Release and Satisfaction of Judgment and Guaranty Liability – IL Law

ReleaseBrahos v. Chickerneo,  2014 IL App (2d) 130543-U, examines Illinois money damages rules, the extent of a guarantor’s liability and satisfaction-of-judgment requirements against the backdrop of a business dispute involving a failed car dealership.

The plaintiff got a multi-million dollar fraud judgment against multiple defendants that stemmed from a failed car dealership business venture.  In post-judgment proceedings, the dealership was sold and the sale proceeds satisfied plaintiff’s judgment against all defendants except for one.  That remaining defendant then moved to dismiss the citation proceedings and for satisfaction of the remaining judgment balance – about $600K.  The trial court agreed and ordered the judgment satisfied.  The plaintiff appealed.

Held: Reversed.  The $600,000 still owed the plaintiff on the money judgment was not satisfied by the bank releasing the investor guarantors from liability under the various dealership loans.


Reversing the trial court and finding that the plaintiff still could purse defendant for the balance of the money judgment, the Court applied several salient guaranty and release/satisfaction-of-judgment rules:

– Generally, the discharge of the principal obligation discharges the guarantor’s obligation;

Code Section 12-183 (735 ILCS 5/12-183) requires a judgment creditor to sign a release and satisfaction of judgment so that the debtor can record that release with the Court that entered the judgment

– the party seeking the release of a judgment bears the burden of proving that a judgment entered against him was released;

– a release is a contract and is governed by contract law;

– the contracting parties intention is determined by the plain language of the contract;

– it is only where a contract is ambiguous (reasonably susceptible to two opposing meanings) that evidence is allowed in to explain what the contracting parties intended;

– typically, a money judgment can only be satisfied by paying the judgment unless the parties agree otherwise.

(¶¶ 32-35).

The Second District sided with the plaintiff and found that his money judgment shouldn’t have been deemed satisfied by the trial court.  The plaintiff never agreed to release his money judgment against the defendant and there was no evidence that plaintiff agreed to accept a “noncash benefit”- namely, the release from his guarantor liability to the bank.

The Court also pointed to the promissory note that required defendant to pay the judgment’s remaining $600K to the plaintiff.  The bank’s release of the dealership investors from their loan and guaranty liabilities didn’t  affect the defendant’s note liability.

In addition, the dealership lender’s release of the various investors (including plaintiff) from their bank obligations didn’t mention plaintiff’s damage award against the remaining defendant. (¶ 35).

The defendant’s double recovery argument – that the plaintiff got a windfall having his guaranty liability to the bank released while getting paid $600K from the defendant – was also rejected. 

The Court found there was no double recovery because plaintiff was not getting paid twice for the same injury and the bank was not a “joint tortfeasor” with the defendant.  Instead, the bank was a third-party creditor. ¶ 37.


–  A release of judgment will be construed as written and not expanded beyond its clear terms;

– A creditor isn’t required to release a money judgment unless that creditor is paid or the parties agree otherwise.  

Creditor Rights In and To a Debtor’s Joint Bank Account – Part II

In re Kuhl, 2012 WL 5935101 (S.D.Ill. 2012) provides a recent synopsis of the rules governing creditor attempts to attach a debtor’s joint bank account.  In it, the Chapter 7 bankruptcy trustee sought turnover of the bankrupt debtor’s funds held in three separate joint accounts with her husband.  The debtor challenged the trustee’s turnover motion, claiming that the funds in all three accounts belonged to her non-debtor husband (and not to her).  The court denied the trustee’s motion on two of the accounts and ordered the turnover of 50% (just over $8,000) of the funds in the third account.

In Illinois, a presumption exists that each owner of a joint bank account owns all of the account funds. Once that presumption is established, the burden shifts to the debtor and non-debtor to prove what part, if any, of the account funds belong to the non-debtor and as a result, are exempt from garnishment. 

The factors a court considers to determine ownership of joint bank account monies include: (1) who controls the account funds; (2) the source of the funds (who contributed what to the account?); (3) whether any contribution to the account was a gift to the other account holder; (4) who paid taxes on earnings from the account; and (5) the purpose for which the account was set up.  The first two factors – control and source of funds – are the main factors that dominate the court’s analysis.  Kuhl, at *2.

Here, the non-debtor (debtor’s husband) exclusively funded the three accounts.  Two of the accounts were set up exclusively to pay the non-debtor’s truck payment and the couples’ joint health insurance premiums, respectively.  Because of this, the court found that the debtor didn’t sufficiently control these two accounts and it denied the trustee’s turnover request directed to these accounts.

But the third account was a closer call.  This account had just over $16,000 and was funded solely by the non-debtor husband.  However, the debtor clearly controlled the funds and freely made withdrawals from the account to pay her personal expenses including at Target and Wal-Mart.  Since it was clear that debtor’s use of these account funds clearly benefitted her individually, the Court found that the Trustee was entitled to at least some of the funds.  The Court held that the Trustee was entitled to one-half of the total funds in the account – just over $8,000.  Kuhl, at *3.

Afterwords: This case provides a good summary of the rules that dictate if and when a creditor can attach a joint bank account.  Clearly, the key factors are control (who controls the account?) over the account and contributions (who funded it?) to the account.  Where control and contributions are vested in two separate parties – one debtor, the other a non-debtor – this case shows that the Court can order a “split the baby” distribution so that the creditor gets half the funds while the contributing non-debtor gets to keep the other half.

Like Pulling Teeth: The Struggles of Collecting Judgments from Corporate Debtors



As someone who does some collection work, I experience first-hand how difficult it is to collect on judgments – especially from small corporate debtors.  A 2011 Second District case illustrates in stark relief just how challenging and frustrating enforcing a judgment can be.

In Conserv v. Von Bergen Trucking, 2011 IL App (2d) 101225U (2011), the Court followed Pyshos v. Heart-Land Development Co., 258 Ill.App.3d 618 (1994) and held that a judgment creditor cannot try to pierce the corporate veil of a corporate defendant in citation proceedings.  In doing so, the court narrowly construed post-judgment proceedings (or supplementary proceedings) and clarified that a piercing claim (one where the creditor tries to hold the corporate officer personally liable for the corporate debt) is beyond the scope of a citation/supplementary proceeding.

If ever there was a case for piercing, this was it.  Even when the trial court denied the creditor’s motion to pierce the corporate veil, the court noted that the defendant was “definitely getting away with something.  But the law allows him to get away with something.”  Cold comfort for the creditor indeed.

In Conserv, once the money judgment was entered, the corporate debtor immediately emptied its bank accounts and began operating under a different (though similar) name.  The “new” corporation was grossly undercapitalized, commingled personal and corporate funds and failed to follow any corporate formalities (keeping minutes, filing annual reports, paying required fees, etc).

The reincarnated corporation was a blatant sham or alter-ego of the principal officer.  Still, the court denied the creditor’s piercing motion stating that a citation proceeding’s only relevant inquiries are (1) whether the judgment debtor possesses assets that can be applied toward the judgment; or (2) whether a third party is holding assets of the judgment debtor.  Period.

So – what should a creditor do when it learns that a corporate debtor is an alter-ego of an individual?  The answer:  (1) issue a third-party citation  against the shareholders or against another corporation the creditor believes ha s assets of the debtor corporation; or (2) file a new breach of contract claim against the corporation.

Under option (2) above, you argue that the officer is responsible for the corporation’s debts because that corporation is a hollow front for the officer’s business dealings.