RBS Citizens, National Association, as Successor by Merger to Charter One Bank, N.A. v. Gammonley et al

Filing 79

MEMORANDUM Opinion and Order Signed by the Honorable John Z. Lee on 3/6/15Mailed notice(ca, ).

IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
RBS CITIZENS, NATIONAL ASSOCIATION,
as successor by merger to Charter One Bank,
N.A.,

)
)
)
)
Plaintiff,
)
)
v.
)
)
RICHARD S. GAMMONLEY; RICHARD T.
)
GAMMONLEY; LISA M. GAMMONLEY;
)
JILL CLEMONS GAMMONLEY; CHARLES
)
DI GIOVANNI, AS TRUSTEE FOR 573 NORTH
)
WASHINGTON LAND TRUST; 573 NORTH
)
WASHINGTON LAND TRUST; CHARLES
)
DI GIOVANNI, AS TRUSTEE FOR 1111 S.
)
WABASH UNIT 2602 LAND TRUST; 1111 S.
)
WABASH UNIT 2602 LAND TRUST; CHARLES
)
DIGIOVANNI, AS TRUSTEE FOR 14326 BLUFF
)
ROAD LAND TRUST; 14326 BLUFF ROAD LAND )
TRUST; RICHARD S. GAMMONLEY, AS TRUSTEE )
FOR THE RICHARD S. GAMMONLEY TRUST;
)
RICHARD S. GAMMONLEY TRUST; RICHARD T. )
GAMMONLEY AS TRUSTEE OF THE RICHARD S. )
AND LISA M. GAMMONLEY 2009 CHILDREN’S
)
TRUSTS; RICHARD S. & LISA M. GAMMONLEY )
2009 CHILDREN’S TRUSTS; SPYDER LLC
)
– SERIES B; SPYDER, LLC – SERIES C; SAMSON )
PROPERTIES, LLC – SERIES A; SAMSON
)
PROPERTIES, LLC – SERIES B; SAMSON
)
PROPERTIES, LLC – SERIES C; SAMSON
)
PROPERTIES, LLC – SERIES D; SAMSON
)
PROPERTIES, LLC – SERIES F,
)
)
Defendants.
)

12 C 8659
Judge John Z. Lee

MEMORANDUM OPINION AND ORDER
Plaintiff RBS Citizens National Association (“RBS”), as successor by merger to Charter
One Bank, N.A. (“the Bank”), has sued Defendants Richard S. Gammonley (“RSG”); Richard T.
Gammonley (“RTG” and together with RSG, the “Gammonleys”); Lisa M. Gammonley; Jill

Clemons Gammonley; Charles Di Giovanni, as Trustee for the 573 North Washington Land
Trust, 1111 S. Wabash Unit 2602 Land Trust, and 14326 Bluff Road Land Trust; 573 North
Washington Land Trust; 1111 S. Wabash Unit 2602 Land Trust; 14326 Bluff Road Land Trust;
Richard S. Gammonley, as Trustee for the Richard S. Gammonley Trust; Richard S. Gammonley
as Trustee of the Richard S. and Lisa M. Gammonley 2009 Children’s Trusts; The Richard S.
and Lisa M. Gammonley 2009 Children’s Trust; Spyder LLC – Series B; Spyder, LLC – Series
C; Samson Properties, LLC – Series A; Samson Properties, LLC—Series B; Samson Properties,
LLC – Series C; Samson Properties, LLC – Series D; Samson Properties, LLC – Series F
(collectively, “the Defendants”) 1 to void what Plaintiff contends were fraudulent transfers of
assets and interests pursuant to the Illinois Uniform Fraudulent Transfer Act (“IUFTA”), 740 Ill.
Comp. Stat. 160 (2003). Defendants move to dismiss Plaintiff’s Second Amended Complaint
pursuant to Federal Rule of Civil Procedure (“Rule”) 12(b)(6). For the reasons provided herein,
the Court denies Defendants’ motion.
Factual Background 2
In 2005, Defendants RTG and RSG were both officers of a company, R.T.G. Land
Development Corporation, which effectively controlled RTG-Bloomingdale, LLC. (2d Am.
Compl. ¶ 46.)

On December 16, 2005, RTG-Bloomingdale, LLC, executed two agreements

with the Bank: (1) a construction loan agreement, and (2) a construction completion guaranty
agreement.

