Illinois Farmers Insurance Co. v. Makovsky

FOURTH DIVISION
November 26, 1997
(Nunc pro tunc as of 9/30/97)

No. 1--96--4266

ILLINOIS FARMERS INSURANCE COMPANY, as ) Appeal from the
subrogee of DOROTHY NILLES, as parent ) Circuit Court of
and guardian of DEREK NILLES, a minor, ) Cook County.
)
Plaintiff-Appellant, )
)
v. )
)
ARNOLD MAKOVSKY, )
)
Defendant-Appellee, )
)
and )
)
VIRGINIA JANKOWICZ, ) Honorable
) Maureen D. Roy,
Defendant. ) Judge Presiding.

MODIFIED OPINION ON DENIAL OF REHEARING

JUSTICE BURKE delivered the modified opinion of the court upon
denial of rehearing:
Plaintiff Illinois Farmers Insurance Company appeals from an
order of the circuit court dismissing plaintiff's personal injury
action against defendant Arnold Makovsky (Makovsky) with prejudice
pursuant to Supreme Court Rule 103(b) (134 Ill. 2d R. 103(b)) for
failure to exercise reasonable diligence in obtaining service of
process on Makovsky and an order denying plaintiff's motion to
reconsider the dismissal. On appeal, plaintiff contends that the
trial court erred in dismissing its action because Rule 103(b) is
inapplicable where the statute of limitations, which the trial
court failed to apply, had not expired, i.e. plaintiff brought its
cause of action against Makovsky as the subrogee to the rights of
Derek Nilles, who was a minor at the time he was involved in an
accident with Makovsky, an uninsured motorist, and the statute of
limitations applicable to Derek had not run at the time of the
trial court's dismissal with prejudice. For the reasons set forth
below, we reverse.
Following a car accident on August 27, 1990, in which Derek
Nilles, a minor, was injured, Dorothy Nilles, Derek's mother, filed
an uninsured motorist claim against plaintiff, her own insurance
company. Plaintiff settled this claim with Dorothy for $50,000:
$16,666 for attorney fees; $472.67 for investigation expenses; $67
for the cost of opening a guardianship file; and the remainder of
$32,794.33 was placed into an interest bearing account in trust for
Derek until he reached his majority. Dorothy and Derek signed a
receipt and release for the settlement which stated, in pertinent
part:
"For and in consideration of the sum of
Fifty Thousand Dollars ($50,000.00) RECEIPT OF
WHICH IS HEREBY ACKNOWLEDGED, the undersigned,
a minor, and the parent (guardian) of Derek
Nilles hereby RELEASES and discharges Illinois
Farmers Insurance Co., their principals,
agents and representatives from any and all
rights, claims and injury damages of any kind
(known and unknown), existing or arising in
the future, and accordingly does hereby
expressly, voluntarily, knowingly and
advisedly WAIVE any and all rights granted to
him/her or said minor for injury damages
resulting from or related to an accident that
occurred on or about the 27th day of August,
1990, at or near 50th & Roberts Road-
Bridgeview.
This release shall not destroy or
otherwise affect the rights of persons on
whose behalf this payment is made, or persons
who may claim to be damaged by reason of the
accident other than the undersigned to pursue
any legal remedies they may have against the
undersigned or any other person.
***
Further, the undersigned agree to
reimburse and indemnify all released parties
for any amounts which any insurance carriers,
government entities, hospitals or other
persons or organizations may recover from them
in reimbursement for amounts paid to or on my
behalf of the undersigned as a result of this
accident by way of CONTRIBUTION, SUBROGATION,
INDEMNITY, or OTHERWISE."
On August 19, 1992, plaintiff filed a complaint against
Makovsky and Virginia Jankowicz (Jankowicz), which alleged that:
plaintiff was the subrogee of Dorothy Nilles and her son Derek
Nilles, a minor, "by virtue of a certain automobile policy of
insurance"; on August 27, 1990, Makovsky was driving in a southwest
direction on Roberts Road, Jankowicz was driving on Roberts Road in
a southern direction and Derek was crossing the street on foot;
Makovsky and Jankowicz acted negligently; and as a direct and
proximate result, Derek was struck by one of the cars, incurring
injury, pain, disability and medical expenses.
