Shipley v. Hoke

Illinois Official Reports
Appellate Court
Shipley v. Hoke, 2014 IL App (4th) 130810Appellate Court JAMES SHIPLEY, as Independent Executor of the Estate of Janet
Caption Shipley, Deceased, Plaintiff-Appellant, v. STEPHEN HOKE,
PATRICK SHINE, and COONEY & CONWAY, Defendants-
Appellees, and THE C.P. HALL COMPANY, Defendant.
District & No. Fourth District
Docket Nos. 4-13-0810, 4-13-0837 cons.
Filed November 24, 2014
Held In supplementary proceedings under section 2-1402 of the Code of
(Note: This syllabus Civil Procedure to collect a judgment in an asbestos case where
constitutes no part of the plaintiff allowed the proceedings to terminate at the six-month mark
opinion of the court but pursuant to Supreme Court Rule 277(f), justiciable matters were still
has been prepared by the presented by plaintiff’s claims that three defendants involved with the
Reporter of Decisions judgment debtor violated the restraining provisions of the citation and
for the convenience of the trial court had personal jurisdiction over two of the three, because
the reader.) one waived his objection to personal jurisdiction by moving to quash
plaintiff’s notice under Supreme Court Rule 237(b) and the other
participated in the proceedings and testified he was the president,
owner, and only employee of the judgment debtor, but the third, a law
firm that won many judgments against the judgment debtor, was not
properly served with the citation, and in the absence of a request from
plaintiff for an extension of the supplementary proceedings beyond
the six-month time limit, plaintiff was barred from invoking relief
under section 2-1402, including relief from violations of restraining
orders; therefore, the dismissal of plaintiff’s enforcement orders was
affirmed.
Decision Under Appeal from the Circuit Court of McLean County, No. 10-L-38; the
Review Hon. Paul G. Lawrence, Judge, presiding.
Judgment Affirmed.
Counsel on James Walker (argued), of James Walker, Ltd., of Bloomington, for
Appeal appellant.
Joseph D. Frank and Reed Heiligman, both of FrankGecker LLP, of
Chicago, for appellee Cooney & Conway.
Stephen R. Swofford and Peter D. Sullivan, both of Hinshaw &
Culbertson LLP, of Chicago, for appellee Stephen Hoke.
Patrick Shine, of Palos Park, appellee pro se.
Panel JUSTICE STEIGMANN delivered the judgment of the court, with
opinion.
Justices Harris and Holder White concurred in the judgment and
opinion.
OPINION
¶1 These consolidated appeals present questions of jurisdiction and procedure in
supplementary proceedings under section 2-1402 of the Code of Civil Procedure (Code) (735
ILCS 5/2-1402 (West 2010)) and Illinois Supreme Court Rule 277 (eff. July 1, 1982).
Supplementary proceedings allow a judgment creditor to examine the judgment debtor or third
parties to discover assets belonging to the judgment debtor that may be used to satisfy the
judgment. Such proceedings are commenced by the service of a citation–issued by the clerk at
the judgment creditor’s request–upon the judgment debtor or a third party. The citation may
include a restraining provision, which prohibits the party to whom the citation is directed from
transferring, disposing of, or interfering with the judgment debtor’s property. 735 ILCS
5/2-1402(f)(1) (West 2010). Failure to abide by this prohibition renders a third party liable for
the full amount of the judgment, or the amount of the property transferred, whichever is less.
Id. Supplementary proceedings automatically terminate six months after the cited party’s first
appearance, unless the trial court grants an extension. Ill. S. Ct. R. 277(f) (eff. July 1, 1982).
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¶2 In December 2010, plaintiff served a citation on defendant, the C.P. Hall Company (C.P.
Hall), a defunct asbestos distributor against which plaintiff won a $3 million judgment in
November 2010. The citation included a restraining provision. In June 2011, following a
hearing, plaintiff allowed the supplementary proceedings to automatically terminate, with the
judgment remaining almost entirely unsatisfied.
¶3 Months later, after C.P. Hall filed for bankruptcy, plaintiff filed motions alleging that
Stephen Hoke (former attorney for C.P. Hall), Patrick Shine (president and owner of C.P.
Hall), and Cooney and Conway, LLC (Cooney) (a law firm that won hundreds of judgments
against C.P. Hall on behalf of asbestos plaintiffs), violated the restraining provision of the
December 2010 citation issued to C.P. Hall. Citing section 2-1402(f)(1) of the Code, plaintiff
sought a judgment holding Hoke, Shine, and Cooney jointly and severally liable for the entire
$3 million judgment. (We note that plaintiff called his motions “Motion[s] in Aid of
Execution.” Such motions appear to have no precedent in Illinois law. We refer to plaintiff’s
motions as “enforcement motions” because they invoke the enforcement mechanism of section
2-1402(f)(1) of the Code.) In the spring of 2013, the trial court issued separate orders finding
that it lacked (1) subject-matter jurisdiction over Shine and (2) personal jurisdiction over Hoke
and Cooney.
¶4 Plaintiff appeals, arguing that (1) the termination of supplementary proceedings did not
deprive the trial court of subject-matter jurisdiction over plaintiff’s enforcement motions, and
(2) plaintiff’s failure to issue separate citations to Hoke, Shine, and Cooney did not deprive the
court of personal jurisdiction over those parties. Although we agree that the court had
subject-matter jurisdiction over plaintiff’s enforcement motions and personal jurisdiction over
Hoke and Shine, we conclude that Hoke and Shine properly invoked the termination of
supplementary proceedings as an affirmative defense, precluding plaintiff’s right to relief
under section 2-1402(f)(1) of the Code. We further conclude that plaintiff’s failure to issue a
separate citation to Cooney deprived the court of personal jurisdiction over Cooney.
Accordingly, we affirm the court’s judgment in both appeals.
¶5 I. BACKGROUND
¶6 The following facts were gleaned from the parties’ pleadings and exhibits, the evidence
and testimony presented at the various hearings throughout this case, and the findings and
orders of the McLean County circuit court (trial court) and the United States Bankruptcy Court
for the Northern District of Illinois (bankruptcy court). Although the record before us contains
tens of thousands of pages, we review only the facts pertinent to our decision.
¶7 A. The Parties
¶8 C.P. Hall is a defunct seller and distributor of raw asbestos fiber. The original plaintiff,
Janet Shipley, allegedly contracted mesothelioma from C.P. Hall asbestos. (Following Janet’s
death in December 2010, Janet’s husband, James Shipley, was substituted as plaintiff as
independent executor of Janet’s estate. We hereinafter refer to Janet and James collectively as
“plaintiff.”)
¶9 In the years before this case commenced, Cooney, a Chicago law firm, won hundreds of
judgments against C.P. Hall on behalf of asbestos plaintiffs, many of whom are now dead or
dying. (The Cooney plaintiffs are not parties to this case.)
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¶ 10 In February 2009, Shine purchased C.P. Hall from the HallStar Company. Shine hoped that
his experience as an insurance attorney would allow him to maximize C.P. Hall’s insurance
coverage returns while paying out the asbestos claims against C.P. Hall. Shine, as president,
considers himself the only employee of C.P. Hall. At the time of the citation hearing, Hoke, a
former attorney for C.P. Hall who assisted with Shine’s purchase of the company, shared office
space with Shine at C.P. Hall’s office in Chicago. Hoke drew checks from C.P. Hall’s accounts
to pay C.P. Hall’s rent, and he was the only person who made deposits into, or drew checks
from, C.P. Hall’s accounts during Shine’s time as president.
