Wells Fargo Bank Minnesota, NA v. Envirobusiness, Inc., 2014 IL App (1st) 133575
Docket No. 1-13-3575
Appellate Court of Illinois, First District, Third Division
November 5, 2014
2014 IL App (1st) 133575
JUSTICE LAVIN delivered the judgment of the court, with opinion. Presiding Justice Pucinski and Justice Mason concurred in the judgment and opinion.
Illinois Official Reports
Appellate Court Caption WELLS FARGO BANK MINNESOTA, NA, as Trustee for the Registered Holders of J.P. Morgan Chase Commercial Mortgage Securities Corp., Commercial Mortgage Pass-Through Certificates, Series 2002-C3, Plaintiff, v. ENVIROBUSINESS, INC., a Massachusetts Corp., d/b/a EBI Consulting, formerly d/b/a EBI Consultants, Defendant.—WELLS FARGO BANK MINNESOTA, NA, Plaintiff-Appellee, v. CRAIG J. WALKER, Defendant-Appellant (CIBC, Inc., Defendant-Appellee; 318 West Adams, LLC, and Steven Byers, Defendants).
Held (Note: This syllabus constitutes no part of the opinion of the court but has been prepared by the Reporter of Decisions for the convenience of the reader.) In an appeal from a supplementary proceeding commenced under
Decision Under Review Appeal from the Circuit Court of Cook County, Nos. 2004-L-10701, 2004-CH-3099 cons.; the Hon. Alexander P. White, Judge, presiding.
Judgment Affirmed.
Counsel on Appeal
Daniel S. Hefter, of Hefter Law, Ltd., of Chicago, for appellee.
¶ 1 This interlocutory appeal arises from supplemental proceedings filed by Wells Fargo Bank Minnesota, NA (Wells Fargo), to enforce a monetary judgment against Craig Walker. In those proceedings, commenced pursuant to
¶ 2 I. BACKGROUND
¶ 3 As a threshold matter, we note that the parties have entered into a stipulation to limit the record on appeal, likely due to the cumbersome nature of the proceedings below. Such stipulations are permitted by
¶ 4 It appears that on December 5, 2002, CIBC, Inc. (CIBC), issued an $11 million commercial mortgage loan to 318 West Adams, LLC (the borrower), secured by the borrower‘s office building (the property). Walker was a principal on the loan, which was eventually sold to J.P. Morgan Chase Commercial Mortgage Securities Corporation (J.P. Morgan) and placed in an investment trust. In addition, Wells Fargo, as trustee, subsequently foreclosed on the property. Wells Fargo then purchased the property and sold it to a third party in July 2005.
¶ 5 Wells Fargo apparently filed a complaint against CIBC and Walker, as well as other parties not before us, after discovering that certain misrepresentations were made with respect to the loan and the property. Pertinent to this appeal, it appears that the circuit court entered judgment in favor of Wells Fargo and against Walker for approximately $18 million. The court also apparently entered judgment in favor of CIBC and against Walker for approximately $5 million. Walker then filed related appeals from that judgment (Nos. 1-13-2714, 1-13-2745, 1-13-2746 and 1-13-2763 (consolidated)). Walker did not, however, obtain a stay of the monetary judgment against him. Accordingly, on August 28, 2013, Wells Fargo pursued enforcement of that judgment by starting supplementary proceedings against Walker under
¶ 7 In response, Walker argued that his stock held in Colorado corporations was exempt from turnover. Walker, relying on
¶ 8 In reply, Wells Fargo argued that only three statutory exemptions from turnover existed: the homestead exemption (
¶ 9 On November 18, 2013, the circuit court entered a written order requiring Walker to turn over his stock for sale. Specifically, the court ordered Walker to deliver the stock to Wells Fargo‘s attorney, “to be held by him in escrow” pending further order. The court also ordered the parties to attempt to agree upon a broker to sell the stock. If the parties failed to agree, however, the court could appoint a broker. In addition, the court granted CIBC‘s motion for turnover and permitted CIBC to participate in the valuation and sale process. Furthermore, the court denied Walker‘s request to place the stock in the court‘s registry. Walker now appeals.1
¶ 10 II. ANALYSIS
¶ 11 A. Turnover of Non-Illinois Stock
¶ 12 On appeal, Walker once again asserts that because stocks in non-Illinois corporations are exempt from levy, they are also exempt from turnover in supplemental proceedings under
¶ 13 A citation to discover assets, also known as a supplementary proceeding, is the predominant procedure for enforcing judgments. Robert G. Markoff, Jeffrey A. Albert, Steven A. Markoff & Christopher J. McGeehan, Citation to Discover Assets, in Creditors’ Rights in Illinois § 2.42 (Ill. Inst. for Cont. Legal Educ. 2014) (citing
¶ 14
“(c) When assets or income of the judgment debtor not exempt from the satisfaction of a judgment, a deduction order or garnishment are discovered, the court may, by appropriate order or judgment:
(1) Compel the judgment debtor to deliver up, to be applied in satisfaction of the judgment, in whole or in part, money, choses in action, property or effects in his or her possession or control, so discovered, capable of delivery and to which his or her title or right of possession is not substantially disputed.
