Harris N.A. v. Harris ( 2012 )

ILLINOIS OFFICIAL REPORTS
Appellate Court
Harris N.A. v. Harris, 2012 IL App (1st) 113813Appellate Court HARRIS N.A., Plaintiff-Appellee, v. SHERI HARRIS, Defendant-
Caption Appellant (Stuart Levine, Defendant).
District & No. First District, First Division
Docket No. 1-11-3813
Filed September 4, 2012
Rehearing denied September 18, 2012
Held Summary judgment was properly entered for plaintiff on its complaint
(Note: This syllabus alleging that defendant’s former husband defaulted on a note held by
constitutes no part of plaintiff and fraudulently transferred assets to defendant in an attempt to
the opinion of the court prevent plaintiff from repossessing them.
but has been prepared
by the Reporter of
Decisions for the
convenience of the
reader.)
Decision Under Appeal from the Circuit Court of Cook County, No. 10-CH-07536; the
Review Hon. Nancy J. Arnold, Judge, presiding.
Judgment Affirmed.
Counsel on Leslie J. Rosen, of Chicago, for appellant.
Appeal
Chapman & Cutler, LLP, of Chicago (David S. Barritt and James P.
Sullivan, of counsel), for appellee.
Panel PRESIDING JUSTICE HOFFMAN delivered the judgment of the court,
with opinion.
Justices Hall and Karnezis concurred in the judgment and opinion.
OPINION
¶1 The appellant, Sheri Harris, appeals from the circuit court’s ruling granting summary
judgment in favor of the plaintiff, Harris N.A., on several counts of its complaint against her
and her former husband Stuart Levine, who is not a party to this appeal. The complaint
alleged that Levine had defaulted on a note and had fraudulently transferred assets to the
appellant to avoid their being recouped by the bank. On appeal, the appellant argues that the
trial court erred in finding most of the disputed transfers to be fraudulent, because (1) Levine
had no ownership interest to transfer after his assets had been forfeited to the United States
government; (2) the transfers were not fraudulent because they were effected for the purpose
of maintaining the defendants’ home, as required by a forfeiture agreement with the United
States; (3) the transfers were not fraudulent because they were made in exchange for
adequate consideration; (4) to the extent the transfers were fraudulent, the plaintiff was
entitled to only one-half of their value, because the transferred assets were marital property;
(5) the circuit court should not have ruled the transfer of a Moore sculpture to be fraudulent,
because the plaintiff never so alleged; and (6) the circuit court should not have ruled the
transfer of an Andy Warhol portfolio to be fraudulent, because Levine never had an
ownership interest in the portfolio. For the reasons that follow, we affirm the circuit court’s
judgment.
¶2 In February 2002, the plaintiff filed its complaint, which alleged that Levine had
defaulted on a note and that judgment had been entered against him for more than
$3,300,000. The complaint further alleged that, knowing that he was insolvent and acting
with the intention of preventing full collection of the judgment, Levine had either transferred
several valuable assets to the appellant for no consideration or had sold the assets and then
transferred the proceeds to the appellant for no consideration. The complaint specifically
mentioned an ownership in Hidden Beach Records, LLC (sold for $50,000); a Mitoraj
sculpture (sold for approximately $130,000); “certain artwork” (one sale for $63,500, another
for approximately $25,000); a Moore sculpture (sold for $100,000); a federal income tax
refund (approximately $25,000); a Jeanne Duval painting (sold for $39,550); a dining room
set and other personal property (sold for approximately $63,000 in one instance and
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$100,000 in another); an Andy Warhol portfolio (sold for $55,000); a car (valued at
$32,000); his ownership interest in a Weston, Florida, residence (valued at $600,000); and
approximately $431,000 of the proceeds of the sale of his and the appellant’s Highland Park
home. The plaintiff alleged that these transfers violated the Uniform Fraudulent Transfer Act
(Act) (740 ILCS 160/1 et seq. (West 2010)), and it asked, among other things, that the court
declare the transfers void and enter judgment against the appellant.
¶3 The appellant responded by filing a motion to dismiss that argued, inter alia, that Levine
had forfeited to the government his interest in the disputed property and that she gave
reasonable consideration in exchange for the property because she had legal right to half of
it. In support of her motion, the appellant presented Levine’s 2006 plea agreement in case
number 05-CR-691 in the Northern Division of the United States District Court. That
agreement contains the following provision regarding Levine’s forfeiture:
“[Levine] further acknowledges that the government will file a civil complaint
against certain property, namely $5 million, alleging that the property is subject to
forfeiture. [Levine] relinquishes all right, title, and interest he may have in this property
that is used to satisfy the amount due and further agrees to the entry of a judgment against
him, extinguishing any interest or claim he may have had in the property subject to
forfeiture, regardless of where they may have been transferred or hidden. *** [Levine]
agrees that no transfers of property available to satisfy this judgment can be effectuated
by [him] or his agents without concurrence of the government or approval of the Court.
