Court Opinion

ID: 4187437
Source: CourtListenerOpinion
Date Created: 2017-07-20 03:14:57.650209+00
Date Added: 2024-06-11T14:40:05.164205
License: Public Domain

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                                       Appellate Court                            Date: 2017.07.19
                                                                                  11:39:52 -05'00'

             CE Design Ltd. v. HealthCraft Products, Inc., 2017 IL App (1st) 143000

Appellate Court          CE DESIGN LTD., Individually and on Behalf of the Certified Class,
Caption                  as Assignees, Plaintiff, Citation Petitioner, and Counter Citation
                         Respondent-Appellant and Cross-Appellee, v. HEALTHCRAFT
                         PRODUCTS, INC., Defendant (ING Insurance Company of Ontario,
                         Citation Respondent and Counter Citation Petitioner-Appellee and
                         Cross-Appellant).

District & No.           First District, Second Division
                         Docket No. 1-14-3000

Filed                    May 2, 2017

Decision Under           Appeal from the Circuit Court of Cook County, No. 03-CH-18105; the
Review                   Hon. Rodolfo Garcia, Judge, presiding.

Judgment                 Affirmed in part and reversed in part; cause remanded.

Counsel on               Bock & Hatch, LLC, of Chicago (Phillip A. Bock, of counsel), and
Appeal                   Anderson + Wanca, of Rolling Meadows (Brian J. Wanca, David M.
                         Oppenheim, and Jeffrey A. Berman, of counsel), for appellant.

                         Tressler LLP, of Chicago (James K. Borcia, of counsel), for appellee.
     Panel                   JUSTICE PIERCE delivered the judgment of the court, with opinion.
                             Presiding Justice Hyman and Justice Neville concurred in the
                             judgment and opinion.

                                              OPINION

¶1         Plaintiff CE Design Ltd. (CE Design), individually and on behalf of the certified class,
       appeals from an order of the circuit court in a collection case denying CE Design’s motion
       for turnover and its citation to discover assets. CE Design argues the court erred in
       recognizing the judgment of a Canadian court finding it had jurisdiction over CE Design and
       that ING Insurance Company of Ontario (ING) had no duty to defend or indemnify against a
       judgment held by CE Design against its insured, HealthCraft Products, Inc. (HealthCraft).
       ING obtained a judgment against CE Design in the Canadian proceeding for fees and costs.
       The circuit court denied enforcement of the Canadian judgment against CE Design finding it
       unenforceable because it did not comport with Illinois and United States standards of due
       process. ING cross-appeals. For the following reasons, we affirm the circuit court’s dismissal
       of CE Design’s motion for turnover and citation to discover assets against ING and we
       reverse the circuit court’s dismissal of ING’s citation to discover assets against CE Design.

¶2                                          BACKGROUND
¶3         CE Design was a company based in Rolling Meadows before it ceased operations in
       2010. HealthCraft, a Canadian company with its principal place of business in Ontario, is in
       the business of supplying home health equipment. ING is a Canadian insurance company
       licensed in Ontario. ING issued a comprehensive general liability insurance policy to
       HealthCraft for the relevant time period.
¶4         On October 29, 2003, CE Design filed a class action complaint in Cook County against
       HealthCraft alleging that CE Design received unsolicited fax transmissions from HealthCraft
       on August 12, 2003. HealthCraft was served with the complaint in its Ontario office on
       December 11, 2003, and tendered its defense to ING on December 23, 2003. ING
       acknowledged receipt of the tender of defense on January 5, 2004, but stated that it was
       investigating the claim and it was reserving its rights pending an investigation. HealthCraft
       retained its own defense counsel and moved to dismiss CE Design’s complaint. While the
       motion to dismiss was pending, HealthCraft and CE Design entered settlement discussions,
       with the settlement preliminarily approved by the circuit court on December 22, 2004. The
       settlement provided for a consent judgment against HealthCraft for $543,500 and the
       assignment of all of HealthCraft’s rights under the ING policy to CE Design; CE Design
       released HealthCraft from any further liability, agreed not to execute on any of HealthCraft’s
       assets, and would only seek recovery from the ING policy. Neither CE Design nor
       HealthCraft gave notice of the settlement discussions to ING. ING first received notice that
       the parties were discussing a settlement agreement on May 13, 2005. Final approval of the
       settlement agreement and judgment against HealthCraft occurred on June 27, 2006. ING
       became aware of the terms of the settlement agreement when it received a copy of the circuit
       court’s dismissal order.