¶ 11 B. The Integrity Insurance Proceeds
¶ 12 During its years of operation, C.P. Hall purchased third-party liability insurance from the
Integrity Insurance Company (Integrity). In June 2009, as Integrity was in the process of
liquidation in New Jersey, C.P. Hall entered into a global settlement with hundreds of asbestos
plaintiffs represented by Cooney, assigning to those plaintiffs all the proceeds of its Integrity
insurance policies. At the time of the assignment, the Integrity liquidation was approaching a
July 2009 bar date for the submission of claims. If C.P. Hall had not settled with the Cooney
plaintiffs and submitted its claims to Integrity by the bar date, none of the proceeds from the
Integrity liquidation would have been available to pay the Cooney plaintiffs’ claims.
¶ 13 In January 2010, C.P. Hall received a “notice of determination” from Integrity, stating that
as part of the liquidation, it would pay approximately $16 million to C.P. Hall for the purpose
of covering the Cooney plaintiff’s claims.
¶ 14 C. Plaintiff’s Case
¶ 15 In February 2010, plaintiff filed a complaint against C.P. Hall and other corporate
defendants, alleging that exposure to asbestos from those companies caused her to contract
mesothelioma, a terminal illness. Hoke represented C.P. Hall until August 2010, when the
company became unable to pay his fees, and he withdrew as counsel. Without counsel, C.P.
Hall failed to appear at subsequent court dates. On November 19, 2010, following a jury trial,
the trial court entered a $3 million default judgment against C.P. Hall.
¶ 16 D. The Commencement of Supplementary Proceedings
¶ 17 On November 30, 2010, at plaintiff’s request, the clerk issued a citation to discover assets
to C.P. Hall, which included a restraining provision prohibiting C.P. Hall from transferring,
disposing of, or interfering with any of its property that may be used to satisfy the judgment.
See 735 ILCS 5/2-1402(f)(1) (West 2010). The citation named Shine as the “person receiving
[the] citation,” and plaintiff served the citation on C.P. Hall, through Shine, on December 1,
2010.
¶ 18 Janet died on December 11, 2010.
¶ 19 On December 17, 2010, the trial court held a hearing on the citation, at which Shine (1)
testified on direct examination by plaintiff and (2) provided documentation of C.P. Hall’s
financial situation. The testimonial and documentary evidence that plaintiff elicited from Shine
focused primarily on the location and nature of C.P. Hall’s financial assets. Among other
things, Shine explained that Integrity sent notice to C.P. Hall that it would pay out
approximately $16 million on C.P. Hall’s insurance policies, the rights to which C.P. Hall had
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already assigned to the Cooney plaintiffs. The hearing was continued to January 7, 2011, at
which time Shine provided further testimony and documentation of C.P. Hall’s financial
assets.
¶ 20 E. Reassignment of the Integrity Distribution
¶ 21 In April 2011, because many of the terminally ill Cooney plaintiffs would not live to see
the outcome of the Integrity liquidation proceedings, Cooney agreed to allow C.P. Hall to
reassign its right to the Integrity insurance proceeds to a third party in exchange for an
immediate lump-sum payout. Accordingly, C.P. Hall reassigned its right to the Integrity
insurance proceeds to Global Legacy Acquisition (Global). Global immediately paid out cash,
which it wired directly to Cooney for distribution to the Cooney plaintiffs.
¶ 22 F. The Trial Court’s June 2011 Turnover Order
¶ 23 On June 15, 2011, at the final court date of the supplementary proceedings, plaintiff
provided the trial court with a proposed order that directed C.P. Hall to turn over $58,806 in
bank assets that had been identified during the previous two hearing dates. Plaintiff argued that
because the supplementary proceedings would automatically terminate on June 17, 2011 (six
months after the date of C.P. Hall’s first appearance (see Ill. S. Ct. R. 277(f) (eff. July 1,
1982))), the court should enter the turnover order immediately. Shine offered to waive the
six-month termination deadline to allow C.P. Hall time to file written objections based upon
the Cooney plaintiffs’ superior right to C.P. Hall’s property. However, plaintiff expressly
objected to an extension of the supplementary proceedings.
¶ 24 Over Shine’s objection–which he made on behalf of C.P. Hall–the trial court entered
plaintiff’s proposed order, which listed $58,806 of specific bank assets held by C.P. Hall, and
ordered “that within seven days of this Order, [C.P. Hall] shall pay to plaintiff *** all funds in
its possession or control on [December 1, 2010,] including the funds listed above.” On June 17,
2011, the supplementary proceedings automatically terminated pursuant to Rule 277(f).
¶ 25 G. C.P. Hall Files for Bankruptcy
¶ 26 C.P. Hall did not turn over any funds pursuant to the trial court’s June 15, 2011, turnover
order. Instead, on June 24, 2011, C.P. Hall filed for chapter 11 bankruptcy protection
(11 U.S.C. § 101 et seq. (2006)) in the bankruptcy court.
¶ 27 H. Plaintiff’s Enforcement Motion Against Shine and Hoke
¶ 28 In November 2011, plaintiff filed in the trial court an enforcement motion against Shine
and Hoke. The enforcement motion alleged that Shine and Hoke violated the restraining
provisions of the citation issued to C.P. Hall, of which they had actual notice, by transferring
C.P. Hall’s assets during the six-month citation period. Specifically, the enforcement motion
asserted that Shine and Hoke transferred (1) cash from C.P. Hall’s bank accounts to various
third parties and (2) C.P. Hall’s right to receive the $16 million Integrity insurance payout to
Global. The enforcement motion sought a judgment holding Shine and Hoke jointly and
severally liable for plaintiff’s full $3 million judgment against C.P. Hall pursuant to section
2-1402(f)(1) of the Code.
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¶ 29 I. Proceedings in the Bankruptcy Court
¶ 30 In December 2011, C.P. Hall filed a notice of removal of the enforcement motion in the
bankruptcy court, which removed the enforcement motion against Hoke and Shine from the
trial court to the bankruptcy court. On July 18, 2012, plaintiff filed a motion to remand the
enforcement motion against Hoke and Shine from the bankruptcy court back to the trial court.
¶ 31 J. Plaintiff’s Enforcement Motion Against Cooney
¶ 32 On July 24, 2012, despite the removal of the trial court action to the bankruptcy court,
plaintiff filed in the trial court an enforcement motion against Cooney. Like the enforcement
motion against Hoke and Shine, the enforcement motion against Cooney was headed with the
same caption as plaintiff’s original action against C.P. Hall. The enforcement motion against
Cooney alleged that Cooney, having actual notice of the December 2010 citation directed at
C.P. Hall, violated the restraining provisions of the citation by causing C.P. Hall to reassign its
right to receive the $16 million Integrity insurance proceeds to Global, and by allowing Global
to transfer the lump-sum proceeds to Cooney. The enforcement motion against Cooney sought
an order holding Cooney liable for plaintiff’s full $3 million judgment against C.P. Hall
pursuant to section 2-1402(f)(1) of the Code. Plaintiff mailed, via first-class mail, a copy of the
filed enforcement motion to Cooney at its business address in Chicago.
¶ 33 On August 9, 2012, Cooney filed in the bankruptcy court a motion to quash plaintiff’s
enforcement motion for lack of personal jurisdiction, or, in the alternative, to enjoin any action
by the trial court. On August 13, 2012, the bankruptcy court, Hon. A. Benjamin Goldgar,
entered an order temporarily enjoining the trial court from taking any action in the case
pending a final decision on Cooney’s motion to quash the enforcement motion for lack of
personal jurisdiction.
¶ 34 K. Remand From the Bankruptcy Court to the Trial Court
¶ 35 On August 17, 2012, the bankruptcy court granted plaintiff’s July 2012 motion to remand
the case back to the trial court, concluding that under the federal Bankruptcy Code (28 U.S.C.
