Collection Professionals v. Logan

No. 4--97--0842

IN THE
APPELLATE COURT OF ILLINOIS
THIRD DISTRICT

A.D., 1998

COLLECTION PROFESSIONALS, ) Appeal from the Circuit Court
INC., ) for the 10th Judicial Circuit
) Putnam County, Illinois
Plaintiff-Appellee, )
)
v. )
)
ROBERT LOGAN, )
)
Defendant-Appellant, ) No. 96--LM--5
)
(Mary Logan, )
Defendant, )
) Honorable
Putnam County Bank, ) Robert J. Cashen,
Garnishee.) ) Judge Presiding

PRESIDING JUSTICE HOMER delivered the opinion of the court:


Judgment-debtor, Robert Logan, appeals the trial court's
decision to permit execution of a nonwage garnishment against his
accounts with Putnam County Bank in favor of judgment-creditor,
Collection Professionals, Inc. Robert contends that an agreed
order executed by Collection Professionals and his cojudgment-
debtor constituted an accord and satisfaction of the entire
judgment which precluded the garnishment of his accounts. He
also challenges the constitutionality of the nonwage garnishment
statute (735 ILCS 5/12--701 et seq. (West 1996)). Following our
review, we affirm.

FACTS
Collection Professionals sued Robert Logan and his former
wife, Mary Logan, to collect on various outstanding medical bills
incurred during their marriage. When Robert and Mary divorced in
1996, they agreed that Mary would assume responsibility for
paying those bills as a part of the settlement; although, Robert
acknowledges that he remained jointly and severally liable for
the debt pursuant to section 15 of the Rights of Married Persons
Act (750 ILCS 65/15 (West 1996)).
On June 6, 1996, Collection Professionals obtained judgment
in the amount of $4,756.30 plus costs against Robert and Mary.
Judgment against Robert was entered by default. Judgment against
Mary was entered by consent in a separate order which established
Mary's monthly payment schedule for the satisfaction of the
judgment, costs, and statutory interest. The order provided that
if Mary failed to make payments as scheduled, Collection
Professionals would file other postjudgment enforcement action,
including garnishment.
Because Mary failed to meet the payment schedule in July
1996, Collection Professionals commenced nonwage garnishment
proceedings against her naming Putnam County Bank (the Bank) as
garnishee. Collection Professionals discovered that the Bank
held no garnishable assets of Mary because her only account with
the Bank was an overdrawn checking account. Despite Mary's
default, it appears from the record that Mary subsequently made
an indeterminate number of payments toward the judgment.
In March 1997, Collection Professionals instigated the
instant nonwage garnishment action against Robert's accounts to
collect $3,575.70, the amount remaining due on judgment including
costs and interest. The Bank, again named as garnishee, declared
that it held deposit accounts totalling $15,572.86 belonging to
Robert.
Robert filed objections to the garnishment and a motion to
quash arguing: (1) Collection Professionals was barred from
enforcing the judgment against him because its agreement with
Mary constituted an accord and satisfaction of the judgment, or
alternatively, a compromise and settlement, and (2) the nonwage
garnishment statute is unconstitutional because it failed to
provide him with pre-seizure notice. After a hearing, the trial
court denied Robert's objections and motion to quash. The court
also denied Robert's subsequent motion to stay the garnishment
pending appeal. The court ordered the Bank to turn over
$3,084.00 from Robert's accounts which represented the judgment
balance. Robert appeals.

