5107355908_1dd9e14a44_zSection 2-1401 of the Illinois Code of Civil Procedure (735 ILCS 5/2-1401) provides that a judgment may be set aside more than thirty days after its entry on petition for various reasons. So when is the apparent lack of diligence of the party seeking to set aside the judgment sufficient grounds for denying the petition? That’s the question presented in Warren County Soil & Water Conservation District v. Walters, which the Illinois Supreme Court heard oral argument on in the final week of its January term. Our detailed summary of the underlying facts and lower court judgments in Warren County is here.

The plaintiff sued the defendants for removing approximately 54 trees from its property, purporting to state claims for trespass, conversion, quantum meruit, negligence and one for violation of the Wrongful Tree Cutting Act. The defendants’ retained counsel failed to file an answer, either at the deadline, or when the Court ordered him to file a month later. The plaintiff moved for a default judgment, and counsel still failed to appear, so default was entered. A month later, the defendant’s counsel moved to set aside the default, but never noticed the motion for hearing. When plaintiff’s counsel noticed the motion for hearing, the defense counsel didn’t show up for the hearing. So the trial court denied the motion. Ten months later, the plaintiff’s counsel filed a citation to discover assets, and a week later, the court removed defense counsel and directed the defendants to retain a new lawyer. The new attorney filed a second motion to set aside the judgment, along with an affidavit from the defendant stating that the client was unaware of the default. The trial court denied the second motion to set aside, and the Appellate Court affirmed, with Justice William E. Holdridge dissenting.

Counsel for the appellant began the argument. Counsel argued that there were three issues before the Court: (1) did Section 2-1401 allow the Circuit Courts discretion to vacate unjust judgments under their equitable powers; (2) if so, what was the standard of review; and (3) applying that standard. Counsel suggested that the plain language of Section 2-1401 preserves all forms of relief which existed before the statute was enacted. What the defendant sought – discretionary relief on equitable grounds – had existed as a permissible form of relief for 148 years. Counsel suggested that People v. Vincent notes the common law roots of the statute, but went on to say that the view that abuse of discretion applied was based on the erroneous belief that Section 2-1401 invoked the equitable powers of the court. But, counsel argued, that statement is contrary to the statute’s plain language, preserving preexisting remedies. Chief Justice Garman asked if the Court should overrule Vincent. Counsel said no, the relevant language is for the most part dicta. The Court needs to revisit and revise that dicta to make it clear that courts still have some discretion here. Justice Thomas asked whether, if the Court agrees, it should remand for an assessment of the defendant’s diligence. Counsel said no, the trial court had already found that if it had discretion, it would have vacated the judgment in the interests of justice. Justice Theis pointed out that the issues of whether a defendant has a meritorious defense and exercised due diligence were judicial gloss which had been added to the statute. Did counsel have a sense of when those ideas evolved? Counsel answered that they had evolved around the Civil War. Justice Theis asked whether there was a framework for trial courts to use in exercising their equitable authority. Counsel said yes, there was both a remedy and standards to apply in using that power. Justice Theis suggested that Section 2-1401 was actually based on the proposition that a judgment was void. Should that impact the analysis? Counsel said that the elements of due diligence and a good defense still applied. Justice Thomas wondered whether the trial court had ever really considered whether it should relax the standard for due diligence. Counsel disagreed. The trial court had said that if it had the power to relax the standard of due diligence, it would, because it was difficult to think of a more unjust situation. Justice Thomas asked whether it would nevertheless make sense, if the Court held that the due diligence standard could be relaxed, to remand. Counsel answered that the Court could do that, but the trial court had already made its inclinations clear. Justice Thomas asked whether opposing counsel could test the issue, and counsel said factually, it had already been tested. There might be more briefing on remand, but plaintiff hadn’t briefed the issue of due diligence the first time around. If the Court agreed that Vincent should be revisited, then the question became whether the defendant met those standards. The defendants researched the ownership of the property, and every deed they found suggested that a certain person owned the property. They got a contract with the apparent owner, and logged the property. There was no showing below that plaintiff owned the property, counsel argued; the only documents available suggest that the party defendants dealt with owned it. Chief Justice Garman asked how the defendants’ failure to keep track of the case impacts the analysis. Counsel responded that although the defendants didn’t keep track of events when they had their initial attorney, they did when they didn’t have an attorney. If the judgment as inequitable, the negligence of their attorney shouldn’t be attributed to them.