On August 26, 1992, plaintiff filed a summons directed to both
defendants. Service of the summons was not obtained on Makovsky
because a neighbor told the process server that Makovsky had moved.
On October 28, 1992, plaintiff filed a motion to voluntarily
dismiss Jankowicz as a party to its complaint pursuant to its
settlement with her. On April 20, 1993, the trial court dismissed
plaintiff's case for want of prosection. On May 25, the trial
court vacated the dismissal, and granted plaintiff leave to file an
alias summons. On June 14, plaintiff filed an alias summons
directed to Makovsky, along with an affidavit of compliance that
stated that Makovsky "was a resident at the time the cause of
action arose but has subsequently became a non-resident of this
state." On June 22, the trial court again dismissed plaintiff's
case for want of prosecution. On June 24, plaintiff filed a second
alias summons directed to Makovsky. On August 17, plaintiff filed
a motion to vacate the dismissal, which the trial court granted.
On March 4, 1994, plaintiff filed an "affidavit of prove-up,"
stating that the allegations in the complaint were true and that
plaintiff expended $50,000 in settlement of Derek's claim for
injuries. The trial court entered a default judgment in favor of
plaintiff and against Makovsky in the sum of $50,000, plus costs.
On July 19, 1995, Makovsky filed a special and limited
appearance and motion to quash service and vacate the default
judgment against him. Makovsky argued that service of process on
him was made under the statute providing service of process for
non-residents of Illinois and, because he was a resident of
Illinois at the time of the occurrence and had lived in Illinois
since the accident, service of process on him pursuant to the
statute applicable to non-residents was ineffective. Makovsky also
attached an affidavit to his motion, stating that he was a resident
of Illinois on August 27, 1990, and resided at 8136 South Octavia
in Bridgeview, had lived "continuously and openly" in Illinois
since that time and resided at 8136 South Octavia during the entire
year of 1992. The trial court entered an order vacating the
default judgment against Makovsky. Thereafter, plaintiff filed an
ex parte motion for the appointment of a special process server.
On November 2, 1995, the trial court again dismissed
plaintiff's case for want of prosecution. On November 6, the trial
court issued an order appointing Jennifer Cochran as a process
server and, on November 22, plaintiff filed a motion to vacate the
dismissal, which the trial court granted.
On January 5, 1996, plaintiff filed a third alias summons
directed to Makovsky. Makovsky was served with the summons on
April 14. On May 13, Makovsky filed a pro se appearance. On May
21, plaintiff's case was again dismissed for want of prosecution.
On July 9, the trial court vacated the dismissal.
On July 30, 1996, Makovsky's counsel filed an appearance and
jury demand on his behalf and, on August 13, he filed a Rule 103(b)
motion to dismiss plaintiff's complaint. In his motion, Makovsky
alleged that: Derek's mother, Dorothy Nilles, had brought an
uninsured motorist claim against plaintiff that was settled for
$50,000; Makovsky had resided at his address in Bridgeview,
Illinois since October 2, 1989; Makovsky was not served in this
case until approximately six years after the accident resulting in
Derek's injury; plaintiff knew or should have known of Makovsky's
whereabouts and could have served him with process in a prompt
manner; and plaintiff's failure to promptly serve him with summons
"strongly justifie[d] dismissal [of plaintiff's complaint] with
prejudice." On August 13, the trial court entered an order
granting plaintiff until September 3 to file a response to
Makovsky's motion. On September 10, Makovsky filed an affidavit in
support of his motion to dismiss in which he stated that he and his
family resided at his home in Bridgeview "exclusively and
continuously" since October 2, 1989.
On September 19, 1996, after a hearing, the trial court
granted Makovsky's Rule 103(b) motion to dismiss plaintiff's
complaint with prejudice. There is no evidence in the record of
what statute of limitations the trial court relied upon in
rendering its decision. Plaintiff filed a motion to reconsider the
court's dismissal order, arguing that the statute of limitations on
the action did not run until April 9, 1997, because Derek was a
minor and plaintiff, as Derek's subrogee, was subject to the same
statute of limitations as Derek and, therefore, the dismissal of
its complaint should be without prejudice. The trial court denied
plaintiff's motion on November 6, 1996, and this appeal followed.
