author: PRESIDING JUSTICE HARTMAN

text:
    BANK OF CHICAGO-GARFIELD RIDGE, f/k/a Garfield Ridge Trust and Savings Bank, Plaintiff-Appellant, v. PARK NATIONAL BANK, Defendant-Appellee.
    First District (2nd Division)
    No. 1—91—3096
    Opinion filed September 22, 1992.
    Rehearing denied January 7, 1993.

      Holleb & Coff, of Chicago (Paul T. Fox, Lori A. Goldstein, and Stuart N. Rappaport, of counsel), for appellant.
    Jones, Day, Reavis & Pogue, of Chicago (James R. Daly, Irene Savanis, and Nancy A. Tanck, of counsel), for appellee.
   PRESIDING JUSTICE HARTMAN

delivered the opinion of the court:

This is an appeal pursuant to a Supreme Court Rule 304(a) (134 Ill. 2d R. 304(a)) certification. Plaintiff, Bank of Chicago-Garfield Ridge (Garfield), brought suit in chancery against defendant, Park National Bank (Park), for damages and other relief arising from the alleged breach of a loan participation agreement. During the pendency of this suit, Garfield repurchased Park’s interest in an unrelated loan participation and set off amounts claimed in the suit against the proceeds due Park from this repurchase. Garfield then sought a declaration that the setoff was valid.

Park moved for summary judgment challenging Garfield’s right to set off the proceeds of the unrelated loan participation. Park’s motion for summary judgment was allowed. Garfield appeals, contending that the circuit court erred (1) in holding the setoff invalid; and (2) in determining that declaratory judgment was an improper procedural means by which to determine the validity of a setoff, and then proceeding to rule against Garfield on the merits of the summary judgment based upon this perceived impropriety.

On April 30, 1990, Garfield filed an eight-count chancery complaint against Park, alleging in general the following. Pursuant to an established lending relationship, Park advanced Evron Industries, Inc. (Evron), two loans: $1 million, evidenced by a promissory note dated September 18, 1987; and $400,000, evidenced by an April 20, 1988, note. Both loans were secured with specific Evron assets. On October 15, 1988, Park’s senior vice-president, Sheldon Bernstein, proposed to Garfield’s vice-president, Marc Holland, that Garfield participate in either or both loans for “up to one year.” Garfield responded with a counteroffer, setting forth as conditions that: (a) Garfield’s participation be limited to a period of 120 days; (b) the funds advanced to Evron by Park be limited to the sum of 75% of Evron’s accounts receivable which were less than 90 days old, plus 25% of the book value of Evron’s inventory; and (c) Park’s right to be paid from proceeds of Evron collateral in the event of default be subordinate to that of Garfield.

Park allegedly agreed to these additional terms, resulting in the “Evron participation.” The participation agreement was embodied in two separate documents dated November 4, 1988, namely, the participation certificate (certificate), and a letter from Bernstein to Holland (Bernstein letter). The Bernstein letter provided as follows:

“Re: Participation in loans to Evron Industries [Park] agrees that future advances to Evron Industries will not exceed the total of 75% of their receivables due within 90 days plus 25% of their inventory. In addition, [Park] subordinates its position on the collateral pledged to secure this loan to [Garfield]. This participation will expire on March 3, 1989.”

Garfield alleged that on February 28, 1990, Evron filed a petition for bankruptcy relief and thereafter discontinued payments to Park on all its outstanding loans, including that comprising the Evron participation. Despite Garfield’s repeated requests, Park refused to repurchase or retire Garfield’s interest in the Evron loan. Garfield sought, in count I, a declaration of Park’s duty under the participation agreement to repurchase Garfield’s interest; in count II, a declaration of Park’s obligation to subordinate its right to the proceeds of the Evron collateral to those of Garfield, and to have those proceeds applied to Garfield’s participation until it has been satisfied in full, including all accrued interest and costs; count III sought, in the alternative, damages in excess of $250,000 for breach of the participation agreement; count IV requested damages for Park’s breach of duty as lead bank; and counts V through VIII sought rescission or damages against Park and Bernstein for fraud or negligent misrepresentation in inducing Garfield to enter into the participation arrangement.

On motion by Park, counts IV and VIII of the complaint were eventually dismissed. On January 24, 1991, Park filed its verified amended answer, amended affirmative defenses and counterclaim, in which it disputed Garfield’s interpretation of the participation agreement and denied any liability for breach. Park’s counterclaim sought Garfield’s proportionate share of the collection expenses for the Evron loan, which Garfield had agreed to pay under the participation certificate.

On or about March 1, 1991, Garfield filed an amended complaint increasing its damage request and adding count IX, the subject of this appeal, which made the following allegations. Sometime after December 23, 1987, Garfield and Park had executed a contract under which Park agreed to participate in the full amount of a $1.9 million loan by Garfield to Wright Industries, Inc. (Wright participation). On January 29, 1991, when the principal balance due on the Wright note was $1,855,487.64, Garfield notified Park that it had repurchased Park’s participation in the note and set off the proceeds from that repurchase against amounts Park owed Garfield “arising from Garfield’s participation in Park’s lending to Evron,” which were the subject of the pending litigation. According to Garfield, those amounts exceeded $2 million, as evidenced by counts I through III, VII and VIII of the complaint. Accordingly, count IX requested that the validity of this setoff be declared.

On March 7, 1991, Park moved for an expedited summary judgment on count IX, alleging that, as a matter of law, Garfield was not entitled unilaterally to set off funds belonging to Park from the Wright participation against the unliquidated, not yet matured, and disputed litigation claims emanating from the Evron participation.

Garfield requested that Park’s motion be continued to enable Garfield to prepare a summary judgment motion as to count II, because such judgment in its favor would dispose of the dispute regarding Park’s obligation on the Evron note, thereby rendering the setoff valid. On April 26, 1991, Garfield filed a motion for partial summary judgment as to count II, alleging that Park received proceeds in excess of $1.5 million from the bankruptcy sale of the Evron collateral. Garfield further alleged it was “undisputed” that the “Bernstein letter and the undertakings of Park which were contained in it were part of the [Evron participation agreement]”; that by this letter, Park “unambiguously” agreed to “subordinate its position” to Garfield’s on the collateral pledged by Evron to secure its loan; and that notwithstanding this agreement, Park has failed to pay Garfield any part of the collateral proceeds, although the collateral assets had been “liquidated for an amount in excess of the balance due on Garfield’s participation.”

Park filed a reply in support of its motion for expedited summary judgment on May 13, 1991, and apparently filed a memorandum opposing Garfield’s summary judgment motion on July 5, 1991, although the record copy is unstamped. In the latter memorandum, Park maintained that the terms of the participation agreement were controverted; that the parties’ interpretations of Bernstein’s letter conflicted; and that, under the certificate, Garfield’s share of the collateral proceeds was limited to its pro rata share of the total indebtedness.

Following a hearing, the court granted summary judgment for Park, finding Garfield’s setoff invalid. On August 1, 1991, the court denied Garfield’s motion for summary judgment on count II. On August 19, 1991, the court granted Park’s request for Rule 304(a) findings as to the ruling on count IX.

I

Garfield initially seeks de novo review from the grant of summary judgment to Park, because the question raised on appeal is solely one of law.

In reviewing a grant of summary judgment, this court considers anew the facts and law related to the case and determines whether the circuit court was correct in its ruling. (Shull v. Harristown Township (1992), 223 Ill. App. 3d 819, 824, 585 N.E.2d 1164; In re Estate of Hoover (1992), 226 Ill. App. 3d 422, 589 N.E.2d 899; but see Evans v. United Bank (1992), 226 Ill. App. 3d 526, 589 N.E.2d 933.) Where no factual dispute exists, the question of law is properly reviewed independently of the circuit court’s judgment. See Scottish & York International Insurance Group/Guarantee Insurance Co. v. Comet Casualty Co. (1990), 207 Ill. App. 3d 881, 885, 566 N.E.2d 477; Bohnen International, Inc. v. Liberty Mutual Insurance Co. (1983), 120 Ill. App. 3d 657, 662-63, 458 N.E.2d 644.

