Broaddus v. Shields

Filing 329

MEMORANDUM Opinion and Order Signed by the Honorable Amy J. St. Eve on 1/5/2012:Mailed notice(kef, )

IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
BRET A. BROADDUS,
Plaintiff/Counter-Defendant,
v.
KEVIN SHIELDS,
Defendant/Counter-Plaintiff.

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No. 08 C 4420

MEMORANDUM OPINION AND ORDER
AMY J. ST. EVE, District Court Judge:
Before the Court is Defendant/Counter-Plaintiff Kevin Shields’ motion for the entry of an
order directing Stanley, LLC, BNR Revocable Trust, Bret A. Broaddus, Associated Bank, Lake
Forest Bank & Trust and Wayne Hummer Investments, LLC (d/b/a Wintrust Wealth
Management), to immediately turn over certain assets to Shields’ undersigned counsel. For the
following reasons, the Court grants Shields’ motion.
BACKGROUND
On June 2, 2010, the Court granted Shields’ motion for summary judgment against
Plaintiff/Counter-Defendant Bret A. Broaddus as to Broaddus’ breach of fiduciary duty claim.
On September 1, 2010, the Court granted Shields’ motion for summary judgment as to his
counterclaims against Broaddus, which included a counterclaim for Shields’ attorney’s fees.
Based on the fee-shifting provisions in the parties’ agreements, the Court awarded Shields, as the
prevailing party, $798,619.16 in attorney’s fees on November 12, 2010. On December 16, 2010,
the Court entered final judgment in favor of Shields and against Broaddus in the amount of

$798,619.16, plus post-judgment interest pursuant to 28 U.S.C. § 1961.1 The Seventh Circuit
affirmed the Court’s summary judgment order and fee award on December 21, 2011. See
Broaddus v. Shields, --- F.2d ----, No. 11-1117, 2011 WL 6396542 (7th Cir. Dec. 21, 2011).
Broaddus has not paid Shields the amount he owes pursuant to the final judgment.
Accordingly, Shields has issued a number of citations to discover assets to Broaddus and various
trusts, banks, and financial institutions in an effort to recover his attorneys’ fees. Shields now
seeks an order from this Court ordering Associated Bank, Lake Forest Bank & Trust Co., and
Wayne Hummer Investments, LLC (d/b/a Wintrust Wealth Management) to turn over certain of
Broaddus’ assets to satisfy, in part, the judgment.
I.

Wintrust Wealth Management and Lake Forest Bank & Trust Co.
On March 1, 2011, the Clerk of the Court issued, and Shields served, a Citation to

Discover Assets on Wintrust Wealth Management Company (“Wintrust”) through its Authorized
Agent Jim Sommerfield (“Wintrust Citation”).2 (R. 280.) Wintrust filed an answer to the
Wintrust Citation on April 15, 2010. (R. 293.) In its answer, Wintrust stated that it has an
account titled “Lake Forest Bank & Trust Collateral Account FBO Stanley LLC” (“Wintrust
Investment Account”) with assets containing $1,411,010.63 as of February 28, 2011. (Id. ¶ 2.)
It further stated that Broaddus is an authorized signator on that account. (Id.)
On March 3, 2011, the Clerk of the Court issued, and Shields served, a Citation to
Discover Assets on Lake Forest Bank & Trust Co. (“Lake Forest”), which service was accepted

1

The parties agree that the interest rate is 0.29% for the relevant period. As such, the
judgment and accrued interest as of December 22, 2011 is $800,973.23. (R. 323 at 1, n.1.)
2

Wayne Hummer Investments does business as “Wintrust Wealth Management” (R.
315-10). Therefore, the two entities are one and the same for the purposes of this Order.
2

by David Stein, its attorney (“Lake Forest Citation”).3 (R. 285.) Lake Forest filed an answer to
the Lake Forest Citation on April 15, 2010. (R. 292.) Lake Forest’s answer states that it is
holding $11,745.47 in checking account number *****587 in Stanley, LLC’s (“Stanley”) name
(“Lake Forest Checking Account”). (Id.) Stanley is a Florida limited liability company formed
on December 8, 2010, after the Court granted summary judgment against Broaddus and Shields’
Fee Petition, and mere days before the Court entered final judgment against Broaddus. (R. 3157.) Broaddus, as Trustee of the BNR Revocable Trust, holds a 99% interest in Stanley.
Broaddus’ daughter, Rachel Broaddus, owns the remaining 1%. (R. 315-8; 315-9.) Broaddus is
an authorized signator on the Lake Forest Checking Account. (R. 292 ¶ 5.)
Lake Forest made two loans to Broaddus that are relevant to this case. Broaddus took out
both loans on August 30, 2010 in his name only, and he pledged assets as collateral to secure
both loans. (R. 320 at 2.) The first loan was loan number ***354-1 in the amount of
$500,000.00 (“354-1 Loan”). (Id. at 2-3; R. 320-2; R. 320-3.) Broaddus pledged the Wintrust
Investment Account, which at that point in time was account number ***9130, as collateral for
that loan. (Id.; R. 320-3.) During late November and early December 2010, Broaddus initiated a
refinance of the 354-1 Loan by a credit agreement in which the borrowers were Broaddus and
Stanley. (R. 320-5.) The refinance was given loan number ***913-1, and Broaddus executed
the loan documents on December 28, 2010. (Id.) At the same time, he initiated a transfer of the
Wintrust Investment Account from his own name to Stanley’s name, and the account was

