Harris Bank St. Charles v. Weber
Annotate this Case
No. 2--97--0508
__________________________________________________________________
IN THE
APPELLATE COURT OF ILLINOIS
SECOND DISTRICT
__________________________________________________________________
HARRIS BANK ST. CHARLES, ) Appeal from the Circuit Court
) of Kane County
Plaintiff, )
)
v. )
) No. 93--CH--0332
RAY WEBER, )
)
Defendant and Counter- )
defendant-Appellee and )
Cross-Appellant )
)
(Bruce Dent; Midwest Webco, )
Inc.; Theodore R. Ranney, )
Indiv.; Margaret A. Ranney; )
Galland Henning Nopak, Inc.; )
Unknown Owners; and Nonrecord )
Claimants, Defendants; Theodore )
R. Ranney, as Trustee of the )
Theodore R. Ranney Trust dated )
January 4, 1979, Defendant and ) Honorable
Counterplaintiff-Appellant and ) Melvin E. Dunn,
Cross-Appellee). ) Judge, Presiding.
__________________________________________________________________
JUSTICE BOWMAN delivered the opinion of the court:
On February 14, 1994, the trial court entered an agreed
judgment of foreclosure against three parcels of property at 33 W
749 Reed Road in Geneva, Illinois. The proceeds from the judicial
sale of the property were insufficient to satisfy the claim of
defendant-counterplaintiff, Theodore R. Ranney, as trustee of the
Theodore R. Ranney Trust (Trust), the holder of a junior mortgage
given by defendants Ray Weber and Bruce Dent. On September 20,
1994, the Trust obtained a deficiency judgment of $320,708.24
against Weber and Dent. In October 1996, Weber filed a motion to
strike the sheriff's sale of his home to satisfy this judgment,
asserting that, on April 13, 1994, he had transferred the home into
tenancy by the entirety with his wife.
The Trust appeals the trial court's April 14, 1997, order
striking the sheriff's sale. Weber has filed a cross-appeal
challenging the trial court's order granting the Trust's motion to
strike his answer to the Trust's request for admission of facts and
finding all facts contained in the request to be deemed admitted.
We reverse the order striking the sheriff's sale but affirm the
order striking Weber's answer to the request for admission of
facts.
The facts relevant to this appeal are as follows. In 1989,
defendants Margaret and Theodore Ranney loaned Ray Weber and Bruce
Dent $333,591.05 in exchange for a junior mortgage on the Reed Road
property. Around the same time, they loaned defendant Midwest
Webco, Inc., of which Weber and Dent were principal shareholders,
$200,000 in exchange for a note for that amount and a security
interest in the corporation's assets. Weber and Dent also gave the
Ranneys a security interest in these assets to secure their junior
mortgage. In November 1990, the Ranneys transferred their interest
in the mortgage on the Reed Road property to the Theodore R. Ranney
Trust and transferred their interest in the $200,000 note to the
Margaret A. Ranney Trust.
On August 6, 1993, Midwest Webco, Inc., assigned its assets
for the benefit of its creditors to Jerome Frett, who was to
liquidate the assets. On October 14, 1993, an auction was held at
which these assets were sold. According to Weber, he did not
become aware of the amount or distribution of the proceeds until
June 1994.
On September 16, 1993, plaintiff Harris Bank, the holder of
the senior mortgage on the Reed Road property, filed a complaint
for foreclosure of its mortgage. The trial court gave the Trust
leave to intervene in this action as a defendant and to file a
counterclaim against the defendants (other than the Ranneys) for
foreclosure of its junior mortgage.
On February 14, 1994, the trial court entered an agreed
judgment of foreclosure and sale of the Reed Road property. The
court found that Harris Bank's mortgage lien was superior to all
others and that the Trust's mortgage lien was second in priority.
It ordered the property to be sold and the proceeds of the
sheriff's sale to be distributed according to this priority.
On March 19, 1994, Weber married Jane Kaufmann. At the time,
title to his home in Batavia, Illinois, was in his name only. On
April 13, 1994, he transferred title in his home to himself and
Kaufmann as tenants by the entirety.
On May 27, 1994, Harris made a successful bid for the Reed
Road property at the sheriff's sale. Its bid was equal to the
amounts owed to it plus the sheriff's fees and commission.
Consequently, there were no funds from the sale to satisfy the
Trust's lien on the property. On June 3, 1994, the trial court
entered an order approving the sale and distribution of the
proceeds. On that same day, the Trust filed a motion for a
deficiency judgment against Weber and Dent.
On September 20, 1994, the trial court entered a deficiency
judgment in favor of the Trust and against Weber and Dent in the
amount of $320,708.24. Thereafter, the Trust filed a memorandum of
this judgment in Kane County, and a sheriff's sale of Weber's home
was scheduled.
A few days before the sheriff's sale was to take place, Weber
filed a motion to strike the sale. In his motion, he claimed that
his home could not be sold to pay the Trust's deficiency judgment
because the home had been transferred into tenancy by the entirety
in April 1994. In support of his motion, Weber relied on the
decision in E.J. McKernan Co. v. Gregory, 268 Ill. App. 3d 383 (2d
Dist. 1994), in which this court held that a judgment debtor's
transfer of property into tenancy by the entirety in order to
shield that property from the judgment creditor cannot violate the
Uniform Fraudulent Transfer Act (740 ILCS 160/1 et seq. (West
1992)).
The Trust responded that the case should be governed by In re
Marriage of Del Giudice, 287 Ill. App. 3d 215 (1st Dist. 1997), in
which, contrary to E.J. McKernan, the first district held that a
judgment debtor who attempts to avoid a judgment creditor by
transferring property into tenancy by the entirety after a judgment
has been entered may violate the Uniform Fraudulent Transfer Act.
According to the Trust, Weber's transfer of the property was
fraudulent under the Uniform Fraudulent Transfer Act because it
occurred after the judgment of foreclosure was entered; he knew
that the proceeds from the sheriff's sale and auction of the
corporate assets would be insufficient to satisfy the Trust's
claim; he received no consideration for the transfer to his wife;
the transfer was of substantially all of his assets; and he
continued to maintain control over the property after the transfer.
After a hearing on March 14, 1997, the trial court granted
Weber's motion. It found that it was required to follow E.J.
McKernan Co. v. Gregory, 268 Ill. App. 3d 383 (1994), because this
was the controlling authority in its district. Based on E.J.
McKernan, the court struck the sheriff's sale.
The Trust raises two contentions on appeal: (1) the trial
court erred in holding that Weber's transfer of title to his home
to tenancy by the entirety did not violate the Uniform Fraudulent
Transfer Act, and (2) the trial court was required to follow Del
Giudice, the most recent appellate court decision, rather than E.J.
McKernan, the decision of the appellate court in the district where
it was located.
The trial court correctly found that it was bound to follow
our decision in E.J. McKernan. See Aleckson v. Village of Round
Lake Park, 176 Ill. 2d 82, 92 (1997). Effective August 22, 1997,
however, the tenancy by the entirety provision contained in the
Code of Civil Procedure was amended. See 735 ILCS Ann. 5/12--112
(Smith-Hurd 1998). The parties have failed to discuss the effect
of this amendment in their briefs. However, we find it necessary
sua sponte to address this issue, which we find dispositive. See
Barnett v. Zion Park District, 171 Ill. 2d 378, 389 (1996); Hux v.