To the extent that [Levine] owns any property available to satisfy this judgment jointly,
he agrees that any efforts to sell, to transfer, or otherwise convey his interest shall be
subject to the same conditions. Further, [Levine] agrees [to] maintain all financial
obligations relating to any property so as to preserve and protect the availability of the
property to satisfy the forfeiture judgment.”
¶4 The appellant also presented a March 2008 stipulated agreement between her and federal
prosecutors. That agreement recited Levine’s liability in a forfeiture suit, and it described the
forfeiture suit as follows:
“5. On February 21, 2008, the United States filed a verified complaint for forfeiture
*** for funds in the amount of five million dollars, *** to be satisfied by proceeds of the
real properties located [in Highland Park, Illinois,] and [Weston, Florida].
***
7. On March 5, 2008, [Levine] entered into a stipulated agreement with the United
States resolving his interests in and claims to the defendant properties and *** agreed to
the entry of a judgment against him in the amount of five million dollars and waived any
right ***, title or interest he may have in the defendant properties or the proceeds from
the sale of the properties ***.
8. The defendant properties representing the substitute res to be sold so that proceeds
may be applied to the aforementioned outstanding agreed five million dollar judgment
against [Levine] are held jointly by [Levine] and [the appellant], his spouse, as part of
their marital estate. The parties agree that the assets of the marital estate of [Levine and
the appellant] have an aggregate value of approximately $4,230,256. [The appellant]
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understands and acknowledges [Levine’s] obligation to satisfy this forfeiture judgment
***. The United States understands and acknowledges that [the appellant] has a legal
right, title and interest to 50 percent of the value of the assets of the marital estate she
shares with [Levine], and that the United States may not seek to satisfy the forfeiture
judgment against [Levine] with [her] interests in the marital estate.
9. In consideration of the foregoing and in resolution of the respective interests of
[the appellant] and the United States in the assets of the marital estate, [the appellant] and
the United States agree to the forfeiture of fifty percent (50%) of the aforementioned
agreed value of the marital estate less $250,000 which amount the parties agree
approximately equals $1,865,128, in partial satisfaction of the forfeiture judgment. On
March 4, 2008, a purchase and sale agreement *** was executed between [Levine, the
appellant], and a prospective buyer for [the Highland Park property] in the amount of
$3,850,000.00. *** From the closing of the [Highland Park property], the United States,
in satisfaction, will receive approximately $1,865,128 of the net proceeds ***. ***
10. *** [T]he United States agrees that upon the partial satisfaction of the forfeiture
judgment described above, it will have no further claim and will take no further action,
including administrative, civil or other criminal proceeding against any [of] the property,
real or personal, in which [the appellant] presently has an interest or claim.
11. [The appellant] further agrees that while the [Highland Park] property is in the
process of being marketed for sale and until such time as the completed sale has closed
***, she must maintain the defendant real properties and continue to satisfy all financial
obligations associated with the real properties in order to preserve and protect these real
properties *** so that the proceeds from their sale can be applied to the agreed judgment
***.”
¶5 The appellant’s motion to dismiss included a copy of a similar stipulated agreement
between the government and Levine. That agreement stated that Levine agreed to relinquish
his interest in property used to satisfy the forfeiture claim against him and that the forfeiture
claim was “to be satisfied by proceeds from the sale of” the Highland Park and Weston
properties. It further stated that the government’s forfeiture complaint had been filed “against
five million dollars and the [Highland Park and Weston] properties, the proceeds from the
sales of those real properties being substituted for the five million dollar judgment and
subject to forfeiture.” As with the appellant’s stipulated agreement, Levine’s agreement
included a clause stating that he would maintain the real properties so that their value would
be protected until they were sold.
¶6 Also attached to the motion to dismiss was a copy of the forfeiture complaint filed
against Levine in February 2008. That complaint stated that it was a forfeiture action “for
forfeiture of funds in the amount of five million dollars, to be satisfied by proceeds from the
sale of real properties located [in Highland Park and Weston].”
¶7 In addition, the appellant provided a copy of the July 1, 2008, judgment dissolving her
and Levine’s marriage. According to the agreed property distribution attached to that
judgment, the appellant kept an A.G. Edwards account and two Chase Bank accounts, while
Levine kept a third Chase Bank account.
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¶8 Finally, the appellant attached to her motion to dismiss a partial transcript of a deposition
in which Levine claimed not to have owned any Andy Warhol artwork. Levine explained that
the Warhol art at issue was owned by someone else but kept in his house for several years
for safekeeping.