Although the decision of whether to grant declaratory relief is discretionary with the circuit court (Ill. Rev. Stat. 1987, ch. 110, par. 2—701; Howlett v. Scott (1977), 69 Ill. 2d 135, 142, 370 N.E.2d 1036), the exercise of this discretion is subject to a “searching,” or independent, appellate review and is not given the same deference as in other contexts. (Chicago & Eastern Illinois R.R. Co. v. Reserve Insurance Co. (1981), 99 Ill. App. 3d 433, 436, 425 N.E.2d 429; Carl Sandburg Village Condominium Association No. 1 v. Carl Sandburg Village Condominium Homeowners’ Association (1987), 175 Ill. App. 3d 1, 5, 530 N.E.2d 40; Hernandez v. Fahner (1985), 135 Ill. App. 3d 372, 381, 481 N.E.2d 1004.) Independent review is justified because “declaratory relief is not dependent upon factors which are difficult for an appellate tribunal to review, such as *** factual determinations of credibility.” Chicago & Eastern Illinois R.R. Co., 99 Ill. App. 3d at 436-37.

In the case at bar, both parties agree that, at least for purposes of the summary judgment motion, no dispute exists as to the facts underlying count IX, and whether the setoff was invalid is purely an issue of law. Accordingly, the searching review standard is applicable to this case. See Carl Sandburg, 175 Ill. App. 3d 1, 530 N.E.2d 40.

II

Garfield contends that it was entitled to set off the amounts claimed under the Evron participation against the proceeds from the Wright participation, because this action was consistent with the historical purpose of setoff, and the parties’ claims were mutual, mature and liquidated.

Setoff most commonly appears as a counterdemand interposed by a defendant against a plaintiff in a lawsuit, arising out of a transaction extrinsic to plaintiff’s cause of action. (See, e.g., Studley v. Boylston (1913), 229 U.S. 523, 528, 57 L. Ed. 1313, 1316, 33 S. Ct. 806, 808; Peterson v. Iris Theatre Co. (1920), 218 Ill. App. 416, 420; Luther v. Mathis (1918), 211 Ill. App. 596, 601; Black’s Law Dictionary 1230 (5th ed. 1979).) Deriving sanction under statute, and in certain circumstances, at equity (see Scott v. Armstrong (1892), 146 U.S. 499, 36 L. Ed. 1059, 13 S. Ct. 148; Messick v. Rardin (E.D. Ill. 1934), 6 E Supp. 200), setoff normally must be pleaded, except in certain limited circumstances. (See e.g., Luther, 211 Ill. App. at 601; see also Lane v. Volunteer Co-operative Bank (1940), 307 Mass. 508, 30 N.E.2d 821.) There is no inherent right in equity to set off one demand against another; rather, equitable set-off was conceived as a limited remedy and is available only where the debts are mutual, mature, and “of such a certain and ascertainable character as to be capable of being applied in compensation of each other” (Smith v. Billings (1896), 62 Ill. App. 77, 85) without the intervention of the court to estimate them. Faber, Coe & Gregg, Inc. v. First National Bank (1969), 107 Ill. App. 2d 204, 246 N.E.2d 96.

Here, Garfield unilaterally withheld funds admittedly belonging to Park, in satisfaction for an alleged debt, including damages, which is the subject of a pending lawsuit. Garfield seeks to justify this conduct as “a remedy intended to extrajudicially resolve offsetting claims.” Garfield offers no authority for this broad proposition, nor is any provided by the cases upon which it relies. Two cases simply involve defendants which sought, by pleading setoff, to credit claims of a fixed sum against amounts sued upon by plaintiffs in contract (see Sterling-Midland Coal Co. v. Great Lakes Coal & Coke Co. (1926), 240 Ill. App. 216, 217, rev’d on other grounds (1929), 334 Ill. 281, 165 N.E. 793; Kelley, Maus & Co. v. Caffrey (1898), 79 Ill. App. 278); however, these cases actually support Park’s position. Four cases involved a bank’s well-recognized equitable right to appropriate funds from its depositor’s account to satisfy a bill, note, or other debt the depositor owes the bank, provided that debt is mature. (See Studley, 229 U.S. 523, 57 L. Ed. 1313, 33 S. Ct. 806; Messick, 6 F. Supp. 200; Hayden v. Alton National Bank (1888), 29 Ill. App. 458; Home National Bank v. Newton (1881), 8 Ill. App. 563; see also Faber, Coe & Gregg, 107 Ill. App. 2d at 209; Olsen v. Valley National Bank (1968), 91 Ill. App. 2d 365, 369-70, 234 N.E.2d 547.) This right, however, is rooted in the fact that the depositor, by having his paper payable at the bank, impliedly makes the bank his agent, and authorized to cover his indebtedness by drawing necessary funds from his account. (See, e.g., Home National Bank, 8 Ill. App. at 565; Messick, 6 F. Supp. 200.) Similarly, in Studley, the Court implicitly limited the concept of an extrajudicial setoff to one based upon mutual consent:

“The banker’s lien on deposits, the right of retention and set-off of mutual debts, are frequently spoken of as though they were synonymous, while in strictness, a set-off is a counterclaim which the defendant may interpose by way of cross-action against the plaintiff. But, broadly speaking, it represents the right which one party has against another to use his claim in full or partial satisfaction of what he owes to the other. That right is constantly exercised by business men in making book entries whereby one mutual debt is applied against another. If the parties have not voluntarily made the entries, and suit is brought by one against the other, the defendant, to avoid a circuity of action, may interpose his mutual claim by way of defense ***.” (Studley, 229 U.S. at 528, 57 L. Ed. at 1316, 33 S. Ct. at 808.)

(See also Scott v. Armstrong (1892), 146 U.S. 499, 508, 36 L. Ed. 1059, 1062, 13 S. Ct. 148, 150.) Unlike these cases, there was no agreement between the parties here, express or implied, that the funds be withheld; accordingly, Garfield’s argument lacks merit.

As stated previously, debts may not be set off unless they are (1) mutual between the parties, (2) mature, and (3) liquidated. See Faber, Coe & Gregg, 107 Ill. App. 2d at 209; Ideal Coated Pa per Co. v. Samuel Cupples Envelope Co. (1912), 169 Ill. App. 484; International Bank v. Jones (1887), 119 Ill. 407; Merchants National Bank v. Maple (1896), 65 Ill. App. 484.

Neither party here disputes that the amounts owed on the Evron and Wright participations were mutual.

Was the debt mature, however? A debt matures on the date it is due. (See Elzy v. Morrison (1913), 180 Ill. App. 711, 715-16; Bonhiver v. State Bank (1975), 29 Ill. App. 3d 794, 804, 331 N.E.2d 390.) Garfield argues that because the parties agreed under Bernstein’s letter that the Evron participation would expire on March 3, 1989, Park had an obligation to repay Garfield for that participation on that date; therefore, when Garfield exercised its right to setoff “on January 29, 1991,” it did so against a mature debt. Alternatively, Garfield maintains that the claim matured in November 1990, when the Evron collateral was liquidated for $1.55 million; Park had “agreed to subordinate” its right to the collateral to Garfield, and $1.5 million was more than sufficient to cover the $1 million Garfield invested in the Evron participation.

In reviewing the grant of summary judgment, we accept as true all well-pleaded facts in count IX of the complaint and resolve all reasonable inferences therefrom in a light most favorable to Garfield. See Killeen v. R.W. Dunteman Co. (1979), 78 Ill. App. 3d 473, 397 N.E.2d 436.

Although Garfield relies upon the terms in Bernstein’s letter in arguing that Park’s “debt” to it was mature, Garfield ignores the terms of the participation certificate, which it alleged was also part of the Evron participation agreement. The certificate provided, in relevant part, as follows:

“All amounts realized by us [Park] from the collateral, if there shall be an event of default, shall be applied pro rata to the payment of the balances of principal and interest then due on our respective participations in the loan on the date of such default. It is understood that we make no representation or warranty, and shall have no responsibility with respect to the execution, validity or collectibility of the Note or any other instrument evidencing said indebtedness ***.
* * *
Any expenses incurred by us in connection with the collection of the indebtedness, or the enforcement of any of the provisions of this loan, shall be borne proportionately between you and us on the basis of our respective interests at the time of incurring such expense, and you agree promptly to pay us on receipt of notice, any portion of such expense so due from you.”

