Opinion
No. 03 C 5728.
June 14, 2004
MEMORANDUM DECISION
On October 9, 2003, judgment by default was entered in this case in favor of plaintiffs, Electrical Insurance Trustees ("Trustees"), and against the defendant, Sunstrand Electric Co., Inc. ("Sunstrand"), in the amount of $76,824.34. On October 30, 2003, a citation to discover assets issued as to Eugene W. Aguirre (a/k/a William Aguirre and herein called "Aguirre") and on November 12, 2003, an alias citation was issued as to Sunstrand A copy of the alias citation, attached as Exhibit M to Trustees' motion to reconsider, reflects that the alias citation was directed to
In considering the pending motion, the court has reviewed the motion for judgment by default, which recites that substitute service was made on the Secretary of State under section 5.25 of the Business Corporations Act. 805 ILCS 5/5.25. Trustees did not file proof of service as required by Rule 4(1), Fed.R.Civ.P. (but failure to make proof of service does not affect the validity of service.) A copy of the affidavit of compliance with section 5.25, however, was attached to the motion for default judgment, in which Trustees assert that substitute service was made because the registered agent could not with reasonable diligence be found at the registered office of record. See 805 ILCS 5/5.25(b)(2). Defendant has never contested service of the summons and complaint, so the court assumes they were properly served.
Eugene William Aguirre, President Sunstrand Electric Company, Inc. c/o Illinois Secretary of State
On November 24, the court entered against Eugene William Aguirre a rule to show cause why he should not be held in contempt of court for failure to appear for the citation examination on behalf of Sunstrand The matter was set for hearing on January 12, 2004, but continued to January 20 and again to March 4, at which time Trustees moved for a turnover order against Sunstrand and for judgment against Aguirre personally in the amount of the judgment against Sunstrand Attorney Michael J. Chmiel, representing respondents (although his appearance on file with the Clerk only reflects representation on behalf of Sunstrand), argued that Sunstrand was not served (or not properly served) because the citation was directed to Aguirre rather than Sunstrand and, therefore, there was no contempt and the motion for turnover should be denied as well as the motion for judgment against Aguirre.
On March 4, 2004, this court denied the Trustees' motion on the ground that Trustees had not effected service of an alias citation to discover assets on Sunstrand on November 17, 2003, as claimed. Rather, the court determined that service occurred in open court on March 4, 2004, when Mr. Chmiel accepted service on behalf of Sunstrand On March 18, 2004, Sunstrand filed a voluntary petition in bankruptcy under Chapter 11 of the Bankruptcy Code, 11 U.S.C. § 1101 et. seq., which filing invoked the automatic stay of all proceedings against Sunstrand under 11 U.S.C. § 362(a). On April 28, 2004, Trustees appeared before the bankruptcy court seeking to lift the automatic stay "to seek a definitive ruling from the district court as to the date their citation was served [on Sunstrand]." Elec. Ins. Trustees' Request for Order Modifying Automatic Stay, ¶ 6. Trustees argued that "[t]he resolution of the claim against Aguirre depends on whether the Trustees' served Sunstrand with a citation to discover assets on November 17, 2003." Id., ¶ 4. The bankruptcy court ruled that the automatic stay did not bar actions against Aguirre because he is not a debtor in the bankruptcy case. Order of Apr. 28, 2004 (Docket # 57). On May 4, 2004, Trustees returned to this court asking the court to reconsider its March 4 ruling insofar as it denied entry of judgment against Aguirre individually based on his having caused the transfer of assets of Sunstrand in violation of the prohibitions of the citation. Sunstrand's counsel appeared on behalf of Aguirre arguing, inter alia, that the court has no jurisdiction to reconsider a ruling made 60 days ago, particularly where the bankruptcy has intervened.
Trustees are presently seeking to hold Aguirre personally liable for causing or allowing the transfer of assets of Sunstrand Aguirre concedes that if Sunstrand was properly served on November 17, "the judgment became a lien on the judgment debtor's assets," Ill. Sup.Ct. Rule 277(f), and under 735 Ill. Comp. Stat. § 5/2-1402(f)(1),
[t]he court may punish any party who violates the restraining provision of a citation as and for a contempt, or if the party is a third party may enter judgment against him or her in the amount of the unpaid portion of the judgment and costs allowable under this section, or in the amount of the value of the property transferred, whichever is lesser.
Fed.R.Civ.P. 69 provides that execution of judgment proceeds according to the practice and procedure of the state in which the district court is held. Applicable law is succinctly summarized in Laborers' Pension Fund v. Dominic, Jr., Inc., No. 02 C 3321, 2003 WL 21310282 *2 (N.D. Ill. 2003).