3

Lake Forest is a wholly-owned subsidiary of Wintrust Financial Corporation, a publicly
traded financial holding company. Wayne Hummer Investments, LLC is a wholly-owned
subsidiary of North Shore Community Bank & Trust Company, which, in turn, is also a whollyowned subsidiary of Wintrust Financial Corporation. (R. 320 at 1, n.1.)
3

renumbered to ***1110.4 (R. 315-12.) The assets in the previous Wintrust Investment Account
(account ***9130) were moved into the new Wintrust Investment Account (account ***1110)
between January and February 2011, and the name on that new account is “Lake Forest Bank &
Trust Collateral Account FBO Stanley LLC.” (R. 320 at 3; R. 320-5; R. 320-6.)) Broaddus is
currently in default on the loan, and the balance due is $299, 354.10, inclusive of interest and
late fees. (R. 320 at 4; R. 292 ¶ 11.)
Broaddus and Standard Bank & Trust Company, as Trustee under a trust agreement dated
September 27, 2007, took out a second loan from Lake Forest in the amount of $910,000.00. (R.
320-10.) This loan is in default and in foreclosure in the Circuit Court of Cook County. See
Lake Forest Bank & Trust v. Standard Bank and Trust, et al., No. 11 CH 27994. As of
November 15, 2011, the balance due on this loan is $962,140.13 plus attorney’s fees and costs.
(R. 320 at 4.) The foreclosure remains pending and judgment has not been entered. Broaddus
pledged the Wintrust Investment Account, along with other assets, as collateral for this loan. (R.
320 at 5-12; R. 320-2; R. 320-11.)
On December 22, 2011, Shields filed a Motion to Approve a written stipulation entered
between Shields, Wintrust and Lake Forest regarding priority to the funds in the Wintrust
Investment Account and the Lake Forest Checking Account. (R. 324.) The Court approved the
stipulation and entered an order re same on January 3, 2012 (the “Stipulation and Order”). (R.
326; R. 327.) Pursuant to that Stipulation and Order, Wintrust and Lake Forest are entitled to

4

Email correspondence between Broaddus and Wintrust from February 2011 shows that
Broaddus intended to remove his name and social security number from all of his accounts in
order to avoid having to turn over the money in those accounts to Shields in satisfaction of the
Court’s order. (R. 320-8.)
4

set off $1,307,396.19 from the assets in the Wintrust Investment Account. Wintrust and Lake
Forest shall hold the balance of that account, in the approximate amount of $147,318.00,
pursuant to the pending Citations under further order of the Court. (Id.) Wintrust and Lake
Forest also shall hold the amount of $11,745.47 in the Lake Forest Checking Account pending
Citations until further order of the Court. (Id.)
II.

Broaddus, Associated Bank, Stanley, and the BNR Revocable Trust
On February 9, 2011, the Clerk of the Court issued, and Shields served, a Citation to

Discover Assets on Broaddus (“Broaddus Citation”) via certified mail. (R. 266.) Proof of
service was returned on March 21, 2011. (R. 315-1.) Broaddus has not answered the Citation,
nor has he appeared in Court to respond to it.
On March 8, 2011, the Clerk of the Court issued, and Shields served, a Citation to
Discover Assets on Associated Bank, NA (“Associated Bank Citation”). Associated Bank filed
an answer dated March 14, 2011, stating that it is holding $1,500.41 in an account in the name of
Bret A. Broaddus. (R. 289.)
On October 4, 2011, the Clerk of the Court issued, and Shields served, a Citation to
Discover Assets on Stanley through its Registered Agent Carlos Arazoza (“Stanley Citation”).
(R. 315-5.) Stanley has not answered the Citation, nor has it appeared in Court to respond to it.
On October 4, 2011, the Clerk of the Court issued, and Shields served, a Citation to
Discover Assets on BNR Revocable Trust (“Revocable Trust”) via the Trustee, Bret A.
Broaddus by certified mail (“Revocable Trust Citation”). (R. 315-6.) The Revocable Trust has
not answered the Citation, nor has it appeared in Court to respond to it. Broaddus is the Settlor
of the Revocable Trust with the right to all income from the trust and the authority to revoke and

5

terminate the trust as well as the authority to distribute the assets of the trust as he wishes. (R.
315-9 at 2, 5.) The Revocable Trust is a self-settled spendthrift trust and is established under
Florida law.5 (Id. at 7-8; 14.) Broaddus executed the trust agreement on October 20, 2010 (id. at
15-17), approximately two months after the Court granted summary judgment against Broaddus
and during the time the parties were briefing Shields’ Fee Petition. See R. 204 and R. 205
(September 1, 2010). When it was created, the Revocable Trust’s corpus consisted of $100.00.
(R. 315-9 at 18.)
LEGAL STANDARD
I.

