What happens when the City doesn’t properly serve a notice of building code violations? In the closing days of its September term, the Illinois Supreme Court agreed to decide that issue in Stone Street Partners, LLC v. City of Chicago Department of Administrative Hearings, a decision from the First District of Division One.

In 1999, a City building inspector found various building code violations in one of plaintiff’s buildings. But the City didn’t mail the notice to the plaintiff’s business address or registered agent – instead, it sent the notice to the property itself – a service method that’s authorized only if notice to the business address or registered agent fails.

Nevertheless, a person appeared at the hearing on the plaintiff’s behalf. Although most of the records of the hearing had been destroyed, it appeared that the representative had filed an appearance and presented exhibits on the plaintiff’s behalf. Nevertheless, the plaintiff was found liable and fined. In 2004, the administrative judgment was filed with the Circuit Court, and five years later, the City recorded the judgment with the Recorder of Deeds.

The plaintiff maintained it knew nothing about any of this until it obtained a copy of the judgment through a FOIA request in 2011. The plaintiff filed a motion to vacate and set aside the administrative order – which was by this time twelve years old – based on lack of notice, claiming that the person who represented the plaintiff at the 1999 hearing had no authority to do so. But the administrative hearing officer found that he had no jurisdiction to vacate the order.

So the plaintiff filed a complaint in circuit court, purporting to state claims for declaratory judgment, quiet title and slander of title. The defendant filed a motion to dismiss, which the court granted.

The Chicago Municipal Code requires that notices to corporate defendants for administrative hearings must be sent to the corporation’s registered agent. The City argued that no similar requirement applies to service of the hearing order, as opposed to the original notice of hearing. But the Court pointed out that defendant’s actual knowledge that an action is pending is not the equivalent of service of summons, or sufficient to vest the court with jurisdiction.

The court next turned to the question of whether the participation of the corporation’s purported agent in the 1999 hearing had waived any objection the plaintiff might otherwise have had to the proceedings. The court held that because the plaintiff participated through a nonattorney, no waiver resulted. The City argued that nonattorneys should be allowed to represent parties at administrative hearings. But the Appellate Court found that the City’s Administrative Rule of Practice conflicted with the Supreme Court’s authority to regulate the practice of law.

The Court rejected claims by the City and the Attorney General that requiring attorney representation in administrative hearings would have negative consequences. “If anything,” the Court wrote, “our holding will protect the rights of corporations.” The City noted Illinois Supreme Court Rule 282(b), which allows corporations to defend small claims through a nonattorney, but the Appellate Court noted that Rule 281 defined a small claim as one involving $10,000 or more – far more than was involved in the case at bar. Nor does a defendant waive objections to jurisdiction by the participation of someone not authorized to represent the party, the Court found.

Nevertheless, the Court found that the City’s first cause of action to set aside the judgment failed on the grounds that Section 108 of the Municipal Code, authorizing the motion, only addresses default judgments.

However, the Appellate Court reversed dismissal of the plaintiff’s claims for quiet title and declaratory judgment. The City argued that plaintiff’s claim was barred since it had failed to seek administrative review of the administrative order. But the plaintiff couldn’t be expected to challenge an administrative order it didn’t know about, the Court found. The Court held that plaintiff was entitled to some form of equitable relief, so it reversed dismissal of plaintiff’s second claim.

The Court affirmed dismissal of the plaintiff’s claim for slander of title. The Court held that the defendant was absolutely immune from liability pursuant to the Local Governmental and Governmental Employees Tort Immunity Act.

Justice Maureen Connors dissented. She agreed that plaintiff’s administrative appeal from the City hearing judgment and the quiet title and slander of title claims couldn’t stand. However, Justice Connors concluded that the plaintiff’s declaratory judgment claim should have failed as well. She acknowledged that the plaintiff could hardly be expected to file an administrative challenge within 35 days after service of the original administrative judgment, thus exhausting administrative remedies, given that the plaintiff didn’t know about the judgment; the problem, Justice Connors said, was the plaintiff didn’t challenge the administrative order even after it learned of it. Justice Connors argued that declaratory judgment actions are not a permissible grounds for challenging administrative judgments.

Justice Connors also rejected the majority’s view that only licensed attorneys could represent corporations at administrative hearings. Justice Connors expressed particular concern that the majority’s holding seemed to invalidate all similar administrative rules used by other agencies.

We expect Stone Street Partners to be decided in four to six months.

Image courtesy of Flickr by Elliott Brown (no changes).