Wells Fargo Bank Minnesota, NA v. Envirobusiness, Inc.
22 N.E.3d 125
Ill. App. Ct.2015Background
- Wells Fargo, as judgment creditor, initiated supplementary proceedings under 735 ILCS 5/2-1402 to enforce an ~$18 million judgment against Craig Walker and sought turnover of Walker’s stock in 12 Colorado corporations.
- Walker claimed the stock was exempt from levy and therefore exempt from turnover, relying on article XII of the Illinois Code and pre-UCC precedent that located the situs of stock in the state of incorporation.
- Wells Fargo argued the UCC governs levy on securities and that non-Illinois stock is not categorically exempt; it also sought appointment of a broker to value and sell the stock.
- The trial court ordered Walker to deliver the stock to Wells Fargo’s counsel to hold in escrow pending appointment of a neutral broker (or court appointment if parties could not agree); it denied Walker’s request to deposit the stock into the court registry and permitted CIBC to participate in valuation/sale.
- Walker appealed, arguing (1) non-Illinois stock is exempt from turnover, (2) the stock could not be delivered to opposing counsel, (3) counsel could not serve as escrow, and (4) the trial court abused discretion in denying a registry stay.
Issues
| Issue | Plaintiff's Argument (Wells Fargo) | Defendant's Argument (Walker) | Held |
|---|---|---|---|
| Whether stock in non-Illinois corporations is exempt from turnover under §2-1402 | UCC governs securities; foreign stock not categorically exempt from levy or turnover | Article XII and older precedent make out-of-state stock immune from levy (thus from turnover) | UCC (revised Article 8) controls; foreign stock not categorically exempt; Walker failed to prove his stock was exempt (de novo legal ruling; factual matters for debtor to prove) |
| Whether property must be delivered to sheriff (vs. other agent) for sale | Court may appoint agent or broker under amended §2-1402(e) when sale by sheriff is inappropriate | Dowling suggested delivery to sheriff; direct delivery to creditor improper | No error: amended §2-1402(e) allows sale by agent; court may appoint broker and ownership remains with debtor until sale |
| Whether opposing counsel can hold stock as escrow agent pending sale | Temporary holding by counsel was an interim step to appoint neutral broker; acceptable given statutory flexibility | Counsel cannot be impartial escrow agent and should not hold debtor’s property | No reversible error: counsel’s temporary holding was interim, not a technical escrow appointment; contempt risk provides protection; order not impermissibly vague |
| Whether trial court abused discretion denying stay to deposit stock into court registry | Enforcement permitted; court’s exercise of discretion presumed correct absent record | Walker sought registry deposit as condition for stay pending appeal | No reversible error: appellant failed to provide report of proceedings; insufficient record to show abuse of discretion |
Key Cases Cited
- Gonzalez v. Profile Sanding Equipment, Inc., 333 Ill. App. 3d 680 (appellate court) (discusses standard of review for §2-1402 turnover orders)
- Goldfine v. Barack, Ferrazzano, Kirschbaum & Perlman, 2014 IL 116362 (Ill. 2014) (statutory construction and de novo review principles)
- Reid Ice Cream Co. v. Stephens, 62 Ill. App. 334 (Ill. App. 1895) (pre-UCC rule locating situs of stock in state of incorporation)
- Dowling v. Chicago Options Associates, Inc., 365 Ill. App. 3d 341 (appellate court) (addressed delivery of property to sheriff under prior §2-1402)
- Stonecrafters, Inc. v. Wholesale Life Insurance Brokerage, Inc., 393 Ill. App. 3d 951 (appellate court) (describing §2-1402’s broad powers)
- Collosseo v. Lynn, 88 Ill. App. 3d 344 (appellate court) (supplemental proceedings do not reach property statutorily exempt from garnishment)