In Charles Austin, Ltd. v. A-1 Food Services, Inc., 2014 IL App (1st) 132384, the First District affirmed the denial of a corporate defendant’s Section 2-1401 motion to vacate a judgment.
About three months after judgment, the defendant sought to vacate the judgment claiming it was never served with the lawsuit. The trial court denied the motion leaving the judgment intact.
Q: Why?
A:
1/ A party can serve a private corporation by leaving the complaint and summons with the registered agent or any officer or agent of the corporation found anywhere in the State. 735 ILCS 5/2-204;
2/ An affidavit of service is prima facie proof of proper service and the court will indulge every presumption in favor of finding that service was proper;
3/ To attack service, the moving party must produce evidence that casts doubt on the return of service by clear and convincing evidence;
4/ A conclusory affidavit that merely says “I was never served” isn’t sufficient to refute a return of service. ¶ 16.
Here, the defendant’s affidavit saying he didn’t recall receiving the plaintiff’s complaint wasn’t enough to contest service on the corporation. A defendant’s bare assertion that it doesn’t remember receiving a summons and complaint is not the kind of evidence required to impeach a facially valid service return. ¶ 19.
In Illinois, to vacate a judgment more than 30 days old, a petitioner must show (1) the existence of a meritorious defense, (2) due diligence in presenting the defense in the underlying claim, and due diligence in filing the 2-1401 petition.
The defendant failed to show a meritorious defense. The plaintiff alleged the predecessor corporation secretly sold its assets to the defendant – the acquiring entity – while the litigation was pending and did so to elude the debt to the plaintiff. A well-known exception to the general rule that a successor corporation doesn’t assume the debts of a corporate predecessor is where the seller engages in a fraudulent transaction to avoid the seller’s contract obligations.
Here, the court found that the fraud exception to the rule against successor liability applied.
The court found that plaintiff sufficiently pled under Illinois fact-pleading rules that the sale of the predecessor’s assets to the defendant was fraudulent and done for the purpose of evading the plaintiff’s contract rights. As a result, the meritorious defense argument failed. ¶¶ 28-37.
The defendant also failed to establish due diligence in raising its defenses to the underlying breach of contract suit. The court noted the defendant’s registered agent was served with process in October 2012, the judgment entered in January 2013, the defendant’s bank account was liened in May 2013 and it didn’t file its 2-1401 motion until June 2013.
The eight month delay in responding to the lawsuit signaled its lack of diligence in defending the suit.
Take-aways:
– To challenge service, a defendant must do more than blanketly allege that he doesn’t recall receiving a pleading;
– If a plaintiff alleges factual basis for his claim, the defendant trying to vacate a default judgment will have difficulty meeting 2-1401’s meritorious defense element.