ANALYSIS
I. Propriety of the Nonwage Garnishment
The instant appeal arises out of a garnishment proceeding
which is a purely statutory remedy for the enforcement of a
judgment. In re Marriage of Schomburg, 269 Ill. App. 3d 13, 17,
645 N.E.2d 1005, 1007 (1995). To maintain a garnishment action,
there must be a valid judgment and the garnishor must meet all of
the requirements set forth in the garnishment statute. Seidmon
v. Harris, 172 Ill. App. 3d 352, 356-57, 526 N.E.2d 543, 545
(1988).
Robert does not dispute that Collection Professionals
obtained a valid default judgment against him. Nor does he
dispute that Collection Professionals followed the procedures set
forth in the nonwage garnishment statute (735 ILCS 5/12--701 et
seq. (West 1996)). He contends, however, that the garnishment of
his accounts was improper because the agreed order between Mary
and Collection Professionals constituted an accord and satisfac-
tion of the entire obligation. He argues that Collection
Professionals was precluded from taking any enforcement action
against him because Mary, his cojudgment-debtor, had already
satisfied the obligation by agreeing to pay it in full.
Because there is no dispute as to the facts upon which
Robert's claim of accord and satisfaction is based, the issue
presented to this court raises a question of law. See A.F.P.
Enterprises, Inc. v. Crescent Pork, Inc., 243 Ill. App. 3d 905,
912, 611 N.E.2d 619, 624 (1993). As with all questions of law,
we will conduct de novo review. Joel R. v. Board of Education of
Mannheim School District 83, 292 Ill. App. 3d 607, 613, 686 N.E.2d 650, 655 (1997).
"Accord and satisfaction" is a method of discharging a claim
whereby the parties agree to give and accept something other than
that which is due in settlement of a claim. 1 Am. Jur. 2d Accord
& Satisfaction 1 (1994). The accord is the agreement settling
the existing dispute which presupposes a disagreement as to the
amount due, and the satisfaction is the execution of the accord.
Professional Therapy Services, Inc. v. Signature Corp., 223 Ill.
App. 3d 902, 916, 585 N.E.2d 1291, 1300 (1992). A valid accord
and satisfaction completely discharges the debtor's existing
duties and constitutes a defense to any attempt to enforce claims
based on those duties. 1 Am. Jur. 2d Accord & Satisfaction 1
(1994). Further, an accord and satisfaction between the creditor
and one debtor will discharge all other jointly and severally
liable debtors from further liability on the claim. 1 Am. Jur.
2d Accord & Satisfaction 12 (1994).
Ordinarily, an accord and satisfaction requires: (1) a bona
fide dispute; (2) an unliquidated claim; (3) consideration; and
(4) a shared and mutual intent to compromise the claim. Grove v.
Winter, 197 Ill. App. 3d 406, 413, 554 N.E.2d 722, 726 (1990).
The instant facts do not support Robert's claim of accord and
satisfaction. The record reveals that neither Robert nor Mary
disputed the amount claimed in the complaint. The claim was
certain and not unliquidated. Evidence of consideration and
mutual intent to compromise the claim is lacking.
Nevertheless, Robert points out that an undisputed claim
may, in some instances, be fulfilled through accord and
satisfaction. See 1 Am. Jur. 2d Accord & Satisfaction 6 (1994).
He argues that the agreed order between Collection Professionals
and Mary constituted an executory accord which was fully
satisfied by Mary's promise to pay the undisputed claim according
to a payment plan. We disagree.
An "executory accord" is an agreement to accept at some
future time a stipulated performance as satisfaction of an
obligation. Black's Law Dictionary 570 (6th ed. 1990). However,
an executory accord is unenforceable and will not bar enforcement
of the original obligation unless: (1) the creditor has clearly
accepted the new promise of future performance, itself, and not
the ultimate performance of it, as satisfaction, and (2) the new
promise is based upon new consideration. 1 Am. Jur. 2d Accord &
Satisfaction 51 (1994).
In this case there is nothing in the record demonstrating
that Collection Professionals intended to accept the payment plan
with Mary as satisfaction of the entire joint obligation. To the
contrary, Collection Professionals sought and obtained judgment
against both Mary and Robert. The judgment against Robert
provided that "execution may issue;" and although Mary was
granted the opportunity to fulfill her obligation over time,
Collection Professionals expressly retained the right to enforce
the judgment through alternative methods of enforcement.
Further, there is nothing in the record to suggest that any new
consideration was tendered in conjunction with the consent
judgment. Therefore, because there was no enforceable executory
accord and no satisfaction of this joint and several obligation,
the fact that Collection Professionals assented to a payment plan
for Mary in no way suspended Robert's joint liability for the
obligation under the default judgment.
Defendant argues, in the alternative, that the agreed order
constituted a compromise and settlement of the entire obligation.
Again, we disagree.
A compromise is an agreement to terminate, by means of
mutual concessions, a claim which is disputed in good faith or
unliquidated. 15A Am. Jur. 2d Compromise & Settlement 1 (1976).
"It involves an agreement that a substituted performance is
acceptable instead of what was previously claimed to be due;
thus, each party yields something and agrees to eliminate both
the hope of gaining as much as he previously claimed and the risk
of losing as much as the other party preciously claimed." 15A
Am. Jur. 2d Compromise & Settlement 1 (1976). There is no
compromise where, as in the instant case, the claim is undisputed
and no concessions are made by the judgment-creditor. Although
the agreed order did allow Mary to pay the judgment over time,
she was required to pay statutory interest, and Collection
Professionals expressly retained its right to enforce the
judgment through alternative means.
We also find unpersuasive Robert's argument that Collection
Professionals was improperly seeking a double recovery by
enforcing the default judgment against him. There is nothing in
the record to suggest that Collection Professionals sought or
received payment in excess of the judgment from the defendants.
For the forgoing reasons, we do not find that the consent
judgment entered against Mary precluded Collection Professionals
from seeking enforcement of the default judgment against Robert.