* * *
(j) This Section does not grant the power to any court to order installment or other payments from, or compel the sale, delivery, surrender, assignment or conveyance of any property exempt by statute from the enforcement of a judgment thereon, a deduction order, garnishment, attachment, sequestration, process or other levy or seizure.”
735 ILCS 5/2-1402 (West 2012) .
¶ 15 Wells Fargo, relying on Gonzalez v. Profile Sanding Equipment, Inc., 333 Ill. App. 3d 680, 692-93 (2002), contends that we must review the circuit court‘s decision for an abuse of discretion because
¶ 16 Our primary objective in construing a statute is to ascertain and give effect to the legislature‘s intent. Goldfine, 2014 IL 116362, ¶ 21. The most reliable indicator of such intent is a statute‘s plain language. Id. As a result, we cannot add limitations, exceptions, or conditions under the guise of statutory construction. In re Minor Child Stella, 353 Ill. App. 3d 415, 421 (2004). In addition, reviewing courts must consider all provisions of a statutory enactment as a whole. Bank of America, N.A. v. Adeyiga, 2014 IL App (1st) 131252, ¶ 98. When a statute‘s language is clear and unambiguous, it must be applied without considering other aids of construction. Commonwealth Edison Co. v. Illinois Commerce Comm‘n, 2014 IL App (1st) 132011, ¶ 19. Where a statute is ambiguous, however, we may look to other sources to determine the legislature‘s intent. Bank of America, N.A., 2014 IL App (1st) 131252, ¶ 98. A statute is ambiguous where well informed persons could reasonably understand the statute in more than one manner. Commonwealth Edison Co., 2014 IL App (1st) 132011, ¶ 21. Moreover,
¶ 17 Wells Fargo asserts that the only types of property exempt from satisfying a judgment pursuant to
¶ 18 More importantly, Wells Fargo fails to acknowledge
¶ 19 Notwithstanding our rejection of Wells Fargo‘s position, we find
¶ 20 Walker contends that non-Illinois stock is exempt from levy under article XII of the Code (
¶ 21 1. Article XII of the Code
¶ 22
“If the property has not been attached in the same action, the officer shall leave a copy of the judgment with the clerk, treasurer or cashier of the company, if there is such officer, otherwise with any officer or person having the custody of the books and papers of the corporation; and the property shall be considered as seized in the enforcement of the judgment when the copy is so left, and shall be sold in like manner as goods and chattels.”
735 ILCS 5/12-171 (West 2012) .
¶ 23 Walker nonetheless contends that the effect of those provisions is to render out-of-state stock statutorily exempt from levy, relying on Reid Ice Cream Co. v. Stephens, 62 Ill. App. 334 (1895). In Reid, the appellate court held, “[t]he attempted levy upon and sale of the stock of this corporation, organized and existing under the laws of the State of New York, was nugatory. Shares of stock can be attached only in the State creating the corporation.” Id. at 339. In reaching this conclusion, the reviewing court apparently
¶ 24 The Reid decision is not binding authority. Clark v. Children‘s Memorial Hospital, 2011 IL 108656, ¶ 37 (appellate court decisions before 1935 are not binding). With that said, the decision in that case still accurately reflects the present version of article XII. See also 3 Ill. L. and Prac. Attachments § 5 (2014) (“shares of stock of a corporation organized and existing under the laws of another state cannot be attached in Illinois“). The Reid decision does not, however, comport with the UCC.