§ 1334(b) (2006)), the bankruptcy court lacked subject-matter jurisdiction over the
enforcement motion against Hoke and Shine because the enforcement motion neither (1) arose
under Title 11, nor (2) arose in, or was related to, a case under Title 11. In the bankruptcy
court’s ruling, after stating its conclusion that it lacked subject-matter jurisdiction under the
Bankruptcy Code (28 U.S.C. § 1334(b) (2006)), the court added the following:
“Finally, it is worth noting that even if the requirements of [28 U.S.C. §] 1334(b)
were met, the court would lack subject[-]matter jurisdiction over [plaintiff’s
enforcement motion against Hoke and Shine] because it is moot. Under Illinois
Supreme Court Rule 277(f), a citation to discover assets ‘terminates automatically’ six
months after the respondent’s first personal appearance unless the court grants an
extension. C.P. Hall first appeared in response to [plaintiff’s] citation on December 17,
[2010]. As far as the record shows, the citation was never extended. The citation
therefore terminated on June 17, 2011, one week before C.P. Hall filed bankruptcy.
With the citation’s termination, [plaintiff’s] right to relief under section 2-1402(f)(1)
[of the Code] terminated as well. See Chicago Title & Trust Co. v. Czubak, 53 Ill. App.
3d 193, 196, 368 N.E.2d 404, 406 (1977).
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Because the citation terminated, no relief can be granted to [plaintiff] on his motion
against Shine and Hoke. *** When a court can no longer grant a party any effective
relief, that party’s request for relief is moot. [Citation.] Mootness is a jurisdictional
doctrine. [Citation.] Since no relief can be granted to [plaintiff] on his motion against
Shine and Hoke, or on his motion against [Cooney] for that matter, the motion is moot
and subject[-]matter jurisdiction is absent for this reason, too.”
¶ 36 Accordingly, the bankruptcy court (1) granted plaintiff’s motion to remand, (2) lifted the
temporary order enjoining the trial court from further action, and (3) denied as moot Cooney’s
motion to quash plaintiff’s enforcement motion.
¶ 37 In October 2012, the C.P. Hall bankruptcy case was converted from a chapter 11
rehabilitative proceeding to a chapter 7 liquidation proceeding. See 11 U.S.C. § 701 et seq.
(2006).
¶ 38 L. Further Trial Court Proceedings
¶ 39 1. Plaintiff’s Rule 237(b) Notices and Requests for Documents
¶ 40 On February 4, 2013–purportedly pursuant to Illinois Supreme Court Rule 237(b) (eff. July
1, 2005)–plaintiff mailed or faxed to Hoke, Shine, and Cooney (1) notices of a hearing on both
enforcement motions set for February 8, 2013, and (2) requests for the production of
documents.
¶ 41 2. The Motions To Quash
¶ 42 On February 6, 2013, Hoke filed a motion to quash plaintiff’s Rule 237(b) notice. In the
motion, Hoke asserted, among other things, that “plaintiff’s Rule 237(b) notice erroneously
presumes that he has a viable [enforcement motion].” Hoke requested that the trial court quash
plaintiff’s Rule 237(b) notice or, in the alternative, “stay the effects of said notice until the
parties have completed a briefing schedule and the court has determined as a matter of law
whether plaintiff can proceed with his [enforcement motion] with respect to [Hoke], and
whether plaintiff can use a Rule 237(b) notice in support of his [enforcement motion].” Hoke
did not assert an objection to the court’s jurisdiction in his motion. On February 8, 2013, Shine
filed a motion joining Hoke’s motion to quash.
¶ 43 On February 7, 2013, pursuant to section 2-301 of the Code (735 ILCS 5/2-301 (West
2012))–which allows a party to file a motion to dismiss an entire proceeding based upon lack
of personal jurisdiction–Cooney filed a “non-party motion to quash” plaintiff’s (1)
enforcement motion, (2) Rule 237(b) notice, and (3) request for documents. Cooney argued in
its motion that the trial court lacked personal jurisdiction over Cooney because Cooney never
(1) received service of process in accordance with the rules of discovery (see 735 ILCS
5/2-402 (West 2012); Ill. S. Ct. R. 201(o) (eff. Jan. 1, 2013)), (2) entered its appearance, or (3)
consented to jurisdiction in this case.
¶ 44 On February 8, 2013, Shine filed a motion, joining Hoke’s motion to quash. That same day,
the trial court set a briefing schedule and hearings for the parties’ motions to quash. Thereafter,
the litigation essentially forked into two parallel proceedings: one involving Cooney’s
attempts to end the litigation and the other involving Hoke and Shine’s attempts to end the
litigation. For ease of explanation, we deviate from our normal chronological review of the
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procedural history and address the remainder of the proceedings involving Cooney before
turning back to review the remainder of the proceedings involving Hoke and Shine.
¶ 45 3. Proceedings Involving Cooney
¶ 46 a. The Hearing on Cooney’s Motion To Quash
¶ 47 At a March 26, 2013, hearing on Cooney’s motion to quash, Cooney argued that it was
never properly served in this case because plaintiff simply sent all of his pleadings against
Cooney–including the original enforcement motion–by regular mail instead of serving the
pleadings by certified or registered mail, or through personal service. Further, Cooney asserted
that actual notice of a citation to discover assets was insufficient to confer personal jurisdiction
over a nonparty in supplementary proceedings under section 2-1402 of the Code, especially if
that party has no association with the party against whom the only citation was directed.
¶ 48 Plaintiff argued that although he did not serve the citation to discover assets upon Cooney,
the trial court had personal jurisdiction because Cooney (1) had actual notice of the citation
against C.P. Hall and (2) willingly participated in a violation of the restraining provisions of
the citation by allowing C.P. Hall to transfer assets (the Global payout from the Integrity
reassignment) to Cooney during the citation period.
¶ 49 b. The Trial Court’s Ruling
¶ 50 At the conclusion of the parties’ arguments at the March 26, 2013, hearing, the trial court
granted Cooney’s motion to quash, finding that (1) plaintiff’s enforcement motion was part of
a supplementary proceeding governed by section 2-1402 of the Code and Rule 277; (2) under
Rule 277(c), Illinois Supreme Court Rule 105 (eff. Jan. 1, 1989) governed service of process in
supplementary proceedings; and (3) the court lacked personal jurisdiction over Cooney
because plaintiff failed to properly serve Cooney with the enforcement motion in accordance
with Rule 105.
¶ 51 c. Plaintiff’s Continued Efforts Against Cooney
¶ 52 On April 3, 2013, plaintiff, through a private process server, hand-delivered to the
secretary of Cooney’s Chicago law office (1) a copy of the quashed enforcement motion and
(2) a “Notice to [Cooney],” which stated, in pertinent part, as follows: “Judgment by default
may be taken against you for the relief requested in the [enforcement motion] unless you file an
answer or otherwise file an appearance in the [trial court] within 30 days after receipt of this
Notice and the attached [enforcement motion].” Plaintiff did not, however, file a new
enforcement motion.
¶ 53 On April 25, 2013, plaintiff filed a motion to reconsider, asking the trial court to vacate or
modify its March 26, 2013, order that quashed the enforcement motion against Cooney.
Plaintiff’s motion essentially argued that the court should vacate its March 26, 2013, order
because plaintiff had since properly served Cooney with the enforcement motion in
accordance with Rule 105.
¶ 54 On May 20, 2013, Cooney filed a new nonparty motion to quash pursuant to section 2-301
of the Code, this one directed at plaintiff’s (1) “Notice to [Cooney]” and (2) motion to
reconsider the trial court’s March 26, 2013, order.
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¶ 55 In July 2013, following a hearing, the trial court (1) denied plaintiff’s motion to reconsider
and (2) granted Cooney’s motion to quash plaintiff’s “Notice to [Cooney].”
¶ 56 Plaintiff filed this appeal, to which we assigned case No. 4-13-0810.