Supplementary Proceedings
District courts follow the “law of supplementary proceedings of the state in which they

sit.” Laborers’ Pension Fund v. Pavement Maint., Inc., 542 F.3d 189, 191 (7th Cir. 2008);
Fed.R.Civ.P. 69(a). Accordingly, the Court proceeds under the Illinois statute governing
supplementary proceedings, 735 ILCS § 5/2-1402. Supplementary proceedings under § 2-1402
are designed to assist a judgment creditor in discovering assets of the judgment debtor in order to
satisfy an unpaid judgment. Pyshos v. Heart-Land Dev. Co., 258 Ill. App.3d 618, 622-23, 196
Ill. Dec. 889, 630 N.E.2d 1054 (1st Dist. 1994). “Section 2-1402 is to be construed liberally, not

5

Black’s Law Dictionary defines a “self-settled trust” as one “in which the settlor is also
the person who is to receive the benefits of the trust, usu. set up in an attempt to protect the trust
assets from creditors.” Black’s Law Dictionary 1518 (7th Ed. 1999); see also In re Quaid, No.
6:11-cv-0280-ACC, 2011 WL 5572605, at *3 (Nov. 16, 2011) (“A trust is self-settled if a settlor
is also the beneficiary) (citation omitted). A “spendthrift trust” is one “that prohibits the
beneficiary’s interest from being assigned and also prevents a creditor from attaching that
interest.” Black’s Law Dictionary 1518 (7th Ed. 1999); see also In re Quaid, 2011 WL 5572605
at *1 (“a spendthrift clause . . . shield[s] assets from any creditors of the beneficiaries”). The
Revocable Trust’s “spendthrift provision” is located on pages 7-8 of the trust agreement. (R.
315-9.)
6

only providing for the discovery of a debtor’s assets and income, but also vesting the courts with
‘broad powers to compel the application of discovered assets or income to satisfy a judgment.’”
City of Chicago v. Air Auto Leasing Co., 297 Ill. App.3d 873, 878, 232 Ill. Dec. 46, 697 N.E.2d
788, 791 (1st Dist. 1998) (citing Kennedy v. Four Boys Labor Serv., Inc., 279 Ill. App.3d 361,
367, 216 Ill. Dec. 160, 664 N.E.2d 1088 (2d Dist. 1996)); accord Society of Lloyd’s v. Estate of
McMurray, 274 F.3d 1133, 1135 (7th Cir. 2001). The relevant inquiries in a supplemental
proceeding are “(1) whether the judgment debtor is in possession of assets that should be applied
to satisfy the judgment; or (2) whether a third party is holding assets of the judgment debtor that
should be applied to satisfy the judgment.” Schak v. Blom, 334 Ill. App.3d 129, 133, 777 N.E.2d
635, 267 Ill. Dec. 832 (1st Dist. 2002); see also Star Ins. Co. v. Risk Marketing. Grp., Inc., 561
F.3d 656, 660-61 (7th Cir. 2009).
II.

Motion for Turnover of Assets
Under § 2-1402(m), proper service of a citation to discover assets creates a lien that

“binds nonexempt personal property, including money, choses in action, and effects of the
judgment debtor ...” 735 ILCS § 5/2-1402(m). 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. . . .” 735 ILCS § 5/2-1402(m)(2). The lien is perfected on the date the citation is served.
Cacok v. Covington Electric Co., Inc., 111 F.3d 52, 53 (7th Cir. 1997).
“A district court may ... summarily compel the application of discovered assets to satisfy
a judgment.” Society of Lloyd’s v. Estate of McMurray, 274 F.3d 1133, 1135 (7th Cir. 2001)
(citing Matthews v. Serafin, 319 Ill. App.3d 72, 77, 253 Ill. Dec. 201, 744 N.E.2d 934 (3d Dist.

7

2001) and Mid-Am. Elevator Co. v. Norcon, Inc., 287 Ill. App.3d 582, 587, 223 Ill. Dec. 202,
679 N.E.2d 387 (1st Dist. 1996)). “Before a judgment creditor may proceed against a third party
who is not the judgment debtor, the record must contain some evidence that the third party
possesses assets of the judgment debtor.” Schak, 334 Ill. App.3d at 133. “[T]he burden lies with
the petitioner to show that the citation respondent possesses assets belonging to the judgment
creditor.” Id. (citation omitted).
ANALYSIS
Shields requests that the Court enter an order directing 1) Associated Bank to
immediately turn over $1,500.41 from Broaddus’ checking account to Shields; 2) Lake Forest to
immediately turn over $11,747.47 from Stanley’s checking account number *****587 to
Shields; and 3) Wintrust to immediately turn over $787,563.65 to Shields. (R. 315 at 5.)
Pursuant to the Stipulation and Order, Shields has agreed to Wintrust’s and Lake Forest’s right to
setoff such that the amount he now requests from the Wintrust Investment Account is
$147,318.00. (R. 327.) Shields further requests that the Court order that the liens associated
with the citations served on Broaddus, BNR Revocable Trust, Stanley, LLC, Associated Bank,
SMB Equity, LLC, Bradley Associates LLP, Wintrust, and Lake Forest remain in full force and
effect, and that those citation respondents be ordered to refrain from “making any transfer or
disposition of, or interfering with, any property not exempt from execution or garnishment
belonging to Broaddus or to which the judgment debtor may be entitled or which may be
acquired by or become due to Broaddus and from paying over or otherwise disposing of any
money not so exempt, which is due or becomes due to Broaddus, until further order of the
Court.” (R. 315 at 5-6.)

