Firstmerit Bank, N.A. v. McEnery

2022 IL App (3d) 210306

219 N.E.3d 661

467 Ill.Dec. 651

FIRSTMERIT BANK, N.A., as Successor-in-Interest to George Washington Savings Bank, Plaintiff-Appellee,

v.William J. MCENERY, Defendant

(The Darlene E. McNulty Revocable Trust, Dated June 10, 2009, and The Michael McNulty Revocable Trust, Dated June 10, 2009, Claimants-Appellants).

Appeal No. 3-21-0306

Appellate Court of Illinois, Third District.

Filed December 21, 2022

D. Cass Wennlund and Michael A. Pascarella, of Wennlund & Associates, of New Lenox, for appellants.

Cornelius P. Brown and Amy E. Daleo, of Cohon Raizes & Regal LLP, of Chicago, for appellee.

OPINION

PRESIDING JUSTICE HOLDRIDGE delivered the judgment of the court, with opinion.

¶ 1 The plaintiff, FirstMerit Bank (Bank), the successor-in-interest to George Washington Savings Bank, issued a notice of citation to the defendant, William J. McEnery, to turnover 500 shares of stock to satisfy a money judgment. During these proceedings, the Darlene E. McNulty Revocable Trust dated June 10, 2009, and the Michael McNulty Revocable Trust dated June 10, 2009 (collectively, the McNulty Trusts) filed an adverse claim as to 200 of the 500 subject shares, claiming that they were bona fide purchasers and owned the shares free and clear of the Bank's lien. The Bank filed a motion for summary judgment, which the circuit court granted.

¶ 2 I. BACKGROUND

¶ 3 This case originated as a citation proceeding pursuant to section 2-1402 of the Code of Civil Procedure (Code) ( 735 ILCS 5/2-1402 (West 2010) ). On June 10, 2010, the Bank obtained a judgment against McEnery for $1,843,129.14 and, that same day, recorded the judgment with the Will County Recorder of Deeds as document number R2010057902. The Bank caused a citation to discover assets to be issued, which was served on McEnery on July 1, 2010. At that time, the William J. McEnery Revocable Trust dated April 22, 1993 (McEnery Trust), with McEnery as beneficiary, owned 500 shares (or a 50% interest) in Mid-Iron Club, Inc. (Mid-Iron), an Illinois Corporation that owned and operated a nine-hole golf course located in Lemont, Illinois (Cook County). The Bank also issued citations to third parties at this time but not to Mid-Iron.¹

¶ 4 On February 18, 2011, the court entered an order compelling McEnery to turnover certain personal property, including his shares in Mid-Iron. On March 11, 2011, the Bank served a third-party citation to discover assets on Mid-Iron. Thereafter, related bankruptcy proceedings caused an automatic stay, which prevented the Bank from enforcing its lien. In July 2012, the automatic stay was modified to allow the Bank to enforce its lien as to the Mid-Iron shares. On September 20, 2013, the Bank filed a second motion seeking to turn over the Mid-Iron shares, which the court granted on January 14, 2015.

¶ 5 On October 4, 2018, the McNulty Trusts filed an adverse claim as to 200 of McEnery's shares in Mid-Iron ( 735 ILCS 5/12-710 (West 2018) ). The McNulty Trusts stated McEnery transferred 200 of his 500 shares in Mid-Iron to the Darlene McNulty Trust on August 16, 2010. The shares were subsequently reallocated between the McNulty Trusts. Prior to this transfer, the McNulty Trusts held the other 500 shares (or 50% interest) in Mid-Iron. The McNulty Trusts alleged that they were bona fide purchasers without knowledge or notice of the Bank's citation lien per section 2-1402(m) of the Code ( 735 ILCS 5/2-1402(m) (West 2010)), which they supported with Darlene and Michael's affidavits. The affidavits provided that they had no knowledge of the citation or awareness of facts indicating a significant probability that a citation was pending against McEnery. A promissory note showed that McEnery sold the shares for $84,000.²

¶ 6 The Bank filed its answer and affirmative defenses to the adverse claim. First, the Bank argued that the McNulty Trusts waived their right to file an adverse claim and interest in the shares by failing to appear in the proceedings for over seven years. It argued that the McNulty Trusts, as shareholders and officers of Mid-Iron, had knowledge of its lien by way of the third-party citation issued on March 15, 2011, and did not file the adverse claim until October 4, 2018. Second, the Bank argued that laches applied, and the McNulty Trusts did not act with due diligence with regard to filing their adverse claim and asserting their interest in the 200 shares, which caused the Bank to suffer prejudice. Third, the Bank argued that the McNulty Trusts failed to state a claim. Specifically, the Bank provided that the notice of citation and the citation were public record as of July 10, 2010. Thus, the Bank concluded that the McNulty Trusts had knowledge of the citation at the time they purchased the shares and were not bona fide purchasers.