A corporate officer's transfer of assets in the ordinary course of business of the cited judgment debtor is a violation of the prohibitions of the citation. City of Chicago v. Auto Leasing Co., 697 N.E.2d 788 (Ill.App. 1988). Under these principles, Aguirre would be personally liable for the transfer of assets of Sunstrand after service of the citation on Sunstrand The only question here is whether Sunstrand was served.
Sunstrand attacks service on the basis that the citation was directed to Aguirre and therefore was not served on Sunstrand In reality, two issues are presented, one, whether the citation was in proper form and the other whether the citation was properly served. Supreme Court Rule 277(c) sets out the form of a citation to discover assets. As pertinent here the rule requires that the citation "be captioned in the cause in which the judgment was entered" (this identifies the judgment debtor), the date of entry and the amount of the judgment, and
(3) shall require the party to whom it is directed, or if directed to a corporation or partnership, a designated officer or partner thereof, to appear for examination at a time (not less than 5 days from the date of service of the citation) and place to be specified therein, concerning the property or income of or indebtedness due the judgment debtor. . . . [Emphasis added].
The alias citation sets out the caption and identifies Sunstrand as both defendant and judgment debtor, and it recites that Aguirre (as President of Sunstrand) is required to appear at a time and place certain for examination. Because the text of the citation refers to "you," and because a corporation can only act through agents, a notice telling Aguirre, as agent for Sunstrand, that "you are commanded to appear before [the court]" and "Your failure to appear . . . may cause you to be arrested . . .", makes clear that a particular individual is responsible to appear for examination concerning Sunstrand As such, the direction to Aguirre appears to be in a proper form.
Rule 277 further provides the manner of service:
The citation shall be served and returned in the manner provided by rule for service, otherwise than by publication, of a notice of additional relief upon a party in default.
Illinois Supreme Court Rule 105 prescribes notice of additional relief upon a party in default:
(b) Service. The notice may be served by any of the following methods:
(1) By any method provided by law for service of summons, either within or without this State. Service may be made by an officer or by any person over 18 years of age not a party to the action. Proof of service by an officer may be made by return as in the case of a summons. Otherwise proof of service shall be made by affidavit of the server, stating the time, manner, and place of service. The court may consider the affidavit and any other competent proofs in determining whether service has been properly made.
(2) By prepaid certified or registered mail addressed to the party, return receipt requested, showing to whom delivered and the date and address of delivery. The notice shall be sent "restricted delivery" when service is directed to a natural person. Service is not complete until the notice is received by the defendant, and the registry receipt is evidence thereof. . . .
Trustees submit at Exhibit L a copy of a return receipt for certified mail directed to Sunstrand Electric Company, reflecting delivery on November 17, 2003. The motion represents (although it is not supported by affidavit or declaration) that the content of the mailing was the alias citation. If this evidence is credited, then service was accomplished under Rule 105(b)(2).
In addition, Trustees served the Secretary of State as prescribed under Illinois law for substitute service on a dissolved corporation. (Trustees have proffered evidence that Sunstrand was dissolved on October 1, 2003.) According to section 5.25 of the Illinois Business Corporation Act, 805 ILCS 5/5.25, as relevant here, service on the Secretary of State constitutes service on a dissolved corporation "whenever the corporation's registered agent cannot with reasonable diligence be found at the registered office in this State." In addition to serving the Secretary of State, the party effecting service must also send copies of the served papers by registered or certified mail at the last registered office of the corporation and at such address as the serving party has reason to believe is most likely to result in actual notice.
Trustees proffer an affidavit of a process server that on November 1 and 3, 2003, he unsuccessfully attempted service of a citation to discover assets on "Eugene Williams Aguirre" at the address of the registered agent (who is identified as Mary Lou Aguirre) at 9 N 856 Bowes Bend, Elgin, Illinois, and at 1616 Berkley Street, Elgin, Illinois, which is Sunstrand's place of business. (Sunstrand's counsel does not suggest that 1616 Berkley is an incorrect business address). The citation was directed to "Eugene William Aguirre, President, Sunstrand Electric Company, Inc., 1616 Berkley Street, Elgin, IL 60123." After diligent investigation (detailed attempts are attached at Exhibits G-L of the motion), Trustees learned that Mary Lou Aguirre no longer could be found at the Bowes Bend address, and so on November 13, 2003, the court issued the alias citation properly addressed to the Secretary's Corporations Department. Trustees also represent that they sent a copy of the alias citation by certified mail to the registered agent. (The envelope, which was returned as undeliverable, bears an address which is obliterated, so it cannot be ascertained whether the envelope was addressed to Sunstrand and/or Mary Lou Aguirre although it is apparent that she did not live at that address anyhow). Trustees also show evidence that a copy was sent via certified mail to Sunstrand at the Berkley Street address as well as via facsimile transmission, which was the last known place of business of Sunstrand Both communications were apparently received, in particular the certified mail receipt was returned delivered. If this evidence is credited, then Trustees served Sunstrand in accordance with Rule 105(a).