II. Constitutional Challenge
Robert also challenges the constitutionality of Illinois'
nonwage garnishment statute. Specifically, he contends that the
statute violates due process by failing to provide a judgment-
debtor with notice and an opportunity to be heard on defenses to
the garnishment prior to service of the summons on the garnishee
and the automatic freezing of his assets. For support, he relies
upon two cases which held a prior version of the statute
unconstitutional. See E.J. McKernan Co. v. Gregory, 268 Ill.
App. 3d 383, 643 N.E.2d 1370 (1994); Jacobson v. Johnson, 798 F. Supp. 500 (C.D. Ill. 1991). Although he acknowledges that the
statute has since been amended significantly, he asserts that the
amendments do not resolve the constitutional infirmity because
due process requires that judgment debtors be given notice and an
opportunity to be heard prior to seizure of their assets.
Until now, the current version of Illinois' nonwage
garnishment statute has not been the subject of a constitutional
challenge in a reported state or federal court decision. Because
the cases relied upon by Robert involved a prior version of
Illinois' statute, we find them unhelpful to our analysis.
Therefore, we consider this challenge a matter of first
impression. It is well established that all statutes are
presumed to be constitutional, and the party challenging a
statute has the burden of clearly proving its invalidity. Rehg
v. Illinois Department of Revenue, 152 Ill. 2d 504, 511-12, 605 N.E.2d 525, 529 (1992).
Contrary to Robert's contention, due process does not
require that a judgment-debtor be given pre-seizure notice and
opportunity to be heard in postjudgment enforcement actions. See
Endicott-Johnson Corp. v. Encyclopedia Press, Inc., 266 U.S. 285,
288-89, 69 L. Ed. 288, ___, 45 S. Ct. 61, 62-3 (1924); McCahey v.
L.P. Investors, 774 F.2d 543, 550 (2d Cir. 1985); Dionne v.
Bouley, 757 F.2d 1344, 1352 (1st Cir. 1985); Brown v. Liberty
Loan Corp., 539 F.2d 1355, 1363 (5th Cir. 1976); Betts v. Coltes,
467 F. Supp. 544, 546 (D. Haw. 1979); see also Jacobson, 798 F. Supp. at 505. In McCahey, the court explained:
"[Pre-seizure notice and opportunity for hearing] for
debtors is not constitutionally required even in the
case of pre-judgment attachments, when liability has
not been determined. A fortiori, it can hardly be
required where the creditor's claim has been finally
confirmed by a court, and where the risk that the
debtor will conceal assets is stronger than in the pre-
judgment context." McCahey, 774 F.2d at 550.
To determine whether a post-judgment garnishment statute
satisfies due process requirements, most courts have adopted the
balancing test set forth in Mathews v. Eldridge, 424 U.S. 319, 47 L. Ed. 2d 18, 96 S. Ct. 893 (1976). This test requires
consideration of the following factors: (1) the private interest
that will be affected by the official action; (2) the risk of
erroneous deprivation of such interest through the procedures
used, and probable value, if any, of additional procedural
safeguards; and (3) the government's interest, including the
fiscal and administrative burdens that the additional safeguards
or substitute procedures would entail. Mathews, 424 U.S. at 334-
35, 47 L. Ed. 2d at 33, 96 S. Ct. at 902-903.
Courts that have implemented this balancing test agree that
post-judgment remedy provisions, such as the instant garnishment
statute, satisfy due process as long as they provide: (1) notice