¶ 25 2. The UCC
¶ 26 The predecessor to the UCC was the Uniform Stock Transfer Act (Transfer Act) (Ill. Rev. Stat. 1957, ch. 23, ¶ 416 et seq.). In re Estate of Jorgensen, 70 Ill. App. 2d 398, 403 (1966). The Transfer Act provided that “‘No attachment or levy upon shares of stock for which a certificate is outstanding shall be valid until such certificate be actually seized by the officer making the attachment or levy, or be surrendered to the corporation which issued it, or its transfer by the holder to be enjoined.‘” Trade Bond & Mortgage Co. v. Schwartz, 303 Ill. App. 165, 168 (1940) (quoting 1917 Ill. Laws 316). Thus, in contrast to article XII, the Transfer Act generally required attachment to take place where the certificate was located. See 11 William Meade Fletcher, Cyclopedia of the Law of Corporations § 5103 (rev. ed. 1995). After the Transfer Act was superseded by the UCC, the same held true. See Ill. Rev. Stat. 1985, ch. 26, ¶ 8-317; see also 11 William Meade Fletcher, Cyclopedia of the Law of Corporations § 5101 (rev. ed. 1995) (“After states enacted the Uniform Stock Transfer Act, and later Article 8 of the Uniform Commercial Code, courts tended to view the situs of shares as the place where the share certificates were located.“). Effective in 1988, however, the UCC began to distinguish between certificated and uncertificated securities. See Ill. Rev. Stat. 1987, ch. 26, ¶ 8-317. While certificated securities were generally levied on by an officer‘s seizure of the security, uncertificated securities were generally levied on by legal process at the issuer‘s executive office. See Ill. Rev. Stat. 1987, ch. 26, ¶ 8-317.
¶ 27 Illinois ultimately adopted revised article 8 of the UCC, which now governs
¶ 28 Regardless of whether Illinois or Colorado law controls our inquiry, both jurisdictions follow the same relevant UCC provisions. Like article XII of the Code, the “Creditor‘s legal process” provision of the UCC, a provision which neither party cites, governs the levy of stock.
“(a) The interest of a debtor in a certificated security may be reached by a creditor only by actual seizure of the security certificate by the officer making the attachment or levy, except as otherwise provided in subsection (d) of this section. However, a certificated security for which the certificate has been surrendered to the issuer may be reached by a creditor by legal process upon the issuer.
(b) The interest of a debtor in an uncertificated security may be reached by a creditor only by legal process upon the issuer at its chief executive office in the United States, except as otherwise provided in subsection (d) of this section.”
Colo. Rev. Stat. Ann. § 4-8-112 (West 2012) .
See also
¶ 29 As to the former, the officer must seize from the debtor the actual security certificate, unless the certificate has been surrendered. It follows that a debtor‘s certificated stock in a Colorado corporation may be levied upon by an Illinois officer if the certificate is located within the State. See 11 William Meade Fletcher, Cyclopedia of the Law of Corporations § 5106 (rev. ed. 1995) (“Although the [UCC] in effect governs the situs of shares of stock for purposes of attachment or levy, it is perhaps more accurate to say that the Code identifies the jurisdiction that has authority over the shares.“). This is in stark contrast to
¶ 31 Here, the parties have presented no reasonable construction that would permit us to construe these statutes together. In addition, neither one is more specific than the other. The UCC‘s provisions, however, were clearly enacted more recently than the nineteenth century provisions still found in article XII of the Code. Accordingly, the UCC prevails and the appellate court‘s pre-UCC decision in Reid has no persuasive value.
¶ 32 We also reject Walker‘s reliance on the Florida decision of Sargeant v. Al-Saleh, 137 So. 3d 432 (Fla. Dist. Ct. App. 2014), a decision that is neither binding nor persuasive. Independent Trust Corp. v. Kansas Bankers Surety Co., 2011 IL App (1st) 093294, ¶ 24. Not only is Sargeant distinguishable, as it dealt with stock certificates located in foreign countries (Sargeant, 137 So. 3d at 433-34), but that case did not involve Florida‘s enactment of the UCC‘s “Creditor‘s legal process” provision. See
¶ 33 Similarly, we encourage the legislature to revisit the redundant provisions purporting to govern levy upon stock. It goes without saying that securities frequently constitute a debtor‘s most significant asset and are vital to a judgment creditor‘s ability to obtain redress. Extraneous legislation unnecessarily complicates what should be an efficient and expeditious process.