Raben, 38 Ill. 2d 223, 224 (1967). Based on this amendment, we
hold that E.J. McKernan and Del Giudice are no longer valid, we
reverse the judgment of the trial court, and we remand the cause
for further proceedings consistent with the amended language of the
statute.
We begin our discussion of the amendment with a description of
its background. Under the Joint Tenancy Act (765 ILCS 1005/0.01 et
seq. (West 1992)) a husband and wife may hold property as tenants
by the entirety (765 ILCS 1005/1c (West 1992)). Prior to the 1997
amendment, the Code of Civil Procedure provided, without
qualification, that, when a husband and wife hold property as
tenants by the entirety, the property may not be attached by a
creditor of one spouse:
"Any real property held in tenancy by the entirety shall not
be liable to be sold upon judgment entered on or after October
1, 1990 against only one of the tenants." 735 ILCS 5/12--112
(West 1992).
Although the tenancy by the entirety statutes permit married
individuals to protect their property from creditors of one spouse
by transferring it into tenancy by the entirety, the Uniform
Fraudulent Transfer Act prohibits transfers with the intent to
defraud a creditor:
"(a) A transfer made or obligation incurred by a debtor
is fraudulent as to a creditor, whether the creditor's claim
arose before or after the transfer was made or the obligation
was incurred, if the debtor made the transfer or incurred the
obligation:
(1) with actual intent to hinder, delay, or defraud any
creditor of the debtor; or
(2) without receiving a reasonably equivalent value in
exchange for the transfer or obligation, and the debtor:
***
(B) intended to incur, or believed or reasonably should
have believed that he would incur, debts beyond his ability to
pay as they became due." 740 ILCS 160/5(a) (West 1992).
The Uniform Fraudulent Transfer Act lists eleven factors that may
be considered among other factors in determining whether a debtor
made a transfer with actual intent under paragraph (1) of
subsection (a). See 740 ILCS 160/5(b) (West 1992).
In E.J. McKernan and Del Giudice, the courts attempted to
reconcile the protections contained in the tenancy by the entirety
provisions with the restrictions of the Uniform Fraudulent Transfer
Act. In E.J. McKernan Co. v. Gregory, 268 Ill. App. 3d 383 (1994),
we held that the Uniform Fraudulent Transfer Act does not apply to
transfers into tenancy by the entirety. In that case, the
defendant and his wife owned their home as joint tenants but
conveyed title to themselves as tenants by the entirety after
judgment was entered against the defendant. E.J. McKernan, 268
Ill. App. 3d at 388.
In upholding the validity of this transfer, we explained that,
although the Uniform Fraudulent Transfer Act prohibits transfers
made with the intent to hinder, delay, or defraud creditors,
"intent is irrelevant in a tenancy by the entirety conveyance
because it simply cannot be fraudulent to engage in conduct
that is specifically and unambiguously sanctioned by statute.
A plain reading of the tenancy by the entirety statutes makes
it clear that no mental state is required to use the tenancy's
protection." E.J. McKernan, 268 Ill. App. 3d at 390.
We therefore concluded that the legislature did not intend the
Uniform Fraudulent Transfer Act to apply to transfers into tenancy
by the entirety and reversed the trial court's order refusing to
restrain the sale of the defendant's home. E.J. McKernan, 268 Ill.
App. 3d at 390-91.
Conversely, in In re Marriage of Del Giudice, 287 Ill. App. 3d
215 (1997), the first district held that transfers into tenancy by
the entirety are subject to the restrictions of the Uniform
Fraudulent Transfer Act. Del Giudice, 287 Ill. App. 3d at 218-19.
Although the facts of the Del Giudice case were almost identical to
those in E.J. McKernan, the court declined to follow our decision
in that case. The Del Giudice court stated that it disagreed that
the intent behind a transfer of title to tenancy by the entirety is
irrelevant simply because the tenancy by the entirety statutes
permit married couples to use the tenancy to shelter their property
from creditors. According to the Del Giudice court, such transfers
may nevertheless be fraudulent because the purpose of the Uniform
Fraudulent Transfer Act is to "invalidate otherwise sanctioned
transactions made with a fraudulent intent." Del Giudice, 287 Ill.
App. 3d at 218. Thus, the court held that the trial court erred in
finding that the defendant's retitling of his property could not
violate the Uniform Fraudulent Transfer Act and remanded the cause
for the trial court to apply the Act. Del Giudice, 287 Ill. App.
3d at 219.
In August 1997, however, the legislature amended the tenancy
by the entirety provision contained in the Code of Civil Procedure
as follows:
"Any real property, or any beneficial interest in a land
trust, held in tenancy by the entirety shall not be liable to
be sold upon judgment entered on or after October 1, 1990
against only one of the tenants, except if the property was
transferred into tenancy by the entirety with the sole intent
to avoid the payment of debts existing at the time of the
transfer beyond the transferor's ability to pay those debts as
they become due." (Emphasis added.) 735 ILCS Ann. 5/12--112
(Smith-Hurd 1998).
The legislature specified that this amendment "is intended as a
clarification of existing law and not as a new enactment" (735 ILCS
Ann. 5/12--112 (Smith-Hurd 1998)).
Given that the amendment became effective subsequent to the
transfer and the trial court's decision in this case, we must first
determine whether it applies to the facts before us. Generally, an
amendment will be considered prospective, but the presumption of
prospective application does not apply when the amendment merely
clarifies existing law. Royal Imperial Group, Inc. v. Joseph
Blumberg & Associates, Inc., 240 Ill. App. 3d 360, 364-65 (1992).
When the legislature has made a material change to a statute, it is
presumed that the legislature intended to change the law. Board of
Trustees of Southern Illinois University v. Department of Human
Rights, 159 Ill. 2d 206, 213 (1994). That presumption, however,
can be rebutted by evidence of legislative intent to merely clarify
the law. State of Illinois v. Mikusch, 138 Ill. 2d 242, 252
(1990). Also, when an amendment follows a controversy concerning
the interpretation of the original statute, courts will regard the
amendment as a clarification of, rather than a change in, existing
law. Church v. State of Illinois, 164 Ill. 2d 153, 163-64 (1995).
For example, in Varelis v. Northwestern Memorial Hospital, 167 Ill. 2d 449 (1995), the supreme court held that an amendment made
in response to a conflict among appellate court districts was
merely a clarification of existing law. In that case, the issue
was whether the personal representative of a decedent could bring
an action under the Wrongful Death Act (Ill. Rev. Stat. 1987, ch.
70, par. 1 et seq. (now 740 ILCS 180/0.01 et seq. (West 1996)))
when, during his lifetime, the decedent had obtained a judgment in
a personal injury action based on the same incident. Varelis, 167 Ill. 2d at 450-51.
Until 1995, the Wrongful Death Act did not expressly address
whether a wrongful death action could be maintained under these
circumstances, and a split in the appellate court developed with
respect to this issue. While decisions from the first district
permitted successive personal injury and wrongful death actions, a
fourth district decision did not. Varelis, 167 Ill. 2d at 452-55.
