INTERSTATE BANKERS CASUALTY COMPANY, а/s/o Jose Mendoza Gonzalez, and JOSE MENDOZA GONZALEZ, Plaintiffs-Appellants, v. ALBERTO HERNANDEZ, Defendant-Appellee.
Docket No. 1-12-3035
Appellate Court of Illinois, First District, Third Division
December 18, 2013
2013 IL App (1st) 123035
JUSTICE PUCINSKI delivered the judgment of the court, with opinion. Presiding Justice Hyman and Justice Mason concurred in the judgment and opinion.
Illinois Official Reports; Appeal from the Circuit Court of Cook County, No. 12-M1-011661; the Hon. James E. Snyder, Judge, presiding.
Held
(Note: This syllabus constitutes no part of the opinion of the court but has been prepared by the Reporter of Decisions for the convenience of the reader.)
Section 143.24d of the Insurance Code, which rеquires the arbitration of physical damage subrogation claims between insurers pursuant to the Nationwide Inter-Company Arbitration Agreement when the amount in controversy, exclusive of the costs of arbitration, is less than $2,500, violates the right to a jury trial and is unconstitutional; here, the complaint basically alleged property damage due to negligence, which has always carried a right to a jury trial, and statutes regulating the right should be liberally construed in its favor and courts should be inclined to protect and enforce the right tо a jury trial.
Judgment Reversed and remanded.
Counsel on Appeal
Law Offices of Laura A. Holwell, of Chicago (Laura A. Holwell and Christopher Holwell, of counsel), for appellee.
OPINION
¶ 1 The issue presented to us in this case is whether the mandatory binding arbitration of insurance subrogation claims enacted under
¶ 2 BACKGROUND
¶ 3 On January 9, 2012, plaintiff, Jose Mendoza Gonzalez, was invоlved in a car accident with defendant, Alberto Hernandez, in Chicago, Illinois. On the date of the accident, Gonzalez was insured for collision coverage under a policy of automobile insurance issued by plaintiff Interstate Bankers Casualty (Interstate). Hernandez was insured by Unique Insurance Company.
¶ 4 On March 26, 2012, Gonzalez and Interstate, as Gonzalez‘s subrogee, brought a two-count negligence complaint, with a jury demand, against Hernandez. The complaint alleged that Interstate made payments to Gonzalez under its insurаnce policy as a result of the accident with Hernandez. Count I alleged that as a direct and proximate result of Hernandez‘s negligent acts, Interstate‘s subrogor, Gonzalez, suffered property damage to his vehicle in the amount of $1,154.47, plus the costs of suit. Count II of the complaint alleged that as a direct and proximate result of Hernandez‘s negligent acts, Gonzalez suffered property damage to his vehicle and loss of use. Gonzalez sought judgment against Hernandez of $500, plus costs of suit.
¶ 5 On April 4, 2012, Hernandez filed a mоtion to dismiss pursuant to
¶ 6 On April 18, 2012, the circuit court entered an order allowing plaintiffs leave to file a brief in opposition to the motion to dismiss challenging the constitutionality of
¶ 7 ANALYSIS
¶ 8 Plaintiffs argue on appeal that dismissal of their complaint was improper
¶ 9
¶ 10 In Reed v. Farmers Insurance Group, 188 Ill. 2d 168, 173-74 (1999), the Illinois Supreme Court addressed the constitutionality of section 143a of the Insurance Code requiring mandatory binding arbitration for claims for uninsured motorist coverage, which foreclosed the right to appeal and have a jury trial. Like
“[T]he plaintiff cites Grace v. Howlett, 51 Ill. 2d 478 (1972), which addressed the constitutionality of a statute that required the arbitration of automobile injury cases in counties with a population under 200,000, and, in other counties, the arbitration of cases in which the claimed loss was less than $3,000. The court concluded, among other things, that the statute violated the right to a jury trial under the Illinois Constitution.