On appeal, plaintiff argues that the trial court erred in
dismissing its complaint with prejudice pursuant to Supreme Court
Rule 103(b) based on a lack of diligence in serving Makovsky with
process. More specifically, plaintiff maintains that because Derek
was a minor at the time of the accident, the statute of limitations
pertaining to minors did not expire until April 9, 1997, which was
two years after Derek turned 18, and plaintiff's complaint was,
therefore, improperly dismissed with prejudice on September 19,
1996. Plaintiff maintains that it, as Derek's subrogee, "'stands
in the shoes'" of Derek with regard to the applicable statute of
limitations; all of Derek's rights, including the applicable
statute of limitations, should pass to plaintiff; until the statute
of limitation expired, Makovsky could not have been prejudiced by
a delay in service of process; and plaintiff's purported lack of
diligence, on which the trial court based its decision to dismiss
the case, occurred prior to the expiration of the statute of
limitations and was improperly considered by the trial court.
Makovsky contends that the trial court did not err in
dismissing plaintiff's complaint with prejudice pursuant to Rule
103(b), arguing that a defendant need not show prejudice for
dismissal of a complaint pursuant to Rule 103(b); Rule 103(b)
dismissals fall within the discretion of the trial court; "[a]ny
limitations period notwithstanding, a plaintiff's delay in later
failing to serve a defendant--which is the soul of due process--is
precisely what the rule proscribes"; one of the purposes of Rule
103(b) "was to prevent a plaintiff from circumventing the statute
of limitations by filing suit within the applicable statutory
period but delaying or failing to effect an issuance of [a]
summons," and "[t]o countenance [plaintiff's] obvious delay in
serving *** Makovsky would be violative of the fundamental purpose
of the rule"; and the record is "void of any diligence" by
plaintiff. Makovsky further contends that giving the same statute
of limitations to subrogees of minors "is neither logical nor
practical"; statutes of limitations are "procedural in nature and
not related to the right but to the remedy by fixing a time within
which an action must be brought"; plaintiff only acquired the
"right" to seek indemnity from defendants; the doctrine applied by
courts in protecting the rights of minors should not be extended to
insurance companies; "[w]hile the majority of cases reported adhere
to the duty of the judiciary to closely monitor the rights of
infants lest they go unprotected ***, this strict scrutiny should
not be extended to individuals of majority of age as well as
corporate entities such as [plaintiff]"; and plaintiff failed to
cite to any authority to support its argument that "the legislature
intended that the limitations period enjoyed by minors also be
acquired by insurance companies seeking recovery under their
claimed subrogation rights." (Emphasis supplied.)
Supreme Court Rule 103(b) states as follows:
"Dismissal for Lack of Diligence. If the
plaintiff fails to exercise reasonable
diligence to obtain service prior to the
expiration of the applicable statute of
limitations, the action as a whole or as to
any unserved defendant may be dismissed
without prejudice. If the failure to exercise
reasonable diligence to obtain service occurs
after the expiration of the applicable statute
of limitations, the dismissal shall be with
prejudice. In either case the dismissal may
be made on the application of any defendant or
on the court's own motion." (Emphasis added.)
134 Ill. 2d R. 103(b).
"In ruling on a Rule 103(b) motion, a court may not consider the
period or activities before the expiration of the statute of
limitations. *** Rule 103(b) indicates a difference between
actions before the statute of limitations runs and those after."
Langford v. Sentry Insurance of Illinois, Inc., 193 Ill. App. 3d
386, 388-389, 549 N.E.2d 951 (1990).
The statute of limitations applicable to minors is set forth
in section 13--211 of the Code of Civil Procedure (735 ILCS 5/13--
211 (West 1993)), and provides:
"Minors and persons under legal
disability. If the person entitled to bring
an action, specified in Sections 13-201
through 13-210 of this Act, at the time the
cause of action accrued, is under the age of
18 years, or is under a legal disability, then
he or she may bring the action within 2 years
after the person attains the age of 18 years,
or the disability is removed."
