Litvak v. Black , 2019 IL App (1st) 181707 ( 2020 )

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Litvak v. Black, 2019 IL App (1st) 181707Appellate Court KATHERINE LITVAK, Plaintiff-Appellee, v. BERNARD S.
Caption BLACK and SAMUEL BLACK, as Trustees of the Supplemental
Needs Trust for the Benefit of Joanne Black, Dated December 19,
1997; BERNARD S. BLACK and SAMUEL BLACK, as Trustees of
the Irrevocable Trust for the Benefit of the Issue of Renata Black,
Dated December 19, 1997; and BERNARD S. BLACK and SAMUEL
BLACK, as Trustees of the Joanne Black 2013 Trust Agreement,
Dated March 22, 2013, Defendants-Appellees (Jeanette Goodwin, as
Court-Appointed Successor Conservator for Joanne Black, Intervenor-
Appellant).
District & No. First District, Sixth Division
No. 1-18-1707
Filed November 22, 2019
Rehearing denied December 19, 2019
Decision Under Appeal from the Circuit Court of Cook County, No. 17-L-9743; the
Review Hon. James E. Snyder, Judge, presiding.
Judgment Affirmed in part and reversed in part.
Cause remanded.
Counsel on Peter Stasiewicz, of Arcturus Law Firm, of Chicago, for appellant.
Appeal
Eugene E. Murphy Jr., David F. Hyde, and Daniel J. Scheeringa, of
Murphy Law Group, LLC, of Chicago, for appellee Katherine Litvak.
No brief filed for other appellees.
Panel PRESIDING JUSTICE MIKVA delivered the judgment of the court,
with opinion.
Justices Cunningham and Connors concurred in the judgment and
opinion.
OPINION
¶1 Unsatisfied with his deceased mother’s decision to leave significant assets to his sister,
Joanne Black, who suffers from a long-standing mental illness, Bernard S. Black devised a
scheme to gain control of Joanne’s finances as her court-appointed conservator. Letting the
Colorado probate court that appointed him to that position believe he would deposit certain
payable-on-death assets left directly to Joanne into a trust their mother had established for
Joanne’s continued care, Mr. Black instead caused the bulk of those funds to pass through his
mother’s estate, where one-third of them—over $1 million—was redirected to a trust
established for the benefit of Mr. Black and his children, with only the remaining two-thirds
going to Joanne.
¶2 When informed of these events, the Colorado court ordered a forensic accounting, held a
multiday evidentiary hearing, and ultimately concluded that Mr. Black had misled the court,
breached his fiduciary duties, and committed civil theft. Mr. Black was enjoined from
accessing any trust funds belonging to his sister and ordered to pay statutory damages of three
times the amount he stole from her. Mr. Black thus found himself unable—though not for want
of trying—to access the funds held in two trusts established for Joanne’s benefit or in the third
trust, set up for the benefit of Mr. Black and his children, to which funds intended for Joanne
had been redirected.
¶3 It is then that Mr. Black’s wife, plaintiff Katherine Litvak, initiated this lawsuit, in which
she asserts that all three trusts are jointly and severally indebted to her for hundreds of
thousands of dollars. Ms. Litvak failed to notify Joanne’s cousin, Anthony Dain, who served
as cotrustee for two of the trusts, or Jeanette Goodwin, Joanne’s new court-appointed
conservator, of this lawsuit. One week after the suit was filed, Ms. Litvak, Mr. Black, and Mr.
Black’s son Samuel (also a trustee) asked the circuit court to enter an agreed judgment against
the trusts for the full amount of the claim. Upon learning of these events, Ms. Goodwin sought
to intervene and vacate the judgment. The circuit court granted her request with respect to the
two trusts for which Joanne was a beneficiary but allowed the judgment to stand as to the third
trust because that trust benefitted only Mr. Black and his children.
¶4 For the reasons that follow, we affirm in part and reverse in part. We conclude that it was
an abuse of discretion not to vacate the agreed judgment in its entirety.
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¶5 I. BACKGROUND
¶6 The relevant events preceding the filing of this litigation were set out quite recently by this
court in an opinion affirming the denial of Mr. Black’s motion to vacate the filing of a foreign
money judgment: i.e., the Colorado court’s award of treble damages in favor of Joanne and
against Mr. Black. Those facts bear repeating here:
“Defendant and his sister Joanne Black are the children of the late Renata Black,
who died in May 2012. Renata’s will provided that her estate assets would be divided
into two trusts. Two-thirds of Renata’s estate would be distributed to a ‘Supplemental
Needs Trust’ for the benefit of Joanne, who had been diagnosed with schizophrenia.
