Page 19 - John Hundley 2013

Litigation Law Roundup

Sharp Thinking

No. 90 Perspectives on Developments in the Law from The Sharp Law Firm, P.C. May 2013
Insufficient Efforts Void Publication Service

Insufficient efforts to locate and serve the defendant before seeking and effecting publication service
may be attacked by that defendant even after judgment by default has been entered, a panel in the
Appellate Court’s Third District has ruled.

In American Chartered Bank v. USMDS, Inc., 2013 IL App (3d) 120397,
the plaintiff had filed an affidavit for publication in the customary form but the
defendant later moved to set aside the resulting judgment on the grounds that
the plaintiff’s due inquiry and due diligence allegations were not true. The
appeals panel said the defendant may so attack the publication affidavit and
that the trial court should have held an evidentiary hearing on the issue.

“When service on a defendant does not comply with the statute, the court
lacks jurisdiction and a default judgment entered against the defendant is void,” the court said. “Due
inquiry and due diligence are statutory prerequisites for service by publication. . . . ‘(T)he law “requires an
honest and well-directed effort to ascertain the whereabouts of a defendant by an inquiry as full as
circumstances can permit,”’” it said, citing previous cases.

The court also rejected the plaintiff’s arguments that its service on the Illinois Secretary of State (SOS)
supported the judgment. In so ruling, the court said that inability to serve at the corporation’s registered
office is insufficient to support SOS service when the plaintiff with minimal effort could have
determined an address at which the defendant was likely to receive actual notice.

In USMDS, defendant alleged that at the time plaintiff sought to use substitute service,
it in fact knew both the working address for the corporation and the home of its key official,
as plaintiff had financed both of those locations and its loan officer had even been to the
official’s home. Though those allegations appear to have been significant, the points of law
handed down apparently may be applied in less egregious circumstances.

Seventh Circuit Issues Opinion on Vacating Default

The Seventh Circuit Court of Appeals recently issued a helpful opinion on vacation of default
judgments due to alleged “mistake, inadvertence . . . or excusable neglect” of a registered agent under
Federal Rule of Bankruptcy Procedure 9024 and Federal Rule of Civil Procedure 60(b)(1).

In In re Canopy Fin., Inc., 708 F.3d 934 (7th Cir. 2013), a bankruptcy trustee had served summons
and a complaint to avoid fraudulent transfers upon the registered agent of the alleged transferee, and then
received a default judgment when the defendant did not respond. After the trustee started seizing
property, the transferee moved to set aside the judgment.

Noting the lack of specificity in the transferee’s motion, the court dealt with a variety of hypotheticals:

► If the documents did not reach the agent, then the transferee’s inaction was excusable.

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