More recently, this court revisited the issue in Martin v. Heinold Commodities, Inc., 163 Ill. 2d 33 (1994). In that case the defendant argued that it was entitled to a jury trial in аn action brought under the Consumer Fraud Act. This court
rejected that contention. After reviewing the current constitutional guarantee and its predecessors, the Martin court observed that the jury trial right expressed in the Illinois Constitution is limited to actions existing at common law. Martin explained, ‘In Illinois, the right to a jury trial does not attach to every action at law. Instead, such right only attaches in those actions where such right existed under the English common law at the time the constitution was adopted.’ Martin, 163 Ill. 2d at 73-74. We do not believe that Grace is controlling here. The action at issue in Grace was a common law claim for persоnal injuries arising from a motor vehicle accident. In the present case, in contrast, the underlying claim is one for uninsured-motorist coverage, a remedy that did not exist at common law but instead was recently devised by the legislature. The state constitutional guarantee of a jury trial ‘ “was not intended to guarantee trial by jury in special or statutory proceedings unknown to the common law.” ’ People ex rel. Keith v. Keith, 38 Ill. 2d 405, 408 (1967), quoting People v. Niesman, 356 Ill. 322, 327 (1934).” (Emphasis omitted.) Reed, 188 Ill. 2d at 179-80.
¶ 11 Plaintiffs argue generally that
¶ 12 The Illinois Supreme Court has held that the right to trial by jury “only attaches in those actions where such right existed under the English common law at the time the constitution was adopted.” Martin v. Heinold Commodities, Inc., 163 Ill. 2d 33, 73-74 (1994).
¶ 13 There are two issues presented here. First, the test as to which actions carry a jury trial right must be stated accurately as to whether it includes оnly actions which existed at common law at the time of the adoption of the original 1870 Illinois Constitution, or whether it means at the time of adoption of the 1970 Illinois Constitution. Second, the case before us is not simply a negligence case but, rather (in count I), a negligence action brought by an insurer by way of subrogation, and thus we must determine what the nature of the claim really is—is this action basically only a negligence claim, a subrogation claim by an insurer, or both (essentially a “case within a case”)?
¶ 14 First, the above-quoted language from Martin in Reed regarding which actions carry a right to a jury trial needs further explanation. The Illinois Supreme Court in Martin stated that the jury trial right “only attaches in those actions where such right existed under the English common law at the time the constitution was adopted” (Martin, 163 Ill. 2d at 73-74), but did not specify whether the court meant at the time of adoption of the 1870 Illinois Constitution or at the time of adoption of the 1970 Illinois Constitution. Some Illinois courts have interpreted the statement of the rule in Martin to mean at the time of the adoption of the original 1870 Illinois Constitution, even though the case decided was after the adoption of the 1970 Illinois Constitution. See, e.g., The Habitat Co. v. McClure, 301 Ill. App. 3d 425, 435 (1998) (the jury trial right “exists only in those
¶ 15 Our 1970 state constitution, artiсle I, section 13, provides that “[t]he right of trial by jury as heretofore enjoyed shall remain inviolate.” (Emphasis added.)
proceedings that were unknown at the common law at the time of the adoption of the 1970 Constitution.” In re K.J., 381 Ill. App. 3d at 352 (citing People ex rel. O‘Malley v. 6323 North LaCrosse Avenue, 158 Ill. 2d 453, 457 (1994)).
¶ 16 This is an important distinction if one views the nature of this action as a subrogation action. Subrogation actions originally arose in equity, which did not carry a jury trial right at the time of the 1870 Illinois Constitution. Subrogation is an old concept that originated in equity, which was adapted by equity from the Roman or civil law. People ex rel. Nelson v. Phillip State Bank & Trust Co., 307 Ill. App. 464, 467 (1940). Subrogation was an action in chancery “ ‘designed to place the ultimate responsibility for the loss upon the one on whom in good conscience it ought to fall and to reimburse the innocent party who is compelled
“Subrogation is the substitution of another person in the place of a creditor or claimant to whose rights he succeeds in relation to the debt or claim asserted, which has been paid by him involuntarily, and contemplates some original privilege on the part of him to whose place substitution is claimed. There must exist the relation of principal and surety or guarantors, or other relation between the parties which would entitle such person to succeed to any rights of the creditor or claimant.” Dunlap, 336 Ill. at 190.
