Collecting a judgment against sophisticated corporate and individual debtors can be a time-consuming and futile exercise. Post-judgment enforcement proceedings can drag on for months (sometimes years), often generating astronomical attorneys’ fees and expenses.
Tobias v. Lake Forest Partners, LLC, 402 Ill.App.3d 484 (1st Dist. 2010) addresses some tricky questions involving competing money judgment priority and when post-judgment attorneys’ fees can be recovered. There, two judgment creditors – one in Illinois, the other in Florida – got judgments totalling nearly $5 million against common defendants.
The Illinois judgment – eight days “older” than the Florida one – stemmed from a loan agreement that provided that the plaintiff could recover “all costs of collection” in the event of a breach.
The Florida creditor registered its judgment in Illinois and intervened in the Illinois post-judgment proceedings started by the Illinois creditor. Before the Florida creditor intervened, however, the Illinois judgment creditor served a third party citation on a corporation (the “Respondent”) to discover if the Respondent had any assets of one of the judgment debtors.
When the Respondent answered that it was holding approximately $340,000 in judgment debtor assets, the Illinois post-judgment judge divvied up the debtor’s assets and ordered Respondent to disburse $87,000 to plaintiff “as full satisfaction” of plaintiff’s judgment, $126,000 to the Florida creditor and $126,000 back to the defendant. The court denied the Illinois creditor’s request for over two years’ worth of attorneys’ fees incurred in trying to enforce the judgment.
The Illinois creditor appealed, arguing that the trial court should have given its (the Illinois creditor) claim for post-judgment attorneys’ fees priority over the later Florida judgment.
The Appeals court affirmed the trial court’s disposition of the judgment debtor’s assets.
The Court first held that under the Illinois wage deduction statute – 735 ILCS 5/12-801 et seq., a judgment creditor can attach only 15% of a debtor’s gross wages. Once a third-party citation is served, it impresses a lien on the debtor’s nonexempt personal property in the third party’s possession up to the judgment amount 735 ILCS 5/2-1402(a), (m). And since Respondent was holding the debtor’s wages, the Court found that the Illinois and Florida creditors could collectively attach only 15% of the wages.
On the subject of post-judgment fees, the court squarely held that unless the creditor’s post-judgment claim for attorneys’ fees is reduced to judgment (that is, assigned a specific dollar value), those fees could not lien the debtor’s property (here, wages) in Respondent’s possession.
The Court made it clear that no claim can achieve lien status until the claim has been reduced to an enforceable judgment. Since the plaintiff’s counsel never had his attorneys’ fees converted to a specific dollar amount, the fees could not trump the Florida creditor – even though the Illinois judgment predated the Florida one.
The lesson for creditor’s counsel is clear: when an underlying contract or judgment provides that post-judgment attorneys’ fees can be added to the judgment amount, creditor’s counsel should document its fees and present a petition so that the fee amount can be liquidated (reduced to a specific sum).
Once that happens, the fees can be added to the judgment amount and can take priority over a competing creditor’s claim.