In 1995, however, the legislature amended the Wrongful Death
Act to expressly prohibit a wrongful death action when the decedent
has already obtained a judgment as the result of a personal injury
lawsuit based on the same occurrence. Although the amendatory act
provided that it applied to actions accruing on or after its
effective date, March 9, 1995, and the decedent in Varelis died in
1989, the supreme court nevertheless applied the amendment in
Varelis because it found that the amendment was a clarification of
existing law. Varelis, 167 Ill. 2d at 451, 461-65.
In support of its finding that the amendment clarified rather
than changed existing law, the supreme court noted that, in the
legislative debates, legislators had indicated that the amendment
was intended to address the conflict in appellate court decisions.
Because the amendment was made in response to decisions permitting
successive personal injury and wrongful death actions and was
designed to explain whether the Wrongful Death Act applied in these
circumstances, the supreme court held that it was intended as a
clarification of existing law rather than a change in substantive
law. Varelis, 167 Ill. 2d at 461-63.
We believe that the amendment at issue in the case before us
was also intended only as a clarification of existing law. First,
the legislature explicitly provided that it was intended as a
clarification and not as a new enactment. In addition, as in
Varelis, the legislative debates indicate that the amendment was
the result of an appellate court conflict concerning the
interpretation of the statute. At the time the bill was passed by
the Senate, Senator Cullerton stated:
"The purpose of this bill is to overcome what was viewed by
many as a wrongly decided case out in DuPage County dealing
with a person who transferred his home into tenancy by the
entirety after a judgment against him had been entered.
Purpose of this bill is to go back to what our original intent
was with regard to tenancy by the entirety and not [to] allow
-- for that type of a -- of a situation to prevail." 90th
Ill. Gen. Assem., Senate Proceedings, June 1, 1997, at 33-34.
There is little doubt that Senator Cullerton's mention of the "case
out in DuPage County" was a reference to E.J. McKernan. Based on
Varelis, we find that the 1997 amendment was a clarification of
existing law and must be applied to the facts before us.
Next, we must decide the meaning of the "clarification" made
by the amendment. When a statute has been amended, courts are to
construe the language of the amendment together with the original
act. People v. Woodard, 175 Ill. 2d 435, 444 (1997). In
interpreting a statute, courts seek to ascertain and give effect to
the intent of the legislature, and the best indication of that
intent is the plain language of the statute itself. Bubb v.
Springfield School District 186, 167 Ill. 2d 372, 381 (1995).
In this case, the relevant language is the provision added by
the 1997 amendment, which states that the protections of the
tenancy by the entirety do not apply when "the property was
transferred into tenancy by the entirety with the sole intent to
avoid the payment of debts existing at the time of the transfer
beyond the transferor's ability to pay those debts as they become
due." 735 ILCS Ann. 5/12--112 (Smith-Hurd 1998).
It is clear from this language that our decision in E.J.
McKernan is no longer valid. In E.J. McKernan, we held that intent
is irrelevant to a transfer into tenancy by the entirety. See E.J.
McKernan, 268 Ill. App. 3d at 390. The amendment specifically
provides, however, that property may be excluded from the
protection of tenancy by the entirety, depending on the
transferor's intent.
Similarly, we believe that the decision in Del Giudice is
inconsistent with the amendment. In Del Giudice, the court held
that whether a transfer into tenancy by the entirety is valid
depends on whether it violates the Uniform Fraudulent Transfer Act.
See Del Giudice, 287 Ill. App. 3d at 218-19. The language of the
amendment, however, contains no reference to the Uniform Fraudulent
Transfer Act. Instead, it provides a much narrower circumstance in
which a transfer will be considered invalid, namely, when the
transferor's "sole intent" is to avoid the payment of existing
debts. Based on this language, we must conclude that the
legislature did not intend for the Uniform Fraudulent Transfer Act
to apply to transfers into tenancy by the entirety.
Although we believe that it is unnecessary to look to
legislative history to interpret the unambiguous language of the
amendment (see People v. Fitzpatrick, 158 Ill. 2d 360, 364-65
(1994)), we note that the history of the amendment supports our
interpretation of its effect on E.J. McKernan and Del Giudice.
First, as we have already explained, the legislative debates
indicate that the purpose of the clarification was to avoid the
result reached in E.J. McKernan. In addition, the legislative
history indicates that the legislature intentionally chose not to
apply the Uniform Fraudulent Transfer Act to transfers into tenancy
by the entirety. An earlier version of the bill amending the
statute provided that property transferred in violation of the
Uniform Fraudulent Transfer Act would not be protected from
creditors of one spouse. Although the Senate passed this version
of the bill, this language was removed from the bill, and the
version of the bill that passed both houses contained language with
no reference to the Uniform Fraudulent Transfer Act.
In light of the amendment, neither E.J. McKernan nor Del
Giudice is a correct statement of the law. Instead, we believe the
language of the amendment clearly sets forth the standard that
trial courts must apply when a creditor challenges a transfer into
tenancy by the entirety: the property is not liable to be sold to
satisfy a judgment against only one spouse unless the property was
transferred with "the sole intent to avoid the payment of debts
existing at the time of the transfer beyond the transferor's
ability to pay those debts as they become due." 735 ILCS Ann.
5/12--112 (Smith-Hurd 1998). As in other cases, the question of
intent will be for the trier of fact. See, e.g., Edward M. Cohon
& Associates, Ltd. v. First National Bank, 249 Ill. App. 3d 929,
936-38 (1993) (existence of intent to defraud under the Mechanics'
Lien Act (Ill. Rev. Stat. 1989, ch. 82, par. 1 et seq.) is a
question for the trier of fact); Western States Insurance Co. v.
Kelley-Williamson Co., 211 Ill. App. 3d 7, 12-13 (1991) (intent
under an exclusionary clause of an insurance contract is a question
of fact).
In this case, the trial court based its decision to strike the
sheriff's sale on E.J. McKernan and, therefore, did not consider
Weber's intent in transferring his property into tenancy by the
entirety. Based on the 1997 amendment, we must reverse the trial
court's judgment striking the sheriff's sale and remand for further
proceedings to determine whether the exception contained in the
amendment applies.
We now consider the issue raised in Weber's cross-appeal, as
the resolution of this matter will be relevant to the proceedings
on remand. In his cross-appeal, Weber argues that the trial court
erred in granting the Trust's motion to strike his answer to the
Trust's request for admission of facts.
During proceedings on Weber's motion to strike the sheriff's
sale, the Trust served Weber with a request for admission of facts.
The request, which was served on December 2, 1996, asked Weber to
admit or deny the following facts:
"1. That on or about October 22, 1992, Ray Weber as President
of Midwest Webco, Inc. received a letter from Philip
Pollack & Company indicating that Philip Pollack &
Company had completed an appraisal of the liquidation
value of the machinery and equipment of Midwest Webco.,
Inc. and setting forth an appraised liquidation value of
$400,950.00 for all of said items. ***
2. That on or about October 14, 1993, machinery and
equipment of Midwest Webco, Inc. were sold through an
action [sic].
3. That proceeds received from said auction amounted to
approximately $491,402.33.