The construction loan agreement was executed in connection with RTG-

Bloomingdale’s development of real property located in Bloomingdale, Illinois. (Id. ¶¶ 45, 46.)
1

This Court previously denied Defendants’ Rule 12(b)(6) motion to dismiss. See Oct. 23, 2013
Order. Defendants argued that (1) Plaintiff failed to adequately plead claims for fraud in fact under 740 Ill.
Comp. Stat. 160/5(a)(1); and (2) Plaintiff failed to adequately plead claims for fraud in law under 740 Ill.
Comp. Stat. 160/5(a)(2) and/or 740 Ill. Comp. Stat. 160/6(a).
2

The following facts are taken from Plaintiff’s Second Amended Complaint and are assumed to
be true for purposes of this motion to dismiss. See Murphy v. Walker, 51 F.3d 714, 717 (7th Cir. 1995).

2

Also on that date, RTG-Bloomingdale executed a revolving credit promissory note in favor of
the Bank in the amount of twenty seven million dollars.

(Id. ¶ 47.)

In addition, RTG-

Bloomingdale executed an open-end construction mortgage (together with the construction
agreement and promissory note, the “Bloomingdale loan”).

(Id. ¶ 48.)

That same day,

Defendants RTG and RSG also executed an individual guaranty agreement in favor of the Bank,
which required the Gammonleys to personally pay the Bank any outstanding payments due under
the Bloomingdale loan in the event that RTG-Bloomingdale were to default. (Id. ¶¶ 50, 51.)
In October and November of 2007, RTG-Bloomingdale defaulted on the Bloomingdale
loan on at least three occasions, each of which permitted the Bank, under the terms of the
construction loan agreement, to declare the promissory note due and payable by the Gammonleys
without presentment, demand, protest or notice. (Id. ¶¶ 52-58.) At the time of the three defaults,
the Bloomingdale Loan had an outstanding balance in excess of $20,000,000.00. (Id. ¶ 58.) The
Gammonleys and the Bank executed a forbearance and loan modification agreement on January
15, 2008, in which the Gammonleys made various promises to the Bank in exchange for the
Bank’s promise not to exercise its rights against RTG-Bloomingdale and the Gammonleys for
defaulting on the Bloomingdale loan. (Id. ¶¶ 59-66.) The Bank and the Gammonleys amended
the forbearance agreement on March 27, 2008. (Id. ¶¶ 63-66.) In the amended forbearance
agreement, the Gammonleys expressly acknowledged defaulting on the Bloomingdale loan on
two additional occasions, on February 29, 2008 and March 31, 2008. (Id. ¶ 65.)
On June 15, 2008, RTG-Bloomingdale and the Gammonleys defaulted on the amended
forbearance agreement, and the Bank and the Gammonleys executed a second forbearance
agreement. (Id. ¶¶ 67-70.) The Gammonleys, however, defaulted on the second forbearance

3

agreement as well, at which time the Bloomingdale loan still had an outstanding balance in
excess of $20,000,000.00. (Id. ¶ 70.)
Subsequently, on February 9, 2009, the Bank filed a complaint (the “Bloomingdale
Complaint”) against the Gammonleys and others for foreclosure and other relief in the Circuit
Court of DuPage County, Illinois. (Id. ¶ 71.) On May 18, 2012, the Circuit Court of DuPage
County, Illinois entered a joint and several judgment in favor of the Bank and against the
Gammonleys in the amount of $20,366,634.16. (Id. ¶ 73.)
Separately, on July 24, 2006, Defendant RTG’s company, RTG-Oak Lawn LLC,
executed a term note (the “Oak Lawn loan”) in favor of the Bank in the amount of
$3,376,000.00.