One-third of Renata’s estate would be distributed to a trust for defendant [Mr. Black]
and his children. Defendant was appointed as the executor of Renata’s estate, the bulk
of which consisted of accounts holding nearly $3.5 million. Defendant discovered that,
before Renata’s death, she designated Joanne as the payable-on-death beneficiary of
some of Renata’s accounts, resulting in the assets in those accounts passing directly to
Joanne rather than to the Supplemental Needs Trust.
At the time of Renata’s death, Joanne was homeless in Colorado. In December
2012, defendant initiated a proceeding in the Denver Probate Court seeking
appointment as conservator of Joanne’s estate because her ‘mental illness interferes
with her ability to manage her assets and income.’ The probate court appointed an
attorney and a guardian ad litem for Joanne and subsequently appointed defendant as
Joanne’s conservator. According to defendant, Joanne’s attorney and the guardian
ad litem both expressly consented to defendant’s request that, as conservator, he be
permitted to disclaim Joanne’s interest in Renata’s payable-on-death accounts. After a
hearing, the probate court specifically authorized defendant ‘[t]o disclaim [Joanne’s]
interest as beneficiary under all payable on death or transferable on death accounts ***
owned by *** Renata.’ Defendant executed the disclaimer, which resulted in the assets
in the payable-on-death accounts flowing through Renata’s will, with two-thirds going
to Joanne’s Supplemental Needs Trust and one-third going to the trust for the benefit
of defendant and his children [the Issue Trust].
In February 2015, Joanne’s counsel filed a motion in the probate court seeking to
void the disclaimer. The motion asserted that defendant breached his fiduciary duties
to Joanne by failing to disclose the effect of the disclaimer on Joanne’s interest in the
nearly $3.5 million in assets from Renata’s accounts. At a status conference on the
motion, the probate court ordered an independent accounting of Joanne’s assets,
scheduled an evidentiary hearing, and ‘advised the parties that it would consider
whether “disgorgement or unwinding of fiduciary actions” was appropriate.’ [Citation.]
On the day before the evidentiary hearing, the guardian ad litem filed a motion alleging
that defendant’s conduct amounted to civil theft under Colorado law and requested that
the probate court award treble damages pursuant to Colorado’s civil theft statute.
[Citation.] After the evidentiary hearing, the probate court concluded that defendant
breached his fiduciary duties to Joanne while serving as the conservator of Joanne’s
estate by converting roughly $1.5 million of her assets for his own benefit. The probate
court found that plaintiff was required to reimburse Joanne’s estate for the amount that
he converted and that damages were trebled under Colorado’s civil theft statute,
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resulting in a judgment of nearly $4.5 million. [Citation.]” Conservatorship Estate of
Black v. Black, 2019 IL App (1st) 181452, ¶¶ 4-6.
The Colorado Court of Appeals subsequently affirmed the Colorado probate court’s order in
all respects. Id. ¶ 2 (citing Black v. Black, 422 P.3d 592 (Colo. App. 2018), cert. denied, No.
18SC419, 2019 WL 2178077 (Colo. May 20, 2019)).
¶7 On January 29, 2016, Mr. Black sued Joanne in the federal district court for the Northern
District of Illinois, seeking a declaration that he was free to administer the Irrevocable Trust
for the Benefit of the Issue of Renata Black, Dated December 19, 1997 (Issue Trust), “without
restraint.” See Black v. Black, No. 1:16-cv-1763 (N.D. Ill.). Mr. Black acknowledged both an
April 2, 2015, order of the Colorado court stating that “all *** assets related to [Joanne Black]
are frozen” and a January 13, 2016, order in a guardianship action in New York that restrained
Mr. Black from making any distributions from the Issue Trust. He asserted, however, that he
and his children were the only beneficiaries of the Issue Trust, that Joanne was not and never
had been a beneficiary of that trust, and that the Issue Trust “contain[ed] no assets of [Joanne].”