8

Broaddus does not dispute any of the factual assertions set forth in, or evidence attached
to, Shields’ motion for turnover or Lake Forest’s and Wintrust’s response to that motion.
Neither the parties nor Associated Bank, Lake Forest, or Wintrust requested a hearing on
Shields’ motion.6 “Proceedings to enforce judgments are meant to be swift, cheap, [and]
informal,” and judges have discretion as to the procedure in such proceedings. See Resolution
Trust Corp. v. Ruggiero, 994 F.2d 1221, 1225-27 (7th Cir. 1993) (holding that the district court
did not err by granting motion for turnover on papers alone where there were no genuine issues
of material fact.) Based on the record before the Court, a hearing is not necessary in this case.
As noted above, the funds at Associated Bank are held in Broaddus’ name. Associated
Bank does not object to the turnover of those funds, and Broaddus objects to the turnover only to
the extent that he argues Shields’ motion is untimely. The funds at Wintrust are held in an
account “for the benefit of” Stanley. (R. 320 at 3.) The funds at Lake Forest are also in
Stanley’s name. (R. 292 ¶ 5.) Broaddus, through the Revocable Trust, owns 99% of Stanley.
I.

Shields May Recover Funds Belonging to the BNR Revocable Trust
Broaddus argues that, under Illinois law, Shields cannot “summarily execute” against the

assets of the BNR Revocable Trust and instead must meet the requirements set forth in the
Illinois Fraudulent Transfer Act (“IFTA”) before he can recover the trust’s assets. (R. 321 at 2-

6

Pursuant to Illinois law, “if the judgment creditor claims entitlement to the assets of a
third party in supplemental proceedings and the third party contests the claim, a trial must be
held.” Harmon v. Ladar Corp., 200 Ill. App.3d 79, 83, 146 Ill. Dec. 110, 557 N.E.2d 1297 (Ill.
App. Ct. 1990) (holding that it was error for a trial court to summarily deny a motion for
turnover order where the parties did not file motions for summary judgment or stipulate to entry
of judgment based on the pleadings, citation examinations, and other stipulated evidence).
Associated Bank does not oppose Shields’ motion. Wintrust and Lake Forest initially opposed
the motion, but that opposition is moot in light of the Stipulation and Order.
9

3.) Shields, on the other hand, argues that Florida law governs the question of whether Shields
may recover the Revocable Trust’s assets, and further contends that it need not establish
fraudulent transfer to reach Broaddus’ assets in the trust under either Florida law or Illinois law.
(R. 315 at 3; R. 323 at 2-3.)
A.

Choice of Law

The Court begins with the choice of law question. Shields argues that Florida law applies
because the Revocable Trust was created under Florida law. Broaddus ignores Shields’
argument and argues his points under Illinois law only. Therefore, he has waived any argument
that Florida law does not apply. See Bonte v. U.S. Bank, N.A., 624 F.3d 461, 466 (7th Cir. 2010)
(“Failure to respond to an argument . . . results in waiver.”).
A district court sitting in diversity, as here, applies the choice-of law rules of the state in
which it sits. See Malone v. Corrections Corp. of Am., 553 F.3d 540, 542 (7th Cir. 2009).
“Illinois respects a contract’s choice-of-law clause as long as the contract is valid and the law
chosen is not contrary to Illinois’s fundamental public policy.” Thomas v. Guardsmark, Inc.,
381 F.3d 701, 705 (7th Cir. 2004) (citation omitted); see also Dexia Credit Local v. Rogan, 624
F. Supp.2d 970, 975-76 (N.D. Ill. 2009) (“Dexia I”). That rule applies to the interpretation of
trusts in addition to other contracts. See Dexia I, 624 F. Supp.2d at 976 (citing Ranger v.
Ranger, 379 Ill. App.3d 752, 757, 318 Ill. Dec. 519, 883 N.E.2d 750 (4th Dist. 2008)).
Accordingly, the Court will apply Florida law applies unless it is contrary to Illinois’
fundamental public policy.
Pursuant to Florida law, “[t]he property of a revocable trust is subject to the claims of the
settlor’s creditors during the settlor’s lifetime to the extent the property would not otherwise be