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¶5          On May 17, 2005, while the matter was still pending in the circuit court of Cook County,
       ING filed a declaratory judgment action against HealthCraft in the Ontario Superior Court of
       Justice. ING alleged that the policy did not cover the claims raised in CE Design’s lawsuit
       against HealthCraft.
¶6          On July 27, 2006, CE Design initiated third party citation proceedings against ING
       seeking to enforce the judgment in Cook County. CE Design served ING in Ontario with its
       citation to discover assets on July 29, 2006.
¶7          Sometime thereafter, ING brought a motion to amend its application in the Ontario court
       to add CE Design as a party respondent and to amend its prayer for relief to seek an order
       that it was not required to defend or indemnify CE Design or HealthCraft. On October 19,
       2006, the Ontario court ordered that CE Design be added as a party respondent to the Ontario
       action and ordered that CE Design be served with the amended application that was filed on
       the same day. CE Design was served on November 7, 2006.
¶8          On November 30, 2006, CE Design through counsel in Ontario, filed a motion to strike
       ING’s amended application contesting the Ontario court’s jurisdiction over CE Design and
       on forum non conveniens grounds. ING filed a motion opposing CE Design’s motion on
       December 15, 2006.
¶9          On December 29, 2006, ING moved to stay the action pending in Cook County due to the
       action pending in Ontario. CE Design opposed the motion arguing that it was not subject to
       the Ontario court’s jurisdiction because it had never done business in Ontario. On February
       21, 2007, the circuit court granted ING’s motion to stay the proceeding pending the outcome
       of CE Design’s motion to dismiss pending in Ontario reasoning that the coverage issues were
       first joined in Ontario and therefore the Ontario court was best suited to decide the coverage
       issues.
¶ 10        On March 8, 2007, the Ontario court denied CE Design’s motion to dismiss ruling that
       Canadian law applied to the contract between ING and HealthCraft, and the Ontario court
       had jurisdiction because there was a real and substantial connection with the province of
       Ontario. The Ontario court further held that CE Design was standing in the shoes of
       HealthCraft as its assignee, and because HealthCraft is an Ontario company and the contract
       was entered into in Ontario, Ontario was the convenient forum.
¶ 11        On June 30, 2009, the Ontario court decided the merits of the coverage issues and found
       that ING had no duty to defend HealthCraft and had no duty to indemnify either HealthCraft
       or CE Design with respect to the judgment obtained by CE Design. The court reasoned that
       CE Design’s claims fell outside of the policy coverage and that HealthCraft breached its duty
       to cooperate and advise ING. The Canadian court further found that CE Design’s claims
       were barred by the Canadian Insurance Act and HealthCraft’s avoidance of liability in the
       settlement precluded coverage. The court ordered CE Design to pay ING costs in the amount
       of $20,746.56.
¶ 12        On August 18, 2009, the Ontario judgment was registered by ING in the circuit court of
       Cook County. CE Design filed a motion to quash and dismiss ING’s petition to register the
       Ontario judgment arguing that the Ontario court never had personal jurisdiction over CE
       Design or the class members. On July 14, 2011, the circuit court denied CE Design’s motion
       to quash, recognized the Ontario judgment, and struck CE Design’s citation to discover
       assets directed at ING. The court however, refused to enforce the money judgment entered
       against CE Design.

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¶ 13       On August 12, 2011, CE Design filed a motion for reconsideration of the part of the
       court’s July 14, 2011, order striking the citation to discover assets directed to ING. On the
       same date, ING sought reconsideration of the motion that vacated the money judgment
       entered against CE Design. Both motions to reconsider were granted on March 7, 2012. On
       August 24, 2014, the circuit court denied CE Design’s motion for turnover and its citation to
       discover assets finding that the question of whether the Ontario court had personal
       jurisdiction over CE Design was resolved by the circuit court’s July 14, 2011, order granting
       ING’s motion to register the Ontario judgment. In addition, the circuit court dismissed ING’s
       citation to discover assets directed at CE Design, finding the separate award of fees and costs
       entered against CE Design by the Ontario court did not comport with Illinois and United
       States standards of due process and therefore was unenforceable by the circuit court.
¶ 14       CE Design filed a timely notice of appeal on September 26, 2014. ING filed a notice of
       cross-appeal on October 1, 2014.