¶9 The circuit court denied the appellant’s motion to dismiss, and the appellant answered
the plaintiff’s complaint. In her answer, the appellant admitted that assets or proceeds of
asset sales identified in the complaint had been placed into her bank accounts. Among these
admissions was an admission that she sold the Andy Warhol portfolio for $55,000. The
appellant added several affirmative defenses, including a defense that she used the proceeds
for ordinary financial affairs such as household expenses.
¶ 10 The plaintiff and the appellant thereafter filed cross-motions for summary judgment. In
her motion, the appellant reiterated her arguments that Levine never had an interest in the
disputed assets, had lost his interest by forfeiture, or had transferred his interest to the
appellant pursuant to the dissolution of their marriage. The appellant attached to her motion
the above-quoted documents. She also attached an affidavit in which she averred that she
liquidated marital assets in order to meet household expenses because “most of [their]
liquidated marital assets were frozen.” In her affidavit, the appellant accounted for her use
of some of the proceeds of the asset sales. She listed household expenses as well as credit
card bills, laundry services, cleaning services, living expenses for her children, personal
training expenses, medical expenses, legal fees, automobile expenses, and taxes. She
supported her affidavit with excerpts from her accounting register and with sometimes-
redacted bank statements.
¶ 11 In its motion for summary judgment, the plaintiff argued, among other things, that
Levine’s forfeiture encompassed only the two named parcels of real property and that the
appellant’s and Levine’s divorce did not shield their other assets from liability.
¶ 12 After hearing argument on the cross-motions, the circuit court granted the plaintiff’s
motion for summary judgment with respect to several of the transferred or sold assets,
including the Moore sculpture, the Warhol portfolio, some personal property, an income tax
refund, and the Hidden Beach Records ownership interest. The circuit court fixed the total
value of these assets at $546,325.73. However, the circuit court granted summary judgment
to the appellant with respect to an automobile and the proceeds of the sales of the Highland
Park and Weston properties. The appellant now timely appeals the circuit court’s order.
¶ 13 Because all of the appellant’s arguments on appeal challenge the circuit court’s decision
to grant summary judgment partly in favor of the plaintiff, we begin our analysis with the
well-established standards for review of a circuit court’s decision to grant summary
judgment. Summary judgment is proper where “the pleadings, depositions, and admissions
on file, together with the affidavits, if any, show that there is no genuine issue as to any
material fact and that the moving party is entitled to a judgment as a matter of law.” 735
ILCS 5/2-1005(c) (West 2010). “The function of a reviewing court on appeal from a grant
of summary judgment is limited to determining whether the trial court correctly concluded
that no genuine issue of material fact was raised and, if none was raised, whether judgment
as a matter of law was correctly entered.” American Family Mutual Insurance Co. v. Page,
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366 Ill. App. 3d 1112, 1115, 852 N.E.2d 874 (2006). “The propriety of a trial court’s
decision to grant summary judgment presents a question of law, which we review de novo.”
Bigelow Group, Inc. v. Rickert, 377 Ill. App. 3d 165, 168, 877 N.E.2d 1171 (2007).
¶ 14 The circuit court here granted summary judgment to the plaintiff on its claims that the
appellant received fraudulent transfers of assets, in violation of section 6 of the Act. That
section provides, in pertinent part, as follows:
“A transfer made or obligation incurred by a debtor is fraudulent as to a creditor whose
claim arose before the transfer was made or the obligation was incurred if the debtor
made the transfer or incurred the obligation without receiving a reasonably equivalent
value in exchange for the transfer or obligation and the debtor was insolvent at that time
or the debtor became insolvent as a result of the transfer or obligation.” 740 ILCS
160/6(a) (West 2006).
If its elements are met, the Act creates a presumption of the debtor’s fraud. See Cordes & Co.
v. Mitchel Cos., 605 F. Supp. 2d 1015, 1020-21 (N.D. Ill. 2009) (discussing the Act).
¶ 15 The appellant does not dispute that Levine’s indebtedness to the plaintiff arose before the
transfers now at issue, nor does she dispute that Levine was insolvent at the relevant times.
Instead, she raises six distinct challenges to the circuit court’s finding that his transfers to her
were fraudulent under the Act.
¶ 16 First, the appellant argues that the property transfers could not have been fraudulent,
because Levine had no assets to transfer to her in the first place. According to the appellant,
Levine “had nothing to transfer because he had forfeited all of his assets to the United States
government.” We disagree with the appellant’s interpretation of the federal forfeiture
proceedings against Levine. Instead, we agree with the plaintiff that the scope of Levine’s
forfeiture was limited to his interest in the Highland Park and Weston properties.