These provisions render Garfield’s position open to question, at best. The certificate neither incorporates nor refers to Bernstein’s letter. Although the letter allegedly dictated that Garfield’s participation would expire on March 3, 1989, it makes no provision for the eventuality of bankruptcy or how that would affect the return of Garfield’s investment. Moreover, it is questionable whether this portion of the letter was viable at the time of the setoff; the record reveals that Garfield continued to accept payments on the Evron loan, with interest, long after the March 3 deadline. Garfield’s alternative assertion, that the debt was payable at the time of the liquidation of the Evron collateral, derives little support from the agreement. Indeed, even if Garfield’s right to payment was found to be superior to Park’s, this would in no way render Garfield automatically entitled to the entire collateral proceeds: in its brief opposing Garfield’s summary judgment motion as to count II, Park alleged that Garfield was but one of several banks participating in the Evron loan at the time of the liquidation. Clearly, Garfield’s argument here is based upon nothing more than its own interpretation of one portion of the alleged agreement. The issue of maturity was open.

Liquidated damages can be ascertained by computation or calculation with reference to specific data; unliquidated damages are “such as rest in opinion only.” (Ideal Coated Paper Co. v. Samuel Cupples Envelope Co. (1912), 169 Ill. App. 484, 486; cf. Faber, Coe & Gregg, 107 Ill. App. 2d 204, 246 N.E.2d 96.) Garfield maintains that its participation in the Evron loan was fixed at $1 million, as reflected in the participation certificate, bearing interest at the rate specified in' the underlying note; therefore, the total amount required to repurchase or retire that participation was precisely calculable without need for opinions or estimates. We disagree.

First, Garfield’s determination presupposes the correctness of its own interpretation of the contract terms, but ignores other significant factors. Initially, although it now claims Park’s debt to be $1 million, Garfield’s count IX asserted that the debt was over $2 million, purportedly to justify the almost $1.9 million setoff. Furthermore, Garfield’s prior calculation included its claim for compensatory damages from Park’s alleged breach of the agreement; its present claim does not. Therefore, it appears that even Garfield’s determination is unsettled.

Second, Garfield’s computation ignores the fact of Evron’s bankruptcy. Garfield might well not be entitled to a full return on its investment. Various other banks seek the same proceeds to which Garfield asserts its interest, the resolution of which will require court intervention. According to Park, Garfield’s pro rata share of the Evron collateral amounts to about $400,000. At this point, the debt is not liquid, but simply a matter of opinion; its exact amount is entirely contingent upon the court’s interpretation of the agreement.

Third, Garfield urges that a debt is not unliquidated simply because it is disputed. This argument is misperceived. It is not only the fact of Park’s liability that is controverted here; the amount of such liability requires resolution of factual issues. Garfield cites United States v. Gray (N.D. Ill. 1982), 552 F. Supp. 943, in support of its contention that disputed debts can be liquidated. That case, however, is unavailing. There, the government sued the defendant on a promissory note and the defendant asserted a setoff based on a claim against a predecessor bank. The court allowed the setoff, finding that the defendant’s claims were “clearly liquidated.” Unlike the present case, although the underlying claim of right in Gray was disputed, the sums allegedly owed were not.

III

Garfield’s final contention is that the circuit court determined, incorrectly, that a declaratory judgment action was not a proper procedural device for deciding the propriety of the setoff, and then proceeded to decide the merits of the controversy against Garfield based on that perceived procedural defect. Park emphasizes that the general requirements of a declaratory judgment action, as well as its propriety as a procedural device to determine validity of set-off, were never in dispute.

In support of its contention, Garfield relies on the following statement by the court during the summary judgment hearing:

“[A] court should [not] countenance the labeling of a controversy as a declaratory judgment *** where [the plaintiff] admits that it owes money to the defendant but seeks to raise it as a setoff in its complaint as opposed to a setoff by a defendant by way of either counterclaim or otherwise.”

A review of the hearing transcript suggests that Garfield’s position is unsupportable. The circuit court’s questions and comments focused not upon the validity of the declaratory judgment posture, but upon the somewhat inappropriate circumstances surrounding Garfield’s setoff.

“I mean essentially boiled down to *** a simple scenario here, what we have is a plaintiff who says I owe you some money, I admit that and I think or I claim that you owe me some money, and I am not going to pay you the money I owe you until we get a resolution on the disputed claim.
* * *
I find no bases for a setoff under that scenario.”

Moreover, immediately following the quotation relied upon by Garfield, the court continued as follows:

“Now, the argument that well, Judge, if we didn’t pay they would have had to sue us cannot be used here in my opinion. A, [sic] there may be some substantial risks, federal or state law wise, for a bank refusing to pay on the debt that it admits it owes another bank and to insulate itself from that criticism filing a so-called setoff in my opinion is forcing a square peg in a round hole. What it is doing here is holding out economic leverage which this Court does not wish to participate in.”

We disagree with Garfield’s interpretation of the basis for the circuit court’s ruling. As Park states, the court was never presented with, nor did it consider on the record, the issues of whether the elements of declaratory relief were present, nor whether such relief is permissible with regard to setoff. In its contention that the court “found that a declaratory judgment action could not be used to decide the validity of a setoff” Garfield appears to be confusing the court’s position regarding the circumstances of the setoff with a disapproval of Garfield’s choice of procedural posture.

It should be noted in passing that the purpose of the declaratory judgment statute is to permit the court to address a controversy one step sooner than normal, after a dispute has arisen but prior to any action which gives rise to a claim for damages or other relief. (Delano Law Offices v. Choi (1987), 154 Ill. App. 3d 172, 173, 506 N.E.2d 723; Tait v. County of Sangamon (1985), 138 Ill. App. 3d 169, 170-71, 485 N.E.2d 558.) A declaration of nonliability for past conduct is not the function of the declaratory judgment statute. (Howlett v. Scott (1977), 69 Ill. 2d 135, 370 N.E.2d 1136; Senese v. Climatemp, Inc. (1991), 222 Ill. App. 3d 302, 314, 582 N.E.2d 1180.) Relief under the statute requires an actual controversy between the parties, meaning the issues of the case are neither premature nor moot, so as to require the court to pass judgment on an abstract proposition of law, render an advisory opinion, or give legal advice on future events. (Howlett, 69 Ill. 2d 135, 370 N.E.2d 1136; Delano, 154 Ill. App. 3d at 173.) In the case sub judice, Garfield merely sought judicial advice concerning the validity of a set-off it had already taken unilaterally.

For the foregoing reasons, the judgment of the circuit court must be affirmed.

Affirmed.

SCARIANO and McCORMICK, JJ., concur.


source: Caselaw Access Project

author: JUSTICE MANNING

license: Public Domain

text:
    AMERICAN MEDICAL ASSOCIATION, Plaintiff-Appellant, v. EDWARD J. ROSEWELL, County Treasurer and ex officio County Collector of Cook County, et al., Defendants-Appellees.
    First District (1st Division)
    No. 1—91—0489
    Opinion filed September 14, 1992.
    Rehearing denied December 1, 1992.

      Sidley & Austin, of Chicago (George A. Platz, J. Douglas Donenfeld, Lisa A. Hausten, and Sheila A. Sundvall, of counsel), for appellant.
    Jack O’Malley, State’s Attorney, of Chicago (Joan S. Cherry, Daniel E. Cannon, and Marie E. Smuda, Assistant State’s Attorneys, of counsel), for appellees.
   JUSTICE MANNING

delivered the opinion of the court:

The plaintiff-appellant, the American Medical Association (hereafter the AMA), a private, voluntary, not-for-profit professional association, petitioned the circuit court for a permanent injunction seeking to prohibit the county assessor from back taxing its property for the latter three quarters of the 1982 tax year. The circuit court dismissed the complaint for injunctive relief for failure to state a cause of action.

The property is commonly known as block 124 and is bounded by Illinois Street on the south, Rush Street on the east, Grand Avenue on the north, and Wabash Avenue on the west. On January 1, 1982, the property was owned by the City of Chicago and marked exempt on the list of assessed property. The property was exempt from taxation pursuant to section 19.6 of the Revenue Act of 1939, which exempts all property owned by municipalities. (Ill. Rev. Stat. 1981, ch. 120, par. 500.6.) Pursuant to a real estate sale on March 29, 1982, the property was conveyed to the AMA for a nonexempt use. The AMA recorded the deed with the recorder of deeds office on March 29, 1982.