(Id. ¶ 74.) As with the Bloomingdale loan, Defendant RTG executed an

unlimited guaranty in favor of the Bank, which provided that Defendant RTG would be
personally, directly, unconditionally, and immediately liable to the Bank in the event that RTGOak Lawn defaulted on the Oak Lawn loan. (Id. ¶¶ 75-76.)
RTG-Oak Lawn defaulted on the Oak Lawn loan on April 8, 2009. (Id. ¶ 77.) After
serving a notice of demand upon RTG-Oak Lawn and the Gammonleys, the Bank filed a
complaint against the Gammonleys in the Circuit Court of DuPage County, Illinois on September
7, 2010. (Id. ¶¶ 80-82.) On May 17, 2012, the Circuit Court entered a final judgment order in
favor of the Bank and against the Gammonleys in the amount of $3,619,745.58. (Id. ¶ 82.)
On November 16, 2007, a few weeks after Defendant RSG became personally liable to
the Bank for more than $20,000,000.00, Defendant RSG conveyed property located at 573 North
Washington, Hinsdale, Illinois (the “North Washington property”), then-valued at more than
$1,400,000.00, to himself and his wife, Lisa Gammonley, as tenants by the entirety. (Id. ¶¶ 86.)
According to Plaintiff, RSG effectuated the transfer with the sole and actual intent to hinder,

4

delay, or defraud the Bank. (Id. ¶ 87.) On May 13, 2010, RSG and Lisa Gammonley transferred
the North Washington property allegedly for the purpose of defrauding the Bank; this time to
Defendant Di Giovanni as the North Washington Trustee in exchange for $10.00. (Id. ¶¶ 92.)
Defendant Di Giovanni was allegedly either the initial transferee of the North Washington
property, a person who directly benefitted from the second North Washington property transfer,
or merely a subsequent transferee of the North Washington Property. (Id. ¶ 94.)
On February 29, 2012, at a time when Defendant RSG knew that he was personally liable
to the Bank for over $23,000,000.00, RSG and Lisa Gammonley conveyed his interest in
timeshare units (the “Timeshare Units”) located in the U.S. Virgin Islands to five different trusts
in exchange for $10.00. (Id. ¶¶ 117, 118.) The beneficiaries of the trusts were RSG and Lisa
Gammonley’s five minor children. (Id. ¶ 120.) As such, Defendant RSG retained effective
control over the property by virtue of his status as a parent. (Id.) According to Plaintiff, RSG
and Lisa Gammonley effectuated the transfer with the sole and actual intent to hinder, delay, or
defraud the Bank. (Id. ¶ 119.)
In or around September 2009, Defendant RSG and his wife transferred various personal
property (“RSG personal property”) located at their North Washington property to either a trust
or entity for the alleged purpose of hindering, delaying, or defrauding the bank. (Id. ¶¶ 137,
139.) Defendant RSG retained effective control over the personal property through his continued
residence at the North Washington property. (Id. ¶ 142.)
On June 24, 2010, Defendants RTG and Jill Gammonley conveyed property located at
1111 S. Wabash, Unit 2602, Chicago, Illinois (the “Wabash property”), then-valued at more than
$875,000.00, to Defendant Di Giovanni, as the Wabash Trustee, in exchange for zero
consideration. (Id. ¶¶ 156, 157.) According to Plaintiffs, RTG and Jill Gammonley effectuated

5

the transfer with the actual intent to hinder, delay, or defraud the Bank. (Id. ¶ 159.) At the time
of the transfer, Defendant RTG knew that he was personally liable to the Bank for more than
$23,000,000.00. (Id. ¶ 157.) Again, Defendant Di Giovanni was allegedly either the initial
transferee of the Wabash property, a person who directly benefitted from the Wabash property
transfer, or merely a subsequent transferee of the Wabash Property. (Id. ¶ 161.)
Four days later, on June 28, 2010, Defendants RTG and Jill Gammonley conveyed
property located at 14326 Bluff Road, Lakeside, Michigan (the “Bluff Road property”) to the
Bluff Road Trust in exchange for $10.00. (Id. ¶ 181.) The Bluff Road property was valued at
$4,990,000.00 at the time of the transfer, which was again consummated allegedly for the
purpose of hindering, delaying, or defrauding the Bank. (Id. ¶ 182.)
Then, on March 12, 2010, Defendant RTG transferred his interest in various items of
personal property located at the Bluff Road property, including paintings, silver, boats, and cars
(collectively, “RTG personal property”) to Defendant Samson for little or no consideration. (Id.
¶¶ 204, 212.) At the time of the transfer, RTG knew that he was personally liable to the bank for
more than $20,000,000.00. (Id. ¶ 206.) RTG allegedly carried out the transfer with the actual
intent to hinder, delay, or defraud the Bank. (Id. ¶ 205.)
The Second Amended Complaint includes fourteen counts alleging that the various
transfers described above were fraudulent in violation of the IUFTA, 740 Ill. Comp. Stat.
160/5(a)(1), 740 Ill. Comp. Stat. 160/5(a)(2), or 740 Ill. Comp. Stat. 160/6(a).
Defendants move to dismiss on several grounds. They contend that: (1) Counts I and II
(fraudulent transfers by RSG, Lisa Gammonley, the North Washington Trustee, the North
Washington Trust, and Spyder C) are barred by the statute of limitations and res judicata; (2)
Counts III and IV (fraudulent transfers by RSG, Lisa Gammonley, the Children’s Trusts, and the