to judgment debtors that their property has been seized; (2)
notice to judgment debtors of exemptions to which they may be
entitled; and (3) a prompt opportunity for judgment debtors to
challenge the seizure and asset exemptions. See McCahey, 774 F.2d at 549. After reviewing the subject statute, we conclude
that it meets these essential requirements.
First, the statute provides prompt notice to the judgment
debtor that his property has been seized by requiring that a copy
of the summons and notice of garnishment be mailed to the
judgment-debtor within two business days of service upon the
garnishee. 735 ILCS 5/12--705(b) (West 1996). A garnishment
order cannot be entered unless the certificate of mailing to the
judgment-debtor is filed with the court. 735 ILCS 5/12--711(e)
(West 1996).
Second, the statute requires the judgment-debtor be informed
of the types of property that may be claimed as exempt from
garnishment. 735 ILCS 5/12--705(a),(b) (West 1996). It also
requires that the judgment-debtor be informed of his right to
request a hearing to dispute the garnishment or declare an
exemption. 735 ILCS 5/12--705(a),(b) (West 1996).
Finally, the statute provides the prompt opportunity for
judgment-debtors to challenge the seizure and assert exemptions.
Although the garnishee is required to freeze any of the debtor's
non-exempt assets in its possession to the extent of the amount
due on the judgment and costs, the assets may not be turned over
to the creditor until the court orders execution of the
garnishment. 735 ILCS 5/12--707(a) (West 1996). At any time on
or before the return date of the summons, the judgment-debtor may
request a hearing to dispute the garnishment or seek exemptions
for certain money or property. 735 ILCS 5/12--711(b) (West
1996). The summons, itself, must be returnable between 21 and 30
days after the date of its issuance (735 ILCS 5/12--705(a) (West
1996)); therefore, judgment-debtors are afforded the opportunity
to request a prompt hearing.
We find that these procedures properly balance the divergent
interests of the government, the creditor, and the debtor. The
creditor's interest in an expedient and inexpensive mechanism for
collecting on judgments is fulfilled; and the ability to freeze
the debtor's assets eliminates the risk that the debtor may
attempt to avoid the judgment by concealing or transferring
assets. In turn, the debtor's interests in protecting his
property and asserting exemptions are fulfilled by the
opportunity for a prompt hearing prior to execution of the
garnishment. This balance promotes the government's dual
interests of providing an efficient mechanism for enforcement of
judgments and ensuring due process of law for judgment-debtors.
We reject Robert's contention that because his purported
defense of accord and satisfaction did not arise until after the
underlying action was completed, it was a violation of due
process to not give him the opportunity to present the defense
prior to the seizure of his assets. However, the statute
provided Robert the prompt opportunity to present his
postjudgment defenses prior to execution of the garnishment
order. Accordingly, we hold that the nonwage garnishment statute
afforded Robert all the procedural due process protection
required under the constitution.

CONCLUSION
For the foregoing reasons, the judgment of the circuit court
of Putnam County is affirmed.
Judgment affirmed.
HOLDRIDGE and BRESLIN, JJ., concur.