The AMA did not receive a tax bill on the property for the 1982 tax year; however, commencing with tax year 1983, the county assessor eliminated the “exempt” status and fully assessed the property. Thus, beginning with the 1983 tax year and for all subsequent years in which the AMA owned the property, the assessor fully assessed the property and the AMA paid all real estate taxes assessed and levied against it.

By notice dated February 8, 1990, the assessor in 1989 certified a 1982 back-tax assessment on the property as omitted property under section 220 of the Revenue Act (Ill. Rev. Stat. 1981, ch. 120, par. 701), for the period during 1982 when AMA owned the property. Per the 1982 back-tax assessment, the clerk extended general real estate taxes and the collector issued corresponding back-tax bills on the property to the AMA in the principal amount of $404,288.64, plus statutory interest in the amount of $121,286.58.

The back-tax bills provided that payment was due August 30, 1990. However, instead of paying the back taxes, the AMA filed the instant action on August 30, 1990, to enjoin the collection of the taxes. In the verified complaint for injunctive relief, the AMA alleged that the assessor had no authority to assess a back tax except where the property has been “omitted” within the meaning of section 220 of the Revenue Act (Ill. Rev. Stat. 1981, ch. 120, par. 701), and since the property here was listed as exempt for the entire 1982 tax year, the back-tax assessment was illegal. The AMA primarily relied on the Illinois Supreme Court decision rendered in People ex rel. Harding v. Atwater (1936), 362 Ill. 546, for the proposition that property listed as “exempt” in the assessment books is not “omitted” property.

Defendants, Edward J. Rosewell, county treasurer and collector of Cook County, Illinois (hereafter defendant or Collector); Stanley Kusper, county clerk of Cook County, Illinois (hereafter defendant or Clerk); Thomas C. Hynes, county assessor of Cook County, Illinois (hereafter defendant or Assessor); and the County of Cook (hereafter defendant or County) filed a section 2—615 (Ill. Rev. Stat. 1981, ch. 110, par. 2—615) motion to dismiss the verified complaint for failure to state a cause of action and failure to state a cause of action for which equitable relief can be granted. Defendants asserted that the property was not listed as exempt for the applicable assessment period within the meaning of Atwater. In the motion to dismiss, defendants specifically contended that the tax status of property is normally established as of January 1. They asserted, however, pursuant to section 27a of the Revenue Act (Ill. Rev. Stat. 1981, ch. 120, 508a), property which is transferred from a use exempt from taxation to a nonexempt use is made subject to taxation from, the date of purchase or conveyance.

Defendants thus made the argument below and on appeal that the relevant assessment period is not the entire year of 1982 dated from January 1, but rather is “that part of the year” dated from the AMA’s acquisition of the title on March 29, 1982. Defendants further assert that the AMA’s complaint for injunctive relief fails to allege facts sufficient to state a cause of action for which equitable relief can be granted.

First, we note the generally accepted rule that an adequate remedy at law bars equitable relief. (See Finn v. Tucker (1980), 81 Ill. App. 3d 1038, 402 N.E.2d 358.) This rule is particularly appropriate in tax cases because the legislature has created a statutory procedure whereby taxpayers can challenge their tax assessments by paying under protest. (Ill. Rev. Stat. 1981, ch. 120, pars. 675, 716.) There are, however, two exceptions to the general rule: (1) the tax is unauthorized by law, or (2) the tax is levied upon exempt property. Here, the AMA raised both exceptions in its verified complaint by challenging the Assessor’s power to levy the back tax (see North Pier Terminal Co. v. Tally (1976), 62 Ill. 2d 540, 548, 343 N.E.2d 507), and by claiming that the back tax was assessed against “exempt property.” Thus, we conclude the trial court was correct in entertaining the AMA complaint for injunctive relief based upon the grounds for relief alleged therein. However, the key issue here is whether the circuit court properly concluded that the Revenue Act authorizes the Assessor to back tax the subject property which had been marked exempt for tax year 1982.

We answer in the affirmative. We affirm the decision of the circuit court of Cook County and agree that the Assessor was authorized pursuant to the Revenue Act of 1939 to back tax in 1989 property which had been marked exempt for 1982.

Section 220 of the Revenue Act, as it provided during the instant lawsuit, states in relevant part:

“If any real or personal property is omitted in the assessment of any year or number of years, so that the taxes thereon, for which such property was liable, have not been paid, or if any such property, by reason of defective description or assessment thereon, fails to pay taxes for any year or years, in either case the same property, when discovered, shall be listed and assessed by the board of review or, in counties having a board of appeals, by the assessor either in his own initiative or when so directed by the board of appeals. *** All such property shall be placed on the assessment and tax books. The arrearages of taxes which have been assessed, with 10% interest thereon for each year or portion thereof from 2 years after the time the first correct tax bill ought to have been received shall be charged against such property by the county clerk.” (Ill. Rev. Stat. 1981, ch. 120, par. 701.)

Section 27a provides in relevant part:

“The owner of real property on January 1 and the owner of personal property on April 1 in any year shall be liable for the taxes of that year.
* * *
The purchaser of real property on January 1 shall be considered as the owner on that day. The purchaser of personal property on April 1 shall be considered as the owner on that day. Provided, however, that whenever a fee simple title or lesser interest in real property is purchased, granted, taken or otherwise transferred for a use exempt from taxation under this Act, such property shall be exempt from taxes from the date of the right of possession, payment or deposit of the award therefor, and whenever a fee simple title or lesser interest in real estate is purchased, granted, taken or otherwise transferred from a use exempt from taxation under this Act to a use not so exempt, such property shall be subject to taxation from the date of purchase or conveyance. In such cases the county collector is authorized to issue a tax bill to the person holding title to the property in that part of the year during which it was not exempt from taxation for such part of the year and to accept payment of such bill as full and final settlement of tax liability for the year involved.” (Ill. Rev. Stat. 1981, ch. 120, par. 508a.)

Both section 220 and section 27a must be read in pari materia. Generally, section 220 provides for a back-tax procedure for omitted property and defective description property. Section 27a establishes the date and formula for assessing liability of taxes and provides that the owner of real property on January 1 shall be liable for that year’s taxes.

Specifically, section 220 authorizes the property to be subject to taxation from the date of purchase, that a tax bill shall issue to the person holding title to the property for that portion of the year not so exempt, and that the property is to be treated as omitted property for that portion of the year. However, section 27a provides an exception to the section 220 rule and provides where property passes from an exempt use to one which is not exempt after January 1 of a given year, the property shall be assessed for that partial year period commencing with the date of the transaction. The AMA argues that under Atwater, once property is listed as exempt, it may not be reassessed and cannot be regarded as omitted property. However, we believe the facts of this case are distinguishable from Atwater. In that case, the Assessor sought to reclassify property as omitted for an entire year when it had already been assessed as exempt. There was no change of ownership resulting in a status change. In the present case, a change of ownership occurred resulting in a change of status from exempt to nonexempt after January 1. Thus, Atwater does not address the present factual matrix; however, section 27a governs the instant matter.

Here, the property was properly marked exempt on January 1 since the City of Chicago was the owner. However, as a result of the change of ownership due to the AMA’s purchase of the property on March 29, 1982, the property was no longer exempt from the date of purchase. Thus, under section 27a the AMA became subject to tax liability beginning March 29, 1982. The Assessor, then, was authorized to assess the property as of March 29, 1982, and issue a tax bill to the AMA. Section 27a mandates that where real estate is purchased or otherwise transferred from a use exempt from taxation to a use nonexempt, such property shall be subject to taxation from the date of purchase or conveyance.

Accordingly, we conclude that the trial court correctly dismissed the AMA’s complaint for injunctive relief for failure to allege sufficient facts to state a cause of action for which relief could be granted.

Affirmed.

BUCKLEY, P.J., and O’CONNOR, J., concur.


author: JUSTICE RAKOWSKI

text:
      In re REHABILITATION OF AMERICAN MUTUAL REINSURANCE COMPANY (American Hardware Mutual Insurance Company, Appellant).
    First District (6th Division)
    No. 1—90—3384
    Opinion filed June 26, 1992.
    Rehearing denied August 10,1992.

