Appeal from the Appellate Court for the Second District; heard
in that court on appeal from the Circuit Court of Du Page County,
the Hon. C.F.J. Henninger, Judge, presiding.
JUSTICE RYAN DELIVERED THE OPINION OF THE COURT:
Rehearing denied December 1, 1986.
The plaintiffs, Margaret Smith and her husband, Wayne O. Smith, filed a two-count complaint in the circuit court of Du Page County against the defendant, Airoom, Inc. (Airoom), seeking to recover compensatory and punitive damages for an alleged breach of contract and breach of express and implied warranties of habitability. Airoom was defaulted and judgment was entered against it and in favor of the plaintiffs for $50,000, plus costs. Approximately seven months after the date upon which the judgment was entered, Airoom filed a verified petition, together with supporting affidavits, pursuant to section 2-1401 of the Code of Civil Procedure (Ill. Rev. Stat. 1983, ch. 110, par. 2-1401). The petition sought to vacate the default judgment on the ground that its entry had resulted from excusable mistake. The circuit court denied the petition. The appellate court affirmed the order of the circuit court (134 Ill. App.3d 1161) in a Rule 23 order (87 Ill.2d R. 23), and we granted Airoom's petition for leave to appeal (94 Ill.2d R. 315).
On November 27, 1982, the plaintiffs entered into a written contract with Airoom for the construction of an 8-foot by 23-foot solar-unit room addition to their Naperville residence. The work was completed in March 1983, at which time the $16,500 purchase price was paid in full. Soon after the solar unit was installed, however, it began to leak. From March to April 1983, Airoom attempted to remedy the problem at its own expense, under the terms of its 15-year guarantee. Notwithstanding Airoom's efforts, the leakage problems persisted.
On June 1, 1983, the plaintiffs filed a two-count complaint in the circuit court of Du Page County. The complaint alleged, inter alia, that the solar unit was improperly and defectively installed; that the unit was unusable because of water leakage; that the leakage prevented the plaintiffs from securing an occupancy permit; and that Airoom neglected, failed, and refused to cure the defects in workmanship and materials. Count I sought compensatory damages for the alleged breach of contract and breach of express and implied warranties of habitability. Count II sought punitive damages for the alleged wilful and wanton failure to repair and/or replace the non-conformities in workmanship.
On June 2, Airoom was served with summons and a copy of the complaint at its place of business in Chicago. Service was had upon Richard Tucker, Airoom's sales manager. Airoom failed to answer or appear within the requisite 30 days (87 Ill.2d R. 101(d)), however, and on July 21, the plaintiffs, without notice to Airoom, had a default judgment entered and continued the cause for a hearing on the amount of damages. This hearing was held on October 31, 1984, and Airoom was not given notice of the hearing. At the hearing, the plaintiffs presented the court with a written report of a registered architect which identified the defects in the room addition and recommended the removal of the roof and the reconstruction of the entire addition. Plaintiff Wayne Smith testified as to the cost of removal of the addition and the proper installation of a similar one. Smith testified that one contractor estimated the cost to be between $35,000 and $40,000, while a second contractor estimated the cost to be between $35,000 and $50,000. Based on this evidence, the circuit court entered a judgment against the defendant for $50,000, plus costs, being the "maximum cost of rebuilding that was testified to here this morning." The court, however, declined to enter a judgment for punitive damages.
On April 18, 1984, a non-wage-garnishment summons was served on the Bank of Lincolnwood in order to satisfy the judgment previously entered. On May 16, the circuit court entered judgment in favor of the plaintiffs and against the bank as garnishee. On May 17, the defendant, represented by counsel, filed a verified petition under section 2-1401 of the Code of Civil Procedure (Ill. Rev. Stat. 1983, ch. 110, par. 2-1401) to vacate the default judgment. The petition alleged that the substituted service of summons on Airoom was improper because Richard Tucker "was not a duly authorized agent to receive process nor was he an officer or director or shareholder of said corporation." The petition also alleged that a meritorious defense was available to Airoom against the plaintiffs' claim. In defense, Airoom stated that the leaks in the solar-unit room addition were the "result of the pre-existing structural defect in the jamb of the patio door located above the room addition." Finally, the petition maintained that Airoom's failure to respond to the judgment was an excusable mistake because (1) Airoom, through its duly authorized officers or agents, never received the summons and complaint from Richard Tucker and (2) Airoom was repeatedly at the plaintiffs' premises in their presence and the presence of their attorney "and at no time was the lawsuit or the default judgment ever mentioned by the attorney." The petition was supported by the affidavits of Richard Belson, Burton Klein, Richard Tucker, and Phil Cohen.
Richard Belson asserted in his affidavit that he is the production manager for Airoom. According to the affidavit, he sent an independent contractor to the plaintiffs' residence in April 1983 to correct the leakage problems. The contractor, however, was unable to determine the cause of the leakage. Belson acknowledged in the affidavit that he met with Mrs. Smith and her attorney in May 1983 because of further complaints and agreed to replace the duct work, to disassemble the solar unit, and to clean and reinstall it. Belson averred that he again met with Mrs. Smith and her attorney in July 1983 and agreed to install sheet-metal flashing between the addition and the wall of the existing building. Belson asserted that in August 1983 Airoom employees had determined that water leakage from the roof near the existing wall was caused by a pre-existing structural defect in the jamb section of the patio door leading onto the roof of the addition, a balcony. Belson stated he sent a contractor to remedy the problem, but Mrs. Smith refused to permit the alteration. Finally, Belson claimed in the affidavit that Airoom had no knowledge that a lawsuit was pending until the garnishment proceeding and that neither the plaintiffs nor their attorney mentioned that a suit had been filed or a default judgment entered.
In his affidavit, Burton Klein stated that he is the president and the registered agent of Airoom and that Richard Tucker was not a director, officer, shareholder, or the registered agent of Airoom. According to the affidavit, Klein did not realize there was a judgment in the case until the nonwage garnishment of Airoom's bank account.
Richard Tucker's affidavit indicated that he was a "sales person" for Airoom, not an officer, director, stockholder or agent of the corporation authorized to receive summons for Airoom. The affidavit also acknowledged that Tucker received the summons and complaint. However, according to the affidavit, Tucker could not recall what he did with the documents thereafter.
Phil Cohen, an employee of Drake Construction, stated in an affidavit that he was contacted by Richard Belson to meet with an Airoom service man at the plaintiffs' residence in October 1983 to pull out the existing patio door which was located directly above a portion of the addition. Cohen stated, however, that Mrs. Smith refused to permit them to remove the patio door.
The plaintiffs' response to the section 2-1401 petition alleged that Airoom had not shown due diligence because it knew of the litigation by June 3, 1983, but failed to answer or appear prior to the date of the default judgment. The response also alleged that Airoom did not have a meritorious defense because the leaks were not caused by a pre-existing structural defect in the jamb section of the patio door. The plaintiffs' response to Airoom's petition to vacate was supported by the counteraffidavits of Margaret Smith, Paul McLennon, Sr., Joseph Pavone, Larry Work, and Wayne Smith.
Margaret Smith, in her affidavit, stated that she first met with her attorney and Richard Belson to discuss the alleged construction defects in June 1983. She stated that they met again in August 1983, at which time Airoom attempted to cure the water leakage by adding tar to the roof. She further stated in her affidavit that she ...