Berg v. Mid American Industries Inc.

5th Division
November 21, 1997

1-96-3337

ALBERT E. BERG and A.E. BERG CO., ) Appeal from the
) Circuit Court of
Plaintiffs-Appellants, ) Cook County.
)
v. )
)
MID AMERICA INDUSTRIAL, INC., and )
RICHARD Z. PIERCE, ) Honorable
) Edwin Richardson,
Defendants-Appellees. ) Judge Presiding.

PRESIDING JUSTICE HARTMAN delivered the opinion of the court:
Plaintiffs, Albert E. Berg (Berg) and A.E. Berg Co. (Berg
Co.), appeal the circuit court's denial of their motion to vacate
its order dismissing with prejudice their two-count complaint and
causes of action. They raise as issues for review whether (1)
defendants' motion to dismiss was properly before the court; (2)
the dismissal was an appropriate sanction and required a hearing
before it was entered; and (3) the complaint filed by a layperson
on his own behalf and on behalf of a corporation was a nullity.
On October 19, 1995, Berg, individually and on behalf of his
corporation, Berg Co., filed a two-count complaint against Mid-
America Industrial, Inc. (Mid-Am), and its president, Richard Z.
Pierce (Pierce) individually. Count I sought $17,227 in salary and
expenses allegedly owed to Berg individually by Mid-Am. Count II
sought recovery of $15,000 allegedly owed to Berg Co. under
equipment leases with Mid-Am. Two summonses appear in the record.
Each contained Berg's typed name, address, and telephone numbers.
Each left blank the line beginning with the printed words,
"Attorney for." On the summons dated October 19, 1995, the line
beginning with the legend "Atty No." was left blank. On the
summons dated November 1, 1995, the numbers "08993," apparently
assigned to an attorney who had done work for both parties, Edward
A. Scott, was written in by hand. The identity of the person who
wrote the numbers is not entirely clear, but is claimed by
defendants to have been Berg himself. Berg is not and never has
been a licensed attorney.
On November 9, 1995, Mid-Am and Pierce moved to dismiss the
complaint because it was filed by a layperson. Under Illinois law,
a corporation can file a complaint only through a licensed
attorney; any action filed without an attorney is null and void ab
initio. Housing Authority of Cook County v. Tonsul, 115 Ill. App.
3d 739, 450 N.E.2d 1248 (1983) (Housing Authority).
On December 14, 1995, Scott sought leave to appear on behalf
of Berg and Berg Co. At the same hearing, Mid-Am and Pierce moved
to disqualify Scott from representing plaintiffs in the
proceedings. In support of the motion to disqualify, Pierce
submitted a sworn affidavit that Scott represented defendants in
three pending legal matters, and knew of confidential information
and the financial situation of the company. In response, Scott
averred that he worked for defendant on only three occasions, never
conferred personally with Pierce, and knew nothing of defendant's
financial situation. In reply to Scott's response, Pierce
submitted a supplemental certification, which is not included in
the record, but is attached to defendants' brief. The
certification further contradicts Scott's affidavit, claiming that
Scott had worked on six cases for Mid-Am and had conferred
personally with Pierce. The order entered on December 14, 1995
granted the parties time to respond to each other and set the
matter for hearing on January 11, 1996. On January 11, 1996, the
motion to disqualify was continued to February 23, 1996.
The next order appearing in the record reveals that on March
1, 1996, the circuit court granted defendants' motion to disqualify
Scott from representing plaintiffs and set the case for a status
hearing on April 12, 1996, the date on which the court heard the
case for status. Scott was present in the courtroom. The court
admonished Scott to refrain from any comment. No one else
representing plaintiffs was then present. According to papers
filed by defendants in the circuit court, made part of the record,
"the court on its own motion asked if there is a motion to
dismiss." Defendants then moved to dismiss, which the circuit
court granted with prejudice.
On May 10, 1996, Alan L. Fulkerson moved for leave to appear
on plaintiffs' behalf, and to vacate the dismissal order of April
12, arguing that plaintiffs never had notice of the April 12 status
hearing and that under Housing Authority, 115 Ill. App. 3d 739
(1983), Count II was void ab initio.
On August 23, 1996, the circuit court denied the motion to
vacate and again dismissed the case, this time sua sponte. In
denying the motion to vacate, the court asserted that plaintiffs
and Scott had "deliberate disregard of this court's authority * *
*." In support of the court's August 23 sua sponte order
dismissing plaintiff's complaint, the court cited Clymore v.
