Southport Bank v. Miles et al

Filing 489

MEMORANDUM Opinion and Order signed by the Honorable John W. Darrah on 2/1/2017. Mailed notice(jh, )

UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
SOUTHPORT BANK,
Plaintiff,
v.
CHARLES V. MILES, et al.,
Defendants.

)
)
) Case No. 10-cv-8321
)
) Judge John W. Darrah
)
)
)

MEMORANDUM OPINION AND ORDER
Citation Respondent and Claimant First National Bank of Omaha (“FNBO”) filed a
Motion to Reconsider and Vacate the November 17, 2015 Order on Perfection [453]. For the
reasons discussed below, FNBO’s Motion [453] is granted.
BACKGROUND
Southport began this action to recover payment under two “Commercial Guaranty”
contracts executed by Randolph and Charles Miles. A jury trial was held, and the Court entered
judgment on the jury’s verdict in favor of Southport against Randolph and Charles Miles, as
follows: on October 25, 2013, a judgment was entered against Randolph in the amount of
$7,061,784.84 and against Charles in the amount of $5,429,916.71. On November 27, 2013,
Southport issued Citations to Discover Assets to the Miles Defendants and a Citation to Discover
Assets to Third Party Goeken Group Corp. (“Goeken”).
On March 27, 2014, Southport’s Motion for Judgment as a Matter of Law was granted
against Goeken. On October 14, 2014, a judgment was entered against Goeken in the amount of
$5,498,081.60.
On June 19, 2015, FNBO loaned Goeken $6,960,571.91. The loan was guaranteed by
The John D. Goeken Revocable Trust (the “Trust”) and by Mona Lisa Goeken. Ms. Goeken and

the Trust collateralized their guaranties, and each assigned a deposit account to FNBO. FNBO
filed UCC Financing Statements in June 2015 with the Delaware Department of State and the
Illinois Secretary of State.
On November 15, 2015, Southport and Goeken filed an Agreed Motion for Entry of
Order Establishing the Date Upon Which Southport Perfected Its Judgment Lien Against
Goeken Group Corp. [358] which was granted in a November 17, 2015 Order [362]. The agreed
motion requested the “entry of an Order establishing that Southport Bank’s lien against the
Goeken Group Corp. regarding Southport’s outstanding judgments was perfected on November
27, 2013.” The FNBO transaction of June 19, 2015, mentioned above, was not disclosed in the
November 15, 2015 Agreed Motion.
A Citation to Discover Assets was issued by Southport to FNBO on February 10, 2016.
Under an agreed stipulation, entered March 8, 2016, FNBO froze $7,051,111.59 in the depositaccount collateral pledged by Ms. Goeken and the Trust. Southport claims an interest superior to
FNBO in these accounts.
LEGAL STANDARD
“Motions for reconsideration serve a limited function: to correct manifest errors of law
or fact or to present newly discovered evidence.” Caisse Nationale de Credit Agricole v.
CBI Indus., Inc., 90 F.3d 1264, 1269 (7th Cir. 1996). A manifest error “is not demonstrated by
the disappointment of the losing party”; it is the “wholesale disregard, misapplication, or failure
to recognize controlling precedent.” Oto v. Metropolitan Life Ins., 224 F.3d 601, 606 (7th Cir.
2000) (internal quotation marks omitted).

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ANALYSIS
FNBO argues that the perfection order was improperly entered on two grounds: (1) that
Illinois law does not provide for the perfection order, and (2) that the perfection order violated
due process.
At the outset, Southport argues that there is no basis for consideration under the law of
the case doctrine: “. . . the law of the case doctrine embodies the notion that a court ought not to
re-visit an earlier ruling in a case absent a compelling reason, such as manifest error or a change
in the law, that warrants re-examination.” Minch v. City of Chicago, 486 F.3d 294, 301 (7th Cir.
2007). However, the doctrine is meant to be a presumption; and the strength of that presumption
varies with the circumstances. Avitia v. Metro. Club of Chicago, Inc., 49 F.3d 1219, 1227 (7th
Cir. 1995). There is reason to overlook that presumption where the court was not fully informed
of the circumstances by the parties, who knew that third-party rights would be affected. As
mentioned above, the Agreed Motion did not disclose any other judgment creditors or liens
against any Goeken assets. The Court, based on what was presented, erroneously concluded that
the Agreed Motion was to correct a procedural formality, not to directly alter the substantive
rights of third parties. 1

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MR. PEARSON: The indulgence that I’m asking of your Honor is while this has all
been going on, there are two subsequent judgments that were entered in much smaller amounts
by other creditors of the Goeken Group. Those two creditors in state court proceedings are trying
to suggest now that the citation proceedings we began, during the window, after we had
judgment against Miles defendants before judgment against Goeken, that that citation is
inoperative.
COURT: It’s stale.
MR. PEARSON: Exactly. Even though Goeken Group agrees, we agree, we have all
been operating under that citation as [if] it was a direct citation to Goeken Group. I’d like to
submit an order to your Honor by agreement clarifying that, which I think your Honor has broad
discretion to enter both under -3