¶8 When the Colorado court learned of this new litigation the following month, it
characterized Mr. Black’s complaint for declaratory relief as “rife with inaccuracies.” It
reiterated that Mr. Black had “no rights to any of the funds contained within the Issue Trust
that were transferred or derived from Renata Black’s [payable-on-death] accounts” and that
Mr. Black’s complaint essentially asked the district court “to allow him to spend funds that he
misappropriated from Joanne Black on his attorney fees and costs to maintain the litigation he
[had] initiate[d] against her and his cousins.” The court granted Mr. Dain’s request to use funds
from the Supplemental Needs Trust for the Benefit of Joanne Black, Dated December 19, 1997
(Supplemental Needs Trust), to hire counsel to defend Joanne in the declaratory action.
¶9 Noting that she had been in contact with the judge in the guardianship action pending in
New York, the Colorado judge stated that, consistent with the New York judge’s order
enjoining Mr. Black from dissipating any of Joanne’s assets, she would continue to enter orders
“to prevent wasting of Joanne Black’s funds and to prevent further wrong-doing.”
¶ 10 Before concluding her order, the Colorado judge had this to say about Mr. Black and Ms.
Litvak:
“Bernard Black and his current wife both testified before this Court that they are
law professors at Northwestern University in Chicago, Illinois. As such, each of these
individuals has an enhanced duty for full and complete candor to the Court and to
conduct themselves and this matter with dignity becoming judicial officers and
professors. The taking of his sister’s funds, the multiple suits initiated by Mr. Black
against his family members, the inaccuracies in his pleadings before this court and his
apparent refusal to accept the changes his mother made to her estate plan are absolutely
appalling and are not in keeping with his status as a law professor.”
¶ 11 The case in the Northern District of Illinois was, according to filings made in this case,
dismissed with prejudice in July 2016, with the court determining that it did not have personal
jurisdiction over Joanne.
¶ 12 On September 26, 2017, Ms. Litvak initiated the present litigation by filing a three-count
complaint for repayment against, respectively, the Supplemental Needs Trust, the Issue Trust,
and the Joanne Black 2013 Trust Agreement, dated March 22, 2013 (2013 Trust)—a trust
established by Mr. Black while purporting to act as Joanne’s conservator. Ms. Litvak named
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as defendants Mr. Black and his son (her stepson), Samuel Black, in their capacities as trustees
of each of these trusts. She alleged that, pursuant to a demand note dated October 1, 2016, and
amended December 21, 2016, the trusts were jointly and severally indebted to her for a total
of $376,464.88, plus over $18,000 in interest and $13,000 in legal fees and costs. Ms. Litvak
moved for entry of an agreed judgment on October 3, 2017, and on October 25, 2017, the
circuit court granted her motion and entered the judgment. Ms. Litvak began collection
proceedings on November 7, 2017.
¶ 13 Shortly after it was entered, Mr. Dain learned about the agreed judgment and also learned
about a similar agreed judgment in an action initiated by Ms. Litvak’s cousin (see Dal v. Black,
No. 17 L 9744), who also claimed to have loaned the trusts hundreds of thousands of dollars.
Mr. Dain filed a motion to intervene and to vacate the agreed judgment that Ms. Litvak had
obtained. Mr. Dain informed Ms. Goodwin about the agreed judgment and, on November 27,
2017, Ms. Goodwin also sought to intervene on Joanne’s behalf and to join and adopt Mr.
Dain’s motion to vacate the agreed judgment.
¶ 14 The circuit court held a hearing on the motions to intervene and vacate the judgment on
February 16, 2018. Ms. Litvak insisted that, because Mr. Dain was not a trustee of the Issue
Trust and Joanne was not a beneficiary of the Issue Trust, neither Mr. Dain nor Ms. Goodwin
had any ability to bring a motion to vacate the agreed judgment with respect to that trust. At
the very least, Ms. Litvak argued, “the issue trust judgment should remain in effect regardless
of what [the court did] with the other two trusts.” Ms. Goodwin argued in response that there
was only money in the Issue Trust from which Ms. Litvak’s judgment could be paid because
Mr. Black stole it from Joanne and laundered it through their mother’s estate, and that Joanne’s
well-documented interest in those funds would be adversely affected if the agreed judgment,
which had been entered into without any notice to Joanne, was allowed to stand as to the Issue
Trust.
¶ 15 The circuit court denied Mr. Dain’s motion to intervene, finding that the Supplemental
Needs Trust and the 2013 Trust were already present and represented as parties, through the
presence of Bernard Black and Samuel Black, as trustees of those trusts. However, the court
granted Ms. Goodwin’s motion to intervene, finding that she had “made at least a prima facie
showing” that Joanne’s interests were “materially affected by these proceedings.”