¶ 57 4. Proceedings Involving Hoke and Shine
¶ 58 a. Hoke’s Combined Motion To Dismiss
¶ 59 On March 1, 2013, before the trial court ruled on Hoke’s motion to quash, Hoke filed a
combined motion to dismiss plaintiff’s enforcement motion pursuant to section 2-619.1 of the
Code (735 ILCS 5/2-619.1 (West 2012)). The motion, which sought dismissal for lack of
personal jurisdiction pursuant to section 2-301 of the Code, set forth the following additional
bases for dismissal: (1) lack of subject-matter jurisdiction (735 ILCS 5/2-619(a)(1) (West
2012)); (2) “estoppel by judgment, res judicata, collateral estoppel, and plaintiff’s improper
collateral attack upon the bankruptcy court’s ruling” (see 735 ILCS 5/2-619(a)(4) (West
2012)); (3) plaintiff’s failure to serve Hoke with a citation, which constituted an affirmative
matter that avoids the legal effect of plaintiff’s supplementary proceedings (735 ILCS
5/2-619(a)(9) (West 2012)); and (4) failure to state a claim (735 ILCS 5/2-615 (West 2012)).
¶ 60 b. Shine’s Joinder of Hoke’s Motion To Dismiss
¶ 61 On March 6, 2013, Shine filed a motion joining Hoke’s section 2-619.1 motion to dismiss.
In his motion, Shine specifically invoked section 2-301 of the Code and requested dismissal
pursuant to that statute. In the alternative, Shine requested dismissal for the other reasons set
forth in Hoke’s section 2-619.1 motion to dismiss.
¶ 62 c. The Hearing on Hoke and Shine’s Motion To Dismiss
¶ 63 At a May 10, 2013, hearing on Hoke and Shine’s combined motion to dismiss, Hoke
argued that the trial court lacked subject-matter jurisdiction because the automatic termination
of the supplementary proceedings in June 2011 barred plaintiff’s right to initiate any type of
subsequent enforcement proceedings related to the citation. Hoke also contended that because
the bankruptcy court came to the same conclusion, the doctrines of collateral estoppel and
res judicata barred the trial court from reaching a different conclusion. Finally, Hoke asserted
that the court lacked personal jurisdiction because the citation was only served on C.P. Hall,
not Hoke.
¶ 64 In response, plaintiff argued that subject-matter jurisdiction, unlike personal jurisdiction, is
not subject to division between parties–the trial court either has subject-matter jurisdiction
over the entire proceeding or it has none. Plaintiff essentially claimed that it would be absurd to
conclude that the automatic termination of supplementary proceedings pursuant to Rule 277(f)
precluded him from thereafter seeking judicial recourse for a party’s violations of the citation’s
restraining provision. Such a conclusion, plaintiff contended, would place the burden on the
judgment creditor to discover all violations of the restraining provision as they were
happening, and to seek recourse for those violations before the end of the supplementary
proceedings.
¶ 65 As to personal jurisdiction, plaintiff argued that Hoke and Shine’s actual notice of the
citation was sufficient to vest the trial court with personal jurisdiction over them. Further,
plaintiff contended that Shine consented to the court’s jurisdiction by appearing at the citation
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hearing and arguing on behalf of C.P. Hall, and Hoke consented to the court’s jurisdiction by
filing pleadings directed at the merits of plaintiff’s enforcement motion in the bankruptcy court
and trial court.
¶ 66 Shine, who appeared at the hearing pro se, did not offer any argument. At the conclusion of
the hearing, the trial court took the matter under advisement.
¶ 67 d. The Trial Court’s Ruling
¶ 68 On May 22, 2013, the trial court entered an order granting Hoke and Shine’s combined
motion to dismiss. Without elaborating, the court simply stated in its order that it lacked (1)
personal jurisdiction as to Hoke and (2) subject-matter jurisdiction as to Shine.
¶ 69 Plaintiff filed this appeal, to which we assigned case No. 4-13-0837. On plaintiff’s motion,
we consolidated plaintiff’s appeal involving Cooney with his appeal involving Hoke and
Shine.
¶ 70 II. ANALYSIS
¶ 71 Plaintiff argues that the trial court had (1) subject-matter jurisdiction over the entire
proceeding and (2) personal jurisdiction over all parties. We first address whether the court had
subject-matter jurisdiction over plaintiff’s enforcement motions, which calls for a single
analysis applicable to all the parties. We then address whether the court had personal
jurisdiction over the individual parties and, if so, whether the court’s judgment dismissing the
action should nevertheless be affirmed on an alternative basis.
¶ 72 A. Subject-Matter Jurisdiction
¶ 73 The trial court in this case, without explaining its reasoning, dismissed plaintiff’s
enforcement motion as to Shine for lack of subject-matter jurisdiction. On appeal, plaintiff
correctly notes that the court could not, as a matter of law, have lacked subject-matter
jurisdiction as to only one of several parties. Instead, “[u]nlike the issue of jurisdiction over the
person, subject[-]matter jurisdiction is not subject to division or apportionment. It either exists
or it does not.” O’Connell v. Pharmaco, Inc., 143 Ill. App. 3d 1061, 1067, 493 N.E.2d 1175,
1179 (1986). In other words, if the court was correct in finding that it lacked subject-matter
jurisdiction as to Shine, it must have also lacked subject-matter jurisdiction as to plaintiff’s
claims against Hoke and Cooney, as well. Accordingly, because a lack of subject-matter
jurisdiction would be dispositive of all the claims at issue in these appeals, we address that
question first.
¶ 74 Initially, however, we address whether we are bound by the bankruptcy court’s
determination that the termination of supplementary proceedings rendered plaintiff’s claims
moot–a determination that, if binding, would deprive the trial court of subject-matter
jurisdiction as well. The bankruptcy court announced that conclusion after determining that it
lacked subject-matter jurisdiction under the Bankruptcy Code (28 U.S.C. § 1334(b) (2006)).
Under the doctrines of res judicata and collateral estoppel, the existence of a valid final
judgment on the merits by a court of competent jurisdiction is necessary for the court’s
decision to have preclusive effect. Nowak v. St. Rita High School, 197 Ill. 2d 381, 389-90, 757
N.E.2d 471, 477 (2001). Having concluded that it lacked subject-matter jurisdiction under the
Bankruptcy Code (28 U.S.C. § 1334(b) (2006)), the bankruptcy court was not competent to
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render a binding ruling on whether, under Illinois law, the termination of supplementary
proceedings deprived the trial court of subject-matter jurisdiction over plaintiff’s enforcement
motions. Although we appreciate the bankruptcy court’s thoughtful explanation of its
reasoning for remanding the case, we are not bound by its conclusion regarding the effect of
termination of supplementary proceedings.
¶ 75 Whether the court had subject-matter jurisdiction to entertain a claim is a question of law
that we review de novo. Crossroads Ford Truck Sales, Inc. v. Sterling Truck Corp., 2011 IL
111611, ¶ 26, 959 N.E.2d 1133. “Subject[-]matter jurisdiction refers to the court’s power to
hear and determine cases of the general class to which the proceeding in question belongs.”
(Internal quotation marks omitted.) Id. ¶ 27, 959 N.E.2d 1133 (quoting In re M.W., 232 Ill. 2d
408, 415, 905 N.E.2d 757, 763 (2009)). “With the exception of the circuit court’s power to
review administrative action, which is conferred by statute, a circuit court’s subject[-]matter
jurisdiction is conferred entirely by our state constitution.” Belleville Toyota, Inc. v. Toyota
Motor Sales, U.S.A., Inc., 199 Ill. 2d 325, 334, 770 N.E.2d 177, 184 (2002); Ill. Const. 1970,
art. VI, § 9. “[I]n order to invoke the subject[-]matter jurisdiction of the circuit court, a
plaintiff’s case, as framed by the complaint or petition, must present a justiciable matter.”