      Lord, Bissell & Brook, of Chicago (Hugh C. Griffin, Spencer Leroy, and Mark R. Goodman, of counsel), for appellant.
    Stephen F. Selcke, Director of Insurance of State of Illinois, and.Rudnick & Wolfe, of Chicago (Seymour Simon, Theodore A. Shapero, Stephen W. Schwab, and Gail M. Goering, of counsel), for appellees.
   JUSTICE RAKOWSKI

delivered the opinion of the court:

This appeal arises from an order entered by the circuit court on October 24, 1990, denying a petition filed by appellant, American Hardware Mutual Insurance Company (American Hardware), in the insurance rehabilitation proceedings of American Mutual Reinsurance Company (Amreco). American Hardware’s petition sought to have the court order the rehabilitator to recognize certain setoff rights allegedly provided by the amended rehabilitation plan (Amended Plan) and section 206 of the Illinois Insurance Code (Ill. Rev. Stat. 1989, ch. 73, par. 818) (Insurance Code). A separate appeal of the denial of American Hardware’s petition was also filed by Employers Insurance of Wausau (Wausau) on December 4, 1990, although Wausau did not participate in the proceedings below. The issues on appeal are: (1) whether the trial court erred in denying American Hardware’s petition seeking certain setoff rights; and (2) whether Wausau is a proper party to participate in this appeal.

Amreco operates exclusively as a reinsurance company whereby it does not sell insurance to the public but only to other insurance companies. The companies which are the insureds of Amreco, also referred to as cedents, have transferred a portion of the risk they have underwritten through their own insurance policies to Amreco. Amreco has also transferred a portion of the risk it has assumed from its cedents to other insurance and reinsurance companies. These companies are organized into groups or “pools,” and the risks Amreco is reinsuring have been divided among them according to agreed-upon percentages. Many companies, including American Hardware and Wausau, have ceded risks to "Amreco and have also assumed risks from Amreco as pool participants. Thus, they are both the reinsureds and reinsurers of Amreco.

Amreco bills its pool participants at the end of a three-month period for amounts they owe on claims that Amreco paid during that quarter. In some instances, companies that have ceded claims and assumed risks from Amreco can set off amounts Amreco owes against reinsurance obligations owed by the companies as pool participants.

In November 1986, the Illinois Department of Insurance (Department) determined that Amreco’s financial condition, if allowed to continue, would be hazardous to policyholders, creditors, or the public within the meaning of section 188 of the Insurance Code (Ill. Rev. Stat. 1985, ch. 73, par. 800). Amreco was subsequently ordered to prepare and file with the Department a plan to resolve its financial situation. A committee selected from Amreco’s board of directors drafted what was identified as the “Voluntary Plan,” which included a provision whereby pool participants who were also cedents waived their setoff rights. However, when Amreco distributed the plan to its contractholders (cedents and pool participants), it was not approved.

On February 22, 1988, the Director of the Department filed a complaint for Amreco’s rehabilitation in the circuit court (supervising court) along with a proposed plan of rehabilitation which also included a setoff waiver. The court entered an order of rehabilitation, scheduled a hearing and ordered the Director to distribute the plan to Amreco’s creditors and contractholders for review. The contractholders again objected to the plan because of a provision eliminating their setoff rights, and the plan was withdrawn. A second plan (Amended Plan) was then submitted and distributed for review. After notice to all contractholders, including American Hardware and Wausau, a public hearing was held in September of 1988. There being no objection to the Amended Plan, it was approved by the supervising court.

Under the Amended Plan Amreco reviews, pays and bills its pool participants on a quarterly basis. Thus, each cedent must report all claims within 90 days after paying them. At the end of each quarter the Director (now Rehabilitator) determines which claims reported during that quarter are approved for payment and then bills the pool participants for their share of the approved claims. Near the end of the next quarter, the Rehabilitator must pay all approved claims from the previous quarter using funds collected from the previous quarter’s pool billings. This payment is made part in cash and part by an interest-bearing instrument known as a “surplus draft” in a proportion approved by the supervising court. In 1990, Amreco paid claims in a combination of 37.5% cash and 62.5% surplus draft. The surplus draft is a major part of the rehabilitation plan and is designed to be the means by which Amreco eventually achieves financial recovery. Payment of the drafts to cedents triggers the obligation of pool participants to pay Amreco in cash. According to the Amended Plan, Amreco’s financial condition would improve to acceptable levels, it would pay claims as they arose and ultimately the outstanding surplus drafts would be redeemed.

In addition to receipt of payment by surplus draft, pool participants who are also cedents are able to set off their pool obligation in one quarter with the amount Amreco owes them for the same quarter. Therefore, according to section 6.01(b) of the Amended Plan, the cedent is required to file, along with its 90-day paid claims report, the amount and description of setoff it has applied, is applying or intends to apply against Amreco’s payment on the reported claims. At the end of the period the Rehabilitator calculates the amount of claims paid by the cedent in that quarter with the amount of pool obligations the company owes for the same period. The balance due if any is paid to the cedent in the following quarter.

On June 6, 1990, American Hardware filed a petition with the supervising court requesting that the court instruct the Rehabilitator to recognize American Hardware’s full setoff rights. What American Hardware sought was that Amreco withhold cash and surplus draft payments owed to American Hardware at the end of each quarter so that American Hardware could apply this accumulated amount against debts it might owe Amreco in any future 90-day period. Thus, rather than accept payment of part cash and part surplus draft, American Hardware sought to continually apply the remaining debt owed by Amreco to reduce the amount of American Hardware’s pool obligation. The circuit court denied the petition, and American Hardware filed this appeal.

Wausau did not participate in the hearing on American Hardware’s petition nor did Wausau file a motion to intervene in the proceedings. However, in December 1990, Wausau filed a “Notice of Separate Appeal” from the order denying American Hardware’s petition. The Rehabilitator subsequently filed a motion to dismiss Wausau’s separate appeal which by order of this court was taken with the appeal of American Hardware.

American Hardware contends that the trial court erred in denying its petition because the limitation of its setoff rights to a 90-day period as prescribed by the Amended Plan was improper. What American Hardware seeks is that any payment owed by Amreco which would be in the form of cash and surplus draft would be withheld to be applied as a setoff against American Hardware’s future pool obligations to Amreco. In the alternative, American Hardware also proposes that it could accept payment from Amreco on the condition that the unpaid amount of the surplus draft would be set off against any future debt American Hardware would owe Amreco. In either instance American Hardware would avoid the surplus draft and would instead receive full payment in cash.

American Hardware first argues that the denial of its petition was improper because the limitation of its setoff rights was contrary to section 206 of the Insurance Code. Section 206 provides in part:

“In all cases of mutual debts or mutual credits between the company and another person, such credits and debts shall be set off or counterclaimed and the balance only shall be allowed or paid ***.” (Ill. Rev. Stat. 1989, ch. 73, par. 818.)

In support of its claim that the denial of its petition was contrary to this statute, American Hardware relies on the rule of statutory construction that where a statute grants a right and states the conditions under which it can be exercised, the statute implies that the legislature intended that no other conditions be applied. (See Department of Corrections v. Illinois Civil Service Comm’n (1989), 187 Ill. App. 3d 304, 309, 543 N.E.2d 190.) In addition, Illinois courts have consistently held that neither an administrative officer nor a court may read into a statute conditions, limitations or exceptions not found in the language of the statute. In re Estate of Orzoff (1983), 116 Ill. App. 3d 265, 268, 452 N.E.2d 82.

Applying these principles tó section 206 of the Insurance Code, American Hardware claims that the Rehabilitator’s limitation of its setoff rights was an attempt to read into the statute a limitation not found in its language or intended by the legislature. However, what American Hardware has failed to recognize is that section 206 should be considered in the context of all of article XIII of the Insurance Code and that each provision should be construed in connection with every other provision and in light of the general purposes of the article. (Miller v. Department of Registration & Education (1979), 75 Ill. 2d 76, 81, 387 N.E.2d 300; Neville v. Friedman (1977), 67 Ill. 2d 488, 492, 367 N.E.2d 1341.) The general purpose of article XIII of the Insurance Code (Ill. Rev. Stat. 1987, ch. 73, pars. 799 through 833) is to provide for the rehabilitation as well as the liquidation, conservation, and dissolution of insurance companies. Viewing section 206 in this context, we do not find any language to prohibit the regulation of setoff rights provided for in the Amended Plan. In fact, while the section indicates when setoff is not allowed, there is no reference in the provision regarding how it should be applied in instances where it is allowed.