10

exempt by law if own directly by the settlor.” Fla. Stat. § 736.0505(1)(b) (2010).7 The Court
agrees with Shields that Florida law on this issue is not contrary to Illinois public policy. Illinois
courts have long recognized that a judgment debtor may not use self-settled trusts to shield assets
from creditors. See, e.g., Crane v. Ill. Merchants Trust Co., 238 Ill. App. 257, 262-63 (1st Dist.
1925) (“The general rule is well settled that a person cannot settle his estate in trust for his own
benefit, so as to be free from liability for his debts.”) (citation omitted); In re Marriage of
Chapman, 297 Ill. App.3d 611, 620, 231 Ill. Dec. 811, 697 N.E.2d 365, 371 (1st Dist. 1998)
(holding that the creditor could recover the judgment debtor’s assets held in a self-settled
spendthrift trust); cf. Dexia I, 624 F. Supp.2d at 976 (holding that Bahamian law permitting the
use of self-settled spendthrift trusts to shield assets from a settlor’s creditors is contrary to
Illinois public policy).
The Illinois Appellate Court’s decision in Rush v. Sessions, 353 Ill. Dec. 628, 956 N.E.2d
490 (Ill. App. Ct. 1st Dist. 2011) did not change Illinois’ long-standing policy on this issue.8 In
Rush, the Illinois Appellate Court held that the judgment creditor could not state a claim for
fraudulent transfer based solely on the assertion that self-settled trusts are per se fraudulent.
Instead, the court held, a judgment creditor must satisfy the IFTA’s requirements in order to
bring a successful fraudulent transfer claim. Id. at 635-36. Under even the most restrictive
reading of that opinion, it does not stand for the proposition that Illinois has a fundamental

7

This statute became effective on July 1, 2010, before Broaddus executed the Revocable
Trust agreement.
8

The Illinois Supreme Court granted the judgment creditor’s petition for appeal in Rush
on November 30, 2011. See http://www.state.il.us/court/SupremeCourt/PLA_Ann/
2011/113011.pdf (accessed December 30, 2011).
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public policy of allowing judgment debtors to shield their assets from creditors in self-settled
trusts. Therefore, because Florida law on this issue is not contrary to Illinois’ public policy,
Florida law applies. As explained below, however, even if Illinois law applies, the outcome
remains the same.
B.

Under Florida Law, Shields May Recover Broaddus’ Interest in the
Revocable Trust

The Revocable Trust is a self-settled spendthrift trust, over which Broaddus retains
complete dominion and control. See R. 315-9 at 2, 5. He has the right to, among other things,
receive all income from the trust as well as the right to distribute all of the trust’s assets. (Id.)
Therefore, pursuant to Florida law, Shields may recover Broaddus’ interest in the Revocable
Trust. See Fla. Stat. § 735.0505(1)(a) (“Whether or not the terms of a trust contain a spendthrift
provision, . . . [t]he property of a revocable trust is subject to the claims of the settlor’s creditors
during the settlor’s lifetime to the extent the property would not otherwise be except by law if
owned directly by the settlor”); Menotte v. Brown (In re Brown), 303 F.3d 1261, 1265-66 (11th
Cir. 2002) (applying Florida law and holding that a debtor who created a trust for her own
benefit could not shield her interest in the trust from creditors) (citing cases); In re Nichols, 434
B.R. 906, 909 (Bankr. M.D. Fla. 2010) (debtor’s interest in a self-settled spendthrift trust over
which the debtor, as settlor, retained complete dominion and control, was subject to creditors’
claims); Dexia I, 624 F. Supp.2d at 980 (under Florida law, “[i]f a settlor creates a self-settled
trust, i.e., a trust under which the settlor is one of the beneficiaries, a judgment creditor of the
settlor can reach the trust’s assets to satisfy its judgment”). Because Broaddus’ current interests
in the Revocable Trust include both the income from the trust as well as all of the assets in the
trust, Shields may reach the entirety of the Revocable Trust’s assets and income. See, e.g., Dexia
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I, 624 F. Supp.2d at 980 (a judgment creditor’s ability to recover against the judgment debtor’s
self-settled trust is “limited to the maximum amount that the settlor-beneficiary could receive
from the trust’s income and corpus, e.g., just income if the settlor can only receive income, or the
entirety of the trust corpus if the settlor can receive the entire corpus.”) (emphasis added).
C.

Even if Illinois Law Applies, Shields Is Entitled to Recover Broaddus’
Interest in the Revocable Trust

The parties dispute whether Illinois law allows Shields to summarily recover the assets of
the self-settled Revocable Trust or whether Shields must prove that Broaddus fraudulently
transferred his assets into the Revocable Trust. Shields, relying on a district court opinion and
subsequent Seventh Circuit opinion in Dexia I, 624 F. Supp. 2d at 976 and Dexia v. Rogan, 629
F.3d 612, 624 (7th Cir. 2010) (“Dexia II”), contends that Illinois law “does not recognize a selfsettled trust established by a judgment debtor as an entity separate and apart from the judgment
debtor himself for purposes of citation proceedings” and that “a judgment creditor may reach the
assets of a self-settled trust in supplementary proceedings as if the assets were owned directly by
the judgment debtor.” (R. 323 at 2.)
Broaddus argues that the Illinois Appellate Court’s recent decision in Rush, 956 N.E.2d
490, rejected that principle and that Illinois law requires a judgment creditor to prove that the
judgment debtor fraudulently transferred the assets to the trust before the creditor may recover
the trust’s assets. (R. 321 at 2-3.) In Rush, the judgment creditor filed a complaint in a
supplementary proceeding against the self-settled trust, alleging that the deceased judgment
debtor fraudulently transferred his assets into the trust. 956 N.E.2d at 493, 497. The creditor
alleged that such transfer was per se fraudulent under Illinois law. Id. at 493. The court held
that Illinois common law, which provides that self-settled trusts are per se fraudulent, conflicts
13