Hayden, 278 Ill. App. 3d 862, 663 N.E.2d 755 (1996) for the
proposition that a circuit court can dismiss an action as a
sanction.
Plaintiffs appeal. We reverse and remand for reasons which
follow.
I
Plaintiffs initially allege that the circuit court abused its
discretion in denying their August 23, 1996 motion to vacate the
dismissal order of April 12, 1996.
The circuit court, in its discretion, may vacate a final order
upon any terms that shall be reasonable. 735 ILCS 5/2-1301(e)(West
1993). The guiding principle in a motion to vacate "is that the
petition invokes equitable powers of the court to prevent
enforcement of a judgment or dismissal of an action when it would
be unfair, unjust, or inequitable." Kirk v. Michael Reese Hospital
& Medical Center, 275 Ill. App. 3d 170, 173, 655 N.E.2d 933 (1995).
A motion to vacate should be granted or denied in the "interests of
justice and fairness." Kirk, 275 Ill. App. 3d at 173. The court's
denial of the motion to vacate will not be disturbed unless an
abuse of discretion is identified. Ward v. Rosenfeld, 204 Ill.
App. 3d 908, 912, 562 N.E.2d 674 (1990).
A
Plaintiffs first contend that they did not receive notice of
the April 12 hearing, which defendants dispute.
Parties to an action who have appeared are entitled to notice
of any impending motions or hearings. City of Chicago v. American
National Bank & Trust Co., 171 Ill. App. 3d 680, 688, 525 N.E.2d 915 (1988). In addition, Rule 2.1 of the circuit court of Cook
County requires written notice of motion hearings, to be given to
all parties who have appeared. Cook Co. Cir. Ct. R. 2.1(a)(eff.
April 23, 1992).
Defendants submit that, because Scott was present at the April
12 status hearing, plaintiffs must have had notice of the hearing.
Plaintiffs do not dispute that Scott was in court on April 12.
Defendants, however, do not argue that after Scott was disqualified
notice to him is imputed to plaintiffs as a matter of law (Foley v.
Metropolitan Sanitary District of Greater Chicago, 213 Ill. App. 3d
344, 572 N.E.2d 978 (1991)), but conclude that, because Scott knew
of the April 12 hearing, plaintiffs did as well. Nothing in the
record, however, demonstrates that Scott and plaintiffs
communicated between March 1, the date of disqualification, and
April 12. Were we to assume, for the sake of argument, that notice
of a hearing on status of the case was sent and received, there
still was no notice to plaintiffs that the motion to dismiss also
would be considered and acted on at that time. The motion to
dismiss the case was not set for hearing in any circuit court order
between the December 14, 1995 order, which allowed the motion to
disqualify Scott to be filed, and the April 12, 1996 order, which
dismissed the action. The court's orders of January 11, 1996, and
March 1, 1996, did not mention the motion to dismiss. The March 1
order merely stated that the case was set for status on April 12,
1996.
It would be unjust, unfair, and inequitable to allow the
dismissal order to stand because, from the foregoing litany of
events, it is unclear that plaintiffs received proper notice of the
April 12 hearing. Clearly, the circuit court's spontaneous
invitation to defendants at that hearing to make the motion to
dismiss demonstrates that plaintiffs could not have had notice that
dismissal was contemplated.
B
Defendants suggest that the circuit court properly dismissed
plaintiffs' complaint as a sanction, thereby justifying the lack of
notice to plaintiffs; however, the preamble of the April 12, 1996
dismissal order is to the contrary, having recited: "This cause
coming on to be heard for status and Defendants' previously filed
motion to dismiss the Complaint at Law, notice having been given
and the Court being informed in the premises, ***." (Emphasis
added.) The order makes no reference to "sanctions."
The circuit court, on August 23, 1996, entertained plaintiffs'
motion to vacate the order of April 12, which it denied, explicitly
"relying upon Clymore v. Hayden, 278 Ill. App. 3d 862 (1996), in
support of its sue [sic] sponte action to dismiss plaintiffs'
complaint based upon plaintiffs deliberate disregard of this
Court's authority." Defendants also rely upon Sander v. Dow
Chemical Co., 166 Ill. 2d 48, 651 N.E.2d 1071 (1995), to justify
the circuit court's action.