Section 192 of article XIII also provides that when an order is entered directing rehabilitation, the rehabilitator has the authority to “conduct the business of the company and take such steps towards removal of the causes and conditions which have made such proceedings necessary as may be expedient.” (Ill. Rev. Stat. 1987, ch. 73, par. 804(1).) This section also provides that if the Rehabilitator “finds that it is to the best interests of policyholders, creditors and the company to effect a plan of mutualization or rehabilitation, he may submit such plan to the court for its approval.” (Ill. Rev. Stat. 1987, ch. 73, par. 804(3).) Under section 192 the Rehabilitator also has the authority to include in the plan any terms or conditions deemed necessary or advisable. When a plan has been prepared, “[n]otice of the hearing upon any such plan shall be given in the manner as may be fixed by the court and upon such hearing the court may either approve or disapprove the plan or modify it in such manner and to such extent as to the court shall seem appropriate.” (Ill. Rev. Stat. 1987, ch. 73, par. 804(3).) Thus, the Rehabilitator, in this case, had the authority to develop the Amended Plan. Notice of the hearing on the plan was then given to all of the contractholders, including American Hardware, where they had an opportunity to raise any objection to the plan and its effect on their respective setoff rights. No objection to the Amended Plan was raised at the hearing, and it was approved by the court. Therefore, the Rehabilitator complied with the provisions of article XIII where the contractholders had an opportunity to review the Amended Plan and raise any objection to its implementation.

American Hardware also argues that the limitation of its setoff rights was improper because its future pool obligations, which it seeks to apply as a setoff against the current amount owed by Amreco, are a mutual debt which thus can be applied as a setoff under section 206. However, the fact that American Hardware’s future pool obligations may have been a mutual debt under section 206 did not mean that its exercise of its setoff rights could not be regulated in such a way as to facilitate Amreco’s rehabilitation, particularly when section 206 is viewed in conjunction with the other provisions of article XIII.

American Hardware next contends that the Rehabilitator’s position was contrary to the express provisions of the Amended Plan. The provisions of the Amended Plan which American Hardware cites in support of its argument are paragraphs 4.01, 6.01, 6.02, and 7.03. Paragraph 4.01 provides that any cedent may assert any setoff or counterclaim against Amreco provided the obligation sought to be set off has been paid and proper written notice has been given to the Rehabilitator. Paragraphs 6.01 and 6.02 address claims reporting and directs ceding companies to report the amount and description of any setoff the cedent has applied, is applying, or intends to apply against Amreco’s share of paid losses. Paragraph 7.03 provides that any and all payments by Amreco shall be the net of any sums properly set off. Although American Hardware argues that the phrase “intends to apply” in paragraph 6.02 allows for a setoff with future obligations of an undetermined amount, the provision requires that cedents report the amount and description of any setoff the cedent intends to apply. Therefore this provision does not allow for a setoff with future obligations of an unknown amount as American Hardware suggests. The remaining provisions of the Amended Plan refer to the availability of setoff and how it is to be exercised. Not only is the Rehabilitator’s position not contrary to the Amended Plan, as American Hardware alleges, but the Amended Plan expressly provides the Rehabilitator with authority to limit American Hardware’s application of setoff to the 90-day payment periods set forth in the plan.

In conclusion, we note that although American Hardware claims to seek unlimited exercise of setoff in its transactions with Amreco, what American Hardware in effect intends is that by not accepting payment from Amreco, it can avoid the surplus draft/cash form of payment and can then use the unpaid amount to set off and reduce its pool obligation to Amreco. Because the financial rehabilitation of Amreco is dependent on the generation of revenue through payment to its cedents with part cash and part surplus draft and its receipt of payment in cash from its pool participants, what American Hardware proposes would undermine the rehabilitative process. If Amreco’s rehabilitation fails and it is forced into liquidation, all of its contractholders, including American Hardware, will receive less revenue from Amreco than is currently available with the surplus dr aft/cash method of payment. For these reasons, as well as those discussed above, we conclude that the Rehabilitator’s limitation of American Hardware’s use of setoff as prescribed by the Amended Plan was proper.

Accordingly the trial court’s order denying American Hardware’s petition is affirmed.

WAUSAU’S SEPARATE APPEAL

Wausau has filed a separate appeal from the denial of American Hardware’s petition, and in addition to the issue raised in American Hardware’s appeal, Wausau raises the issue of whether the order denying American Hardware’s petition is void because Wausau did not receive notice of the hearing or have an opportunity to participate in the proceedings.

Although it did not take part in the hearing on American Hardware’s petition, Wausau contends that it has standing to participate in this appeal because it was a necessary party to that proceeding and did not receive notice. A necessary party is one whose participation in the lawsuit is required for any of the following reasons: (1) to protect an interest which the absent party has in the subject matter of the controversy which would be materially affected by his absence; (2) to reach a decision that will protect the interests of those before the court; and (3) to enable the court to make a complete determination of the controversy. (Ill. Rev. Stat. 1989, ch. 110, par. 2—405(a); Zurich Insurance Co. v. Raymark Industries, Inc. (1986), 144 Ill. App. 3d 943, 946, 494 N.E.2d 630; Tomaso v. Plum Grove Bank (1985), 130 Ill. App. 3d 18, 26, 473 N.E.2d 588.) Consequently, the court is without jurisdiction to enter an order or judgment which affects the right or interests of someone not before the court, and under these circumstances, such order or judgment is void. Lain v. John Hancock Mutual Life Insurance Co. (1979), 79 Ill. App. 3d 264, 269, 398 N.E.2d 278.

In its argument that it was a necessary party to the hearing on American Hardware’s petition, Wausau implies that it was not yet a party to the proceeding on American Hardware’s petition. However, American Hardware’s petition arose from the original rehabilitation proceeding where Wausau and the other contractholders were already parties. While the court is without jurisdiction to enter a judgment or order where one found to be a necessary party has not been joined, the same does not apply where one who is already a party to a proceeding has not been given notice of pleadings or motions subsequent to a complaint. Supreme Court Rule 104 addresses the issue of notice to parties, and Rule 104(d) states in relevant part that “[fjailure to deliver or serve copies as required by this rule does not in any way impair the jurisdiction of the court over the person of any party.” (134 Ill. 2d R. 104(d).) In People ex rel. Hamer v. Jones (1968), 39 Ill. 2d 360, 371, 235 N.E.2d 589, the court held that a motion for extension of time to answer or otherwise plead without notice to the opposing party was not a denial of due process where the nonmoving party was not harmed by the ruling. Similarly, the court in In re Marriage of Collins (1987), 154 Ill. App. 3d 655, 657, 506 N.E.2d 1000, held that the failure to serve the nonmoving parties with notice of a motion for reconsideration did not render the ruling on the motion invalid where the parties not served were present at the hearing on the motion and suffered no prejudice as a result of not being served. A motion to vacate a dismissal absent notice to the opposing party was not void in Kollath v. Chicago Title & Trust Co. (1974), 24 Ill. App. 3d 353, 357-58, 321 N.E.2d 344, rev’d on other grounds (1975), 62 Ill. 2d 8, 338 N.E.2d 188. The Kollath court held that Supreme Court Rule 104(b) “renders a failure to comply with Rule 104(b) or like rules in the circuit courts non-jurisdictional.” Kollath, 24 Ill. App. 3d at 357-58. See also Schlenz v. Castle (1985), 132 Ill. App. 3d 993, 1014, 477 N.E.2d 697.

In this case we also conclude that, although Wausau did not receive notice or participate in the hearing on American Hardware’s petition, it was not harmed or prejudiced by not being present. American Hardware’s petition was precipitated by the implementation of the Amended Plan, which contained the provisions regarding Amreco’s partial payment with surplus drafts, cash payment by pool participants and the limitation of setoff to the same 90-day period in which both debts occurred. When the Amended Plan was being considered, all of the contractholders including Wausau had an opportunity to review it and to raise any objections at the public hearing. Thus, the same information that was available to American Hardware regarding the impact of the Amended Plan on its setoff rights was also available to Wausau, and Wausau was equally able to take the same or similar action pertaining to its setoff rights.