with the IFTA, and therefore, a judgment creditor “must allege the elements contained in the
[IFTA] to properly plead a fraudulent transfer claim.” Id. at 496-97.
Shields attempts to distinguish Rush from this case on the grounds that the judgment
debtor in Rush sought to hold the trust, established by the judgment debtor, liable for fraud by
alleging that the transfer of assets to the self-settled trust was per se fraudulent, whereas here,
Shields does not seek to impose liability on the Revocable Trust for fraud but rather seeks to
establish Broaddus’ ownership interest in the trust’s assets. (R. 323 at 3.) In support of its
argument, Shields relies on the Seventh Circuit’s statements in Dexia II, in which it
distinguished between using equitable common law theories to establish ownership of the trust
assets rather than imposing liability on the trust for fraud. See Dexia II, 629 F.3d at 623. Shields
also relies on 735 ILCS 5/2-1403, which provides that “[n]o court, except as otherwise provided
in this Section, shall order the satisfaction of a judgment out of any property that is held in trust
for the judgment debtor if such trust has, in good faith, been created by, or the fund so held in
trust has proceeded from, a person other than the judgment debtor.” According to Shields, the
corollary of that rule is that a “court may order the satisfaction of a judgment out of funds held in
a trust established by a judgment debtor.” See R. 323 at 4; see also Dexia I, 624 F. Supp. 2d at
976 (stating that, pursuant to 735 ILCS 5/2-1403, “spendthrift trusts are valid except when they
have been created or funded by a judgment debtor”).
Although there is some merit to Shields’ argument, the Court ultimately need not decide
this issue because even if Shields must prove that Broaddus fraudulently transferred his assets to
the Revocable Trust, Shields could easily do so. Pursuant to the IFTA, 740 ILCS 160/5(a), a
transfer is fraudulent as to a creditor if the debtor made the transfer “with actual intent to hinder,

14

delay or defraud any creditor of the debtor.” 740 ILCS 160/5(a)(1). In determining whether the
debtor had “actual intent” to defraud, courts may consider a series of non-exclusive factors,
including whether:
1)

the transfer or obligation was to an insider;

2)

the debtor retained possession or control of the property transferred after
the transfer;

3)

the transfer or obligation was disclosed or concealed;

4)

before the transfer was made or obligation was incurred, the debtor had
been sued or threatened with suit;

5)

the transfer was of substantially all of the debtor’s assets;

6)

the debtor absconded;

7)

the debtor removed or concealed assets;

8)

the value of the consideration received by the debtor was reasonably
equivalent to the value of the asset transferred or in the amount of the
obligation incurred;

9)

the debtor was insolvent or became solvent shortly after the transfer was
made or the obligation was incurred;

10)

the transfer occurred shortly before or shortly after a substantial debt was
incurred; and

11)

the debtor transferred the essential assets of the business to a lienor who
transferred the assets to an insider of the debtor.

740 ILCS 160/5(b)(1)-(11).
Applying those factors here, it is clear that Broaddus fraudulently transferred his assets to
the Revocable Trust. First, the transfer was to an insider–namely, a self-settled trust over which
Broaddus has complete control and entitlement to all of the trust’s income and assets. Second,
Broaddus retained possession and control over the assets he transferred to the Revocable Trust,
15

as evidenced by the terms of the trust, which grant him authority to distribute the trust’s income
and assets as he wishes and allows him to receive all of the trust’s income. See R. 315-9 at 2, 5.
Third, before Broaddus transferred his assets to the Revocable Trust, the Court granted summary
judgment against him, ordering that he was liable for Shields’ attorney’s fees. See R. 204 and R.
205 (dated September 1, 2010).9 As such, he transferred his assets while being fully aware that
there was a judgment against him. Fourth, there is ample evidence that Shields created the
Revocable Trust and transferred his assets to that trust in order to conceal his assets. The most
telling evidence of this fraud is a series of emails from December 2010 in which Broaddus tells
Wintrust that, “due to the Will partners [sic], LLC legal GP/LP position and related legal fees
judgment,” Wintrust needs to change the title on his accounts so that they are “not in the BAB
[Bret A. Broaddus] entity.” (R. 320-9.) He also reiterated his intent to conceal his assets by
writing “we DO NOT WANT ANYTHING such as the BAB [Bret A. Broaddus] SS# associated
with such BNR Trust - PERIOD!” (Id.) Such evidence clearly reflects Broaddus’ nefarious
intent to shield his assets. Fifth, it appears that Broaddus received no consideration, let alone
valuable consideration, in exchange for his transfer of assets to the Revocable Trust. All of these
facts necessitate a conclusion that Broaddus fraudulently transferred his assets to the Revocable
Trust in order to hide them from Shields. Therefore, under both Florida and Illinois law, Shields
is entitled to recover the assets in and income from the Revocable Trust.
II.