4. That prior to April 13, 1994 this Defendant knew that the
outstanding secured debts of Midwest Webco, Inc. for
those creditors who had priority over the debt due the
Plaintiff were as follows:
(1) Lake Shore Bank $290,000.00 plus interest
(2) Margaret A. Ranney Trust $144,000.00 plus interest
(3) Galland Henning Nopak, Inc. $240,000.00 plus
interest
5. That prior to April 13, 1994, Ray Weber knew that after
the debts due the Lake Shore Bank, Margaret A. Ranney
Trust, and Galland Henning Nopak, Inc. were satisfied out
of the proceeds obtained from the auction of machinery
and equipment of Midwest Webco, Inc. that no monies would
be available to satisfy the debt due Theodore Ranney, as
trustee of the Theodore R. Ranney Trust dated January 4,
1979."
Weber did not serve the Trust with an answer to this request
until March 11, 1997. In the answer, Weber asserted that the
Pollack valuation was low, admitted that the machinery and
equipment were sold at auction, claimed insufficient information to
admit or deny the amount realized at the auction, and denied the
remaining facts contained in the request.
Subsequently, the Trust filed a motion to strike the answer
based on the fact that Weber had failed to respond to the request
within 28 days. Weber responded that his delay in filing his
answer should be excused because it was attributable to the Trust.
He asserted that, before receiving the request for admission of
facts, he was unaware of the exact dollar amount realized from the
auction of the Midwest Webco, Inc., assets and contacted the
Trust's attorney late in December to request documentation to
verify this amount. According to Weber, the Trust's attorney
agreed to provide the documentation but never did so. Weber also
argued that the Trust's motion should be denied because the request
contained ultimate facts" and because the late filing of his answer
did not prejudice the Trust.
On March 14, 1997, after hearing the parties' arguments, the
trial court granted the Trust's motion to strike the answer and
held that the facts contained in the request were deemed to be
admitted. Weber now claims that the court's ruling was an abuse of
discretion.
Under Supreme Court Rule 216(c), factual matters contained in
a request for admission of facts are deemed admitted unless the
party served with the request denies them, explains why they cannot
be admitted or denied, or objects to the request within 28 days.
134 Ill. 2d R. 216(c); People v. Mindham, 253 Ill. App. 3d 792,
793-94 (1993). A trial court has the discretion to permit a party
to file a response to a request for admission of facts after the
28-day time limit but only if the party has shown "good cause" for
an extension of time. See 134 Ill. 2d R. 183; Bright v. Dicke, 166 Ill. 2d 204, 209 (1995).
In this case, the trial court properly granted the Trust's
motion to strike Weber's answer to the request for admission of
facts because he failed to show "good cause" for his failure to
file a timely response to the request. First, contrary to Weber's
argument, a lack of prejudice to the opposing party does not
constitute "good cause." See, e.g., Bright, 166 Ill. 2d at 209.
In addition, this court has previously held that it is not improper
for a request for admission of facts to contain "ultimate facts."
See Mindham, 253 Ill. App. 3d at 799.
Further, although Weber argues that his delay in filing his
answer was caused by the Trust's failure to provide documentation
concerning one of the facts contained in the request, these facts
do not establish good cause. Weber does not explain why he failed
to make a timely motion for an extension of time to respond. In
addition, contrary to his assertion, Weber did not need the
documentation from the Trust in order to respond to the request for
admission of facts. Rule 216(c) permits a party to answer a
request for admission of facts by explaining why the facts cannot
be admitted or denied. Consequently, Weber could have filed an
answer explaining that he had insufficient information to admit or
deny the dollar amount realized from the auction. Indeed, he did
just that in the answer he filed in March 1997. The record
contains no justification for his failure to file this answer
within the 28-day time limit.
Thus, we find that the trial court did not abuse its
discretion in granting the Trust's motion to strike Weber's
response to its request for admission of facts and ordering that
these facts be deemed admitted. On remand, these facts will be
deemed admitted.
For the foregoing reasons, the judgment of the circuit court
of Kane County is affirmed in part, reversed in part, and the cause
is remanded.
Affirmed in part and reversed in part; cause remanded.
RATHJE, J., concurs.
JUSTICE HUTCHINSON, specially concurring:
I agree with the majority's order disposing of the Trust's
appeal in this matter. However, I believe that this court has an
obligation to provide certain instructions on remand because I do
not agree that the amendment in question (735 ILCS Ann. 5/12--112
(Smith-Hurd 1998)) is clear and unambiguous on its face.
The 1997 amendment adds the dimension of intent to the
statutory authority. I acknowledge that the determination of
intent is within the province of the trier of fact. See, e.g.,
Edward M. Cohon & Associates, Ltd. v. First National Bank, 249 Ill.
App. 3d 929, 936-38 (1993). However, I believe that the language
of the 1997 amendment, which is identified as a clarification of
the existing statutory authority by the legislature, still leaves
the issue of how to determine "sole intent" unclear. To adhere to
the cardinal rule of statutory construction, which is "to ascertain
and give effect to the legislative purpose and intent of the
statute" (Olney Trust Bank v. Pitts, 200 Ill. App. 3d 917, 923
(1990)), it is my opinion that this court "must look to the reasons
for the enactment of the statute and purposes to be gained thereby
and construe the statute in a manner which is consistent with that
purpose." Olney Trust Bank, 200 Ill. App. 3d at 923.
The majority looked at legislative intent, the reasons for the
amendment, and the likely purposes to be gained from the statutory
authority as amended when it came to the conclusions that (1) the
amendment should be considered, and (2) section 5(a) of the Uniform
Fraudulent Transfer Act (740 ILCS 160/5(a) (West 1996)) was
inapplicable to the subject transfer. I would use a similar
analysis to assist the trial court in defining and determining
"sole intent."
The legislative discussion of March 1997 begins by
acknowledging that the goal of the statutory authority remains to
protect the property of married couples. More specifically, the
legislature was concerned about an unsuspecting wife and/or husband
who found herself/himself in a position of losing the family
residence as a result of some clandestine or inappropriate action
by her/his spouse dealing with the equity in that residence. The
legislature was careful during the March 1997 debates, as well as
the earlier debates, to recognize the rights of creditors at the
same time. However, the later debates make it quite clear that the
timing of the transfer of the property into a tenancy by the
entirety is very important.
Specifically, a statement by the 1997 amendment sponsor
indicates that it is "only in a very limited situation, where after
there is literally a judgment entered against you, you can't
transfer your property into -- from joint tenancy into tenancy by
the entirety; you should do it beforehand." 90th Ill. Gen. Assem.,
Senate Proceedings, March 17, 1997, at 32 (statements of Senator
Cullerton). Furthermore, later in the discussion, Senator
Cullerton suggests that the conditions of the Uniform Fraudulent
Transfer Act are very clear and that those factors would be helpful
in determining actual intent to hinder, delay, or defraud
creditors. 90th Ill. Gen. Assem., Senate Proceedings, March 17,
1997, at 33. However, as correctly noted by the majority, the 1997
amendment does not specifically call for an interface with or
application of the Uniform Fraudulent Transfer Act, nor do Senator
Cullerton's remarks require such an interpretation. Instead, I
would interpret Senator Cullerton's remarks to mean that the
factors identified in that act could be used as a place to begin
when defining and determining "sole intent."
Therefore, I would remand this matter with instructions that
the trial court initially consider the eleven factors from section
5(b) of the Uniform Fraudulent Transfer Act (740 ILCS 160/5(b)
(West 1996)) and then specifically look to the timing of the
transfer to define and determine "sole intent."
