Pontikes v. Perazic
State: Illinois
Court: 1st District Appellate
Docket No: 1-97-0298
Case Date: 03/03/1998
March 3, 1998
No. 1-97-0298
GEORGE PONTIKES, MITCHELL KREIGER, ) APPEAL FROM
and VISTA TRUST ) THE CIRCUIT COURT
) COOK COUNTY.
Plaintiffs-Judgment Creditors, )
Defendants-Appellants, )
)
v. )
)
AVDIJA PERAZIC, OSMAN PERAZIC, BANK )
ONE, CHICAGO, N.A. as TRUSTEE UNDER )
TRUST NO. 10818, )
)
Defendants-Judgment Debtors ) No. 94 CH 10932
)
)
(Roger Duba and Mercedes Benz Credit )
Corporation, )
)
Plaintiffs and Claimants- ) THE HONORABLE
Appellees). ) LESTER D. FOREMAN,
) JUDGE PRESIDING.
)
JUSTICE COUSINS delivered the opinion of the court:
Appellants, George Pontikes, Mitchell Kreiger and Vista
Trust, were judgment creditors of debtors Avdija Perazic, Osman
Perazic and Bank One, Chicago N.A., as trustee under trust No.
10818. Appellants appeal from an order in which the trial court
released three vehicles belonging to the debtors to appellee and
third-party claimant Roger Duba. On appeal, appellants contend
that: (1) the trial court committed reversible error in failing
to conduct an evidentiary hearing, and (2) an injunction dated
January 11, 1996, prevented the judgment debtors' transfer of
ownership of the vehicles to the appellee.
BACKGROUND
On August 29, 1995, appellee Roger Duba obtained a judgment
of $1,100,00 against Avdija Perazic (Perazic) in the circuit
court of Cook County. Duba filed a citation to discover assets
against Perazic, which was served on Perazic on September 6,
1995. On December 1, 1995, appellants, George Pontikes, Mitchell
Kreiger and Vista Trust, secured a judgment against Perazic in
the amount of $138,000 and, thereafter, filed a citation to
discover assets against Perazic on December 10, 1995. Perazic
was served with the citation later that day. The citation was a
standard form that provided in relevant part:
"YOU ARE PROHIBITED from making or allowing any transfer or
other disposition of, or interfering with, any property not
exempt from execution or garnishment belonging to the
judgment debtor or to which the judgment debtor may be
entitled or which may be acquired by or become due to the
judgment debtor ***."
A hearing was held on January 11, 1996, after which the
trial court ordered that Perazic pay the outstanding judgment of
$138,000 on or before January 31, 1996. In addition, the trial
court prohibited Perazic from transferring or disposing of any
property that could become due under the judgment to appellants
until further order of the court or termination of the
proceedings.
On January 31, 1996, appellants' citation proceedings were
stayed when Perazic began bankruptcy proceedings in federal
court. On October 7, 1996, Perazic sold three of his vehicles to
Duba. The bills of sale for vehicles were dated October 7, 1997.
Thereafter, Perazic moved to dismiss the proceedings and, on
October 10, 1996, the bankruptcy proceedings were dismissed.
Appellants filed a petition for a rule to show cause in which
they argued that Perazic and Duba should be held in contempt of
court because certain property belonging to Perazic had been
transferred to Duba in violation of the January 11, 1996, order.
In response to the petition, Perazic stated, inter alia, that,
while certain documents were executed prior to the order of
dismissal, the vehicles were not actually delivered to Duba until
after the bankruptcy court dismissed Perazic's suit on October
10, 1997. The bankruptcy court denied appellants' petition.
On October 28, 1996, appellants filed an execution and levy
in the circuit court of Cook County on three vehicles belonging
to Perazic. Appellants also secured an order permitting the
sheriff to use a locksmith to remove locks on Perazic's garage
and enter the garage. Thereafter, the sheriff took possession of
Perazic's vehicles and scheduled a sale for November 15, 1996.
Roger Duba and Mercedes Benz Credit Corporation (Mercedes)
objected to the sale and claimed ownership of the vehicles. Duba
claimed that, prior to the dismissal of his petition for
bankruptcy relief, he disclosed to the bankruptcy court that he
and Perazic agreed that he would lend Perazic $70,000 so that
Perazic could pay the administrative costs due to the court and
dismiss the bankruptcy proceedings. As a result of their
agreement, Perazic was to transfer all of his assets to Duba.
Duba argued that appellants did not object when Duba informed the
court of this agreement. Duba also stated that "the Bankruptcy
Court approved the transfers, including the legal transfer of the
automobiles [at issue]." Duba concluded that appellants were
therefore estopped from challenging the transfer of the vehicles
to Duba.