¶ 15                                               ANALYSIS
¶ 16       CE Design argues that the Ontario judgment is not binding because (1) ING inadequately
       proved the foreign judgment, (2) a judgment against HealthCraft does not affect the rights of
       CE Design or the class, and (3) the Ontario court lacked jurisdiction over CE Design and
       therefore its default judgment against CE Design is void and unenforceable. CE Design also
       argues that even if the Ontario court had jurisdiction, its judgment would be unenforceable as
       contrary to Illinois public policy. Furthermore, CE Design argues that ING had a duty to
       defend HealthCraft.
¶ 17       CE Design first argues that ING inadequately proved the Ontario judgment, where such
       issues generally must be proven by expert testimony. ING argues that CE Design has waived
       this issue where it failed to raise it in the trial court. We agree.
¶ 18       A review of CE Design’s motion to quash and dismiss ING’s petition for registration of
       foreign judgment shows that CE Design opposed the registration of the foreign judgment for
       six specific reasons, none of which included an argument that ING inadequately proved the
       Ontario judgment. “It is well settled that issues not raised in the trial court are deemed
       waived and may not be raised for the first time on appeal.” Haudrich v. Howmedica, Inc.,
       169 Ill. 2d 525, 536 (1996). Waiver aside, we have found no Illinois law, nor has CE Design
       cited to any, requiring a movant to prove foreign law by expert testimony in conjunction with
       the simple act of registration of a foreign judgment. We therefore reject this argument.
¶ 19       CE Design next argues that the Ontario court lacked personal jurisdiction over CE
       Design, and therefore, its default judgment against CE Design is void and unenforceable.
       ING argues that CE Design appeared through counsel and challenged the Ontario court’s
       personal and subject matter jurisdiction and lost prior to the Ontario court ruling that ING
       had no duty to defend HealthCraft under the insurance policy and no duty to indemnify
       HealthCraft or CE Design with respect to the judgment obtained by CE Design, and
       therefore, this court is barred from considering CE Design’s arguments relating to the default
       judgment based on the doctrine of res judicata.
¶ 20       “[J]udgments rendered by courts outside the State of Illinois” are enforced by two
       uniform statutes: the Uniform Foreign Money-Judgments Recognition Act (Recognition Act)

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       (735 ILCS 5/12-618 et seq. (West 2008)) 1 and the Uniform Enforcement of Foreign
       Judgments Act (Enforcement Act) (735 ILCS 5/12-650 et seq. (West 2008)). Pinilla v. Harza
       Engineering Co., 324 Ill. App. 3d 803, 806-07 (2001). The Recognition Act recognizes
       judgments of a foreign country that is “any governmental unit other than the United States, or
       any state.” (Internal quotation marks omitted.) Id. at 807. “The Recognition Act provides that
       as long as a foreign judgment is ‘final and conclusive and enforceable where rendered’ [(735
       ILCS 5/12-619 (West 2008))], it ‘is enforceable in the same manner as the judgment of a
       sister state which is entitled to full faith and credit’ [(735 ILCS 5/12-620 (West 2008))].”
       Pinilla, 324 Ill. App. 3d at 807. On the other hand, the Enforcement Act governs enforcement
       of judgments outside of the State of Illinois from “a court of the United States or of any other
       court which is entitled to full faith and credit in this State.” 735 ILCS 5/12-651 (West 2008).
¶ 21        “The Recognition Act serves the purpose only of allowing [an Illinois] court a means to
       recognize a foreign country’s judgment. The Recognition Act does not establish the
       procedure to file or enforce a foreign judgment.” Pinilla, 324 Ill. App. 3d at 807. “The
       Recognition Act does provide, however, that once a foreign judgment is recognized, it is to
       be enforced in the same manner as the judgment of a sister state.” Id.; 735 ILCS 5/12-620
       (West 2008). The Enforcement Act governs the methods to file and enforce a foreign
       judgment. Pinilla, 324 Ill. App. 3d at 807.
¶ 22        The Enforcement Act provides that a recognized foreign country’s judgment “is subject
       to the same procedures, defenses and proceedings for reopening, vacating, or staying as a
       judgment of a circuit court for any county of this State and may be enforced or satisfied in
       like manner.” 735 ILCS 5/12-652(a) (West 2008); Pinilla, 324 Ill. App. 3d at 808 (once a
       foreign country’s judgment is recognized, it is subject to enforcement procedures). Therefore,
       local and foreign judgments are subject to the same enforcement and satisfaction mechanisms
       and standards.
¶ 23        The exception to this rule is that a circuit court may inquire into the defenses of lack of
       jurisdiction in the foreign court, as CE Design asserts occurred here, or fraud in the
       procurement of the judgment, provided those issues have not been litigated in the foreign
       court. Morey Fish Co. v. Rymer Foods, Inc., 158 Ill. 2d 179, 186-87 (1994) (holding that full
       faith and credit must be given to a foreign judgment when the issue of jurisdiction has been
       litigated and decided in the rendering court); First Wisconsin National Bank of Milwaukee v.
       Kramer, 202 Ill. App. 3d 1043, 1048, (1990) (same); see Brownlee v. Western Chain Co., 49
Ill. App. 3d 247, 251 (1977) (citing Baldwin v. Iowa State Traveling Men’s Ass’n, 283 U.S.
522, 524-26 (1931)); Holy Cross Hospital, Inc. v. Rossi, 171 Ill. App. 3d 637, 639 (1988). If
       the issue of jurisdiction was litigated in a foreign court, an Illinois court is precluded from
       inquiring into the foreign court’s jurisdiction under the doctrine of res judicata. First
       Wisconsin National Bank, 202 Ill. App. 3d at 1048; Ross & Chatterton Law Offices v. Lewis,
       109 Ill. App. 3d 856, 857-58 (1982); Transamerica Trade Co. v. McCollum Aviation, Inc., 98
Ill. App. 3d 430, 432 (1981); Brownlee, 49 Ill. App. 3d at 251. If the issue of jurisdiction has
       been litigated and decided in the foreign court, the registering court is compelled to accord
       full faith and credit to that ruling. Morey Fish Co., 158 Ill. 2d at 186-89; Brownlee, 49 Ill.
       App. 3d at 251; Baldwin, 283 U.S. at 524-26.