__________________________________________________________________
IN THE
APPELLATE COURT OF ILLINOIS
SECOND DISTRICT
__________________________________________________________________
HARRIS BANK ST. CHARLES, ) Appeal from the Circuit Court
) of Kane County
Plaintiff, )
)
v. )
) No. 93--CH--0332
RAY WEBER, )
)
Defendant and Counter- )
defendant-Appellee and )
Cross-Appellant )
)
(Bruce Dent; Midwest Webco, )
Inc.; Theodore R. Ranney, )
Indiv.; Margaret A. Ranney; )
Galland Henning Nopak, Inc.; )
Unknown Owners; and Nonrecord )
Claimants, Defendants; Theodore )
R. Ranney, as Trustee of the )
Theodore R. Ranney Trust dated )
January 4, 1979, Defendant and ) Honorable
Counterplaintiff-Appellant and ) Melvin E. Dunn,
Cross-Appellee). ) Judge, Presiding.
__________________________________________________________________
JUSTICE BOWMAN delivered the opinion of the court:
On February 14, 1994, the trial court entered an agreed
judgment of foreclosure against three parcels of property at 33 W
749 Reed Road in Geneva, Illinois. The proceeds from the judicial
sale of the property were insufficient to satisfy the claim of
defendant-counterplaintiff, Theodore R. Ranney, as trustee of the
Theodore R. Ranney Trust (Trust), the holder of a junior mortgage
given by defendants Ray Weber and Bruce Dent. On September 20,
1994, the Trust obtained a deficiency judgment of $320,708.24
against Weber and Dent. In October 1996, Weber filed a motion to
strike the sheriff's sale of his home to satisfy this judgment,
asserting that, on April 13, 1994, he had transferred the home into
tenancy by the entirety with his wife.
The Trust appeals the trial court's April 14, 1997, order
striking the sheriff's sale. Weber has filed a cross-appeal
challenging the trial court's order granting the Trust's motion to
strike his answer to the Trust's request for admission of facts and
finding all facts contained in the request to be deemed admitted.
We reverse the order striking the sheriff's sale but affirm the
order striking Weber's answer to the request for admission of
facts.
The facts relevant to this appeal are as follows. In 1989,
defendants Margaret and Theodore Ranney loaned Ray Weber and Bruce
Dent $333,591.05 in exchange for a junior mortgage on the Reed Road
property. Around the same time, they loaned defendant Midwest
Webco, Inc., of which Weber and Dent were principal shareholders,
$200,000 in exchange for a note for that amount and a security
interest in the corporation's assets. Weber and Dent also gave the
Ranneys a security interest in these assets to secure their junior
mortgage. In November 1990, the Ranneys transferred their interest
in the mortgage on the Reed Road property to the Theodore R. Ranney
Trust and transferred their interest in the $200,000 note to the
Margaret A. Ranney Trust.
On August 6, 1993, Midwest Webco, Inc., assigned its assets
for the benefit of its creditors to Jerome Frett, who was to
liquidate the assets. On October 14, 1993, an auction was held at
which these assets were sold. According to Weber, he did not
become aware of the amount or distribution of the proceeds until
June 1994.
On September 16, 1993, plaintiff Harris Bank, the holder of
the senior mortgage on the Reed Road property, filed a complaint
for foreclosure of its mortgage. The trial court gave the Trust
leave to intervene in this action as a defendant and to file a
counterclaim against the defendants (other than the Ranneys) for
foreclosure of its junior mortgage.
On February 14, 1994, the trial court entered an agreed
judgment of foreclosure and sale of the Reed Road property. The
court found that Harris Bank's mortgage lien was superior to all
others and that the Trust's mortgage lien was second in priority.
It ordered the property to be sold and the proceeds of the
sheriff's sale to be distributed according to this priority.
On March 19, 1994, Weber married Jane Kaufmann. At the time,
title to his home in Batavia, Illinois, was in his name only. On
April 13, 1994, he transferred title in his home to himself and
Kaufmann as tenants by the entirety.
On May 27, 1994, Harris made a successful bid for the Reed
Road property at the sheriff's sale. Its bid was equal to the
amounts owed to it plus the sheriff's fees and commission.
Consequently, there were no funds from the sale to satisfy the
Trust's lien on the property. On June 3, 1994, the trial court
entered an order approving the sale and distribution of the
proceeds. On that same day, the Trust filed a motion for a
deficiency judgment against Weber and Dent.
On September 20, 1994, the trial court entered a deficiency
judgment in favor of the Trust and against Weber and Dent in the
amount of $320,708.24. Thereafter, the Trust filed a memorandum of
this judgment in Kane County, and a sheriff's sale of Weber's home
was scheduled.
A few days before the sheriff's sale was to take place, Weber
filed a motion to strike the sale. In his motion, he claimed that
his home could not be sold to pay the Trust's deficiency judgment
because the home had been transferred into tenancy by the entirety
in April 1994. In support of his motion, Weber relied on the
decision in E.J. McKernan Co. v. Gregory, 268 Ill. App. 3d 383 (2d
Dist. 1994), in which this court held that a judgment debtor's
transfer of property into tenancy by the entirety in order to
shield that property from the judgment creditor cannot violate the
Uniform Fraudulent Transfer Act (740 ILCS 160/1 et seq. (West
1992)).
The Trust responded that the case should be governed by In re
Marriage of Del Giudice, 287 Ill. App. 3d 215 (1st Dist. 1997), in
which, contrary to E.J. McKernan, the first district held that a
judgment debtor who attempts to avoid a judgment creditor by
transferring property into tenancy by the entirety after a judgment
has been entered may violate the Uniform Fraudulent Transfer Act.
According to the Trust, Weber's transfer of the property was
fraudulent under the Uniform Fraudulent Transfer Act because it
occurred after the judgment of foreclosure was entered; he knew
that the proceeds from the sheriff's sale and auction of the
corporate assets would be insufficient to satisfy the Trust's
claim; he received no consideration for the transfer to his wife;
the transfer was of substantially all of his assets; and he
continued to maintain control over the property after the transfer.
After a hearing on March 14, 1997, the trial court granted
Weber's motion. It found that it was required to follow E.J.
McKernan Co. v. Gregory, 268 Ill. App. 3d 383 (1994), because this
was the controlling authority in its district. Based on E.J.
McKernan, the court struck the sheriff's sale.
The Trust raises two contentions on appeal: (1) the trial
court erred in holding that Weber's transfer of title to his home
to tenancy by the entirety did not violate the Uniform Fraudulent
Transfer Act, and (2) the trial court was required to follow Del
Giudice, the most recent appellate court decision, rather than E.J.
McKernan, the decision of the appellate court in the district where
it was located.
The trial court correctly found that it was bound to follow
our decision in E.J. McKernan. See Aleckson v. Village of Round
Lake Park, 176 Ill. 2d 82, 92 (1997). Effective August 22, 1997,
however, the tenancy by the entirety provision contained in the
Code of Civil Procedure was amended. See 735 ILCS Ann. 5/12--112
(Smith-Hurd 1998). The parties have failed to discuss the effect
of this amendment in their briefs. However, we find it necessary
sua sponte to address this issue, which we find dispositive. See
Barnett v. Zion Park District, 171 Ill. 2d 378, 389 (1996); Hux v.