A trial of right of property was held in the circuit court
on January 6, 1997. The trial court found that Mercedes had a
perfected lien on one of the vehicles, a 1994 Mercedes E 320, and
that it was yet to be determined which party had a superior lien
subject to Mercedes' lien. At trial, Duba argued that appellants
were estopped from asserting rights to the vehicles because
Perazic had assigned Duba all of his property. Appellants argued
that the January 11, 1996, order precluded Perazic from
transferring any of his property. The trial court concluded that
appellants failed to bring the circuit court's January 11, 1996,
order to the bankruptcy court's attention and failed to object to
the agreement between Duba and Perazic. The trial court stated:
"I would subscribe to a principle that where a party
has an obligation to speak and does not speak, that that
party becomes barred from asserting what should have been
asserted at the time the speaking should have taken place.
* * *
It seems to me that from what has been read here to me
by [counsel for Duba] that the judge knew what was taking
place, recalled what was taking place and said yes, that's
the way it's supposed [sic] that Mr. Duba gets these cars
because there is some logic in this.
* * *
The judge turned your client's request for a rule to
show cause down and in doing, [sic] so seems to reaffirm
that he understood that yes Duba is paying 70 thousand
dollars. He gets everything *** and he salvages whatever
possible opportunities for recovery exist in all these
creditors by not allowing Perazic to get a discharge.
* * *
I think you had an obligation to bring that to the
attention of the bankruptcy court. You stood by and remained
silent when you had an obligation to speak."
The trial court ruled that Duba had priority in his lien on the
vehicles and ordered that the vehicles be released to Duba.
On April 21, 1997, the parties appeared before the
bankruptcy court. At the hearing, the bankruptcy court stated
the following:
"I have to say, [counsel for Duba], I didn't approve
any agreement between your client and the debtors respecting
any transfer of property prior to the time that this was
ordered. In fact when a similar problem arose earlier, I
said that there was no violation of the automatic stay in
the entering into of any such agreement because it wasn't
done prior to the time the bankruptcy case was dismissed.
What the transcripts reflect is what my understanding was:
That if the cases were being dismissed and the creditors,
all of the creditors, would be able to pursue whatever
remedies they had outside of bankruptcy.
I did nothing to prefer your client over any other
creditors.
* * *
So nobody got notice of any transfers and any
opportunity to object to that, nor did I approve them. ***
[A]ll I did was dismiss the case with the understanding that
the administrative expenses would be paid. ***
If there was some property that wasn't encumbered by
liens, which I didn't realize at the time, I thought all the
property was encumbered by liens and I said that on the
record, but if there was property that wasn't encumbered by
liens, the creditors would be in a position to race to the
courthouse to try to assert their rights as to that
property. Nothing in my order changed whatever rights the
parties had outside of bankruptcy.
* * *
Who has priority is absolutely a question for the state
court without any interference from the bankruptcy
proceeding.
* * *
The point is the order that I entered accomplished two
things only: It provided for the payment of administrative
expenses, and it dismissed the bankruptcy case, leaving the
creditors free to pursue their state court remedies. I did
nothing more than that. *** Any agreement that was entered
into was entered into without bankruptcy approval and has
whatever effect it has under state law.
* * *
There was an argument made that the order somehow
affected the agreement to assign property of Mr. Perazic to
Mr. Duba. Judge Foreman wanted to assure himself as to
whether that was the case or not. The simple answer to that
question is no, there is nothing in the order that I entered
that affects the validity or enforceability of any
assignment of Mr. Perazic's assets to Mr. Duba."
Appellants appeal from the January 6, 1997, order in which the
trial court awarded ownership of the three vehicles to Duba.
We affirm.
ANALYSIS
I
Appellants first contend that the trial court committed
reversible error in not conducting an evidentiary hearing.
Appellants contend that, at the January 6, 1996, hearing, the
trial court heard only arguments of counsel and did not hear
evidence, even though they stated on several occasions that the
reason for the hearing was to have a full evidentiary hearing.
Appellants argue that an evidentiary hearing was required under
part 2 of article XII of the Code of Civil Procedure, entitled
"Trial of Right of Property" (Act)(735 ILCS 5/12-201 et seq.
(West 1992)).
The Act provides the procedure to be followed whenever a
judgment or order of attachment for property is entered by a
court and such property is claimed by any person other than the
judgment debtor. 735 ILCS 5/12--201 et seq. (West 1992).
Section 12--202 provides:
" 12--202. Trial. The trial shall proceed without
written pleadings in the same manner as in other civil
cases, and may be by a jury if either party demands one."
735 ILCS 5/12--202 (West 1992).
Our review of the record indicates that on five separate
occasions at the January 6, 1997, hearing, the trial court either
asked appellants whether they wanted a full evidentiary hearing
or asked them how they wished to proceed in general. On each
occasion, appellants either replied that they did not want a
hearing or failed to request a hearing. For example, the
following colloqy occurred at trial:
"THE COURT: Now, if you think that you're in a position
to prove this collusion, I'll be glad to conduct an
evidentiary hearing.
