2021 IL App (1st) 200755
Ill. App. Ct.2021Background
- Kalmin obtained a default judgment (≈ $298,664) against Varan after Varan’s failures to comply with discovery and court orders.
- Kalmin issued a third-party citation to Citibank seeking accounts in which Varan had title or signatory power; Citibank disclosed a JV account ("…LLC JV") with $26,453.95 and froze the funds.
- JV was granted leave to intervene; it later moved to quash the citation but did not promptly pursue that motion, and lengthy delays followed (including a bankruptcy stay and appeals).
- Trial court denied the motion to quash, ordered turnover, and after JV’s motion to reconsider held an evidentiary hearing where Varan was the sole witness.
- The court found Varan not credible, concluded the Citibank funds were attributable to Varan (JV and a Becky Trust were used to funnel cash withdrawals to Varan’s wife), and ordered turnover; the appellate court affirmed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the citation expired under Rule 277(f) | Citation proceedings may be continued/extended by the court; continuing to litigate extended it | Citation terminated automatically six months after Citibank’s appearance | Court: Rule 277 construed liberally; proceedings continued and JV’s own delay contributed to lapse — no void citation |
| Whether the citation should be quashed as overly broad or for lack of service on JV | Citation may seek accounts where debtor has signatory authority; service to debtor (Varan) within 3 days satisfied §2‑1402 | Citation was overly broad and not served on JV | Court: citation proper (signatory authority discoverable); service to Varan sufficed; motion to quash denied |
| Whether Kalmin met burden to show the Citibank funds belonged to Varan / whether JV is separate (alter‑ego) | Account activity and Varan’s role show funds are Varan’s (cash withdrawals to wife, Varan sole signatory) | JV/Becky Trust are separate entities; Varan testified JV held no assets and Rebecca was beneficiary | Court: credibility finding against Varan; lack of corroborating documents; funds attributable to Varan; turnover lawful; not a veil‑piercing holding |
| Whether adverse inferences were improper / whether exemptions apply | Absence of trust/LLC documents and Rebecca’s testimony supports adverse inference; Varan failed to timely assert exemptions | JV not required to produce non‑officer witness; plaintiff bore burden to prove assets belonged to Varan | Court: adverse inference permissible where party failed to produce evidence/witness under its control; Varan failed to timely assert statutory exemptions |
Key Cases Cited
- Bank of Aspen v. Fox Cartage, Inc., 126 Ill.2d 307 (1989) (third‑party citation seeks assets belonging to the judgment debtor)
- Pelczynski v. Dolatowski, 308 Ill. App.3d 753 (1999) (creditor bears burden to show citation respondent has debtor’s assets)
- Schak v. Blom, 334 Ill. App.3d 129 (2002) (section 2‑1402 requires some evidence that third party possesses debtor’s assets)
- Best v. Best, 223 Ill.2d 342 (2006) (standard for manifest weight of evidence and deference to trial court’s factual findings)
- Laborers’ Pension Fund v. Pavement Maintenance, Inc., 542 F.3d 189 (7th Cir. 2008) (Rule 277 construed liberally; court may extend citation proceedings)
- Nasrallah v. Davilla, 326 Ill. App.3d 1036 (2001) (civil proceedings: adverse inference may be drawn from party’s refusal or failure to testify)