Additionally, because the substance of how Wausau proposes to apply its setoff rights is somewhat different from what American Hardware seeks, Wausau was not prejudiced by not receiving notice of the hearing on American Hardware’s petition. While American Hardware requests that the Rehabilitator withhold payments due from Amreco to be applied to future amounts American Hardware will owe as a pool participant, Wausau currently owes Amreco over $2 million in pool obligations which it is withholding to set off against amounts Amreco will owe it in the future. Consequently, a ruling on American Hardware’s petition by the court would not be a determination as to what Wausau seeks.

Even assuming, arguendo, that what Wausau sought was the same as that proposed by American Hardware, Wausau would still not be adversely affected by the court’s ruling. Because Wausau did not receive notice or participate in the hearing on American Hardware’s petition, any ruling by the court, while valid as to American Hardware, would not be in effect as to Wausau. (Moore v. One Stop Medical Center (1991), 218 Ill. App. 3d 1011, 1016, 578 N.E.2d 1231.) While Wausau argues that it would be prejudiced if it brought such a motion because the trial court has already ruled on the issue as to American Hardware, we deem the argument to be without merit. Like American Hardware, Wausau received notice of the hearing on the Amended Plan, and like American Hardware, it did not object. While judicial economy would be best served if one hearing would encompass all contractholders with similar motions, Wausau has not supplied us with any authority that would compel such a result.

Finally, in support of its proposition that an order entered without proper notice is void, Wausau cites as additional authority Maras v. Bertholdt (1984), 126 Ill. App. 3d 876, 467 N.E. 2d 599, Wilson v. Moore (1973), 13 Ill. App. 3d 632, 301 N.E.2d 39, and Vlahakis v. Parker (1971), 3 Ill. App. 3d 126, 278 N.E.2d 523 (abstract decision). The Vlahakis and Wilson courts, partially relying on Supreme Court Rule 104(b), concluded that an order entered without notice was void. However, based on Supreme Court Rule 104(d) and the case law cited above (see Hamer, 39 Ill. 2d 360, 235 N.E.2d 589; Collins, 154 Ill. App. 3d 655, 506 N.E.2d 1000; Kollath, 24 Ill. App. 3d 353, 321 N.E.2d 344), we conclude that a failure to serve a nonmoving party with notice renders a subsequent order based on that motion voidable rather than void. The determining factor is not the absence of notice but whether there was any harm or prejudice to the nonmoving party. In Maras v. Bertholdt, a more recent decision cited by Wausau, the plaintiff’s appeal filed within 30 days of a final order denying plaintiff’s motion for a new trial was timely even though the appeal was filed more than 30 days after an earlier written order which contained Rule 304(a) language because the plaintiff did not receive notice of the earlier order. (Maras, 126 Ill. App. 3d at 881.) In that case, plaintiff would have clearly been prejudiced if the appeal had been found untimely unlike the case sub judice in which Wausau is not precluded from filing its own petition.

For the foregoing reasons, we conclude that Wausau does not have standing to participate in this appeal. Accordingly, the Rehabilitator’s motion to dismiss Wausau’s appeal is granted. As to this appeal, the order of the circuit court is affirmed.

Affirmed.

EGAN, P.J., and LaPORTA, J., concur.

       This assumption seems remote indeed in that it has been over 3½ years since the Amended Plan was approved and over 19 months since the court ruled on American Hardware’s petition.


text:
    MOSE LEAKS et al., Plaintiffs-Appellants, v. THE CITY OF CHICAGO et al., Defendants-Appellees.
    First District (6th Division)
    No. 1—91—2762
    Opinion filed October 23, 1992.
    Rehearing denied December 14,1992.

      David P. Zev, of Chicago, for appellants.
    Kelly R. Welsh, Corporation Counsel, of Chicago (Lawrence Rosenthal, Benna Ruth Solomon, and Jean Dobrer, Assistant Corporation Counsel, of counsel), for appellees.
   JUSTICE RAKOWSKI

delivered the opinion of the court:

Plaintiffs brought suit against defendants, seeking recovery for personal injuries allegedly sustained in an automobile collision. The cause was tried by a jury, and a verdict was returned in favor of defendants. Plaintiffs appeal, contending that: (1) the trial court erred in finding that defendant Johnson was engaged in the enforcement of the law at the time of the accident; (2) the trial court erred in denying the plaintiffs the right to impeach Johnson’s testimony with prior inconsistent statements; (3) the determination of whether Johnson was engaged in the enforcement of the law was within the province of the jury; (4) the trial judge abused his discretion in refusing to allow plaintiffs to exercise more than six peremptory challenges of potential jurors; and (5) plaintiffs were entitled to a directed verdict on the negligence count where Johnson testified that he failed to look behind the squad car before moving in reverse.

The record reveals that plaintiffs sought recovery for personal injuries allegedly sustained in an automobile collision as a result of negligent conduct by defendants, Willie Johnson, a Chicago police officer, and the City of Chicago. Plaintiffs also alleged that their injuries were caused by willful and wanton conduct on the part of defendants. Defendants denied the substantive allegations in plaintiffs’ complaint and raised as an affirmative defense the claim that plaintiffs’ injuries were proximately caused by their own negligence. Defendants also asserted as an affirmative defense that they were not liable in negligence for plaintiffs’ injuries because defendant Johnson was acting in the execution or enforcement of the law. (Ill. Rev. Stat. 1985, ch. 85, pars. 2 — 109, 2 — 202.) During trial, the court determined that defendant Johnson was engaged in the enforcement of the law at the time of the accident. Accordingly, the court ruled that, in order to recover, plaintiffs were obligated to prove that Johnson was guilty of willful and wanton conduct. Upon consideration of all of the evidence presented, the jury returned a verdict in favor of defendants, finding that plaintiffs failed to establish willful and wanton behavior.

The only trial testimony included in the record on appeal is that of defendant Officer Willie Johnson. Defendant Johnson, who was called by counsel for the City of Chicago, testified that he had been employed as a Chicago police officer for 6V2 years. At the time of trial, Johnson was assigned to the mobile force of the Area 4 gang crimes unit.

In June 1986, Johnson was a patrolman in the third district, which encompassed the area surrounding 63rd Street and Rhodes. Johnson stated that he patrolled this high-crime area on a regular basis. On June 29, 1986, Johnson was on duty with his partner, Gregory Patten, who was deceased at the time of trial. Johnson and Patten were assigned to the third watch, 4 p.m. to 12 a.m. At approximately 6 p.m., Johnson and Patten were cruising down the 6200 block of Rhodes Street, a southbound one-way street. Johnson testified that he was driving the marked police car and that he was travelling at about 15 or 20 miles per hour.

As he passed an alley at 6247 South Rhodes, Johnson observed several people standing in front of and in the hallway of an apartment building. Johnson testified that he believed the behavior of these people was suspicious and similar to the “methods used by some narcotics dealers to peddle their drugs.” Johnson also testified that he believed the conduct of these people constituted a violation of a municipal law against loitering, which, according to Johnson, precluded the gathering of three or more persons in one place without a permit. Johnson determined that he should investigate the situation further. He stopped the squad car a couple of car lengths beyond the apartment building and informed Patten what he had seen.

Johnson then put the car in reverse and raised his foot off the brake pedal. As he took his foot off the brake, the car moved back two or three feet. Johnson started to turn his head to look over his right shoulder, but the squad car struck the plaintiffs’ vehicle before Johnson was able to look behind him. Johnson testified that he was not conversing with anyone on the street at the time the collision occurred.

Johnson testified that he had not depressed the accelerator while the car was in reverse, and the squad car could not have been moving any faster than three or five miles per hour. When Johnson felt the impact, he turned all the way around and saw the plaintiffs’ car behind him. Johnson testified that he said “oops” because it was not a serious collision. Johnson then got out of the squad car and walked back to the plaintiffs’ car and inquired whether the occupants were all right. Johnson testified that when he asked this question he did so rather jokingly because he knew there was nothing serious to it. Johnson said none of the occupants incurred any injuries and that the only damage to plaintiffs’ vehicle was a bent license plate.