¶ 17 Subrogation actions evolved into common law actions at law, with an attendant jury trial right by the time of the adoption of the 1970 Illinois Constitution. By the 1940s and 1950s, courts in Illinois recognized that subrogation was also recognized at law, and not only in equity in cases of contracts and suretyships. See Smith v. Clavey Ravinia Nurseries Inc., 329 Ill. App. 548, 552 (1946) (“the doctrine of subrogation has been steadily expanding and is a favorite of the law”). In Geneva Construction Co. v. Martin Transfer & Storage Co., 4 Ill. 2d 273 (1954), the Illinois Supreme Court recognized that subrogation:
“originated in equity, but is presently an integral part of the common law, and is designed to place the ultimate responsibility for a loss uрon the one on whom in good conscience it ought to fall, and to reimburse the innocent party who is compelled to pay. Under this doctrine, a person who, pursuant to a legal liability, has paid for a loss or injury resulting from the negligence or wrongful act of another, will be subrogated to the rights of the injured person against such wrongdoer. [Citations.]
The Illinois courts have recognized the broad purview of this doctrine.” Geneva Construction Co., 4 Ill. 2d at 283.
¶ 18 Also, by that time our courts distinguished between conventional subrogation, which was based on an express agreement where one person paid a debt for another secured by a lien, and legal subrogation, where there was no express agreement and was based only on the relationship between the parties, such as principal and surety. See In re Estate of Dickson, 316 Ill. App. 599, 604 (1942).
¶ 19 By the 1950s, our courts specifically recognized subrogation actions by insurers as part of the common law:
“Under the subrogation doctrine an insurer may sue third party tort feasors in the name of its assured whose damages have been covered and paid. The dоctrine has been expanded to prevent injustices which would arise in new situations where one party has underwritten the damages or losses of another and the former would be unable to recover its damage or loss payments from the third party causing the damage or loss.” Standard Industries, Inc. v. Thompson, 19 Ill. App. 2d 319, 324 (1958).
¶ 20 Although it originated in equity, subrogation became an “integral” part of the common law. Geneva Construction Co., 4 Ill. 2d at 283. Thus, even if one were to characterize the underlying nature of this case as a subrogation action, subrogation claims were recognized at cоmmon law by the time of the adoption of the 1970 Illinois Constitution. As subrogation was recognized at common law at the time of the adoption of the 1970 Illinois Constitution, there is a right to a jury trial.
¶ 21 Also, the subrogation in this case arises by contract and is governed by contract and was not created by statute. It is not a new “statutory proceeding[ ] that [was] unknown at the common law at the time of the adoption of the 1970 Constitution.” In re K.J., 381 Ill. App. 3d at 352. Where the right of subrogation is created by the terms of an enforceable contract, the contraсt terms control, rather than common law or equitable principles. “[A] subrogee’s rights arise either at common law or in contract, not by statute.” Johnson v. State Farm Fire & Casualty Co., 151 Ill. App. 3d 672, 674 (1987).
¶ 22 Or, one may alternately view the nature of this case as basically a negligence action, and the subrоgation aspect of the case is merely a theory of recovery. An action for damages due to negligence in tort has, of course, long been part of the common law with an attendant right to a jury trial. Plaintiffs cite to Vasic v. Chicago Transit Authority, 33 Ill. App. 2d 11, 11f (1961), where this court noted that “an action involving damages to person or property caused by the negligence of a driver of a vehicle” was “known at common law as an action on the case.” See also Morgan v. Pacific Express Co., 161 Ill. App. 245 (1911) (action on the case against the driver and owner alleging nеgligence); The Fair v. Hoffmann, 209 Ill. 330 (1904) (action on the case brought for alleged injuries received through the negligence of a driver); Tuller v. Talbot, 23 Ill. 298 (1860) (action on the case to recover for damages caused by the negligence of a driver).