It is well settled that "[t]he court has a duty to see that the
rights of an infant are adequately protected." Muscarello v.
Peterson, 20 Ill. 2d 548, 555, 170 N.E.2d 564 (1960). "The
language of Rule 103(b) protects minors from a shortening of the
statute of limitations applicable to them in a case where the
defendant is entitled to a dismissal." Parker v. Piskur, 258 Ill.
App. 3d 344, 349, 630 N.E.2d 475 (1994).
In discussing the nature of subrogation, our supreme court in
Dix Mutual Insurance Co. v. LaFramboise, 149 Ill. 2d 314, 319, 597 N.E.2d 622 (1992), stated:
"The doctrine of subrogation is a
creature of chancery. It is a method whereby
one who had involuntarily paid a debt or claim
of another succeeds to the rights of the other
with respect to the claim or debt so paid.
[Citation.] The right of subrogation is an
equitable right and remedy which rests on the
principle that substantial justice ought to be
attained by placing ultimate responsibility
for the loss upon the one against whom in good
conscience it ought to fall. ***
One who asserts a right of subrogation
must step into the shoes of, or be substituted
for, the one whose claim or debt he has paid
and can only enforce those rights which the
latter could enforce."
Plaintiff here asserts, and we agree, that the issue of
whether the statute of limitations applicable to a minor subrogor
also applies to his subrogee is a case of first impression in this
state. Other jurisdictions have held that the statute of
limitations applicable to a subrogor also applies to the subrogee.
For example, in Automobile Insurance Co. of Hartford v. Union Oil
Co., 85 Cal. App. 2d 302, 193 P.2d 48 (1948), the court stated:
"We are convinced that among the rights of an
insurance company to recover a loss paid by
it, which rights are claimed by subrogation to
the rights of an insured against a third party
responsible for a fire, there is included the
right to the same statute of limitations
period that applies to its insured. ***
Manifestly, whatever period of limitation was
applicable to the insured herein passed by
subrogation to the insurance carriers ***.
Upon principles of reason as well as natural
justice, it seems only fair, right, just and
equitable that one who is subrogated to the
rights and remedies of another should be
allowed the same time in which to enforce such
rights that the law would have allowed to the
person to whose rights and remedies he
succeeds." Union Oil, 193 P.2d at 49-50.
See also Insurance Co. of North America v. Puerto Rico Marine
Management, Inc., 599 F. Supp. 199, 203 (1984) (where the subrogee
sought breach of contract damages from its subrogors' carrier, the
court held that "[w]hatever period of limitations is applicable to
the insured passes by subrogation to the insurance carrier, who by
reason of such subrogation, is put in place of the party to whose
right it is subrogated").
This court has held, in workers' compensation cases, that when
an employer has a subrogated action against a third party, the same
statute of limitations applies to the employer as would apply to
the worker. Employers Mutual Casualty Co. v. Trimon Elevator Co.,
71 Ill. App. 2d 124, 131, 217 N.E.2d 391 (1966) ("[T]he rule with
reference to the period of limitations applied to an employer's
subrogated action; in other words, the employer stepped into the
shoes of the employee and was governed by the same statute of
limitations"); Walsh v. Central Cold Storage Co., 324 Ill. App.
402, 413, 58 N.E.2d 325 (1944) ("[T]he statute of limitations as to
personal injuries and wrongful death is applicable in actions
against such third party in the same manner as it would have been
applicable to the employee or his personal representative if they
had had an action against such third party").
The above cases embody sound reasoning and we conclude that,
based on the principle that a subrogee attains all of the rights of
a subrogor, the statute of limitations applicable to a minor
subrogor is equally applicable to a subrogee insurance carrier.
Applying this reasoning to the case at bar, it is clear that the
same statute of limitations that applies to Derek also applies to
plaintiff. Therefore, we hold that the trial court erred in
dismissing plaintiff's complaint with prejudice pursuant to Rule
103(b) because the statute of limitations applicable to Derek's
claims against Makovsky had not expired at the time of the
dismissal.
