also filed a motion for judgment against Larson in an amount sufficient to cover the judgment and interest accrued from 1979. Finally, plaintiffs filed a petition for rule to show cause against Larson based on his failure to provide the accounting previously ordered.

The trial court denied plaintiffs' motion for leave to add additional parties as well as the petition for issuance of an injunction. The petition for rule to show cause and apparently the ...

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