Denial of Motion for Judgment in Citation Proceedings Not Final – Appeal Dismissed (IL 1st Dist.)

While there are nuances and some exceptions to it, the general rule is that only “final” orders are appealable.  If a trial court’s order is final, the losing party can appeal it.  If the order isn’t final – meaning, the case is still going on – the losing party can’t appeal it.  Whether an order is final is often overlooked during the heat of trial battle.  However, as today’s feature case illustrates, the failure to appreciate the final versus non-final order distinction can doom an appeal as premature.

National Life Real Estate Holdings, LLC v. International Bank of Chicago, 2016 IL App (1st) 151446, the plaintiff judgment creditor won a $3MM-plus judgment against an individual and two LLC defendants. In trying to enforce the money judgment, the plaintiff issued a third-party citation to IBC, the respondent and defendant.

Upon learning that after IBC disbursed $3.5MM in loan funds to two businesses associated with the individual judgment debtor after it received the third-party citation, the plaintiff moved for judgment against IBC on the basis that it violated its obligations as a third-party citation respondent (to not transfer any of the judgment debtor’s property).

The circuit court denied the plaintiff’s motion.  It found that since the loan funds disbursed by IBC were not paid to and didn’t belong to the judgment debtor, IBC did not flout the citation’s “restraining provision” (which prevents a citation respondent from disposing of property belonging to a judgment debtor).  Affirming, the appeals court discussed the pertinent rules governing when orders entered in post-judgment proceedings can be appealed.

  • An appeal can only be taken from a “final order”‘
  • An order is final where it disposes of the rights of the parties, either upon the entire lawsuit or upon a separate and definite part of it;
  • A final order entered in a post-judgment proceeding is appealable, too;
  • A post-judgment order is deemed final when the judgment creditor is in a position to collect against the judgment debtor or third-party or the judgment creditor is prevented from doing so by court order;
  • A post-judgment order that does not (a) leave a creditor in position to collect a judgment or that (b) conclusively bars the creditor from collecting, is not final for purposes of appeal. 

(¶10); See 735 ILCS 5/2-1402; Ill. Sup. Ct. R. 304(b)(4).

The trial court’s order denying the judgment creditor’s motion for judgment wasn’t final as it didn’t end the lawsuit.  The appeals court noted the case is still pending and the judgment creditor may still have valid claims against IBC.  Since the trial court’s denial of the judgment creditor’s motion didn’t foreclose it from future collection efforts, the denial of the motion wasn’t a final and appealable order.  As a consequence, the creditor’s appeal was premature and properly dismissed.

Afterwords:

In hindsight, the plaintiff should have requested a Rule 304(a) finding that the order denying the motion for judgment was appealable.  While the court could have denied the motion, it would have at least give the creditor a shot at having an appeals court review the trial court’s order.

Going forward, the plaintiff should issue third-party citations to the loan recipients (the two business entities) and see if it can link the individual debtor to those businesses.  The plaintiff should also issue discovery to IBC to obtain specifics concerning the post-citation loan.  This information could give the plaintiff ammunition for future litigation against IBC relating to the loans.

 

The Third-Party Citation: How Long Does It Last?

Shipley v. Hoke, 2014 IL App (4th) 130810 provides an exhaustive discussion of Illinois’ post-judgment enforcement rules in the context of a judgment creditor trying to reach debtor assets held by third parties.

It’s key points concerning a citation’s life span include:

– Code Section 2-1402 allows a judgment creditor to prosecute supplementary proceedings for the purposes of examining a judgment debtor and to compel the application of non-exempt assets or income discovered toward the payment of a judgment;

– Section 2-1402(f)(1) contains a “restraining provision” that prohibits any person served with a citation from allowing a transfer of property belonging to a judgment debtor that may be applied to the outstanding judgment amount;

– If someone violates the restraining provision, the Court can punish the violator by holding him in contempt or entering a money judgment against him in the amount of the property he transferred; 

– A third-party citation must be served in the same manner a (“first party”) citation is served (e.g. either by personal service or certified mail);

– Supreme Court Rule 277(f) provides that a citation proceeding automatically terminates six months from the date of the respondent’s first personal appearance unless the court grants an extension of the citation;

– This six-month rule is an affirmative defense that must be raised by a citation respondent or else it’s waived;

-Rule 277(f)’s purpose is to prevent a creditor from harassing a judgment debtor or a third party subject to a citation proceeding and is designed to provide an incentive for creditor’s to diligently work to discover debtor assets;

– While a court can retain jurisdiction over a turnover order entered before but not complied with until after the expiration of the six-months, the court does not maintain jurisdiction to enforce any restraining provision violations past that six-month mark.

– Rule 277 does permit a creditor to request an extension of the six-month limitation period indefinitely to fit the needs of a given case.

(¶¶ 78-81, 92-93).

Take-away: While I often serve bank respondents with third-party citations by certified mail (since banks usually aren’t motivated to evade service),  a judgment creditor should serve any non-bank respondent by personal service; either via county sheriff or a special process server.

In addition, the creditor should keep track of when a judgment debtor first appears in response to a citation.  If it looks like the creditor’s post-judgment case isn’t going to be finished at the six-month mark, he should move to extend the citation for as long as necessary to complete his examination of the debtor and any third-party(ies).