Makovsky makes several arguments with respect to the
application of Rule 103(b) and the statute of limitations issue,
which we briefly address. Makovsky first argues that it would be
inequitable for this court to permit plaintiff "this extended
period of time [pursuant to the statute of limitations for minors],
especially in light of *** [plaintiff's] conspicuous dilatoriness
in serving Mr. Makovsky, to now bring any action against him." It
is clear, however, that notwithstanding Makovsky's "conspicuous
dilatoriness" argument, "a dismissal with prejudice [can] only be
entered when the failure to use diligence in obtaining service
occurred after the expiration of the applicable statute of
limitations." (Emphasis added.) Aranda v. Hobart Manufacturing
Corp., 66 Ill. 2d 616, 619, 363 N.E.2d 796 (1977). "In ruling on
a Rule 103(b) motion, a court may not consider the period or
activities before the expiration of the statute of limitations.
*** To indicate that a court could consider the time and actions
before the running of the statute would encourage the filing of
claims at the tail end of the statute of limitations so the
prestatute time would not be held against a plaintiff. This is
clearly contrary to the policy and intent of the rule." Langford,
193 Ill. App. 3d at 388. While it is true that Makovsky was not
served with process until almost six years after the accident had
passed, it would be improper for the court to consider this period
in ruling on a Rule 103(b) motion to dismiss because the applicable
statute of limitations as to minors, as discussed above, had not
run at the time of service of process.
Makovsky also maintains that plaintiff received an assignment
of rights from Dorothy and Derek, rather than a subrogation,
because only Derek, a minor, could have brought an action for
defendants' negligence which resulted in injuries to Derek and
Dorothy, upon payment and satisfaction of the claim, "arguably
assigned her rights to Farmers [plaintiff] to pursue these alleged
tortfeasors." (Emphasis in original.)
Assignment "of an action for injuries to the body" is
prohibited in Illinois and is void. Remsden v. Midway Liquors,
Inc., 30 Ill. App. 2d 132, 142-143, 174 N.E.2d 7 (1961). Makovsky
relies on Haley v. Posdal, 201 Ill. App. 3d 963, 559 N.E.2d 1083
(1990), for the proposition that the transfer of rights in this
case was an assignment rather than a subrogation. This case is
clearly distinguishable from the case at bar. In Haley, the
plaintiff had an insurance policy under which she made an
underinsured motorist claim. The insurer paid the plaintiff
$15,000, then sued in subrogation to collect the $15,000 from the
other driver and the plaintiff's son Tate, the driver of the car in
which the plaintiff was a passenger. The trial court dismissed the
subrogation action against Tate, holding that the insurer could
only subrogate against the underinsured motorist. The plaintiff
then filed an action against Tate and, after receiving an
additional settlement from her insurer, the plaintiff signed a
release of her claim against her insurer, which stated:
"'The undersigned hereby assigns,
transfers and sets over to [the insurer] any
and all claim or causes of action for bodily
injury which the undersigned now has, or may
hereafter have, to recover against any person
or persons as the result of said accident and
loss above stated to the extent of the payment
made above ***.'" (Emphasis added.) Haley,
201 Ill App. 3d at 966.
The insurer filed an amended complaint containing a count against
Tate which was again dismissed by the trial court with prejudice.
On appeal, the court found that the release was not a subrogation,
but instead was an assignment of a bodily injury claim and was,
therefore, void. The court stated "where the language in the
release 'assigns' the claim or cause of action to the insurer
without the necessity of recovery, an assignment rather than a
subrogation exists." Haley, 201 Ill. App. 3d at 968. It found
"the use of the term 'assigns' plus the absence of any recovery by
Haley against Tate (due, of course, to the fact that Haley
dismissed her suit against Tate) establishes an assignment not a
subrogation action." Haley, 201 Ill. App. 3d at 968.