Shields May Recover the Funds Held in Stanley LLC’s Name
Broaddus argues that the Court may order Lake Forest and Wintrust to turn over only

“assets or income of the judgment debtor,” see 740 ILCS 5/2-1402(c), and because the funds in

9

This fact is relevant to both 740 ILCS 160/5(b)(4) and (10).
16

the Lake Forest and Wintrust accounts are in the name of and belong to Stanley, LLC and not
Broaddus, Shields may not recover them. Shields does not dispute the general contention that
the Court may only order the turn over of “assets or income of the judgment debtor,” but
contends that because Broaddus, through the Revocable Trust, owns 99% of Stanley and is its
managing member, the Court should order turn over of Stanley’s assets in Wintrust’s and Lake
Forest’s possession. (R. 323 at 5.) Shields points out that he has issued a Citation for Discovery
of Assets to Stanley LLC, and argues that “it makes little sense to request that Stanley be
compelled to turn the funds over to Shields, particularly where Broaddus controls Stanley and
has demonstrated a willful disregard of his obligation to satisfy the Judgment.” (Id. at 6.)
Neither party cites any case law in support of his argument.
Based on the undisputed facts in the record, Shields is entitled to recover the assets held
in Stanley’s name. See Kennedy v. Four Boys Labor Serv., Inc., 279 Ill. App.3d 361, 367, 664
N.E.2d 1088, 216 Ill. Dec. 160 (2d Dist. 1996) (noting that the provisions of § 2-1402 are to be
“liberally construed, and the statute gives courts broad powers to compel the application of
discovered assets or income to satisfy a judgment.”); Elmhurst Auto Parts, Inc. v. Fencl-Tufo
Chevrolet, Inc., 235 Ill. App.3d 88, 94, 175 Ill. Dec. 771, 600 N.E.2d 1229 (2d Dist. 1992)
(noting that the supplemental proceedings statute permits the court to “determine the rights of
third parties”). Broaddus does not dispute that, at the time the Court entered final judgment
against him, the Wintrust Investment Account and the Lake Forest Checking Account were in his
name only. Indeed, Broaddus did not even form Stanley until December 2010, well after the
Court granted summary judgment against him and ordered him to pay Shields’ attorney’s fees.
(R. 315-7; R. 315-9.) The overwhelming evidence shows that Broaddus created Stanley, and

17

transferred his own assets into Stanley’s name, in a vain attempt to hide his assets from Shields
after the Court issued its judgment. See, e.g., R. 320-9. To allow Broaddus to succeed in doing
so would set the undesirable precedent that a judgment debtor may avoid paying its creditor by
merely creating a shell corporation after judgment is entered and transferring its assets into the
corporation’s name. Cf. Kennedy, 279 Ill. App.3d at 367 (holding that “where a third party has
transferred the assets of the corporate debtor for consideration, with full knowledge of the
existence of an outstanding claim against the corporation, then the judgment creditor may
properly treat the proceeds from the sale of the assets as property of the corporate debtor, noting
that an opposite holding “would allow a third party to obtain assets of a judgment debtor and
then sell those assets to another third party, thereby precluding recovery”).
Broaddus, through the Revocable Trust, owns 99% of Stanley and is its managing
member. His argument that he owns only a “membership interest” in Stanley, and not any of
Stanley’s assets or property, is unavailing. First, Broaddus fails to cite any authority to support
why such a distinction is relevant to this issue. Second, it is undisputed that the approximate
$1.45 million in the Wintrust Investment Account, which is currently in Stanley’s name,
belonged directly to Broaddus individually at the time the Court entered final judgment against
Broaddus. He also does not dispute that he transferred those assets, which again were in his own
name, into Stanley’s name after the Court’s judgment. Furthermore, Broaddus has not presented
any evidence that Stanley paid anything of value to him in exchange for the transfer of the assets
in the Wintrust Investment Account.10

10

Although Broaddus’ daughter owns the other 1% of Stanley, there is no evidence in
the record that she gave anything of value to Broaddus or Stanley in consideration for her
membership interest. Shields does not explicitly argue that Broaddus fraudulently transferred his
18

Moreover, the Court finds merit in Shields’ argument that requiring it to recover
Broaddus’ assets directly from Stanley is procedurally unnecessary, especially in light of
Broaddus’ history of dishonesty and disregard for the Court’s rulings during the initial and
supplemental proceedings in this case. Requiring Shields to incur even more attorney’s fees and
spend more time and resources to recover that which this Court long ago deemed is his would
frustrate the stated purpose of supplemental proceedings to be “ swift, cheap, [and] informal.”
See Resolution Trust, 994 F.2d at 1225-27.
III.

Shields’ Motion is Not Untimely
Broaddus also objects to Shields’ motion on the ground that it is too late, citing to Illinois

Supreme Court Rule 277, which provides that citation proceedings terminate automatically six
months from the date of “(1) the respondent’s first personal appearance pursuant to the citation
or 2) the respondent’s first personal appearance pursuant to subsequent process issued to enforce
the citation, whichever is sooner.” See Ill.Sup.Ct.R. 277(f). Supreme Court Rule 277 further
states that the court may “grant extensions beyond the 6 months, as justice may require.” Id.

