Can A, who holds a judgment against B, who is owed money by C, proceed directly against C in an effort to recover monies prior to C paying the monies to B who may dissipate the monies before A has had an opportunity to collect against B? According to Illinois rules of civil procedure, A may attach these future payments, as illustrated in the recent United States District Court ruling in Laborers’ Pension Fund v. KMC Masonry, LLC.
This case came before the District Court on a Motion to Bar Third Party Nicholas & Associates, Inc. ("Nicholas") from Transferring Assets to Defendant/Judgment Debtor KMC Masonry, LLC ("KMC"), filed by plaintiffs Laborer's Pension Fund, Laborers' Welfare Fund of the Health and Welfare Department of the Construction and General Laborers' District Council of Chicago and Vicinity, and James R. Jorgensen, the administrator of the Funds (collectively referred to herein as the "Fund"). The Fund obtained a $279,725 default judgment against KMC and began collection proceedings in the District Court. In the meantime, KMC sued Nicholas for $1,872,767 in Kane County. With their motion, the Fund sought to bar Nicholas from transferring assets to KMC, without first paying the Fund’s $279,725 judgment entered against KMC.
Since no federal statute applied, the District Court followed Illinois law. Illinois law allows a judgment creditor to pursue assets or income of the judgment debtor by instituting citation proceedings against the judgment debtor and/or a third party. When issued against a third party, a citation "may prohibit the party to whom it is directed from making or allowing any transfer or other disposition of ... any property ... 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 ... moneys ... which are due or to become due to the judgment debtor .."
A lien is created by proper service of a citation to discover assets that "binds nonexempt personal property, including money, choses in action, and effects of the judgment debtor...." When the citation has been served on a third party, that lien reaches "all personal property belonging to the judgment debtor in the possession or control of the third party or which thereafter may be acquired or come due the judgment debtor...." The lien is perfected on the date the citation is served.
The Fund sought a restraining order to prevent Nicholas from paying KMC anything in connection with the Kane County action without first satisfying the Fund’s judgment. The Fund argued that the Kane County action could be settled without public notice or trial, and thus a restraining order against Nicholas was required to ensure Nicholas could not transfer funds to KMC without first paying the Fund. Nicholas opposed the motion, claiming that the Fund's only remedy was to seek a turnover order of KMC’s Kane County action and then independently prosecute the action as KMC's assignee.
For obvious reasons, the Fund would not be interested in independently prosecuting an action against Nicholas. The District Court agreed with the Fund's position and said it was fully supported by Illinois law. A judgment creditor – the Fund in this case – is allowed to pursue a contingent asset such as a potential judgment. A judgment creditor may obtain a restraining order by means of a citation proceeding against a third party – Nicholas in this case – who is a defendant in a separate action brought by the judgment debtor – KMC in this case.
Accordingly, if the Kane County action is later resolved such that Nicholas isn’t liable to KMC, Nicholas would have no obligation under the restraining order. On the other hand, if Nicholas is found liable to KMC, an amount not in excess of $279,725 would be subject to a restraining order. The restraining order thus maintains the status quo and protects the priority of the Fund's lien.
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