Southport also argues that the November 17, 2015 Order was a final decision under
Federal Rule of Civil Procedure 54 that adjudicated all of the rights and all of the claims of all of
the parties and cannot be reviewed. The November 17, 2015 Order was a postjudgment order.
For purposes of a final judgment, a postjudgment proceeding is treated as a freestanding lawsuit.
Solis v. Current Dev. Corp., 557 F.3d 772, 775 (7th Cir. 2009). The full rights and claims of the
parties to any funds or property were not decided by the November 17, 2015 Order. It was not a
final order under Federal Rule of Civil Procedure 54.
FNBO argues that Illinois law does not provide for converting a third-party citation into a
direct citation and that Illinois law does not provide for retroactively dating a lien to before the
judgment was entered, as is the case here. “The powers available to a district court in a postjudgment proceeding are dictated by state law – here, the law of Illinois.” Bank of Am., N.A. v.
Veluchamy, 643 F.3d 185, 188 (7th Cir. 2011) (citing Fed. R. Civ. P. 69; Star Ins. Co. v.
Risk Mktg. Grp. Inc., 561 F.3d 656, 661 (7th Cir. 2009)). These powers are broadly construed
and give the district court “authority to enter a wide variety of orders to ensure that usable assets
are located, seized, and – where appropriate – applied to the judgment.” Id. Under Illinois law,
supplemental proceedings are not available to a creditor “until after judgment capable of
enforcement has first been entered in their favor.” Dexia Credit Local v. Rogan, 629 F.3d 612,
620-21 (7th Cir. 2010) (citing Marble Emporium, Inc. v. Vuksanovic, 790 N.E.2d 57, 62 (Ill.
App. Ct. 2003)). Further, a judgment becomes a lien when a citation is served:
(m) The judgment or balance due on the judgment becomes a lien when a citation
is served in accordance with subsection (a) of this Section. The lien binds
COURT: Well, I’ll do whatever the law permits me to do.
(Nov. 4, 2015 Trans., p. 4:1-17.)
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nonexempt personal property, including money, choses in action, and effects of
the judgment debtor as follows:
(1) When the citation is directed against the judgment debtor, upon all
personal property belonging to the judgment debtor in the possession or
control of the judgment debtor or which may thereafter be acquired or
come due to the judgment debtor to the time of the disposition of the
citation.
(2) When the citation is directed against a third party, upon 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 and comes into the possession or control of the third
party to the time of the disposition of the citation.
The lien established under this Section does not affect the rights of citation
respondents in property prior to the service of the citation upon them and does not
affect the rights of bona fide purchasers or lenders without notice of the citation.
The lien is effective for the period specified by Supreme Court Rule.
735 Ill. Comp. Stat. 5/2-1402(m).
FNBO points to a related ruling in state court for support of their position. In April 2015,
Gary Rockis and Toni Rockis (collectively, “Rockis”) obtained a judgment against
Goeken Group in the Circuit Court of Cook County. At some point, Rockis began
supplementary proceedings against Goeken Group in the Circuit Court of DuPage County and
moved for a turnover order. Southport filed to intervene and opposed Rockis’s motion for a
turnover order, asserting priority over Rockis’s judgment lean based on the November 17, 2015
Order. On January 6, 2016, Judge Paul Fullerton, of the Circuit Court of DuPage County,
granted Rockis’s motion for a turnover order, noting that apparently this Court was not made
aware of the Rockis’s litigation and that there was no basis in Illinois law for the

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November 17, 2015 Order. Rockis’s judgment against Goeken and FNBO’s interest in the
collateral came after Southport’s judgment against Goeken. 2
Proceedings under § 1402 may be initiated only after a court enters underlying judgment.
Dowling v. Chicago Options Associates, Inc., 847 N.E.2d 741, 746 (Ill. App. Ct. 2006). At the
time the citations were served, there was only a judgment entered against Charles and
Randolph Miles. Therefore, the citation to Goeken was a third-party citation that solely created a
lien against personal property belonging to Charles and Randolph Miles that was in the
possession or control of Goeken. There could be no direct citation against Goeken until
judgment was entered against Goeken on October 14, 2014. Goeken was, at that time, in receipt
of a third-party citation only. The issue then is whether the third-party citation sent to Goeken
could function as a direct citation once an enforceable judgment was entered against Goeken. 3
“A judgment lien is purely a statutory creation.” Maniez v. Citibank, F.S.B., 890 N.E.2d 662,
665 (Ill. App. Ct. 2008). Third-party citations and direct citations are statutorily created as
separate citations. See Ultsch v. Illinois Mun. Ret. Fund, 874 N.E.2d 1, 8 (Ill. 2007) (statutory
language “must be given its plain and ordinary meaning”); 735 Ill. Comp. Stat. 5/2-1402(m)
(differentiating between effect of a citation against the judgment debtor and a citation against a
third-party). Further, the contents of a third-party citation to Goeken for the Miles judgments are
different from a direct citation against Goeken for its own judgment. A citation is required to
“state the date the judgment was entered or revived, and the amount thereof remaining
2

There is no question that FNBO had a perfected security interest in the collateral
deposits as of June 2015, when FNBO filed UCC Financing Statements with the Delaware
Department of State and the Illinois Secretary of State.
3

There has been no other citation served on Goeken other than the November 27, 2013,
third-party citation.
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unsatisfied.” Ill. S. Ct. R. 277(c)(2). The third-party citation to Goeken did not recite the date
the judgment was entered against Goeken or the amount of the judgment remaining unsatisfied.
No judgment lien was created against Goeken for the judgment entered against it. 4
CONCLUSION
First National Bank of Omaha’s Motion to Reconsider and Vacate the
November 17, 2015 Order on Perfection [453] is granted.

Date:

February 1, 2017

/s/
JOHN W. DARRAH
United States District Court Judge

4

As the motion is granted on the basis of Illinois law, FNBO’s due process arguments are
not addressed.
7