Neither Clymore nor Sander are helpful in resolving the issues
presented here. Clymore was an appeal from the dismissal of a
malpractice action as a discovery sanction pursuant to Rule 219
(134 Ill. 2d R.219) (Rule 219). There, for a period of two years,
"plaintiff's counsel *** caused delay" disregarding the circuit
court's pre-trial and discovery orders in seven specific instances,
which the opinion set forth in detail. Clymore, 278 Ill. App. 3d
at 867. Based upon plaintiff's consistent and deliberate disregard
of judicial authority in that case, the court affirmed the
dismissal as an appropriate discovery sanction, holding that
"[w]here, as in this case, it is apparent that a party has wilfully
disregarded the authority of the court and such disregard is likely
to continue, the interests of that party in the lawsuit must bow to
the interests of the opposing party." Clymore, 278 Ill. App. 3d at
868.
There was no discovery ordered or pending in the instant case.
Neither Berg nor Berg Co. were accused of violating any pre-trial
order. Rule 219 cannot form the basis for the sanction which the
circuit court imposed here. Nor does Clymore hold that a court may
sua sponte dismiss a plaintiffs' complaint, based on isolated acts
which a court perceives to be in disregard of its authority,
without affording to plaintiff a hearing.
Sander also is clearly distinguishable. There, for almost two
years, plaintiffs' counsel failed to comply with court orders.
Affirming dismissal of the case as a Rule 219 sanction, the supreme
court noted:
"On four separate occasions, the trial court
entered orders setting deadlines for the
filing of plaintiffs' amended complaint. The
court also ordered plaintiffs to reply to
Monsanto Corporation's motion for a protective
order relating to discovery on or before
specific dates. Plaintiffs violated each of
these orders. In addition, plaintiffs
repeatedly violated court orders that struck
certain allegations in plaintiffs' complaint.
Those allegations were pled again in
plaintiffs' second-amended and third-amended
complaints. These court orders directly
addressed pretrial issues concerning
amendments to the pleadings, the
simplification of issues and the court's
pretrial calendar, each of which is expressly
contemplated by Rule 218." Sander, 166 Ill. 2d at 62-63.
Nothing in the present record demonstrates that Berg, Berg Co.
or their prior attorney engaged in conduct which repeatedly
violated Rule 218 in disregard of the circuit court's authority.
C
The sanction of dismissal entered by the circuit court could
not have been authorized by invoking Supreme Court Rule 137 (155 Ill. 2d 137 (Rule 137)) in entering the August 23, 1996 order.
Sanctions may be directed against a party or its attorney
under Rule 137 for filing any pleading which is not well-grounded
in fact, not warranted by existing law, or which has been
interposed for any improper purpose, including harassment.
Sanction orders are given considerable deference, and will not be
reversed on appeal absent an abuse of discretion (Yassin v.
Certified Grocers of Illinois, Inc., 133 Ill. 2d 458, 467, 551 N.E.2d 1319 (1990)); however, prior to their imposition, a hearing
must be conducted to afford the parties an opportunity to present
evidence to support or rebut the claim and to allow them to
articulate their respective positions. Estate of Baker, 242 Ill.
App. 3d 684, 687, 611 N.E.2d 59 (1993). Rule 137 is penal in
nature and will be strictly construed. Century Road Builders, Inc.
v. City of Palos Heights, 283 Ill. App. 3d 527, 530, 670 N.E.2d 836
(1996). A court exacting a Rule 137 sanction must make explicit
the legal or factual basis for its decision. O'Brien & Associates
v. Tim Thompson, Inc., 274 Ill. App. 3d 472, 653 N.E.2d 956 (1995).
At worst, the record here shows only the improper inclusion of an
attorney's identification number on one of two summonses, and the
presence of a disqualified attorney who rose to speak, but never
said one word about the present case or any other, because he was
precluded from doing so by the court. No hearing was conducted by
the court in the case sub judice to resolve factually the
contradictions appearing in the affidavits and certifications. Nor
did the circuit court provide the requisite legal or factual
findings in the August 23 order as prescribed by Rule 137, so that
the bases for its actions could be appropriately evaluated.
When considering the propriety of Rule 137 sanctions, a
reviewing court must determine whether (1) the circuit court's
ruling was based upon adequate information; (2) valid reasons
appropriate to the case are identifiable; and (3) the ruling
logically follows from applying the reasons stated to the
particular circumstances of the case. Wagener v. Papie, 242 Ill.