¶ 16 The court then granted the motion to vacate, seemingly without limitation:
“[THE COURT]: Having intervened, the Conservator for Joanne may do anything
that an intervening party in a lawsuit may do.
In this case, it seeks to vacate the judgment within 30 days, and that motion is
granted.
That brings you to just the status quo of the lawsuit at its beginning; a claim by
Katherine Litvak against these various Defendants. These Defendants have elected to
not contest summary judgment. They haven’t answered otherwise, right?”
¶ 17 A moment later, however, the court seems to have had a change of heart, interrupting a
discussion regarding the timing for responsive pleadings with the following amended ruling:
“THE COURT: And then it is the case that the judgment against the issue trust
stands.
She’s not—she can’t intervene for Joanne in that regard.”
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¶ 18 Counsel for Ms. Litvak seized on this notion, insisting that the Colorado court’s decision
not to unwind the transactions it had condemned but instead to award Joanne money damages
against Mr. Black precluded Joanne from asserting any interest over the funds held in the Issue
Trust. The circuit court agreed, stating repeatedly that Joanne was “not a part of” the Issue
Trust and any interest she had in the funds that were moved to that trust “doesn’t make her a
beneficiary.” In the court’s view, the proper avenue for Ms. Goodwin to assert Joanne’s interest
in the funds held in the Issue Trust was a collection proceeding. When Ms. Goodwin pointed
out that there would be nothing to collect if the agreed judgment in this case was upheld and
the funds in the Issue Trust were dissipated, the court stated “I can’t tell you what kind of
options you might have” but assured her there were “other options.”
¶ 19 II. JURISDICTION
¶ 20 On February 16, 2018, the circuit court granted in part and denied in part Ms. Goodwin’s
motion to vacate the agreed judgment. On July 9, 2018, the court found, pursuant to Illinois
Supreme Court Rule 304(a) (eff. Mar. 8, 2016), no just reason to delay enforcement or appeal
of that decision. Ms. Goodwin timely filed her notice of appeal on August 8, 2018. We have
jurisdiction under Illinois Supreme Court Rule 301 (eff. Feb. 1, 1994) and Rule 303 (eff. July
1, 2017), governing appeals from final judgments entered by the circuit court in civil cases.
¶ 21 III. ANALYSIS
¶ 22 On appeal, Ms. Goodwin argues it was an abuse of discretion for the circuit court to vacate
the agreed judgment in favor of Ms. Litvak with respect to the Supplemental Needs Trust and
the 2013 Trust but to let the judgment stand as to the Issue Trust.
¶ 23 Section 2-1301(e) of the Code of Civil Procedure (Code) provides that a circuit court “may
on motion filed within 30 days after entry thereof set aside any final order or judgment upon
any terms and conditions that shall be reasonable.” 735 ILCS 5/2-1301(e) (West 2016).
Whether to grant or deny a motion under this section “is within the sound discretion of the trial
court, and its decision will not be reversed absent an abuse of discretion or a denial of
substantial justice.” Jackson v. Bailey, 384 Ill. App. 3d 546, 548 (2008). A court abuses its
discretion “where no reasonable person would take the position adopted” or where the court
“acted arbitrarily or ignored recognized principles of law.” Id. at 548-49.
¶ 24 Ms. Goodwin first asserts that the circuit court should have granted her motion to vacate
in its entirety because the entire agreed judgment in this case was the product of fraud or
collusion. We agree. Our supreme court has made clear that agreed judgments entered into
through litigation that is not truly adversarial but collusively brought for the purpose of having
such a judgment entered by a court of law are presumed to be collusive and fraudulent and may
be challenged as void by adversely affected third parties. Green v. Hutsonville Township High
School District No. 201, 356 Ill. 216, 221-22 (1934).
¶ 25 In Green, for example, our supreme court held that “whenever a judgment is procured
through fraud and collusion for the purpose of defrauding some third person, such third person
may show collaterally the fraud and collusion by which the judgment was obtained and escape
the burdens and injuries thus thrust upon him.” Id. It went on to explain that “[i]f a suit is
devised for the purpose of having a certain judgment entered, it will not be binding upon the
public or those who are not parties to the scheme adopted for that purpose.” Id. at 222; see also
23 Ill. L. and Prac. Judgments § 117 (2019) (noting that “[f]raud or collusion in the
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procurement of a judgment constitutes a sufficient ground for opening, vacating, or setting
aside such judgment at any time” and that “[c]ourts have inherent power to set aside their own
judgments obtained by fraudulent collusion between the parties”).