6

Children’s Trustee) should be dismissed with respect to Jill Gammonley because the properties
in question were owned as tenants by the entirety; (3) Counts V and VI (fraudulent transfers by
RSG, Lisa Gammonley, the RSG Trust, the RSG Trustee, and Spyder B) should be dismissed
with respect to Lisa Gammonley because Plaintiff has failed to assert any legal or factual basis to
name Jill Gammonley with respect to the transfers in question; (4) Counts VII and VIII
(fraudulent transfers by RTG, Jill Gammonley, the Wabash Trust, the Wabash Trustee, and
Samson D) should be dismissed because Wabash Property was held in joint tenancy by the
entireties by RTG and Jill Gammonley and is thus unreachable by creditors; (5) Counts IX and X
(fraudulent transfers by RTG, Jill Gammonley, the Bluff Road Trust, the Bluff Road Trustee and
Samson C) should be dismissed because the Bluff Road Residence was held in joint tenancy by
the entireties by RTG and Jill Gammonley and is thus unreachable by creditors; and (6) Counts I,
II, VII, VIII, IX, and X fail to state cognizable claims to challenge transfers of property into
tenancy by the entireties.
Legal Standard
To survive a motion to dismiss under Rule 12(b)(6), a complaint must “state a claim to
relief that is plausible on its face.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007). “A
claim has facial plausibility when the plaintiff pleads factual content that allows the court to
draw the reasonable inference that the defendant is liable for the misconduct alleged.” Ashcroft v.
Iqbal, 556 U.S. 662, 678 (2009). In reviewing this motion to dismiss, the Court must accept as
true all well-pleaded allegations in the complaint and draw all possible inferences in the
plaintiff’s favor. See Tamayo v. Blagojevich, 526 F.3d 1074, 1081 (7th Cir. 2008). Mere legal
conclusions, however, “are not entitled to the assumption of truth.” Iqbal, 556 U.S. at 679.
Analysis

7

A.

Counts I and II
1. Dismissal for Untimeliness Is Inappropriate.
Defendants first assert that Counts I and II should be dismissed because Plaintiff failed to

bring suit within the applicable limitations periods. As the Seventh Circuit repeatedly has held, a
complaint need not anticipate nor overcome affirmative defenses, including one based on the
relevant statute of limitation. See Xechem, Inc. v. Bristol-Myers Squibb Co., 372 F.3d 899, 901
(7th Cir. 2004); Gomez v. Toledo, 446 U.S. 635, 640 (1980). Accordingly, where a defendant
raises the statute of limitations as an affirmative defense at the pleading stage, a court can only
dismiss a claim “when [the] complaint plainly reveals that an action is untimely under the
governing statute of limitations.” Andonissamy v. Hewlett-Packard Co., 547 F.3d 841, 847 (7th
Cir. 2008) (quotation omitted).
Here, Plaintiff does not plead itself out of court.

For example, Plaintiff does not

affirmatively defeat by its own allegations the potential application of the equitable estoppel or
tolling doctrines. Evidence gathered in discovery may show these doctrines to be applicable. See,
e.g., Reiser v. Residential Funding Corp., 380 F.3d 1027, 1030 (7th Cir. 2004) (noting that
“[w]hether the sins of a [defendant] may be used to extend the [statute of limitations] period” is a
question that could not be tackled at the motion to dismiss stage).
Moreover, Section 10(a) of the IUFTA states that a cause of action with respect to a
fraudulent transfer is extinguished unless action is brought “within 4 years after the transfer was
made . . . or, if later, within one year after the transfer or obligation was or could reasonably have
been discovered by the claimant[.]” 740 Ill. Comp. Stat. 160/10(a). Nothing on the face of the
Second Amended Complaint demonstrates Plaintiff’s failure to satisfy the second proviso of