¶ 17 We draw this conclusion from the documentation the appellant presented to the circuit
court. That documentation begins with Levine’s plea agreement, which states that the United
States would pursue a $5 million forfeiture complaint against “certain property” of Levine’s
and encumber Levine’s ability to transfer property “available to satisfy this judgment.” Later
documents clarify exactly what “certain property” would satisfy the forfeiture judgment. The
stipulated agreement between the appellant and the United States, like the agreement
between Levine and the United States, indicates that the forfeiture judgment was “to be
satisfied by the proceeds of the real properties located [in Highland Park and Weston].”
Likewise, the forfeiture complaint itself states that the forfeiture judgment was “to be
satisfied by proceeds from the sale of real properties located [in Highland Park and
Weston].” These passages unequivocally limit the reach of the forfeiture judgment to the two
real properties.
¶ 18 To urge a different interpretation, the appellant points out that her stipulated agreement
with the United States included (1) a valuation of her and Levine’s marital estate and (2) the
government’s agreement to leave just over half of that value for the appellant. In the
appellant’s view, these passages indicate that the government seized the entirety of Levine’s
portion of the marital estate, not just his real estate holdings. We disagree. The passage to
which the appellant refers does indeed set a value for the marital estate, but it does so for
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purposes of shielding the appellant from Levine’s forfeiture. The fact that the government
put a value on the marital estate does not change the scope of Levine’s forfeiture, which, as
we have stated, was limited to his interest in the two named real properties. For that reason,
we reject the appellant’s argument that Levine’s forfeiture bereaved him of any property
interests he could have transferred fraudulently.
¶ 19 The appellant’s second argument on appeal is that the transfers here were not fraudulent,
because they were necessary to allow her to maintain her and Levine’s real property, an
obligation that she and Levine assumed pursuant to their agreements with the United States.
As support for this argument, the appellant points out that household expenses were paid out
of her personal account. Based on this, the appellant argues that she and Levine had no
choice but to sell the disputed assets and place them in her account. However, among its
several responses to this point in its brief, the plaintiff points out that, at the time of the
disputed asset transfers, the appellant had access to over $1 million in her own funds. This
fact belies her claim that she and Levine needed to sell the assets in order to pay for
household expenses.
¶ 20 The appellant’s third argument on appeal is that the transfers should not be considered
fraudulent because Levine received adequate consideration for them. Because the lack of
adequate consideration is one of the three elements necessary to establish fraud under section
6(a) of the Act, the appellant argues that the exchange of consideration defeats the plaintiff’s
fraud claim. The appellant argues that Levine transferred the assets to her so that she would
pay household bills as required by the terms of his criminal bond, and thus that he obtained
a benefit–his own liberty–in exchange for the assets. However, as the plaintiff observes in
its brief, neither the appellant nor Levine raised this “liberty” argument at the circuit court
level. Moreover, as even the appellant observes in her brief, “[t]here was no evidence
presented on these cross motions for summary judgment as to what [Levine’s] liberty ***
meant to him.” Because neither this argument nor any evidence supporting it was presented
to the circuit court, we deem the argument forfeited on appeal. See Cooney v. Magnabosco,
407 Ill. App. 3d 264, 268, 943 N.E.2d 290 (2011) (stating that an appellant that fails to raise
an issue in the circuit court waives that issue for purposes of appeal).
¶ 21 The appellant’s fourth argument is that much of the disputed property was marital
property in which the appellant already held a one-half interest. Thus, she argues, at least half
of the proceeds from the sale of those assets belonged to her irrespective of any fraudulent
transfer. However, again, the plaintiff failed to raise this argument at the circuit court level,
and we deem it forfeited.
¶ 22 The appellant next argues that the circuit court should not have awarded the plaintiff the
value of the Moore sculpture, because the plaintiff never asserted that Levine’s transfer of
the Moore sculpture to her was fraudulent. We disagree. Count V of the plaintiff’s complaint,
titled “Violation of Illinois Uniform Fraudulent Transfer Act Transfer of Moore Sculputure,”
asserts that “[t]he sale by Levine of the Moore sculpture *** was fraudulent.” That count
prays that the court, among other things, “[d]eclare the sale[ ] of the Moore sculpture *** as
void” and “[o]rder that [the judgment against Levine on the plaintiff’s note] be declared a
lien on the Moore sculpture.” This count unquestionably raises the allegation that Levine
transferred the sculpture to the appellant in order to defraud the plaintiff.
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¶ 23 The appellant’s final argument on appeal is that the circuit court erred in ruling that
Levine fraudulently transferred the Warhol portfolio. In fact, the appellant argues, “[t]he
evidence was undisputed that [Levine] never had an ownership interest in this portfolio.” Be
that as it may, the evidence is also unquestioned that the appellant sold to a third party
whatever interest she and Levine had in the portfolio. The actual value of that interest is a
matter for them and their buyer. For our purposes it is sufficient to know that the appellant
received value for it, and Levine and the plaintiff did not.
¶ 24 For the foregoing reasons, we affirm the judgment of the circuit court.
¶ 25 Affirmed.
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