Belleville Toyota, Inc., 199 Ill. 2d at 334, 770 N.E.2d at 184. “Generally, a ‘justiciable matter’
is a controversy appropriate for review by the court, in that it is definite and concrete, as
opposed to hypothetical or moot, touching upon the legal relations of parties having adverse
legal interests.” Id. at 335, 770 N.E.2d at 184.
¶ 76 At issue here is whether plaintiff’s enforcement motions, which alleged that Hoke, Shine,
and Cooney were liable under section 2-1402(f)(1) of the Code for violating the restraining
provision of the citation against C.P. Hall, presented justiciable matters. Hoke and Shine
essentially argue that the termination of the supplementary proceedings pursuant to Rule
277(f) rendered plaintiff’s claims nonjusticiable, depriving the trial court of subject-matter
jurisdiction over plaintiff’s enforcement motions against Hoke, Shine, and Cooney. (Cooney
does not address subject-matter jurisdiction in its brief to this court.) Plaintiff contends that the
automatic six-month termination of supplementary proceedings pursuant to Rule 277(f) does
not create a jurisdictional bar to subsequent enforcement of the restraining provision of the
expired citation. Before addressing the parties’ arguments, we first turn to the pertinent statute
and rule governing supplementary proceedings.
¶ 77 Section 2-1402 of the Code allows a judgment creditor to “prosecute supplementary
proceedings for the purposes of [1] examining the judgment debtor or any other person to
discover assets or income of the debtor not exempt from the enforcement of the judgment, ***
and of [2] compelling the application of non-exempt assets or income discovered toward the
payment of the amount due under the judgment.” 735 ILCS 5/2-1402(a) (West 2010). Such
proceedings are commenced when, at the judgment creditor’s request, the clerk issues a
citation to discover assets, which is then served upon the party sought to be examined. 735
ILCS 5/2-1402(a) (West 2010); Ill. S. Ct. R. 277(a) (eff. July 1, 1982).
¶ 78 Section 2-1402(f)(1) provides that the citation may include a restraining provision:
“The citation may prohibit the party to whom it is directed from making or allowing
any transfer or other disposition of, or interfering with, any property not exempt from
the enforcement of a judgment therefrom *** belonging to the judgment debtor or to
which he or she may be entitled or which may thereafter be acquired by or become due
to him or her, and from paying over or otherwise disposing of any moneys not so
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exempt which are due or to become due to the judgment debtor, until the further order
of the court or the termination of the proceeding, whichever occurs first.” 735 ILCS
5/2-1402(f)(1) (West 2010).
¶ 79 Section 2-1402(f)(1) of the Code also sets forth the enforcement mechanism for the
restraining provision, as follows: “The court may punish any party who violates the restraining
provision of a citation as and for a contempt, or if the party is a third party may enter judgment
against him or her in the amount of the unpaid portion of the judgment and costs allowable
under this Section, or in the amount of the value of the property transferred, whichever is
lesser.” 735 ILCS 5/2-1402(f)(1) (West 2010).
¶ 80 Supreme Court Rule 277 sets forth procedures for implementing section 2-1402 of the
Code. Bank of Aspen v. Fox Cartage, Inc., 126 Ill. 2d 307, 313, 533 N.E.2d 1080, 1083 (1989).
Subsection (f) of Rule 277 provides for termination of supplementary proceedings, as follows:
“(f) When Proceeding Terminated. A proceeding under this rule continues until
terminated by motion of the judgment creditor, order of the court, or satisfaction of the
judgment, but terminates automatically 6 months from the date of (1) the respondent’s
first personal appearance pursuant to the citation or (2) the respondent’s first personal
appearance pursuant to subsequent process issued to enforce the citation, whichever is
sooner. The court may, however, grant extensions beyond the 6 months, as justice may
require. Orders for the payment of money continue in effect notwithstanding the
termination of the proceedings until the judgment is satisfied or the court orders
otherwise.” Ill. S. Ct. R. 277(f) (eff. July 1, 1982).
¶ 81 In this case, plaintiff declined to request an extension of the supplementary proceedings,
thereby allowing the proceedings to automatically terminate at the six-month mark pursuant to
Rule 277(f). At issue for purposes of subject-matter jurisdiction, however, is not whether that
automatic termination of supplementary proceedings barred plaintiff’s right to relief under
section 2-1402(f)(1) of the Code. See Belleville Toyota, Inc., 199 Ill. 2d at 340-41, 770 N.E.2d
at 188 (“[S]ubject[-]matter jurisdiction does not depend upon the ultimate outcome of the suit.
A party may bring unsuccessful as well as successful suits in the circuit court.”). Instead, at
issue is whether plaintiff’s claims that Hoke, Shine, and Cooney violated the restraining
provisions of the citation–as those issues were framed in plaintiff’s enforcement
motions–presented justiciable matters. We conclude that they did.
¶ 82 As we will explain in further detail, although the supplementary proceedings had
terminated when plaintiff filed his enforcement motions, a time-barred claim is not
automatically rendered outside of the trial court’s subject-matter jurisdiction. Doe A. v.
Diocese of Dallas, 234 Ill. 2d 393, 413, 917 N.E.2d 475, 487 (2009) (“[T]he bar of a statute of
limitations does not go to the court’s jurisdiction to hear a case.”). Instead, a time bar offers an
affirmative defense, “which a defendant may, in its sole discretion, assert or waive.” Id.Section 2-1402(f)(1) of the Code plainly vests the court with authority to enter a specific type
of judgment for a specific type of violation. Plaintiff’s enforcement motions clearly invoked
that section of the Code and asked the court to enter judgment against Hoke, Shine, and
Cooney for violating the restraining provision of a citation. Although Hoke, Shine, and
Cooney may have other defenses to plaintiff’s claims, those defenses do not render plaintiff’s
claims nonjusticiable for purposes of subject-matter jurisdiction. Because plaintiff’s
enforcement motions presented justiciable matters, the court had subject-matter jurisdiction
over them.
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¶ 83 We now turn to whether the trial court had personal jurisdiction over Hoke, Shine, and
Cooney, and, if so, whether those parties invoked other defenses to plaintiff’s claims that
would support the court’s dismissal.
¶ 84 B. Personal Jurisdiction
¶ 85 1. Hoke
¶ 86 Hoke waived his objection to personal jurisdiction by filing his February 2013 motion to
quash plaintiff’s Rule 237(b) notice, which contained no objection to the trial court’s personal
jurisdiction pursuant to section 2-301 of the Code. That statute provides, in pertinent part, as
follows:
“(a) Prior to the filing of any other pleading or motion other than a motion for an
extension of time to answer or otherwise appear, a party may object to the court’s
jurisdiction over the party’s person, either on the ground that the party is not amenable
to process of a court of this State or on the ground of insufficiency of process or
insufficiency of service of process, by filing a motion to dismiss the entire proceeding
or any cause of action involved in the proceeding or by filing a motion to quash service
of process. ***
(a-5) If the objecting party files a responsive pleading or a motion *** prior to the
filing of a motion in compliance with subsection (a), that party waives all objections to
the court’s jurisdiction over the party’s person.” (Emphasis added.) 735 ILCS
5/2-301(a), (a-5) (West 2012).
Pursuant to section 2-301(a-5) of the Code, the court had personal jurisdiction over Hoke
because Hoke waived his objection to personal jurisdiction by filing his motion to quash
plaintiff’s Rule 237(b) notice. (In so concluding, we use the term “waived” because that is the
term used in section 2-301(a-5) of the Code. We note, however, that the action described in that
section would more correctly be termed “forfeited” instead of “waived.” See People v. Phipps,
238 Ill. 2d 54, 62, 933 N.E.2d 1186, 1191 (2010) (“Waiver is distinct from forfeiture ***.
While forfeiture applies to issues that could have been raised but were not, waiver is the
voluntary relinquishment of a known right.”).)