¶ 23 The complaint in this case alleges property damage due to negligence in both counts. The court‘s analysis in Reed demonstrates that we must look to the nature
¶ 24 Further, the ultimate issue to be decided in this case is negligence, which entails factual issues decided by a jury. It has long been recognized that the ultimate determination of fault in a negligence case must be decided by a jury:
“The ultimate question in cases charging negligence at common law always is, do the acts and conduct charged in fact constitute negligence; and this, except in extreme cases, is not a question of law for the court, but a question of fact for the jury.” Illinois Central R.R. Co. v. Behrens, 101 Ill. App. 33, 36 (1902).
¶ 25
¶ 26 The fact that the claim in count I is brought by Gоnzalez‘s insurer through subrogation does not change the fact that ultimately liability in negligence must be decided, and this is typically a jury question in an action that carries a right to a jury trial. In Noren v. Metropolitan Property & Casualty Insurance Co., 369 Ill. App. 3d 72 (2006), this court held that an insurer had the right to a jury trial in a declaratory judgment action, even though a declaratory judgment action was unknown at common law, because the relief sought depended on factual issues regarding the cause of damage to the insured‘s property. Noren, 369 Ill. App. 3d at 76-77. This court held: “Actions for a declaratory judgment were unknown to the common law and are neither legal nor equitable, but are sui generis, and the right to a trial by jury depends upon the relief sought.” Noren, 369 Ill. App. 3d at 76. This court nevertheless held that the insurer was entitled under the Illinois Constitution to have a jury assess the credibility of the witnesses and make findings of fact as to the cause of the damage to the insured‘s property. Noren, 369 Ill. App. 3d at 76-77. This court reiterated the well-known maxim that “[s]tatutes regulating the right to a jury trial should be liberally construed in favor of the right and courts should be inclined to protect and enforce the right.” Noren, 369 Ill. App. 3d at 76 (citing Williams v. National Super Markets, Inc., 143 Ill. App. 3d 110, 111 (1986)). Thus, this court held that the circuit сourt order striking the insurer‘s jury demand was an abuse of discretion and reversed and remanded the case. Noren, 369 Ill. App. 3d at 77. The facts of this case are even stronger, in that subrogation actions are recognized at common law.
¶ 27 Either way—whether it is said that the nature of this case is basically an action for negligence, or whether the nature of the claim is that it is a subrogation action—both types of actions were recognized as common law actions entailing the right to a trial by jury at the time of the adoption of the 1970 Illinois Cоnstitution. Thus, either way there is a right to a jury trial for Interstate in its claim for negligence in count I of the complaint.
¶ 28 Further, count II is brought by Gonzalez individually and should not have been dismissed. First, Gonzalez is not an insurer and therefore is not even subject to
¶ 29 Defendant Hernandez‘s only аrguments in response are: (1) the statute requires arbitration; (2) no significant claims of the individuals are impaired by the statute; and (3) the statute is constitutional because the legislature had a rational basis for adopting the statute. Defendant‘s first argument is circular.
¶ 30 Defendant‘s second argument does not address the unconstitutional deprivation of the right to a jury trial. Defendant concedes that common law negligence claims have always been recognized as carrying an attendant right to a jury trial and also concеdes that this case is one for negligence. Yet defendant claims the mandatory binding arbitration requirement of
¶ 31 Defendant‘s third argument applies the wrong constitutional standard for reviewing this statute. The rational basis test applies to due process and equal protection claims that do not аffect a fundamental constitutional right or a suspect or quasi-suspect classification (Schultz v. Lakewood Electric Corp., 362 Ill. App. 3d 716, 720 (2005)), but not to claims of the violation of the right to a trial by jury. The right to a jury trial is a fundamental right guaranteed by article I, section 13, of the Illinois
¶ 32 Additionally,
¶ 33 CONCLUSION
¶ 34
¶ 35 Reversed and remanded.