App. 3d 354, 364, 609 N.E.2d 951 (1993); Kubiak v. City of Kewanee,
228 Ill. App. 3d 605, 592 N.E.2d 1200 (1992).
The dismissal orders entered without notice or hearing by the
circuit court on April 12 and August 23, 1996 are devoid of
sufficient information or valid reasons appropriate to the
sanctions imposed and must be reversed and remanded.
II
Plaintiffs contend that Count II of their complaint was null
and void ab initio because it was brought by a layperson on behalf
of a corporation. Defendants argue that the nullity rule should
not be applied in this case, apparently seeking a status for the
complaint sufficiently viable to sustain the punishment meted out
by the circuit court.
Corporations may not appear in court through a layperson,
only by a licensed attorney. Housing Authority, 115 Ill. App. 3d
739, 740. Any proceedings which ensue in a case involving a
layperson representing a corporation are null and void ab initio.
Housing Authority, 115 Ill. App. 3d at 740. This rule applies even
where the lay agent merely files the complaint over his own
signature, and all subsequent court appearances are made by a duly
licensed attorney. Housing Authority, 115 Ill. App. 3d at 740. The
purpose of the rule is to protect litigants against the mistakes of
those ignorant of the law and the schemes of the unscrupulous, and
to protect the court itself in the administration of its
proceedings from those lacking requisite legal skills. Janiczek v.
Dover Management Co., 134 Ill. App. 3d 543, 546, 481 N.E.2d 25
(1985) (Janiczek).
It is undisputed that plaintiff Berg, a layperson, brought
suit under Count I pro se and Count II on behalf of Berg Co., a
corporation. Defendants argue, however, that "the corporate
nullity rule has been used by defendants [in prior instances] to
vacate the judgment where the corporate plaintiff commenced an
action without duly licensed counsel," in other words, as "a
shield," a defensive measure to protect the opponents of a
corporation, but that here the corporation seeks to use the nullity
rule as a sword, thereby defeating the purpose of the rule. The
purpose of the rule does not limit its use only to a defensive
measure of a corporation's opponent, however. The rule also was
intended to guarantee that corporations receive professional legal
counsel and to assure competent practice in court proceedings.
Janiczek, 134 Ill. App. 3d at 546. In the instant case, it is
undisputed that a layperson filed the complaint. The aforesaid
purposes of the rule apply here.
In support of their argument, defendants also rely upon
Janiczek, because there the court refused to apply the nullity
rule. In Janiczek, however, a layperson retained a then duly
licensed attorney for representation in a personal injury action,
who initially filed the layperson's action while still an attorney.
Subsequently, the attorney was disbarred. Defendants then moved to
dismiss the action, claiming plaintiff was represented by a non-
attorney and, therefore, the complaint was null and void ab initio.
The circuit court granted the motion and dismissed the case with
prejudice. The appellate court reversed the dismissal, reasoning
that dismissal of a layperson's claim under the unique
circumstances of this case defeated the purpose of the rule,
because the layperson's representative had been a licensed attorney
when he was retained to render his services. Janiczek, 134 Ill.
App. 3d at 546. Plaintiffs correctly argue that Janiczek
establishes an express exception to the nullity rule which does not
apply to the instant case.
It is clear that Count II of plaintiffs' complaint should
have been deemed null and void ab initio; therefore, the court's
April 12 order dismissing the action with prejudice should have
been vacated. The circuit court abused its discretion when it
failed to do so.
Also questionable is the dismissal of the entire complaint,
including Count I. That count attempted to articulate an action by
a layperson based upon an alleged breach of an oral contract
between Berg, as an individual, and Mid-Am and Pierce. Berg sought
for himself damages in the amount of $11,100 for unpaid salary and
$6,127 for unreimbursed expenses. Although mentioned in the body
of this count, no grievance of Berg Co. was articulated and no
relief was sought for Berg Co. This count certainly was
susceptible to a motion to strike for want of clarity, with leave
granted to replead; however, Berg was not precluded by law from
filing a complaint in his own behalf. See Janiczek, 134 Ill. app.
3d at 545, and cases therein cited.
For the reasons set forth above, the order of August 23, 1996,
denying vacatur of the April 12, 1996 dismissal order, and again
dismissing the two count complaint, is reversed and the cause
remanded for proceedings consistent with this opinion.
Reversed and remanded.
HOFFMAN and HOURIHANE, JJ., concur.