8

UFTA Section 10(a) (also known as the “discovery rule”). Workforce Solutions v. Urban Servs.
of Am., Inc., 977 N.E.2d 267, 278 (Ill. App. Ct. 2012).
Defendants nevertheless argue that Plaintiff’s Second Amended Complaint is inadequate
because it fails to provide a reason for Plaintiff’s late discovery of Defendants’ alleged
fraudulent transfers: “Plaintiff having the burden did not assert any facts as why the action was
not made within the four year period or why the discovery and/or challenge of the ‘alleged’
fraudulent transfer of the residence ‘could not have occurred prior to expiration of the limitations
period.’” (Defs.’ Reply 8.) In support of this position, they cite Gilbert Bros., Inc. v. Gilbert, a
case in which the Illinois Appellate Court held that “[a]n action brought under the fraudulent
conveyance act is time barred unless the complaint contains an explanation of why discovery of
the alleged fraud could not have occurred prior to the expiration of the limitations period.” 630
N.E.2d 189, 192 (Ill. App. Ct. 1994). But, in diversity actions, the pleading requirements “are
governed by the federal rules and not by the practice of the courts in the state in which the
federal court happens to be sitting.” 5 Wright & Miller, Federal Practice and Procedure § 1204;
see Colton v. Swain, 527 F.2d 296, 304 (7th Cir. 1975) (fact that complaint may have failed to
meet Illinois pleading requirements not determinative, federal pleading requirements govern);
Hanna v. Plumer, 380 U.S. 460, 465 (1965) (procedural requirements in federal court are
governed by federal procedural law). Under federal pleading standards, a plaintiff need not
negate defenses, such as the statute of limitations, in its complaint. See, e.g., Clark v. City of
Braidwood, 318 F.3d 764, 767-68 (7th Cir. 2003).
For these reasons, the Court declines to dismiss Counts I and II as time barred.

9

2. Dismissal for Res Judicata Is Not Appropriate.
Defendants next assert that Plaintiff’s Counts I and II should be dismissed based on the
doctrine of res judicata. Res judicata likewise is an affirmative defense but may be considered
under Rule 12(b)(6) where the plaintiff has, through the allegations in its complaint, pleaded
itself out of court. Muhammad v. Oliver, 547 F.3d 874, 878 (7th Cir. 2008). Also, a court in
ruling on a motion to dismiss may take judicial notice of matters in the public record, including
pleadings and orders in previous cases, without converting a Rule 12(b)(6) motion into a motion
for summary judgment. See Henson v. CSC Credit Servs., 29 F.3d 280, 284 (7th Cir.
1994) (district court properly considered public court documents from prior state court litigation
in deciding defendants' motion to dismiss for failure to state a claim).
Plaintiff’s prior suit was brought in Illinois state court, so the Court applies Illinois res
judicata principles. Chi. Title Land Trust Co. v. Potash Corp. of Saskatchewan Sales Ltd., 664
F.3d 1075, 1079 (7th Cir. 2011) (citation omitted). Under those principles, subsequent litigation
is barred where three elements exist: “(1) a final judgment on the merits rendered by a court of
competent jurisdiction, (2) [a new case presenting] the same cause of action, and (3)
[involvement of] the same parties or their ‘privies.’” Id. (citing Hudson v. City of Chi., 889
N.E.2d 210, 215 (Ill. 2008)).
The doctrine of res judicata is inapplicable in this case because the state court has not
rendered a final judgment. Although Plaintiff’s Turnover Motion was denied by Judge Bonnie
Wheaton in the Circuit Court of Du Page County, Illinois (the “Illinois case”), it was denied via
an interlocutory order. See Defs.’ Mem., Ex. B, Order. Illinois courts have held that “[r]es
judicata does not apply to an interlocutory order.” People v. Taylor, 6 Ill. App. 3d 961, 286
N.E.2d 122, 123 (1972); see also Alliance Syndicate, Inc. v. Parsec, Inc., 318 Ill. App. 3d 590,

10

602 (“[i]nterlocutory orders cannot form the basis for claims of either res judicata or collateral
estoppel.”). Accordingly, the Court denies the motion to dismiss Counts I and II based on the
doctrine of res judicata.
B.