          1
           Sections 12-618 through 12-626 (735 ILCS 5/12-618 to 12-626 (West 2008)) were repealed by
       Public Act 97-140 (eff. Jan. 1, 2012).

                                                  -5-
¶ 24       In the Ontario court, CE Design argued that the Ontario court lacked personal jurisdiction
       over CE Design under Canadian law. CE Design argued that it had never had an office,
       owned real estate, or done business in Ontario; had never had any employees in Ontario; and
       had not entered into any contracts in Ontario. CE Design challenged the Ontario court’s
       assumed jurisdiction arguing that there was no “real and substantial connection between the
       cause of action and the forum province” and that the court “should decline to exercise
       jurisdiction over the out of province respondent because there is another forum that is more
       convenient.” CE Design further argued that the convenient forum test was discretionary but
       factors to consider in applying the test were (1) the location of the majority of the parties,
       (2) the location of key witnesses and evidence, (3) contractual provisions that specify law or
       accord jurisdiction, (4) the avoidance of multiplicity of proceedings, (5) the applicable law
       and its weight in comparison to the factual question to be decided, (6) geographical factors
       suggesting the natural forum, and (7) whether declining jurisdiction would deprive the
       plaintiff of a legitimate juridical advantage available in domestic court.
¶ 25       With respect to the real and substantial connection, CE Design argued that despite the
       fact that the contract for insurance between ING and HealthCraft was entered into in Ontario,
       there was little real and substantial connection between the cause of action initiated by CE
       Design and Ontario because the damages sustained by CE Design and the class occurred in
       Cook County, Illinois. Applying the forum non conveniens test, CE Design argued that CE
       Design and the class were located in Illinois, while ING and HealthCraft are located in
       Ontario. CE Design also argued that the evidence with respect to the faxes will be from CE
       Design and the class, all of whom are located in Illinois. CE Design acknowledged that the
       ING policy was written in Ontario but argued that there was no doubt the policy
       contemplated activity that involved an inherent risk of harm to parties outside of Ontario. CE
       Design also argued that the circuit court of Cook County had jurisdiction of all matters
       relating to CE Design’s recovery against ING because ING voluntarily submitted to the
       jurisdiction of Cook County. CE Design further argued that there was no evidence to suggest
       that Illinois liability law differed at all from the laws of Ontario and CE Design would have
       no difficulty recovering from the ING policy in Illinois.
¶ 26       ING responded to CE Design’s motion and argued that there was a real and substantial
       connection between Ontario and the subject matter of the application because ING and
       HealthCraft are located in Ontario and entered into a contract of insurance in Ontario. In
       addition, there was a connection between CE Design and Ontario in that, as an alleged
       assignee, it stood in the shoes of HealthCraft. Furthermore, CE Design purported to claim an
       interest in the proceeds of ING’s policy of insurance as the result of the assignment. ING
       further argued that there was no significant unfairness to CE Design to be subject to the
       jurisdiction of the Ontario court but it would be unfair to ING for the court not to assume
       jurisdiction. With respect to the appropriate forum, ING argued that both ING and
       HealthCraft were Ontario companies, and although CE Design is not an Ontario company, it
       alleges rights as an assignee of HealthCraft, an Ontario company. Because the contract
       between ING and HealthCraft was entered into in Ontario, it is a reasonable expectation that
       the law of Ontario applies. The action filed in the Ontario court was first, with the citation
       proceeding filing in Illinois occurring while the action in Ontario was pending.
¶ 27       Although the Ontario court did not specifically use the words personal and subject matter
       jurisdiction, the Ontario court found Ontario was the proper law of the contract between ING