¶ 87 2. Shine
¶ 88 When a judgment creditor serves a corporation with a citation to discover assets, failure to
personally serve a corporate officer does not necessarily prevent the court from exercising
personal jurisdiction over the corporate officer. In O’Connell, 143 Ill. App. 3d at 1069, 493
N.E.2d at 1181–cited by plaintiff–this court held that the trial court had personal jurisdiction
over the defendant, Roger Larson, who was the former chief executive officer and director of
the defendant corporation, Pharmaco. In that case, the citation was served upon
“ ‘PHARMACO, INC., c/o Roger Larson-Corporate Officer.’ ” Id. at 1064, 493 N.E.2d at
1177. This court held as follows:
“[W]e conclude that although [Larson] was not formally named as a party or served
with a citation in his personal capacity[,] he nevertheless had notice of the proceedings,
failed to limit his appearance in the trial court, actively participated and directed the
litigation[,] and requested affirmative relief from the court when it became apparent
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that plaintiffs sought to discover assets of the judgment debtor which he held. Personal
jurisdiction over defendant was satisfied.” Id. at 1069, 493 N.E.2d at 1181.
¶ 89 In this case, Shine–although not formally named as a party or served with a citation in his
personal capacity–appeared at the citation hearing and purported, at times, to represent the
interests of C.P. Hall. Further, Shine testified that he was the president, owner, and only
employee of C.P. Hall. For all practical purposes pertaining to plaintiff’s citation, Shine was
C.P. Hall. The issuance of the citation to C.P. Hall, combined with Shine’s participation in the
supplementary proceedings, sufficiently vested the trial court with personal jurisdiction over
Shine.
¶ 90 3. Cooney
¶ 91 Plaintiff presents a convoluted argument regarding the source of the trial court’s personal
jurisdiction over Cooney. According to plaintiff, the court had personal jurisdiction over
Cooney because Cooney’s “actual notice and possession of the [enforcement motion] satisfied
the requirements of both procedural and substantive due process.” To get to this ultimate
conclusion, plaintiff begins by citing the above-quoted holding in O’Connell for the
proposition that “neither section 2-1402 [of the Code] nor Rule 277 require[s] that a third party
be formally made a defendant” in supplementary proceedings. From this ostensible rule,
plaintiff asserts that in all supplementary proceedings, any party who has actual notice of a
citation to discover assets is bound by it and may be held personally liable for violating its
restraining provision. To put it another way, plaintiff contends that although Rule 277(c) sets
forth specific requirements for the service of a citation upon a third party, a third party need
only have actual notice of a citation to be bound by it. Plaintiff concludes that because Cooney
allegedly had actual notice of the citation issued to C.P. Hall (a fact that is nowhere established
in the record), the court had personal jurisdiction over Cooney. However, we conclude that
plaintiff’s argument is contrary to the text and purpose of section 2-1402 of the Code and Rule
277.
¶ 92 Section 2-1402 of the Code and Rule 277 discuss two categories of parties against whom a
judgment creditor may bring supplementary proceedings: (1) the judgment debtor and (2) third
parties who the judgment creditor believes have property of, or are indebted to, the judgment
debtor. The statute and its implementing rule set forth substantive and procedural requirements
for the issuance and service of a citation upon third parties, including requirements designed to
apprise the party to whom the citation is directed of its rights, responsibilities, and potential
liabilities. See 735 ILCS 5/2-1402(b) (West 2010); Ill. S. Ct. R. 277(c) (eff. July 1, 1982)
(providing that a citation to discover assets “shall be served and returned in the manner
provided by rule for service, otherwise than by publication, of a notice of additional relief upon
a party in default”). Further, Rule 277(g) provides that “[s]upplementary proceedings against
the debtor and third parties may be conducted concurrently or consecutively. The termination
of one proceeding does not affect other pending proceedings not concluded.” Ill. S. Ct. R.
277(g) (eff. July 1, 1982).
¶ 93 The above provisions illustrate that the General Assembly and the Supreme Court of
Illinois contemplated a separate citation for each judgment debtor and third party. This makes
sense because supplementary proceedings may target third parties who might not even know
that a lawsuit has taken place or that a judgment has been rendered. For this reason, the
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initiation of supplementary proceedings against a third party must be accompanied by service
of process and the special notices set forth in section 2-1402(b) of the Code.
¶ 94 Acceptance of plaintiff’s argument would render superfluous many of the provisions of
section 2-1402 of the Code and Rule 277 governing third parties. Under plaintiff’s theory, a
single citation issued to the judgment debtor would effectively bind all third parties having
actual notice of the citation. Indeed, this is exactly what plaintiff asserts happened in this case
through the issuance of a citation against C.P. Hall. However, section 2-1402(f)(1) of the Code
clearly provides that the restraining provision of a citation restrains “the party to whom [the
citation] is directed” from taking certain actions toward the judgment debtor’s property (735
ILCS 5/2-1402(f)(1) (West 2010)). Plaintiff seems to suggest in his brief that because
supplementary proceedings are “ancillary to the original action,” the due process requirements
are more lax, and the procedural protections set forth in section 2-1402 of the Code and Rule
277 are mere suggestions. However, because issuance of a citation imposes very real
restrictions and affirmative duties upon a third party–backed by the threat of contempt and
monetary liability–the service and notice requirements set forth in section 2-1402 of the Code
and Rule 277(c) mirror the requirements of due process.
¶ 95 By arguing that Cooney was bound by the citation issued to C.P. Hall because it had actual
notice of it, plaintiff equates the restraining provision of a citation to an injunction, asserting
that the trial court’s authority under section 2-1402(f)(1) of the Code derives from the court’s
inherent authority to enforce its orders. However, the supreme court has held that the
restraining provision of a citation is not an injunction, but instead, it “simply informs the citee
of the penalties which may occur if it transfers or disposes of property belonging to the
judgment debtor.” Bank of Aspen v. Fox Cartage, Inc., 126 Ill. 2d 307, 315, 533 N.E.2d 1080,
1083 (1989). The purpose of the restraining provision is to provide “ ‘a means of forestalling
the judgment debtor or a third party from frustrating the supplementary proceedings before the
judgment creditor has had an opportunity to reach assets[ ] *** in the possession of [the]
debtor or of a third party.’ ” Id. at 314, 533 N.E.2d at 1083 (quoting Kirchheimer Brothers Co.
v. Jewelry Mine, Ltd., 100 Ill. App. 3d 360, 362, 426 N.E.2d 1110, 1113 (1981)).
¶ 96 Unlike an injunction, which is binding upon any party having actual notice of it (Stavros v.
Karkomi, 28 Ill. App. 3d 996, 1003, 329 N.E.2d 563, 569 (1975)), the restraining provision of
a citation to discover assets is binding only upon the party cited. See 735 ILCS 5/2-1402(f)(1)
(West 2010) (“The citation may prohibit the party to whom it is directed from making or
allowing any transfer or other disposition of, or interfering with, any property not exempt from
the enforcement of a judgment therefrom ***.” (Emphasis added.)).
¶ 97 Because a citation was never directed to Cooney, Cooney was never prohibited from doing
any of the things that section 2-1402(f)(1) of the Code prohibits a cited party from doing. The
cases plaintiff cites regarding corporate officers merely reflect the reality that corporations are
made up of individual people, and those people should rightfully be held liable for violating the
restraining provision of a citation issued to the corporation. However, unlike Hoke and Shine,
who were corporate officers of C.P. Hall, Cooney was a completely outside entity. Cooney’s
only relationship with C.P. Hall was that of a longtime adversary in litigation. Service of the
citation to discover assets upon C.P. Hall did nothing to confer the court with personal
jurisdiction over Cooney.