¶ 34 3. Walker‘s Stock
¶ 35 Having determined as a legal matter that foreign stocks are not categorically exempt from levy and turnover, we also find that the circuit court did not abuse its discretion by requiring Walker to turn over his stock in this particular instance. As stated, Walker had the burden of demonstrating that his stock was exempt from levy and, thus, was exempt from turnover under
¶ 36 B. Sale of Property
¶ 37 Next, Walker asserts the circuit court improperly ordered his stock to be delivered to opposing counsel, rather than the sheriff, relying solely on Dowling. There, the reviewing court held that under the language of the 2002 version of
¶ 38 Here, however, the court did not expressly order Walker to convey his ownership interest to Wells Fargo. Instead, Wells Fargo‘s counsel was ordered to hold the stock until a broker could be appointed to sell it. In addition, Wells Fargo concedes on appeal that Walker remains the owner of his stock until that broker sells it. Furthermore, following Dowling,
“All property ordered to be delivered up shall, except as otherwise provided in this Section, be delivered to the sheriff to be collected by the sheriff or sold at public sale and the proceeds thereof applied towards the payment of costs and the satisfaction of the judgment. If the judgment debtor‘s property is of such a nature that it is not readily delivered up to the sheriff for public sale or if another method of sale is more appropriate to liquidate the property or enhance its value at sale, the court may order the sale of such property by the debtor, third party respondent, or by a selling agent other than the sheriff upon such terms as are just and equitable. The proceeds of sale, after deducting reasonable and necessary expenses, are to be turned over to the creditor and applied to the balance due on the judgment.” (Emphasis added.)
735 ILCS 5/2-1402(e) (West 2012) .
Accordingly, this statute authorizes the court to appoint an agent, in lieu of the sheriff, to sell the debtor‘s property. Although Walker argues the court did not expressly find that sale by an agent was more appropriate, the statute contains no such requirement. In any event, the court implicitly made that finding. We find no error.
¶ 39 C. The Circuit Court‘s “Escrow” Order
¶ 40 Walker also asserts that the circuit court improperly ordered Wells Fargo‘s counsel to retain Walker‘s stock as an escrow agent. An escrow agent has a fiduciary duty to the party making the deposit and the party for whose benefit the deposit is made. Fantino v. Lenders Title & Guaranty Co., 303 Ill. App. 3d 204, 208 (1999). As a result, an escrow agent must act impartially toward all of the parties. Patel v. Lacey, 203 Ill. App. 3d 1048, 1051 (1990). Walker contends that Wells Fargo‘s counsel cannot act as both an advocate for Wells Fargo and an impartial escrowee. Walker‘s position rests, however, on the premise that
¶ 41
¶ 42 To the extent Walker contends the turnover order was vague, the circuit court clearly anticipated in its interlocutory order that details regarding the stock brokerage were yet to be determined. In addition, Walker has cited no authority in support of his position that the order was impermissibly vague. Accordingly, he has forfeited this contention. See Lake County Grading Co. v. Village of Antioch, 2014 IL 115805, ¶ 36.
¶ 43 D. Denial of Stay
¶ 44 Finally, Walker contends the circuit court erred by denying his motion to stay the turnover order on the condition that he deposit his stock into the court registry. Walker correctly asserts that we review the denial of a stay for an abuse of discretion. In re Estate of Michalak, 404 Ill. App. 3d 75, 99 (2010). Absent a report of proceedings, however, the record in this case does not show how the court exercised its discretion. The circuit court‘s written order does not include the court‘s reasoning. In the absence of a sufficient record, we must presume the circuit court‘s order was sound. In re Marriage of Iqbal, 2014 IL App (2d) 131306, ¶ 51.
¶ 45 III. CONCLUSION
¶ 46 We conclude that pursuant to the UCC, stock in non-Illinois corporations is not as a rule exempt from levy or, in turn, from turnover under
¶ 47 Affirmed.