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       and HealthCraft, and the Ontario court had jurisdiction because there was a real and
       substantial connection with the province of Ontario. The Ontario court further held that CE
       Design was standing in the shoes of HealthCraft as its assignee, and because HealthCraft is
       an Ontario company and the contract was entered into in Ontario, Ontario was the convenient
       forum.
¶ 28       In the instant case, the issue of jurisdiction was raised by CE Design in the Ontario court.
       The Ontario court rejected CE Design’s argument that it lacked jurisdiction. After the court
       ruled against CE Design on the issue of jurisdiction, CE Design, a named respondent in the
       proceeding, chose not to appear on any subsequent court dates and did not in any way oppose
       the court’s finding of jurisdiction or its later finding on the issue of coverage. “A party
       cannot be permitted to merely file a special appearance, challenge that court’s jurisdiction,
       and expect the lawsuit to hang in limbo! A reasonable expedition of the administration of
       justice cannot be so thwarted.” Ross & Chatterton Law Offices, 109 Ill. App. 3d at 858. CE
       Design advanced multiple jurisdictional arguments before the Ontario court, and after it lost,
       it pursued no further action in the Ontario court to challenge or reverse that ruling; it cannot
       now look to Illinois to relitigate the issue of Ontario’s jurisdiction. Id. Therefore, CE
       Design’s challenge to the Ontario court’s jurisdiction is barred by the doctrine of
       res judicata.
¶ 29       Similarly, CE Design’s challenge to the Ontario court’s ruling on the issue of coverage is
       also barred by the doctrine of res judicata. “Under the doctrine of full faith and credit, the
       forum court will not rehear a case on its merits because the judgment is res judicata ***.”
       (Internal quotation marks omitted.) All Seasons Industries, Inc. v. Gregory, 174 Ill. App. 3d
700, 703 (1988). Under principles of res judicata, the nature and amount of the judgment,
       together with all defenses that could have been raised in the original trial court, are
       foreclosed. Falcon v. Faulkner, 209 Ill. App. 3d 1, 13 (1991); Dawson v. Duncan, 144 Ill.
       App. 3d 532, 537 (1986). All the coverage issues advanced in this court should have, but
       were not, advanced in ING’s Ontario coverage proceeding.
¶ 30       On cross-appeal, ING argues that because CE Design’s motion to strike ING’s
       registration of the Ontario judgment was denied, there was no basis for the circuit court to
       deny its citation to discover assets and to strike the portion of the award in ING’s favor
       regarding costs because the circuit court found that the Ontario court had jurisdiction over
       CE Design for purposes of recognition and enforcement of the Ontario judgment. In the
       August 28, 2014, order the court stated that “the separate award of fees and costs entered
       against CE Design in the Ontario judgment does not comport with Illinois and United States
       standards of due process and therefore is unenforceable in this Court.” The court gave no
       explanation for its finding.
¶ 31       As previously stated, a judgment from a foreign country is entitled to “full faith and
       credit.” 735 ILCS 5/12-620 (West 2008). The circuit court’s refusal to enforce the costs
       portion of the Ontario judgment against CE Design is inconsistent with the circuit court’s
       recognition and enforcement of the Ontario judgment. We find no authority for the
       proposition that the circuit court can pick and choose the portions of a foreign court’s order
       that will be recognized and enforced. The circuit court was required to give the Ontario
       court’s judgment order the “full faith and credit” to which it was entitled. Therefore, we
       reverse the circuit court’s ruling denying ING’s citation to discover assets on the basis that
       the award of fees and costs entered by the Ontario court against CE Design violated due

                                                  -7-
       process and was unenforceable, and remand for further proceedings consistent with this
       opinion.

¶ 32                                        CONCLUSION
¶ 33       For all the foregoing reasons, the decision of the circuit court of Cook County denying
       CE Design’s motion for turnover of insurance proceeds is affirmed. We reverse the circuit
       court’s ruling on ING’s citation to discover assets and that portion of the circuit court’s
       ruling finding the Ontario court judgment awarding ING costs to be unenforceable on the
       basis of due process and remand for further proceedings.

¶ 34      Affirmed in part and reversed in part; cause remanded.

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