¶ 98 Because the citation to discover assets did not confer personal jurisdiction over Cooney,
plaintiff’s July 2012 enforcement motion against Cooney was, for all practical purposes, a
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freestanding civil complaint asserting a cause of action under section 2-1402(f)(1) of the Code.
However, plaintiff simply sent the enforcement motion to Cooney through the regular mail,
which did not satisfy the requirements for proper service of process. After the trial court
quashed plaintiff’s enforcement motion, plaintiff attempted to serve the quashed enforcement
motion on Cooney through one of the methods permitted under Rule 277(c). However, because
the court quashed the enforcement motion, and plaintiff never refiled, plaintiff’s final attempt
at service on Cooney was a nullity. See Black’s Law Dictionary 1363 (9th ed. 2009) (to
“quash” means to “annul or make void”).
¶ 99 We note that our holding does not diminish the scope of protection that section 2-1402 of
the Code provides to judgment creditors; it simply recognizes the procedures set forth in the
statute and Rule 277. Plaintiff could have conferred the trial court with personal jurisdiction
over Cooney simply by issuing a separate citation to Cooney. Plaintiff learned as early as
December 17, 2010, at the first date of the citation hearing, that C.P. Hall had assigned its right
to the Integrity liquidation payout to the Cooney plaintiffs. Assuming arguendo that those
liquidation proceeds were the property of C.P. Hall, as plaintiff alleges, a citation issued to
Cooney–or to the Integrity liquidator–could have included a restraining provision freezing the
assets in place. Supplementary proceedings do not reward the judgment creditor who attempts
to kill multiple birds with a single stone.
¶ 100 As a final matter pertaining to plaintiff’s argument that Cooney was bound by the citation
issued to C.P. Hall, we address plaintiff’s reliance on the supreme court’s decision in Podvinec
v. Popov, 168 Ill. 2d 130, 658 N.E.2d 433 (1995). In that case, the judgment creditor
(Podvinec) served a citation to discover assets on the judgment debtor (Popov). At the time,
Popov was the plaintiff in an unrelated action (the Popov action) against a bank and other
defendants (respondents). In Podvinec’s supplementary proceedings, the trial court entered a
judicial lien “ ‘upon any funds realized’ ” in the Popov action. Id. at 132-33, 658 N.E.2d at
434-35. (We note that the General Assembly has since codified the citation lien in section
2-1402(m) of the Code (735 ILCS 5/2-1402(m) (West 2010) (added by Pub. Act 88-48 (eff.
July 6, 1993))).) The court granted Podvinec’s motion to have the lien “spread of record” in the
Popov action, which essentially made the lien part of the recording in the Popov action, putting
the parties to that action on notice of the lien. Respondents were served with notice of
Podvinec’s motion to spread the lien of record, to which they did not object.
¶ 101 Months later, the court in Podvinec’s supplementary proceedings entered an order
discharging the citation but providing that the lien remain in place. Two years later, after
settlement in the Popov action, Podvinec filed a “petition for enforcement of the judicial lien,”
seeking an order finding Popov and the respondents (1) in contempt for violating the lien and
(2) jointly and severally liable for the full amount of Podvinec’s judgment against Popov. The
trial court granted Podvinec’s petition. The supreme court affirmed, concluding that the
respondents could be held liable for violating the lien imposed in Podvinec’s supplementary
proceedings:
“The effect of spreading the lien of record [in the Popov action] was to give the
respondents notice of the lien. Once the lien was spread of record, the respondents were
bound by the lien. Thus, the respondents acted at their own peril in paying the
settlement proceeds of the Popov action directly to Popov without giving notice to
Podvinec. As the respondents had notice of the lien, Podvinec now has the right to
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obtain the amount of the lien plus costs from the respondents.” Popov, 168 Ill. 2d at
135, 658 N.E.2d at 436.
Popov is distinguishable from this case for several important and interrelated reasons.
¶ 102 First, as the Popov court’s holding indicates, notice of the lien (through spreading the lien
of record in the Popov action) was what made the lien binding on respondents. In this case,
under plaintiff’s theory, Cooney became bound by the restraining provision of the citation
issued to C.P. Hall without (1) receiving notice of the citation or (2) having an opportunity to
contest whether it held any of C.P. Hall’s property. In Popov, before the lien was spread of
record and made binding on the respondents, the “respondents had a full opportunity to be
heard at the hearing on [Podvinec’s motion to spread the lien of record], but the respondents
failed to challenge Podvinec’s motion and failed to object to the validity of the lien.” Id.Podvinec’s motion to spread the lien of record in the Popov action was a means of providing
the respondents with notice of the lien and an opportunity to be heard. The same could have
been accomplished in this case had plaintiff issued a separate citation to Cooney, which would
have (1) bound Cooney by a restraining provision, (2) provided Cooney with notice of that
restraining provision, and (3) afforded Cooney an opportunity to be heard on the issue of
whether it held C.P. Hall’s property.
¶ 103 Second, in Popov, the lien was the product of a judicial determination–made following a
citation hearing–that Podvinec had a right to the funds realized in the Popov action. Unlike the
lien at issue in Popov, the restraining provision of a citation freezes only the judgment debtor’s
property, the existence of which has yet to be judicially determined. For this reason,
supplementary proceedings allow the judgment creditor to bring the necessary parties and
documents into court for examination to identify the judgment debtor’s property. The citation
hearing is where the judgment debtor’s ownership of property is determined.
¶ 104 In this case, Shine’s testimony at the citation hearing clearly laid out the (1) existence of
the $16 million in Integrity insurance proceeds and (2) C.P. Hall’s assignment of those
proceeds to the Cooney plaintiffs. Although plaintiff now alleges that the Integrity insurance
proceeds were the property of C.P. Hall, he fails to explain why he did not (1) include those
proceeds in his proposed turnover order or (2) seek a finding that C.P. Hall owned the
proceeds. The supplementary proceedings were plaintiff’s opportunity to obtain a judicial
determination of C.P. Hall’s property. He cannot claim after the fact that Cooney violated the
restraining provision of the citation by transferring property that was never determined to
belong to C.P. Hall.
¶ 105 Third, C.P. Hall’s reassignment of the Integrity insurance proceeds from the Cooney
plaintiffs to Global in April 2011 was a far cry from the actions of the Popov respondents, who
knowingly transferred a settlement payment to Popov in direct violation of Podvinec’s lien, of
which they had demonstrable notice. C.P. Hall’s willingness to execute the necessary papers to
provide the dying Cooney plaintiffs with an immediate lump-sum payment from Global had no
substantive effect on the nature of the property at issue or C.P. Hall’s right to that property. It
was not as if C.P. Hall could have decided to keep the $16 million in insurance proceeds at any
point during the reassignment to Global. The Integrity liquidator specifically awarded the
proceeds to C.P. Hall to pay for the Cooney plaintiffs’ specific claims, and the Cooney
plaintiffs held the right to those proceeds since the execution of the assignment in June 2009.
¶ 106 Finally, the restraining provision of a citation is not the same as a judicial lien. Plaintiff in
this case is attempting to invoke the trial court’s statutory authority under section 2-1402(f)(1)
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of the Code to punish for a violation of the restraining provision of a citation. In Popov,
Podvinec invoked the court’s inherent authority to hold Popov and the respondents in contempt
for violating the lien, which was a court order. People v. Warren, 173 Ill. 2d 348, 368, 671
N.E.2d 700, 710 (1996) (“A court is vested with inherent power to enforce its orders and
preserve its dignity by the use of contempt proceedings.”). As already explained, the
restraining provision of a citation–which a judgment creditor can impose on a third party
without even speaking to a judge–does not rise to the level of a court order, and the court’s
authority to enforce the restraining provision is not inherent, but derivative of the statute that
authorizes the restraining provision. 735 ILCS 5/2-1402(f)(1) (West 2010). Accordingly,
whereas the lien in Popov survived the termination of citation proceedings, the restraining
provision of the citation issued to C.P. Hall did not.