Counsel for the plaintiff followed, arguing that Vincent is clear. The case spells out five scenarios in which Section 2-1401 can apply. Justice Thomas asked whether Vincent even contemplated the current situation. Counsel answered that it addressed several different situations, including the issue of due diligence. Justice Thomas asked counsel to address defendants’ argument that Section 2-1401 preserves common law remedies. Counsel answered that Vincent plainly states there is no judicial discretion to relax the standards. Justice Thomas asked whether counsel was saying Vincent would have to be overruled for him not to prevail, and counsel said yes. Justice Thomas asked whether the allegation that plaintiff stands to receive a windfall plays any role, and counsel said no, the only real issue is whether the standard in Vincent applies. Justice Thomas asked whether, if the Court disagrees re Vincent, the matter should be remanded to the trial court to determine whether it should exercise discretion. Counsel said yes, the trial court suggested that it would relax due diligence, but only in dicta. Justice Thomas asked whether plaintiff would want more to say about diligence, and counsel said he would. Plaintiff disagrees about ownership of the property, and would offer testimony to that issue. Justice Theis asked about the argument that two different standards of review apply for meritorious defense and due diligence. Counsel answered that such a standard would be impossible for practitioners to follow. The Chief Justice asked whether it was accurate to say that to get a more forgiving standard under Vincent, one should seek an evidentiary hearing. Counsel said yes. The Chief Justice suggested that was putting the decision as to how this turns out in the hands of the petitioner. Counsel said yes and no. To a certain extent it does; there may be some cases where due diligence and a good defense could be established on affidavits, and those could be granted without a hearing. Vincent was about summary judgments – it left the evidentiary issue for another day. Since there was no evidentiary hearing here, the plaintiff argued that it was just asking for Vincent to be reaffirmed, and for the Court to make it clear that defendants lacked due diligence as a matter of law.

Counsel for the defendant began rebuttal by reading from the trial court’s order, noting that it was bound by earlier decisions. The lower court made it clear that if it had the ability to exercise discretion, it would have set aside the judgment. The finding that the defendant had a meritorious defense was not dicta, according to the defendant’s counsel; the court said defendant had made a showing that someone else appeared to own the property. Justice Thomas asked the defendant to address the plaintiff’s argument that plaintiff would have more to say about due diligence in the event of remand. Counsel answered that the issue had been addressed below. Justice Thomas asked whether it would be a reason to relax the due diligence standard if there was a windfall here (because plaintiff didn’t actually own the property). Counsel agreed. Justice Thomas pointed out that plaintiff challenged that assertion, and wasn’t that a fact question? Counsel said no, the trial court had found no evidence to back up the plaintiff’s claim to own the property. Justice Thomas suggested that plaintiff believed it didn’t need to provide that evidence because of Vincent. Counsel answered that the 2-1401 proceeding was an entirely new proceeding, and any admissions in the default were merely evidentiary, not conclusive. The plaintiff’s claim to own the property was clearly contradicted by the defendants’ affidavits. In addition to the proposition that plaintiff never owned the property, defendants had the additional defense of bona fide purchaser. Counsel argued that the defendants had investigated, and everything they found supported the view that the party they were dealing with owned the property. The delay of the first defense counsel was a bit of a red herring, counsel argued. The plaintiff had gotten a default judgment and had sat on it, and that’s relevant to the equitable balancing. Counsel concluded by arguing that all notices on the case had gone to the original lawyer for the defendant; the clients believed that their status as bona fide purchasers was an absolute defense.

We expect Warren County to be decided in three to four months.

Image courtesy of Flickr by William Warby (no changes).