¶ 7 The Bank filed a motion for summary judgment and proceeded under the theory that the McNulty Trusts had constructive knowledge of the citation and took ownership of the 200 shares subject to the Bank's lien. Following a hearing, the court granted the motion.

¶ 8 The McNulty Trusts filed a motion to reconsider, which the court granted and vacated its previous order. The court continued the matter for additional argument and again granted the motion for summary judgment. The court found the McNulty Trusts had constructive notice and they were not bona fide purchasers. The McNulty Trusts appeal.

¶ 9 II. ANALYSIS

¶ 10 On appeal, the McNulty Trusts argue that they were bona fide purchasers without notice of the Bank's citation based on the plain language of section 2-1402(m) of the Code ( 735 ILCS 5/2-1402(m) (West 2010)) and, therefore, the court erred as a matter of law when it granted summary judgment in the Bank's favor. The Bank argues that the court's ruling was proper.

¶ 11 Summary judgment is proper if the pleadings, depositions, and admission on file—together with any affidavits—show that there is no genuine issue of material fact and that the moving party is entitled to judgment as a matter of law. 735 ILCS 5/2-1005(c) (West 2018). The purpose of summary judgment is not to try a question of fact but, rather, simply to determine whether a genuine issue of triable fact exists. Ross Advertising, Inc. v. Heartland Bank & Trust Co. , 2012 IL App (3d) 110200, ¶ 27, 360 Ill.Dec. 921, 969 N.E.2d 966. This court reviews a summary judgment ruling de novo. Id. ¶ 28.

¶ 12 A. Statutory Interpretation

¶ 13 Section 2-1402(m) of the Code ( 735 ILCS 5/2-1402(m) (West 2010)) enables a judgment creditor to commence supplementary proceedings to enforce a judgment by serving a citation to discover assets upon a judgment debtor, and provides, as follows:

"The judgment or balance due on the judgment becomes a lien when a citation is served in accordance with subsection (a) of this Section. The lien binds nonexempt personal property, including money, choses in action, and effects of the judgment debtor as follows:

(1) When the citation is directed against the judgment debtor, upon all personal property belonging to the judgment debtor in the possession or control of the judgment debtor or which may thereafter be acquired or come due to the judgment debtor to the time of the disposition of the citation.

(2) When the citation is directed against a third party, upon all personal property belonging to the judgment debtor in the possession or control of the third party or which thereafter may be acquired or come due the judgment debtor and comes into the possession or control of the third party to the time of the disposition of the citation.

The lien established under this Section does not affect the rights of citation respondents in property prior to the service of the citation upon them and does not affect the rights of bona fide purchasers or lenders without notice of the citation. The lien is effective for the period specified by Supreme Court Rule."

¶ 14 Here, the Bank's lien was perfected on July 1, 2010, when the notice of citation was served on McEnery. See Midwest Commercial Funding, LLC v. Kelly , 2022 IL App (1st) 210644, ¶ 7, 461 Ill.Dec. 573, 204 N.E.3d 909. The McNulty Trusts claim that they are bona fide purchasers without notice of the lien when they purchased the subject shares on August 16, 2010. Thus, the issue is whether the McNulty Trusts had notice within the meaning of section 2-1402(m) of the Code. Notably, this section of the Code does not define the term "notice," and no Illinois court has defined it in this context. The McNulty Trusts argue that the statute requires that they had actual notice for the Bank's lien to take priority, and the Bank argues that both actual and constructive notice are applicable.

¶ 15 "The most fundamental rule in statutory construction is to give effect to the legislative intent." Murray v. Chicago Youth Center , 224 Ill. 2d 213, 235, 309 Ill.Dec. 310, 864 N.E.2d 176 (2007). The language of the statute itself is the best indicator of the legislature's intent. Id. When interpreting statutory language, we are to give effect to the plain and ordinary meaning, avoiding absurd, unreasonable, unjust, or inconvenient results. Midwest Sanitary Service, Inc. v. Sandberg, Phoenix & Von Gontard, P.C. , 2022 IL 127327, ¶ 24, 463 Ill.Dec. 887, 211 N.E.3d 448. Further, "[u]nless the words are defined within the statute itself, they will be ‘interpreted as taking their ordinary, contemporary, common meaning.’ " Id. (quoting Sandifer v. United States Steel Corp. , 571 U.S. 220, 227, 134 S.Ct. 870, 187 L.Ed.2d 729 (2014) ). The statute must be viewed as a whole where this court construes words and phrases, not in isolation, but relative to other relevant statutory provisions. Cooke v. Illinois State Board of Elections , 2021 IL 125386, ¶ 52, 451 Ill.Dec. 70, 183 N.E.3d 116.

¶ 16 "We likewise keep in mind the subject addressed by the statute and the legislature's apparent intent enacting it." Id. Here, "[t]he provisions of section 2-1402 are to be liberally construed, and the statute gives the court...