Sunstrand points to no case in which a citation directed to a corporate officer in his official capacity but served on the corporation has been held defective. The court's own research, however, suggests that both service on Sunstrand at the Berkley address by certified mail and service on the Secretary of State of an alias citation directed to Aguirre in his capacity as president was sufficient to effect service on Sunstrand See, e.g., Martin v. C.D. Gray, Inc., 110 F.R.D. 398, 401 (N.D. Ill. 1986), quoting Manley Motor Sales Co. v. Kennedy, 95 Ill. App.3d 199, 203, 419 N.E.2d 947, 950 (1981) ("`[T]he essence of the service requirements is to provide due process;' and although `generally due process requires following the rules, . . . where the rules are inadequate substantive due process requires only actual notice, that is, reasonable assurance that notice was actually given to the party.'"); Professional Therapy Services, Inc. v. Signature Corp., 223 Ill. App.3d 902, 911, 585 N.E.2d 1291, 1297 (1992) (summons directed to chairman in his capacity as an agent for the corporate defendant was service on the corporation); Ingram v. MFA Ins. Co., 18 Ill. App.3d 560, 566, 309 N.E.2d 690, 695 (1974) ("Where summons is served upon a party and the circumstances are such as to indicate that he is the person intended to be sued, he is subject to the judgment even though the process and judgment do not refer to him by his correct name."). Thus, the court concludes that Trustees have proffered prima facie evidence that Sunstrand was properly served as of November 17, 2003.
The final issue to wrap up this motion is whether it is timely, having been filed 60 days after the court's ruling. A motion to reconsider is subject to the discretion of the district court and serves the limited function to correct manifest errors of law or fact or to present newly discovered evidence. Caisse Nationale Credit Agricole v. CBI Indus., Inc., 90 F.3d 1264, 1269-70 (7th Cir. 1996); Rothwell Cotton Co. v. Rosenthal Co., 827 F.2d 246, 251 (7th Cir. 1987). The motion also serves a valuable function where the court "has patently misunderstood a party, or has made a decision outside the adversarial issues presented to the Court by the parties, or has made an error not of reasoning but of apprehension." Bank of Waunakee v. Rochester Cheese Sales, Inc., 906 F.2d 1185, 1191 (7th Cir. 1990) (quotation omitted). In general a motion brought more than 10 days after judgment requires proof entitling one to relief from judgment under Rule 60(b), whereas a motion brought within 10 days is treated under Rule 59 as one to alter or amend the judgment.
The court concludes that this motion may be treated as one under Rule 59 in light of the court's order of March 18, 2004, staying "all matters" in this case. March 18 was the tenth business day after the March 4, 2003, order, which in effect dismissed the citation. A stay stops the clock on the case. Thus, the motion to reconsider filed on May 4 while the stay was in effect will be treated as filed on the tenth day. If the case was stayed, perhaps Trustees should have first sought to lift the stay, but inasmuch as the court entertained the motion, it must be assumed that it implicitly lifted the stay for the purpose of hearing the motion to reconsider. Nevertheless, the court will formally lift the stay of the case to permit Trustees to proceed with a motion for rule to show cause against Aguirre why he should not be held personally liable for transfer of assets of Sunstrand after November 17, 2003. Sunstrand, in addition to contesting the rule to show cause, may also contest the evidence Trustees have proffered as proof of service if it has a good faith basis for doing so. In that event, Sunstrand's counsel shall request an evidentiary hearing on the matter of service on or before the next status date.
ORDER
The motion of plaintiffs-judgment creditors for reconsideration is granted [#15]. The court concludes that plaintiffs-judgment creditors have presented prima facie proof of service on defendant-judgment debtor Sunstrand on November 17, 2003. The order of March 18, 2004 staying the proceedings is vacated insofar as it stayed proceedings against William Aguirre. This matter will be called for a status hearing on June 24, 2004, at 9:30, to set the matter down for further proceedings.