¶ 26 Ms. Litvak’s sole response to this argument is that Ms. Goodwin did not allege sufficient
facts to establish fraud or collusion in the circuit court. In City of Chicago Heights v. Public
Service Co. of Northern Illinois, 345 Ill. App. 393, 400 (1952), our supreme court did
acknowledge that it is not enough for one challenging an agreed judgment to simply conclude
that it was the product of a “friendly” suit. But the court went on to say that where the facts
demonstrate that a suit was “an adversary proceeding only in form” and the resulting judgment
was “not entered on a hearing on the merits, but by the default, acquiescence and tacit consent”
of the parties, the “necessary inference” is that the judgment was “collusive and fraudulent.”
Id. at 400-01. In that case, the defendant was a municipality sued for repayment on various
contracts it knew or should have known were invalid because they resulted in a level of
indebtedness the municipality was prohibited by statute from taking on. Id. at 395-97. Rather
than assert this meritorious defense, the municipality acquiesced to a default judgment. Id.
¶ 27 Here, the trustees, as defendants to Ms. Litvak’s suit, never answered her complaint and
within one week agreed to a judgment against the trusts for the full amount requested. The
judgment they agreed to was actually against all three trusts, including two trusts for which
Joanne was the only beneficiary. The motion to vacate and its various attachments, including
the persuasive orders of other courts detailing the conduct of Mr. Black and Ms. Litvak in
related litigation and Joanne’s clear interest in all of the funds at issue, are detailed allegations
from which we can infer that the agreed judgment in this case, like the judgment in City of
Chicago Heights, was improper and that Joanne’s interests were “adversely affected” by this
judgment in Ms. Litvak’s favor, as it concerned all three of the trusts.
¶ 28 The factors we consider when determining whether substantial justice is achieved through
the grant or denial of a motion for relief from judgment under section 2-1301(e) also weigh
strongly in favor of vacating the agreed judgment in its entirety. Those factors include “[the
moving party’s] diligence or the lack thereof, the existence of a meritorious defense, the
severity of the penalty resulting from the order or judgment, and the relative hardships on the
parties from granting or denying vacatur.” Jackson, 384 Ill. App. 3d at 549.
¶ 29 Here, the record establishes that, although given no notice of these proceedings, Mr. Dain
and Ms. Goodwin moved quickly to protect Joanne’s rights, filing their motion within 30 days
of entry of the agreed judgment.
¶ 30 And the circuit court in this case clearly believed that Ms. Goodwin had “made at least a
prima facie showing” that Joanne’s interests were “materially affected by these proceedings.”
Recovery of the funds the Colorado court found Mr. Black stole from Joanne may certainly—
as the circuit court in this case noted—require separate collection proceedings. But that does
not prevent Ms. Goodwin from protecting Joanne’s interests in this action to prevent further
wasting or dissipation of those assets that Mr. Black strategically moved into the one trust
established by his mother that was not set up for Joanne’s benefit. In our view, the motion to
vacate raises meritorious arguments for why—her lack of beneficiary status notwithstanding—
the funds in the Issue Trust that Mr. Black and Ms. Litvak seek access to belong to Joanne.
¶ 31 This brings us to the severity of the penalty resulting from the judgment and the relative
hardships on the parties from granting or denying it. As Ms. Goodwin’s counsel pointed out at
argument in the circuit court, if the funds in the Issue Trust are distributed, they may never be
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recovered. Conversely, if the agreed judgment is vacated in its entirety, Ms. Litvak will still
have an opportunity to present her own claim to those funds. The import of this opinion is
simply this: that determination should be made only after the court has fully considered
Joanne’s competing interest in those funds.
¶ 32 IV. CONCLUSION
¶ 33 For the reasons stated above, the circuit court’s order of February 16, 2018, is affirmed in
part and reversed in part. The agreed judgment entered on October 25, 2017, is vacated in its
entirety. This case is remanded to the circuit court for a decision on the merits of Ms. Litvak’s
claims, with Ms. Goodwin’s full participation in this suit on Joanne’s behalf.
¶ 34 Affirmed in part and reversed in part.
¶ 35 Cause remanded.
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