Shield’s motion is not untimely. Lake Forest and Wintrust filed their answers on April
15, 2011, and Associated Bank filed its answer on March 14, 2011. (R. 289; R. 292; R. 293.)
As Broaddus acknowledges, the Court granted several extensions of the relevant citations.
Broaddus’ argument that the last extension expired on November 8, 2011 fails because, at the
status hearing on November 8, 2011, the Court granted another extension of those citations

assets into Stanley’s name, and through such transfer, to his daughter’s name, but the Court finds
that such an argument would be successful for the same reasons articulated in the Court’s
fraudulent transfer analysis with respect to the Revocable Trust, supra.
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through December 8, 2011 and ordered that Shields’ file a written submission regarding
“extending the time on the pending citations,” which Shields did on November 15, 2011. See R.
312 and 313.11
Furthermore, even if the Court had not granted such an extension on November 8, 2011,
Broaddus’ argument would still fail. The language of Rule 277(f) makes clear that extensions
may be granted “as justice may require.” Ill.Sup.Ct.R. 277(f). As the Seventh Circuit has
explained:
Both state and federal courts construe Rule 277 liberally. We have
not found examples of cases where a reviewing court found that a
lower court’s ruling was invalid as a result of Rule 277(f)’s operation.
The text of the rule supports this interpretation. It says that despite
the six-month limit, “[t]he court may ... grant extensions beyond the
6 months, as justice may require.” Nothing in the rule requires a
party to seek or request an extension from the court in order to avoid
termination. Rather, the rule allows the court to “grant extensions ...
as justice may require.”
Laborers’ Pension Fund, 542 F.3d at 194-95 (emphasis in original); see also United States v.
Macchione, 660 F. Supp.2d 918, 922, n.2 (N.D. Ill. 2009) (“[T]he language of [Illinois Supreme
Court Rule 277] does not require that the request for an extension be made prior to the expiration
of the six-month period.”) (citing State Bank of India v. Commercial Steel Corp., No. 97 C 1150,
2001 WL 423001, at *3, n.7 (N.D. Ill. Apr. 24, 2001)). Rule 277(f)’s so-called “automatic
termination deadline” seeks to “force judgment creditors to move promptly to collect their
judgments, so that property does not remain encumbered by liens indefinitely and to avoid undue

11

Although the minute order entry for November 8, 2011 does not explicitly state that
the Court granted an extension of the citations in question, it is clear from the Court’s statements
in open court, as well as from the Court’s directive to Shields to file a submission supporting the
continuation of those citations, that the Court indeed granted the extension.
20

harassment of a judgment debtor or a third party.” Macchione, 660 F. Supp.2d at 922 (citations
and internal quotation marks omitted); see also West Bend Mut. Ins. Co. v. Belmont State Corp.,
No. 09 C 354, 2010 WL 5419061, at *5 (N.D. Ill. Dec. 23, 2010). Those concerns are not
present here. Shields issued citations to Associated Bank, Wintrust, and Lake Forest to discover
assets in order to assist him in collecting on a judgment that this Court entered on December 16,
2010. Shields has been in ongoing discussions with representatives from those entities and has
learned that they are in possession of Broaddus’ assets that may be used to satisfy part of the
judgment against him. Broaddus has set forth no substantive argument that the pending citations
have caused him or others harassment or undue prejudice.12 Because the Court has extended the
citations for good cause through the present time, Shields’ motion is not untimely.

IV.

Shields is Entitled to a Turnover Order
Based on all of the above considerations, the Court orders that
1.

Associated Bank turn over $1,500.41 from Broaddus’ checking account to
Shields by January 31, 2012;

2.

Lake Forest turn over $11,745.47 from Stanley checking account number
*****587 to Shields by January 31, 2012; and

12

Because the citation proceeding never terminated, Broaddus’ reliance on King v.
Ionization Int’l, Inc., 825 F.2d 1180, 1188 (7th Cir. 1987) is inapposite. In King, the Seventh
Circuit held that where a judgment creditor’s lien was created by a citation to discover assets, but
lapsed at the end of the six-month period provided by Rule 277(f), a motion to extend the
citation could not provide the creditor with a lien for the period between the lapse of the citation
proceeding and the date of the motion, to the exclusion of other creditors. Id.; see also State of
India, 2011 WL 423001 at *3. In contrast to King, the Court repeatedly extended the relevant
citations, and the citation proceeding has not lapsed.
21

3.

Wintrust turn over $147,318.00 from the Wintrust Investment Account
(number ***1110) by January 31, 2012.

Further, the Court orders that the liens associated with the Citations served on Broaddus,
BNR Revocable Trust, Stanley, LLC, Associated Bank, SMB Equity, LLC, Bradley Associates
LLP, Wintrust, and Lake Forest remain in full force and effect. Those Citation Respondents are
ordered to refrain from making any transfer or disposition of, or interfering with, any property
not exempt from execution or garnishment belonging to Broaddus or to which he may be entitled
or which may be acquired by or become due to him and from paying over or otherwise disposing
of any money not so exempt, which is due or becomes due to Broaddus, until further order of the
Court.
CONCLUSION
For the reasons explained above, the Court grants Shields’ motion.
Dated: January 5, 2012

ENTERED

AMY J. ST. EVE
United States District Judge

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