Raben, 38 Ill. 2d 223, 224 (1967). Based on this amendment, we
hold that E.J. McKernan and Del Giudice are no longer valid, we
reverse the judgment of the trial court, and we remand the cause
for further proceedings consistent with the amended language of the
statute.
We begin our discussion of the amendment with a description of
its background. Under the Joint Tenancy Act (765 ILCS 1005/0.01 et
seq. (West 1992)) a husband and wife may hold property as tenants
by the entirety (765 ILCS 1005/1c (West 1992)). Prior to the 1997
amendment, the Code of Civil Procedure provided, without
qualification, that, when a husband and wife hold property as
tenants by the entirety, the property may not be attached by a
creditor of one spouse:
"Any real property held in tenancy by the entirety shall not
be liable to be sold upon judgment entered on or after October
1, 1990 against only one of the tenants." 735 ILCS 5/12--112
(West 1992).
Although the tenancy by the entirety statutes permit married
individuals to protect their property from creditors of one spouse
by transferring it into tenancy by the entirety, the Uniform
Fraudulent Transfer Act prohibits transfers with the intent to
defraud a creditor:
"(a) A transfer made or obligation incurred by a debtor
is fraudulent as to a creditor, whether the creditor's claim
arose before or after the transfer was made or the obligation
was incurred, if the debtor made the transfer or incurred the
obligation:
(1) with actual intent to hinder, delay, or defraud any
creditor of the debtor; or
(2) without receiving a reasonably equivalent value in
exchange for the transfer or obligation, and the debtor:
***
(B) intended to incur, or believed or reasonably should
have believed that he would incur, debts beyond his ability to
pay as they became due." 740 ILCS 160/5(a) (West 1992).
The Uniform Fraudulent Transfer Act lists eleven factors that may
be considered among other factors in determining whether a debtor
made a transfer with actual intent under paragraph (1) of
subsection (a). See 740 ILCS 160/5(b) (West 1992).
In E.J. McKernan and Del Giudice, the courts attempted to
reconcile the protections contained in the tenancy by the entirety
provisions with the restrictions of the Uniform Fraudulent Transfer
Act. In E.J. McKernan Co. v. Gregory, 268 Ill. App. 3d 383 (1994),
we held that the Uniform Fraudulent Transfer Act does not apply to
transfers into tenancy by the entirety. In that case, the
defendant and his wife owned their home as joint tenants but
conveyed title to themselves as tenants by the entirety after
judgment was entered against the defendant. E.J. McKernan, 268
Ill. App. 3d at 388.
In upholding the validity of this transfer, we explained that,
although the Uniform Fraudulent Transfer Act prohibits transfers
made with the intent to hinder, delay, or defraud creditors,
"intent is irrelevant in a tenancy by the entirety conveyance
because it simply cannot be fraudulent to engage in conduct
that is specifically and unambiguously sanctioned by statute.
A plain reading of the tenancy by the entirety statutes makes
it clear that no mental state is required to use the tenancy's
protection." E.J. McKernan, 268 Ill. App. 3d at 390.
We therefore concluded that the legislature did not intend the
Uniform Fraudulent Transfer Act to apply to transfers into tenancy
by the entirety and reversed the trial court's order refusing to
restrain the sale of the defendant's home. E.J. McKernan, 268 Ill.
App. 3d at 390-91.
Conversely, in In re Marriage of Del Giudice, 287 Ill. App. 3d
215 (1997), the first district held that transfers into tenancy by
the entirety are subject to the restrictions of the Uniform
Fraudulent Transfer Act. Del Giudice, 287 Ill. App. 3d at 218-19.
Although the facts of the Del Giudice case were almost identical to
those in E.J. McKernan, the court declined to follow our decision
in that case. The Del Giudice court stated that it disagreed that
the intent behind a transfer of title to tenancy by the entirety is
irrelevant simply because the tenancy by the entirety statutes
permit married couples to use the tenancy to shelter their property
from creditors. According to the Del Giudice court, such transfers
may nevertheless be fraudulent because the purpose of the Uniform
Fraudulent Transfer Act is to "invalidate otherwise sanctioned
transactions made with a fraudulent intent." Del Giudice, 287 Ill.
App. 3d at 218. Thus, the court held that the trial court erred in
finding that the defendant's retitling of his property could not
violate the Uniform Fraudulent Transfer Act and remanded the cause
for the trial court to apply the Act. Del Giudice, 287 Ill. App.
3d at 219.
In August 1997, however, the legislature amended the tenancy
by the entirety provision contained in the Code of Civil Procedure
as follows:
"Any real property, or any beneficial interest in a land
trust, held in tenancy by the entirety shall not be liable to
be sold upon judgment entered on or after October 1, 1990
against only one of the tenants, except if the property was
transferred into tenancy by the entirety with the sole intent
to avoid the payment of debts existing at the time of the
transfer beyond the transferor's ability to pay those debts as
they become due." (Emphasis added.) 735 ILCS Ann. 5/12--112
(Smith-Hurd 1998).
The legislature specified that this amendment "is intended as a
clarification of existing law and not as a new enactment" (735 ILCS
Ann. 5/12--112 (Smith-Hurd 1998)).
Given that the amendment became effective subsequent to the
transfer and the trial court's decision in this case, we must first
determine whether it applies to the facts before us. Generally, an
amendment will be considered prospective, but the presumption of
prospective application does not apply when the amendment merely
clarifies existing law. Royal Imperial Group, Inc. v. Joseph
Blumberg & Associates, Inc., 240 Ill. App. 3d 360, 364-65 (1992).
When the legislature has made a material change to a statute, it is
presumed that the legislature intended to change the law. Board of
Trustees of Southern Illinois University v. Department of Human
Rights, 159 Ill. 2d 206, 213 (1994). That presumption, however,
can be rebutted by evidence of legislative intent to merely clarify
the law. State of Illinois v. Mikusch, 138 Ill. 2d 242, 252
(1990). Also, when an amendment follows a controversy concerning
the interpretation of the original statute, courts will regard the
amendment as a clarification of, rather than a change in, existing
law. Church v. State of Illinois, 164 Ill. 2d 153, 163-64 (1995).
For example, in Varelis v. Northwestern Memorial Hospital, 167 Ill. 2d 449 (1995), the supreme court held that an amendment made
in response to a conflict among appellate court districts was
merely a clarification of existing law. In that case, the issue
was whether the personal representative of a decedent could bring
an action under the Wrongful Death Act (Ill. Rev. Stat. 1987, ch.
70, par. 1 et seq. (now 740 ILCS 180/0.01 et seq. (West 1996)))
when, during his lifetime, the decedent had obtained a judgment in
a personal injury action based on the same incident. Varelis, 167 Ill. 2d at 450-51.
Until 1995, the Wrongful Death Act did not expressly address
whether a wrongful death action could be maintained under these
circumstances, and a split in the appellate court developed with
respect to this issue. While decisions from the first district
permitted successive personal injury and wrongful death actions, a
fourth district decision did not. Varelis, 167 Ill. 2d at 452-55.