¶ 107 Plaintiff’s failure to serve Cooney with a separate citation to discover assets precluded the
trial court from exercising personal jurisdiction over Cooney in the supplementary proceedings
against C.P. Hall. Accordingly, the court properly concluded that it lacked personal
jurisdiction over Cooney.
¶ 108 C. Hoke and Shine’s Affirmative Defense Under Rule 277(f)
¶ 109 Although we have concluded that the termination of supplementary proceedings pursuant
to Rule 277(f) did not deprive the trial court of subject-matter jurisdiction over plaintiff’s
enforcement motions, Rule 277(f) did provide an affirmative defense to plaintiff’s claims,
similar to the affirmative defense that a statute of limitations creates. Rule 277(f) essentially
provides that unless an extension is granted, a judgment creditor’s right to wield section
2-1402 of the Code as a sword terminates six months after the citation respondent’s first
appearance. “[T]he primary purpose of Rule 277(f) is to prevent the harassment of the
judgment debtor or any third party subject to the citation proceeding.” Kirchheimer Brothers
Co., 100 Ill. App. 3d at 364, 426 N.E.2d at 1114. Once supplementary proceedings have
terminated, a party may assert the termination as an affirmative defense to shield that party
from a judgment creditor’s attempt to use section 2-1402 of the Code as a sword.
¶ 110 In Chicago Title & Trust Co. v. Czubak, 53 Ill. App. 3d 193, 195, 368 N.E.2d 404, 405
(1977), following the automatic termination of supplementary proceedings pursuant to Rule
277(f), the trial court entered an order finding the citation respondent in contempt of court for
his earlier refusal (prior to the termination of supplementary proceedings) to appear and be
examined pursuant to the citation issued to him. At issue on appeal was “whether the
[supplementary] proceedings had been terminated prior to the entry of the contempt order, and,
if so, whether it was error for the trial court to enter the contempt order.” Id. The appellate
court answered both questions in the affirmative, holding as follows:
“[W]here the underlying [supplementary] proceeding has automatically terminated, so
must all other proceedings which are collateral to it except as exempted by supreme
court rule. [Citations.] Contempt proceedings are not exempted by Rule 277(f). Since
the [supplementary] proceedings automatically terminated on March 9, 1976, the
contempt proceedings also were terminated as of that date because such proceedings
were collateral to the citation. As such, the contempt order which was entered after the
termination date must fail because the contempt proceedings had been terminated.” Id.
at 196, 368 N.E.2d at 406 (citing Federal Loan Corp. v. Harris, 17 Ill. App. 3d 49,
51-52, 308 N.E.2d 125, 128 (1974) (“Where, as here, the underlying [supplementary]
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proceeding has automatically terminated, so must all other proceedings which are
collateral to it except as exempted by Supreme Court Rule.”)).
¶ 111 Plaintiff attempts to avoid the rule articulated in Czubak and Harris by arguing that (1)
under Rule 277(f), the trial court’s June 15, 2011, turnover order continued in effect
notwithstanding the termination of supplementary proceedings and (2) Czubak is contrary to
the well-established rule that a court has inherent authority to punish for a violation of its
orders. In other words, plaintiff seems to contend that because Rule 277(f) provides that
“[o]rders for the payment of money continue in effect notwithstanding the termination of the
proceedings” (Ill. S. Ct. R. 277(f) (eff. July 1, 1982)), the court’s power under section
2-1402(f)(1) of the Code must also survive the termination of supplementary proceedings.
Plaintiff’s argument misconstrues both the facts and the law at issue.
¶ 112 Plaintiff is correct that under the final clause of Rule 277(f), the trial court’s June 15, 2011,
turnover order–which directed C.P. Hall to turn over $58,806 in specific assets and all other
funds in its possession as of December 1, 2010–continued in effect after the supplementary
proceedings terminated on June 17, 2011. However, plaintiff fails to explain how the court’s
continued authority to enforce its turnover order also preserved the court’s statutory authority
under section 2-1402(f)(1) of the Code to “punish any party who violates the restraining
provision of a citation.” 735 ILCS 5/2-1402(f)(1) (West 2010).
¶ 113 Plaintiff does not dispute that the supplementary proceedings in this case terminated in
June 2011. His argument, however, attempts to tether the court’s authority under section
2-1402(f)(1) of the Code to turnover orders, which survive the termination of supplementary
proceedings but have nothing to do with restraining provisions. Simply put, the continued
validity of a turnover order provides the court with no continued authority under section
2-1402(f)(1) of the Code. Rule 277(f), which “terminates” supplementary proceedings after six
months, would have little meaning if a turnover order provided the court with continuing
authority to grant a judgment creditor the full scope of relief permitted under section 2-1402 of
the Code.
¶ 114 Our conclusion that a judgment creditor’s right to relief under section 2-1402(f)(1) of the
Code expires with the termination of supplementary proceedings is consistent with the overall
purpose and structure of section 2-1402 of the Code and Rule 277. Section 2-1402 of the Code
gives judgment creditors a commanding arsenal of tools for discovering and reaching the
property of the judgment debtor. The citation to discover assets provides the judgment creditor
with unique ex parte power to haul faultless third parties into court for examination, to require
them to produce documents, and to hold them liable for the full amount of the judgment if they
transfer, dispose of, or interfere with any of the judgment debtor’s property. 735 ILCS
5/2-1402(f)(1) (West 2010). This generous grant of power is tempered by the termination
provisions of Rule 277(f), which provide incentives for the judgment creditor to work
diligently and thoroughly to discover and reach all available property that might be used to
satisfy the judgment during the limited time allotted.
¶ 115 This is not to say, however, that Rule 277(f) always requires a judgment creditor to
abandon his unsatisfied judgment after six months. In this case, plaintiff could have preserved
his right to invoke section 2-1402(f)(1) of the Code by requesting an extension of the
supplementary proceedings beyond the default six-month time limit. He failed to do so. Rule
277(f) gives the trial court great discretion to adjust the length of supplementary proceedings to
fit the particular needs of a given case. In this case, for example, if the court had deemed it just,
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the court could have entered an order from the outset stating that the supplementary
proceedings would remain open until further order of the court. Ill. S. Ct. R. 277(f) (eff. July 1,
1982) (“A proceeding under this rule continues until terminated by motion of the judgment
creditor, order of the court, or satisfaction of the judgment ***. The court may, however, grant
extensions beyond the 6 months, as justice may require.”). The six-month time limit is merely
the default period. Plaintiff’s failure to request an extension of the proceedings beyond the
default six-month period doomed his right to invoke section 2-1402(f)(1) of the Code after the
termination of the proceedings.
¶ 116 Because Hoke and Shine have argued throughout this case that the termination of
supplementary proceedings barred plaintiff from invoking the provisions of section
2-1402(f)(1) of the Code, we affirm the trial court’s dismissal of plaintiff’s enforcement
motions against them based upon their invocation of that affirmative defense. Studt v. Sherman
Health Systems, 2011 IL 108182, ¶ 48, 951 N.E.2d 1131 (“[A]n appellate court may affirm a
trial court’s judgment on any grounds which the record supports ***.”).
¶ 117 III. CONCLUSION
¶ 118 For the reasons stated, we affirm the trial court’s judgment in both appeals.
¶ 119 Affirmed.
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