Find Laws Find Lawyers Free Legal Forms USA State Laws
Laws-info.com » Cases » Illinois » 3rd District Appellate » 2002 » Golden Rule Insurance Co. v. Elton
Golden Rule Insurance Co. v. Elton
State: Illinois
Court: 3rd District Appellate
Docket No: 3-01-0569 Rel 
Case Date: 03/05/2002

No. 3--01--0569


IN THE APPELLATE COURT OF ILLINOIS

THIRD DISTRICT

A.D., 2002

GOLDEN RULE INSURANCE CO.,  ) Appeal from the Circuit Court
               Plaintiff-Appellee, ) for the 12th Judicial Circuit,
) Will County, Illinois
               v. )
)
) No. 93--MR--14282
FRANK ELTON and DEBORAH )
ELTON, Defendants (DEBORAH  )
EBNER, as Trustee of the )
Bankruptcy Estate of Frank )
and Deborah Elton, Real Party ) Honorable
in Interest, ) Amy M. Bertani-Tomczak
           Defendant-Appellant). ) Judge, Presiding


JUSTICE BRESLIN delivered the opinion of the court:


This declaratory judgment action was brought by plaintiffGolden Rule Insurance Co. against defendants Frank and DeborahElton after Golden denied coverage of Deborah's medical claims. After the Eltons filed a counterclaim against Golden seekingpayment of Deborah's medical bills, the trial court dismissed thecounterclaim on the basis that the Eltons lacked standing. TheEltons moved to vacate the dismissal; thereafter the trustee oftheir bankruptcy estate was substituted in the action as the realparty in interest. Although the substitution cured the standingdefect, the trial court denied the motion to vacate because itdetermined that the medical bills were previously discharged inbankruptcy. The trustee appealed. We reverse and hold thatalthough bankruptcy discharges the personal liabilities of thedebtors, it does not discharge any independent liability of a thirdparty insurer. Thus, the trial court erred when it dismissed thecounterclaim.

FACTS

In April of 1989, Golden issued Frank a health insurancepolicy which provided coverage for the Eltons and their children. In early 1990, Deborah was diagnosed with breast cancer andunderwent a mastectomy, incurring medical expenses in excess of$30,000. Based on a review of Deborah's prior medical records,Golden determined that Deborah's breast cancer was a pre-existingcondition, denied Deborah's claims and ultimately voided theEltons' policy. Thereafter, Golden filed a complaint fordeclaratory judgment, seeking a determination that the claims wereproperly denied based on alleged material misstatements made byDeborah on the policy application.

In 1994, the Eltons filed for Chapter 7 bankruptcy, listingthe unpaid medical bills as debts and the declaratory action as aliability. An order of discharge was eventually entered in thebankruptcy action. In 2001, the Eltons filed a counterclaim in thedeclaratory judgment action which sought payment of Deborah'smedical bills and damages for Golden's denial of Deborah's claim. Golden moved to dismiss pursuant to section 2-619(a)(6) of the Codeof Civil Procedure (Civil Code) (735 ILCS 5/2-619(a)(6) (West2000)), claiming that the Eltons lacked standing and that the billshad been discharged in bankruptcy. The trial court grantedGolden's motion. After the Eltons filed a motion to vacate thedismissal, the bankruptcy trustee sought to be substituted as thereal party in interest. The trial court allowed the substitutionbut denied the motion to vacate. The trustee appealed.

ANALYSIS

On appeal, Golden complains that the trustee did not properlypreserve its objection to the dismissal of the counterclaim and thetrustee complains that the counterclaim was improperly dismissed. This court reviews questions of law and a trial court'sdetermination of a section 2-619 motion to dismiss de novo. Woodsv. Cole, 181 Ill. 2d 512, 693 N.E.2d 333 (1998); Epstein v. ChicagoBoard of Education, 178 Ill. 2d 370, 687 N.E.2d 1042 (1997).

The first issue is whether the trustee is precluded fromappealing the dismissal of the counterclaim. Golden argues thatthe nature of the trustee's objection to the dismissal was notpreserved in the trial court. We disagree.

According to the record, the Eltons timely objected to thetrial court's dismissal of the counterclaim, and the objection wasrecognized by the trial court in its order dismissing thecounterclaim when it stated that the counterclaim was beingdismissed "over the defendants' objection." In addition, theEltons' subsequent motion to vacate the dismissal of thecounterclaim informed the trial court of the nature of theobjection. After the trustee was substituted as the real party ininterest, the action already in progress continued, and the trusteeinherited the objection. See 735 ILCS 5/2-1008(a) (stating thatwhen interests to an action are changed by reason of a bankruptcyoccurring after an action has been commenced and a different partyis substituted, the original action does not abate but is carriedon with the new and remaining parties). Consequently, we hold thatthe Eltons sufficiently informed the court of the nature of theirobjection to the motion to dismiss and that the trustee inheritedthe objection, thereby preserving it for appeal.

The second issue is whether the trial court properly dismissedthe counterclaim. The trustee argues that the counterclaim shouldnot have been dismissed because the bankruptcy order dischargedonly the personal liability of the Eltons, not the independentliability of third parties such as Golden.

Section 2-619(a)(6) of the Civil Code (735 ILCS 5/2-619 (a)(6)(West 2000)) provides for the involuntary dismissal of an actionwhere the claim at issue had been discharged in bankruptcy. Whilea discharge in bankruptcy prevents a later action to collect a debtthat was a personal liability of the debtor, it does not affect theliability of any other entity for a debt. 11 U.S.C.

Illinois Law

Illinois State Laws
Illinois Tax
Illinois Court
Illinois Labor Laws
    > Minimum Wage in Illinois
Illinois Agencies
    > Illinois DMV

Comments

Tips