In 1995, however, the legislature amended the Wrongful Death
Act to expressly prohibit a wrongful death action when the decedent
has already obtained a judgment as the result of a personal injury
lawsuit based on the same occurrence. Although the amendatory act
provided that it applied to actions accruing on or after its
effective date, March 9, 1995, and the decedent in Varelis died in
1989, the supreme court nevertheless applied the amendment in
Varelis because it found that the amendment was a clarification of
existing law. Varelis, 167 Ill. 2d at 451, 461-65.
In support of its finding that the amendment clarified rather
than changed existing law, the supreme court noted that, in the
legislative debates, legislators had indicated that the amendment
was intended to address the conflict in appellate court decisions.
Because the amendment was made in response to decisions permitting
successive personal injury and wrongful death actions and was
designed to explain whether the Wrongful Death Act applied in these
circumstances, the supreme court held that it was intended as a
clarification of existing law rather than a change in substantive
law. Varelis, 167 Ill. 2d at 461-63.
We believe that the amendment at issue in the case before us
was also intended only as a clarification of existing law. First,
the legislature explicitly provided that it was intended as a
clarification and not as a new enactment. In addition, as in
Varelis, the legislative debates indicate that the amendment was
the result of an appellate court conflict concerning the
interpretation of the statute. At the time the bill was passed by
the Senate, Senator Cullerton stated:
"The purpose of this bill is to overcome what was viewed by
many as a wrongly decided case out in DuPage County dealing
with a person who transferred his home into tenancy by the
entirety after a judgment against him had been entered.
Purpose of this bill is to go back to what our original intent
was with regard to tenancy by the entirety and not [to] allow
-- for that type of a -- of a situation to prevail." 90th
Ill. Gen. Assem., Senate Proceedings, June 1, 1997, at 33-34.
There is little doubt that Senator Cullerton's mention of the "case
out in DuPage County" was a reference to E.J. McKernan. Based on
Varelis, we find that the 1997 amendment was a clarification of
existing law and must be applied to the facts before us.
Next, we must decide the meaning of the "clarification" made
by the amendment. When a statute has been amended, courts are to
construe the language of the amendment together with the original
act. People v. Woodard, 175 Ill. 2d 435, 444 (1997). In
interpreting a statute, courts seek to ascertain and give effect to
the intent of the legislature, and the best indication of that
intent is the plain language of the statute itself. Bubb v.
Springfield School District 186, 167 Ill. 2d 372, 381 (1995).
In this case, the relevant language is the provision added by
the 1997 amendment, which states that the protections of the
tenancy by the entirety do not apply when "the property was
transferred into tenancy by the entirety with the sole intent to
avoid the payment of debts existing at the time of the transfer
beyond the transferor's ability to pay those debts as they become
due." 735 ILCS Ann. 5/12--112 (Smith-Hurd 1998).
It is clear from this language that our decision in E.J.
McKernan is no longer valid. In E.J. McKernan, we held that intent
is irrelevant to a transfer into tenancy by the entirety. See E.J.
McKernan, 268 Ill. App. 3d at 390. The amendment specifically
provides, however, that property may be excluded from the
protection of tenancy by the entirety, depending on the
transferor's intent.
Similarly, we believe that the decision in Del Giudice is
inconsistent with the amendment. In Del Giudice, the court held
that whether a transfer into tenancy by the entirety is valid
depends on whether it violates the Uniform Fraudulent Transfer Act.
See Del Giudice, 287 Ill. App. 3d at 218-19. The language of the
amendment, however, contains no reference to the Uniform Fraudulent
Transfer Act. Instead, it provides a much narrower circumstance in
which a transfer will be considered invalid, namely, when the
transferor's "sole intent" is to avoid the payment of existing
debts. Based on this language, we must conclude that the
legislature did not intend for the Uniform Fraudulent Transfer Act
to apply to transfers into tenancy by the entirety.
Although we believe that it is unnecessary to look to
legislative history to interpret the unambiguous language of the
amendment (see People v. Fitzpatrick, 158 Ill. 2d 360, 364-65
(1994)), we note that the history of the amendment supports our
interpretation of its effect on E.J. McKernan and Del Giudice.
First, as we have already explained, the legislative debates
indicate that the purpose of the clarification was to avoid the
result reached in E.J. McKernan. In addition, the legislative
history indicates that the legislature intentionally chose not to
apply the Uniform Fraudulent Transfer Act to transfers into tenancy
by the entirety. An earlier version of the bill amending the
statute provided that property transferred in violation of the
Uniform Fraudulent Transfer Act would not be protected from
creditors of one spouse. Although the Senate passed this version
of the bill, this language was removed from the bill, and the
version of the bill that passed both houses contained language with
no reference to the Uniform Fraudulent Transfer Act.
In light of the amendment, neither E.J. McKernan nor Del
Giudice is a correct statement of the law. Instead, we believe the
language of the amendment clearly sets forth the standard that
trial courts must apply when a creditor challenges a transfer into
tenancy by the entirety: the property is not liable to be sold to
satisfy a judgment against only one spouse unless the property was
transferred with "the sole intent to avoid the payment of debts
existing at the time of the transfer beyond the transferor's
ability to pay those debts as they become due." 735 ILCS Ann.
5/12--112 (Smith-Hurd 1998). As in other cases, the question of
intent will be for the trier of fact. See, e.g., Edward M. Cohon
& Associates, Ltd. v. First National Bank, 249 Ill. App. 3d 929,
936-38 (1993) (existence of intent to defraud under the Mechanics'
Lien Act (Ill. Rev. Stat. 1989, ch. 82, par. 1 et seq.) is a
question for the trier of fact); Western States Insurance Co. v.
Kelley-Williamson Co., 211 Ill. App. 3d 7, 12-13 (1991) (intent
under an exclusionary clause of an insurance contract is a question
of fact).
In this case, the trial court based its decision to strike the
sheriff's sale on E.J. McKernan and, therefore, did not consider
Weber's intent in transferring his property into tenancy by the
entirety. Based on the 1997 amendment, we must reverse the trial
court's judgment striking the sheriff's sale and remand for further
proceedings to determine whether the exception contained in the
amendment applies.
We now consider the issue raised in Weber's cross-appeal, as
the resolution of this matter will be relevant to the proceedings
on remand. In his cross-appeal, Weber argues that the trial court
erred in granting the Trust's motion to strike his answer to the
Trust's request for admission of facts.
During proceedings on Weber's motion to strike the sheriff's
sale, the Trust served Weber with a request for admission of facts.
The request, which was served on December 2, 1996, asked Weber to
admit or deny the following facts:
"1. That on or about October 22, 1992, Ray Weber as President
of Midwest Webco, Inc. received a letter from Philip
Pollack & Company indicating that Philip Pollack &
Company had completed an appraisal of the liquidation
value of the machinery and equipment of Midwest Webco.,
Inc. and setting forth an appraised liquidation value of
$400,950.00 for all of said items. ***
2. That on or about October 14, 1993, machinery and
equipment of Midwest Webco, Inc. were sold through an
action [sic].
3. That proceeds received from said auction amounted to
approximately $491,402.33.
