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09/08/87 the Department of Revenue v. William Steinkopf

September 8, 1987

THE DEPARTMENT OF REVENUE EX REL. THE PEOPLE OF ILLINOIS, PLAINTIFF-APPELLEE

v.

WILLIAM STEINKOPF, D/B/A BUFFALO GROVE T.

v.

, DEFENDANT-APPELLANT



APPELLATE COURT OF ILLINOIS, FIRST DISTRICT, SECOND DIVISION

513 N.E.2d 1016, 160 Ill. App. 3d 1008, 112 Ill. Dec. 407 1987.IL.1305

Appeal from the Circuit Court of Cook County; the Hon. Earl Arkiss, Judge, presiding.

APPELLATE Judges:

PRESIDING JUSTICE SCARIANO delivered the opinion of the court. BILANDIC and HARTMAN, JJ., concur.

DECISION OF THE COURT DELIVERED BY THE HONORABLE JUDGE SCARIANO

The Department of Revenue of the State of Illinois (the State) filed suit against William Steinkopf (Steinkopf) to collect unpaid taxes he was alleged to owe pursuant to the Retailers' Occupation Tax Act . (Ill. Rev. Stat. 1983, ch. 120, par. 440 et seq.) The trial court found that Steinkopf's retailers' occupation tax (occupation tax) liability had not, as he had alleged, been discharged in bankruptcy. We affirm.

In 1979 Steinkopf purchased a business designated as "Buffalo Grove T.V.," which was engaged in the sale of television sets and other electronic equipment at retail. As a retailer, Steinkopf was subject to the requirements of the ROTA, and, in compliance with the statute, he applied for and obtained a certificate of registration from the State. (Ill. Rev. Stat. 1979, ch. 120, par. 441a.) While operating Buffalo Grove T.V. from July 1979 through April 15, 1981, Steinkopf filed monthly tax returns with the State, but failed to make payments in full for the amounts of liability indicated thereon. The record indicates that the State subsequently sent him 12 notices of delinquency showing that he owed $11,713.28 in unpaid occupation taxes, with interest and penalties as of February 1986 amounting to $11,641.57, for a total debt of $23,354.85.

Because he was experiencing financial difficulties, Steinkopf filed a chapter 13 petition in bankruptcy on February 26, 1981, seeking relief pursuant to 11 U.S.C. sec. 1301 et seq. (1982) and listing the State of Illinois as a creditor with respect to the ROTA liability which he had not paid. On January 20, 1982, the United States Bankruptcy Court for the Northern District of Illinois entered an order discharging Steinkopf's debts pursuant to 11 U.S.C. sec. 1328(b)(1982). The State had not filed a claim, nor did it object to the discharge.

The State filed its complaint at law in August of 1982 seeking to collect the occupation tax debt. On November 30, 1982, without answering the complaint, Steinkopf filed a section 2-619 (Ill. Rev. Stat. 1985, ch. 110, par. 2-619) motion to dismiss, alleging that the debt was discharged in bankruptcy. On December 8, 1983, the trial court denied Steinkopf's motion to dismiss and allowed him 45 days to answer the complaint. After failing to receive an answer within the 45-day period, the State, on April 5, 1983, filed a motion for a default judgment. Over one year later, on April 16, 1984, without either having filed an answer or having responded to the State's motion for a default judgment, Steinkopf filed a section 2-615 (Ill. Rev. Stat. 1985, ch. 100, par. 2-615) motion to strike certain portions of the State's complaint. On April 25, 1984, the trial court entered a default judgment against Steinkopf and struck his section 2-615 motion, noting that Steinkopf's attorney failed to appear for argument thereon. On July 3, 1984, the trial court vacated the default judgment pursuant to Steinkopf's motion requesting such relief.

Finally, on August 8, 1984, Steinkopf filed his answer to the original complaint, interposing the affirmative defense that the State's claim had been discharged in bankruptcy, and asserting a counterclaim alleging that the State wrongfully attached and applied against the ROTA debt $1,125 which Steinkopf contended he was entitled to receive as a tax refund. The State responded by filing a motion to strike Steinkopf's affirmative defense and counterclaim. After considering his reply to the State's motion, the trial court proceeded to strike Steinkopf's affirmative defense and the counterclaim, finding that the occupation tax liability alleged to be owing was not dischargeable in bankruptcy.

On November 29, 1984, the case proceeded to trial; however, the record does not contain any transcript of the proceedings at the trial level. The record does specify, however, that on December 11, 1984, the circuit court Judge, after trial and before judgment, ordered a mistrial due to a "substantial error . . . made during the proceedings when the defendant's request to consult with his counsel before testifying as an adverse witness was denied," and that said error "totally impaired the ability of [the trial Judge] to make a fair, impartial decision." The case was subsequently transferred to the supervising Judge of the tax section for reassignment to another Judge for trial.

The record indicates that after the reassignment there was no progress on the case until approximately 14 months later when, on February 7, 1986, the State attempted to initiate discovery by filing interrogatories and a request for the production of certain documents. When Steinkopf did not respond to any of the discovery requests, the State filed a motion for the entry of summary judgment, which Steinkopf moved to strike, but to no avail. On April 10, 1986, the trial Judge rejected Steinkopf's arguments and entered judgment in favor of the State in the amount of $23,301.45, consisting of $11,585.65 in assessed tax liability and penalties, and $11,513.76 as interest. The trial court also stated that Steinkopf's "motion to dismiss for want of prosecution . . . hereby is denied," although the record does not indicate when or how this motion was tendered.

Steinkopf presents the following issues on appeal: (1) whether his ROTA liability was dischargeable in bankruptcy; (2) whether the trial court erred when it denied his motion to dismiss for want of prosecution; and (3) whether the trial court erred in striking his counterclaim.

The order of discharge entered by the Bankruptcy Court states in pertinent part:

"1. [Steinkopf] is released from all dischargeable debts.

2. Any judgment heretofore or hereafter obtained in any court other than this court is null and void as a determination of the personal liability of the debtor with respect to any of the following:

(a) debts dischargeable under 11 U.S.C., sec. 523."

Title 11 U.S.C., sec. 523, states:

Section 523. Exceptions to ...


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