During trial, plaintiffs moved for a directed verdict. Plaintiffs contended that because Johnson was not engaged in the enforcement of the law at the time of the accident, the standard to be applied was one of negligence, and the evidence established that his conduct was negligent as a matter of law. The trial court denied plaintiffs’ motion for a directed verdict, finding that Johnson was engaged in the enforcement of the law at the time of the accident. Accordingly, the court ruled that plaintiffs were obligated to prove that Johnson was guilty of willful and wanton conduct.

Plaintiffs initially assert that the trial court erred in finding that defendant Johnson was engaged in the enforcement of law at the time of the accident. We agree.

Section 2 — 109 of the Local Governmental and Governmental Employees Tort Immunity Act (Tort Immunity Act) provides that “[a] local public entity is not liable for an injury resulting from an act or omission of its employee where the employee is not liable.” (Ill. Rev. Stat. 1985, ch. 85, par. 2 — 109.) Section 2 — 202 of the Tort Immunity Act states that “[a] public employee is not liable for his act or omission in the execution or enforcement of any law unless such act or omission constitutes willful and wanton negligence.” Ill. Rev. Stat. 1985, ch. 85, par. 2 — 202.

In Arnolt v. City of Highland Park (1972), 52 Ill. 2d 27, 282 N.E.2d 144, the Illinois Supreme Court held that only acts done “while in the actual execution or enforcement of a law” were entitled to immunity and noted that a police officer merely cruising in his car while on duty may not claim immunity if the factual determination indicated that he was not executing or enforcing a law at the time. (Arnolt, 52 Ill. 2d at 33-34.) The court held further that the question of whether a police officer is executing and enforcing the law is a factual determination which must be made in light of the circumstances involved in each case. Arnolt, 52 Ill. 2d at 35.

The ruling in Anderson v. City of Chicago (1975), 29 Ill. App. 3d 971, 331 N.E.2d 243, was predicated upon the Arnolt decision and held that a police officer transporting two prisoners in a squad car was not enforcing or executing any laws. (Anderson, 29 Ill. App. 3d at 977.) The court concluded, therefore, that the plaintiff pedestrian who was struck by the officer’s vehicle was not required to show willful or wanton conduct under the Tort Immunity Act. Anderson, 29 Ill. App. 3d at 977.

In Thompson v. City of Chicago (1985), 108 Ill. 2d 429, 484 N.E.2d 1086, two police officers activated the siren of the squad car and began to move the car slowly forward in an attempt to disperse an unruly crowd. The officers’ vehicle struck the plaintiff while backing up when the mob began to pelt the car with bottles, rocks, and debris. There, the supreme court held that the officers’ action was merely a tactical retreat and was part of a continuing course of conduct intended to restore the peace. Thompson, 108 Ill. 2d at 434.

In Fitzpatrick v. City of Chicago (1986), 112 Ill. 2d 211, 492 N.E.2d 1292, the plaintiff was involved in an automobile accident on an expressway, and a police officer in a squad car stopped nearby to investigate. Another car struck the squad car and caused it to hit the plaintiff. The supreme court held that the police officer and his employer were entitled to assert immunity where the evidence established that at the time of the incident, the officer was engaged in a course of conduct designed to enforce traffic laws.

In Aikens v. Morris (1991), 145 Ill. 2d 273, 583 N.E.2d 487, the Illinois Supreme Court considered whether an officer was liable for injuries to the plaintiff when the police car collided with the plaintiff’s vehicle while the officer was in the process of transporting a prisoner from one lockup facility to another. In Aikens, the court specifically reaffirmed the reasoning employed in Arnolt. The court held that because the words “in the execution or enforcement of any law” should be given their plain and commonly ascribed meaning (Aikens, 145 Ill. 2d at 278), the Tort Immunity Act did not provide a blanket immunity for the negligent performance of all activities while an officer was on duty (Aikens, 145 Ill. 2d at 279). The court noted that the statute provided only a limited immunity which was narrower than the scope of a police officer’s employment or his performance of all official functions and duties. The court also reaffirmed its prior holding in Arnolt that the determination of whether an officer is executing or enforcing a law is a factual one which must be made in light of the circumstances in each case. (Aikens, 145 Ill. 2d at 286.) The court concluded that the transportation of prisoners did not constitute a course of conduct in the execution or enforcement of a law. Aikens, 145 Ill. 2d at 286.

In the case at bar, defendant Johnson testified that he was merely cruising when he observed several individuals standing outside and in the hallway of the apartment building on Rhodes. It is undisputed that Johnson was not engaged in the execution or enforcement of a law while he was routinely cruising the neighborhood. (See Arnolt, 52 Ill. 2d at 34.) Defendants have, however, asserted that they were immune from liability because Johnson had embarked upon a course of conduct in the execution and enforcement of a law at the time of the collision. We find that the evidence in the record does not support this assertion.

The only testimony included in the record on appeal is that of defendant Johnson, who stated that he observed several people standing outside and in the hallway of an apartment building at approximately 6 p.m. on the evening of June 29, 1986. There is absolutely no indication that Johnson observed the exchange of any money or the transfer of any drugs, or for that matter any crime at all. While Johnson did testify that what he observed was similar to how some dealers peddle their drugs, he did not elaborate upon this. What remains is a record which only shows several people standing in front of and in the hallway of an apartment building on a summer evening, a common occurrence in most every neighborhood.

Defendants have raised executing and enforcing the law as an affirmative defense and as such bear the burden of coming forth with facts to support the defense. This they have not done. Our holding, we stress, is not intended to establish a rule that facts establishing that an actual crime or violation of law was taking place must be shown to prevail upon the affirmative defense, or that investigatory procedure may never bring police personnel within the ambit of section 2 — 202. Rather, our holding is bottomed upon defendants’ failure to support their affirmative defense with facts. At best, Johnson’s testimony was conclusory in nature as to suspected violation of State law or municipal ordinance. We therefore hold that the trial court erred in ruling that plaintiffs were required to prove willful and wanton conduct. Accordingly, the judgment in favor of defendants is reversed, and the cause is remanded for a trial on plaintiffs’ negligence claim.

Plaintiffs also assert that they were entitled to a directed verdict because Johnson was guilty of negligence per se. Specifically, plaintiffs contend that Johnson violated section 11—708 of the Illinois Vehicle Code, which provides that traffic shall proceed only in the direction designated for one-way streets. (Ill. Rev. Stat. 1985, ch. 95½, par. 11—708(b).) Plaintiffs alleged that Johnson violated this statute and was guilty of negligence per se when he drove in the wrong direction on a one-way street. This argument is unpersuasive.

Violation of a statute or ordinance designed for the protection of human life or property is prima facie evidence of negligence, but does not constitute negligence per se because the evidence of negligence may be rebutted by proof that the party acted reasonably under the circumstances, despite the violation. (Barthel v. Illinois Central Gulf R.R. Co. (1978), 74 Ill. 2d 213, 219-20, 384 N.E.2d 323; Davis v. Marathon Oil Co. (1976), 64 Ill. 2d 380, 390, 356 N.E.2d 93.) Consequently, Johnson’s conduct in driving the squad car in the wrong direction on a one-way street cannot be considered negligence per se, and plaintiffs are not entitled to a directed verdict on this basis.

Plaintiffs also assert that Johnson was guilty of negligence per se because he had not looked behind the squad car before moving in reverse. Plaintiffs characterize Johnson’s actions as “driving without vision” and negligence as a matter of law. (See Hartigan v. Robertson (1980), 87 Ill. App. 3d 732, 736, 409 N.E.2d 366.) We note, however, that the evidence in the record reflects that Johnson put the car in reverse and raised his foot off the brake pedal. As he took his foot off the brake, the car moved back two or three feet. Johnson started to turn his head to look over his right shoulder, but the squad car struck the plaintiffs’ vehicle before Johnson was able to look behind him. Based upon the evidence before us, we are unwilling to say that Johnson was necessarily “driving without vision” and guilty of negligence as a matter of law. Thus, we hold that plaintiffs were not entitled to a directed verdict on this basis.

Based upon our decision in this case, we need not address the remaining issues raised by plaintiffs on appeal.

For the foregoing reasons, the judgment of the circuit court of Cook County is reversed, and the cause is remanded to the trial court for a trial on plaintiffs’ negligence claim.

Reversed and remanded.

EGAN, P.J., and McNAMARA, J., concur.

       Justice LaPorta participated in this case before her death. Presiding Justice Egan has taken her place and has read the briefs and listened to the tape of the oral arguments.