Here, the release signed by Dorothy and Derek was a
subrogation rather than an assignment. Unlike the Haley case, the
release in this case did not contain the term "assigns," and
instead contained the term "subrogation." Moreover, the release
essentially goes to plaintiff's right to collect any damages paid
by third parties for Dorothy and Derek's injuries arising from the
accident. Thus, the release granted plaintiff the right of
subrogation in consideration of plaintiff's settlement with Dorothy
and Derek. Accordingly, while inartfully drafted, a reading of the
release in its entirety shows that Dorothy and Derek agreed, "by
way of CONTRIBUTION, SUBROGATION, INDEMNITY, or OTHERWISE," to
reimburse plaintiff for any amounts paid to Dorothy and Derek by
third parties. Based on these facts, the release signed by Derek
and Dorothy was clearly not an assignment and, instead was a
subrogation.
Makovsky further contends that the obligation to pay medical
bills lies with the parent and, therefore, the cause of action to
recover those expenditures would lie with the parent and not the
child. He argues, therefore, that Dorothy is the true party in
interest, not Derek. He further argues that "the true subrogor"
was Dorothy Nilles and not her son Derek because Dorothy was the
one who had contracted with plaintiff for uninsured motorist
coverage, "under which contract she sought her remedy and payment
under the terms of the policy." Makovsky maintains that because
Dorothy was "of majority age" at the time of the accident, the
limitations period acquired by plaintiff was two years following
the date of the accident, instead of two years following the date
Derek reached his majority. In support of his argument, Makovsky
relies on Bibby v. Meyer, 60 Ill. App. 2d 156, 159, 208 N.E.2d 367
(1965), where the court found that a minor's medical expenses
"properly belonged to his mother and since his mother had released
[the] defendant, the mother's release would be binding on the
plaintiff to the extent of the medical expenses incurred," and
Kennedy v. Kiss, 89 Ill. App. 3d 890, 894, 412 N.E.2d 624 (1980),
where the court stated that it was well settled "in Illinois that
the parents of a minor child are responsible for the child's
medical expenses," and "[s]ince the obligation to pay medical
payments is on the parent, the cause of action to recover for the
medical expenses lies in the parent, not in the child." We find
these cases distinguishable from the case at bar because, as
plaintiff's counsel stated at oral arguments, plaintiff is not
claiming medical expenses as damages from Makovsky. This is clear
based on the fact that the entire $50,000 settlement entered into
between plaintiff and Dorothy, as guardian, minus costs, went into
a trust for Derek's benefit only and none of the money went to
Dorothy. While the settlement did not specify exactly what damages
the funds covered, it clearly did not include medical expenses
which, by law, as discussed above, would have been given to
Dorothy.
Lastly, Makovsky relies upon Curtis v. Pekin Insurance Co.,
105 Ill. App. 3d 561, 434 N.E.2d 555 (1982), in support of his
argument that a specific limitations period may be included within
Dorothy's insurance policy with plaintiff "which must be given
priority." In Curtis, the plaintiff had sued her insurance company
for the recovery of damages for the destruction of her house by
fire. The trial court dismissed the plaintiff's complaint with
prejudice pursuant to Rule 103(b) based on a 20-month delay of
service of process. The main issue before the court on appeal was
whether a standard 12-month limitation of actions clause contained
within the policy, as required by law, constituted a statute of
limitations for the purposes of a Rule 103(b) dismissal with
prejudice. The Curtis court held that "the standard 12-month fire
insurance policy limitation-of-actions clause *** [was] a statute
of limitations for purposes of Supreme Court Rule 103(b)." Curtis,
105 Ill. App. 3d at 565. However, Curtis is distinguishable from
the present case because here there is no evidence in the record
regarding a special limitations period in Dorothy's insurance
policy. In addition, even if a special limitations period was set
forth in the policy, it would not control in this case because
Derek was a minor at the time of the accident. Severs v. Country
Mutual Insurance Co., 91 Ill. App. 3d 350, 414 N.E.2d 846 (1980).
For the reasons stated, we reverse the circuit court's orders
dismissing plaintiff's complaint with prejudice and remand the
cause for further proceedings.
Reversed and remanded.
WOLFSON, P.J., and CERDA, J., concur.