MR. TAGLER: [Appellants' counsel]: Well, I believe
that's what the trial of right of property requires, your
Honor, first of all.
THE COURT: Very good. Are you ready for hearing now to
put on some witnesses?
MR. TAGLER: Judge, as I don't believe it's our burden -
- we're not plaintiffs -- the actual original plaintiffs are
the defendants in the trial. It's the burden of --
* * *
THE COURT: You want me to continue this for a hearing
and bring in Judge Wedoff [bankruptcy judge]?
MR. TAGLER: No. We have the transcript right here.
* * *
THE COURT: We spent a lot of time here. We've been
talking now for almost an hour. What do you wish to do
today?
MR. TAGLER: Well, your Honor, once again our position
is once the bankruptcy was dismissed Mr. Perazic was under
injunction on the citation. That's our position. Now
apparently --
THE COURT: I'm rejecting that position.
MR. TAGLER: Okay. Then there was no injunction.
* * *
THE COURT: I'll give you the choice of doing one of two
things. We can put everything at rest today by my finding
that there's a priority in Mr. Duba. Or, if you still
challenge that, if you feel I'm acting precipitously I'll be
more than glad to conduct a full evidentiary hearing. And
you can bring Judge Wedoff in.
* * *
THE COURT: Now again, do you want a full evidentiary
hearing? Do you think it'll serve any purpose?
MR. TAGLER: No, Judge.
THE COURT: Do you want to call Judge Wedoff and bring
him in?
MR. TAGLER: Well, you have to understand it's not our
burden really, Judge. It's the claimant's burden. But I
understand your ruling."
Clearly, the trial court offered appellants ample
opportunities to proceed with a full evidentiary hearing.
However, on each occasion, appellants failed to proceed or argued
that it was not their burden to proceed with a hearing. They
cannot now complain that the trial court abused its discretion.
Therefore, we see no error.
II
Appellants next contend that the trial court's order of
January 11, 1996, precluded Perazic from transferring ownership
of his vehicles to Duba. Duba responds that he is entitled to
the vehicles because he has a superior claim. We agree.
At the January 6, 1997, hearing, the trial court found that
Duba had a superior claim to Perazic's vehicles pursuant to the
bankruptcy court's approval of the agreement between Duba and
Perazic. However, on April 21, 1997, the bankruptcy court
clarified its rulings and stated that it did not approve an
assignment. The bankruptcy court concluded that the issue of
priority was a "question for the state court." Therefore, we
must decide which party has a superior lien on the vehicles at
issue.
Under Illinois law, a citation to discover assets is a
method by which a judgment creditor may proceed against a
judgment debtor or third parties to discover and recover the
judgment debtor's assets for the purpose of applying the property
in satisfaction of the judgment. Bloink v. Olson, 265 Ill. App.
3d 711, 714, 638 N.E.2d 406 (1994). The judgment creditor can
then bring supplementary proceedings under section 2--1402 of the
Code of Civil Procedure (735 ILCS 5/2--1402 (West 1993)), for the
purpose of examining the judgment debtor or any other party to
discover assets or income of the debtor. 735 ILCS 5/2--1402
(West 1993). Section 2--1402 further provides that a lien is
created upon service of the citation to discover assets. 735
ILCS 5/2--1402 (West 1993); Bloink, 265 Ill. App. 3d at 714.
Here, appellants received a judgment against Perazic on
December 1, 1995, and served a citation to discover assets on
Perazic on December 10, 1995. However, Duba received a judgment
against Perazic on August 29, 1995, and served a citation to
discover assets against Perazic on or about September 6, 1995.
At the January 6, 1997, hearing, appellants conceded that Duba's
citation proceedings commenced before their proceedings. At
trial, the following colloquy occurred:
"THE COURT: Does Duba have a judgment?
MR. DITKOWSKY [Counsel for Duba]: Yes.
THE COURT: When did he get his judgment?
MR. DITKOWSKY: Prior to theirs. I wrote it down there.
MR. TAGLER [Counsel for appellants]: Sometime in early
1995.
* * *
MR. TAGLER: I think it was earlier than December of
'95. Ours is December 1st.
MR. DITKOWSKY: August 29, 1995.
THE COURT: So his judgment was before yours.
MR. DITKOWSKY: That is correct. And our citation.
THE COURT: And he had a citation going before yours.
MR. TAGLER: Correct. Correct."
We conclude that Duba served his citation to discover assets to
Perazic on September 6, 1995, before appellants served their
citation to Perazic on December 10, 1995. If a lien has been
perfected, the lien of the senior judgment is superior to that of
a junior one. See Kaiser-Ducett v. Chicago-Joliet Livestock, 86
Ill. App. 3d 216, 218, 407 N.E.2d 1149 (1980). Accordingly, we
hold that Duba's lien was perfected before appellants' and is
therefore superior.
Affirmed.
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