4. That prior to April 13, 1994 this Defendant knew that the
outstanding secured debts of Midwest Webco, Inc. for
those creditors who had priority over the debt due the
Plaintiff were as follows:
(1) Lake Shore Bank $290,000.00 plus interest
(2) Margaret A. Ranney Trust $144,000.00 plus interest
(3) Galland Henning Nopak, Inc. $240,000.00 plus
interest
5. That prior to April 13, 1994, Ray Weber knew that after
the debts due the Lake Shore Bank, Margaret A. Ranney
Trust, and Galland Henning Nopak, Inc. were satisfied out
of the proceeds obtained from the auction of machinery
and equipment of Midwest Webco, Inc. that no monies would
be available to satisfy the debt due Theodore Ranney, as
trustee of the Theodore R. Ranney Trust dated January 4,
1979."
Weber did not serve the Trust with an answer to this request
until March 11, 1997. In the answer, Weber asserted that the
Pollack valuation was low, admitted that the machinery and
equipment were sold at auction, claimed insufficient information to
admit or deny the amount realized at the auction, and denied the
remaining facts contained in the request.
Subsequently, the Trust filed a motion to strike the answer
based on the fact that Weber had failed to respond to the request
within 28 days. Weber responded that his delay in filing his
answer should be excused because it was attributable to the Trust.
He asserted that, before receiving the request for admission of
facts, he was unaware of the exact dollar amount realized from the
auction of the Midwest Webco, Inc., assets and contacted the
Trust's attorney late in December to request documentation to
verify this amount. According to Weber, the Trust's attorney
agreed to provide the documentation but never did so. Weber also
argued that the Trust's motion should be denied because the request
contained ultimate facts" and because the late filing of his answer
did not prejudice the Trust.
On March 14, 1997, after hearing the parties' arguments, the
trial court granted the Trust's motion to strike the answer and
held that the facts contained in the request were deemed to be
admitted. Weber now claims that the court's ruling was an abuse of
discretion.
Under Supreme Court Rule 216(c), factual matters contained in
a request for admission of facts are deemed admitted unless the
party served with the request denies them, explains why they cannot
be admitted or denied, or objects to the request within 28 days.
134 Ill. 2d R. 216(c); People v. Mindham, 253 Ill. App. 3d 792,
793-94 (1993). A trial court has the discretion to permit a party
to file a response to a request for admission of facts after the
28-day time limit but only if the party has shown "good cause" for
an extension of time. See 134 Ill. 2d R. 183; Bright v. Dicke, 166 Ill. 2d 204, 209 (1995).
In this case, the trial court properly granted the Trust's
motion to strike Weber's answer to the request for admission of
facts because he failed to show "good cause" for his failure to
file a timely response to the request. First, contrary to Weber's
argument, a lack of prejudice to the opposing party does not
constitute "good cause." See, e.g., Bright, 166 Ill. 2d at 209.
In addition, this court has previously held that it is not improper
for a request for admission of facts to contain "ultimate facts."
See Mindham, 253 Ill. App. 3d at 799.
Further, although Weber argues that his delay in filing his
answer was caused by the Trust's failure to provide documentation
concerning one of the facts contained in the request, these facts
do not establish good cause. Weber does not explain why he failed
to make a timely motion for an extension of time to respond. In
addition, contrary to his assertion, Weber did not need the
documentation from the Trust in order to respond to the request for
admission of facts. Rule 216(c) permits a party to answer a
request for admission of facts by explaining why the facts cannot
be admitted or denied. Consequently, Weber could have filed an
answer explaining that he had insufficient information to admit or
deny the dollar amount realized from the auction. Indeed, he did
just that in the answer he filed in March 1997. The record
contains no justification for his failure to file this answer
within the 28-day time limit.
Thus, we find that the trial court did not abuse its
discretion in granting the Trust's motion to strike Weber's
response to its request for admission of facts and ordering that
these facts be deemed admitted. On remand, these facts will be
deemed admitted.
For the foregoing reasons, the judgment of the circuit court
of Kane County is affirmed in part, reversed in part, and the cause
is remanded.
Affirmed in part and reversed in part; cause remanded.
RATHJE, J., concurs.
JUSTICE HUTCHINSON, specially concurring:
I agree with the majority's order disposing of the Trust's
appeal in this matter. However, I believe that this court has an
obligation to provide certain instructions on remand because I do
not agree that the amendment in question (735 ILCS Ann. 5/12--112
(Smith-Hurd 1998)) is clear and unambiguous on its face.
The 1997 amendment adds the dimension of intent to the
statutory authority. I acknowledge that the determination of
intent is within the province of the trier of fact. See, e.g.,
Edward M. Cohon & Associates, Ltd. v. First National Bank, 249 Ill.
App. 3d 929, 936-38 (1993). However, I believe that the language
of the 1997 amendment, which is identified as a clarification of
the existing statutory authority by the legislature, still leaves
the issue of how to determine "sole intent" unclear. To adhere to
the cardinal rule of statutory construction, which is "to ascertain
and give effect to the legislative purpose and intent of the
statute" (Olney Trust Bank v. Pitts, 200 Ill. App. 3d 917, 923
(1990)), it is my opinion that this court "must look to the reasons
for the enactment of the statute and purposes to be gained thereby
and construe the statute in a manner which is consistent with that
purpose." Olney Trust Bank, 200 Ill. App. 3d at 923.
The majority looked at legislative intent, the reasons for the
amendment, and the likely purposes to be gained from the statutory
authority as amended when it came to the conclusions that (1) the
amendment should be considered, and (2) section 5(a) of the Uniform
Fraudulent Transfer Act (740 ILCS 160/5(a) (West 1996)) was
inapplicable to the subject transfer. I would use a similar
analysis to assist the trial court in defining and determining
"sole intent."
The legislative discussion of March 1997 begins by
acknowledging that the goal of the statutory authority remains to
protect the property of married couples. More specifically, the
legislature was concerned about an unsuspecting wife and/or husband
who found herself/himself in a position of losing the family
residence as a result of some clandestine or inappropriate action
by her/his spouse dealing with the equity in that residence. The
legislature was careful during the March 1997 debates, as well as
the earlier debates, to recognize the rights of creditors at the
same time. However, the later debates make it quite clear that the
timing of the transfer of the property into a tenancy by the
entirety is very important.
Specifically, a statement by the 1997 amendment sponsor
indicates that it is "only in a very limited situation, where after
there is literally a judgment entered against you, you can't
transfer your property into -- from joint tenancy into tenancy by
the entirety; you should do it beforehand." 90th Ill. Gen. Assem.,
Senate Proceedings, March 17, 1997, at 32 (statements of Senator
Cullerton). Furthermore, later in the discussion, Senator
Cullerton suggests that the conditions of the Uniform Fraudulent
Transfer Act are very clear and that those factors would be helpful
in determining actual intent to hinder, delay, or defraud
creditors. 90th Ill. Gen. Assem., Senate Proceedings, March 17,
1997, at 33. However, as correctly noted by the majority, the 1997
amendment does not specifically call for an interface with or
application of the Uniform Fraudulent Transfer Act, nor do Senator
Cullerton's remarks require such an interpretation. Instead, I
would interpret Senator Cullerton's remarks to mean that the
factors identified in that act could be used as a place to begin
when defining and determining "sole intent."
Therefore, I would remand this matter with instructions that
the trial court initially consider the eleven factors from section
5(b) of the Uniform Fraudulent Transfer Act (740 ILCS 160/5(b)
(West 1996)) and then specifically look to the timing of the
transfer to define and determine "sole intent."
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