Counts III through X
Defendants move to dismiss Counts III through X by impermissibly relying on

extraneous exhibits that are nowhere mentioned in Plaintiff’s Second Amended Complaint. For
that reason, the Court denies the motion to dismiss these counts.
Rule 12(b) limits the scope of materials that a court may consider in deciding a Rule
12(b)(6) motion to dismiss for failure to state a claim: “[i]f . . . matters outside the pleading are
presented to and not excluded by the court, the motion shall be treated as one for summary
judgment and disposed of as provided in Rule 56.” Fed. R. Civ. P. 12(b). Consequently, if
documents outside of the pleadings are placed before a district court in support of a motion to
dismiss, the Court must convert it to a motion for summary judgment and afford the plaintiff an
opportunity to submit additional evidentiary material in opposition to the motion. Venture Assoc.
Corp. v. Zenith Data Sys. Corp., 987 F.2d 429, 431 (7th Cir. 1993).
It is true that, in the Seventh Circuit, “[d]ocuments that a defendant attaches to a motion
to dismiss are considered part of the pleadings” and may be considered on a motion to dismiss,
“if they are referred to in the plaintiff’s complaint and are central to [its] claim.” Venture Assoc.
Corp. v. Zenith Data Sys. Corp., 987 F.2d 429, 431 (7th Cir. 1993). But the Seventh Circuit has
instructed that this is a “narrow” exception to the aforementioned rule. Tierney v. Vahle, 304
F.3d 734, 738 (7th Cir. 2003); see also Levenstein v. Salafsky, 164 F.3d 345, 347 (7th Cir. 1998)
(“narrow exception” to conversion rule “aimed at cases interpreting, for example, a contract”).

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1.

Counts III and IV

Defendants argue that Counts III and IV should be dismissed with respect to Jill
Gammonley because the two timeshare properties located in the U.S. Virgin Islands labeled
“Second Timeshare Unit” (Am. Compl. ¶ 112, 114) have been owned at all times by RSG and
Lisa Gammonley as tenants by the entirety. Defendants’ argument relies on a copy of a warranty
deed purporting to reflect the tenancy by the entirety status of the Second Timeshare Unit.
Here, the warranty deed, see Defs.’ Mem., Ex. D, is mentioned nowhere in Plaintiff’s
allegations and is certainly not “central” to Plaintiff’s claim for fraudulent transfers. Venture
Assoc., 987 F.2d at 431. Because review of this ground for dismissal would require the Court to
review materials outside the four corners of the Second Amended Complaint, the Court excludes
the warranty deed and denies the motion to dismiss Counts III and IV with respect to Jill
Gammonley.
2. Counts V and VI
Defendants similarly argue that Counts V and VI must be dismissed with respect to Lisa
Gammonley because Plaintiff has not asserted “any legal or factual basis to name his wife
[Lisa] 3 Gammonley with respect to this challenged transfer.” Defendants rely on exhibits
submitted by Plaintiff in Plaintiff’s Turnover Motion in the Illinois case. Again, these exhibits
were nowhere mentioned in the Second Amended Complaint and are not central to Plaintiff’s
claim. Thus the Court denies the motion to dismiss Counts V and VI.
3. Counts VII, VIII, IX, and X
Defendants argue that Counts VII, VIII, IX, and X should be dismissed because the
Wabash and Bluff Road properties are unreachable by creditors by virtue of their being owned
3

Defendants’ Memorandum mixes up Jill and Lisa Gammonley. See Defs.’ Mem. Supp. Mot. Dismiss 6.
Regardless as to whether Defendants intended to reference Jill, Defendants’ argument relies on
documents that are not properly considered by the Court on a motion to dismiss.

12

by RTG and Jill Gammonley as tenants by the entireties. Defendants again rely on extraneous
exhibits, Exhibits E and G, that cannot be considered on a Rule 12(b)(6) motion to dismiss. See
Defs.’ Mem., Exs. E & G. Therefore, the Court denies the motion to dismiss Counts VII, VIII,
IX, and X.
C.

Defendants’ Alternative Argument in Support of Dismissing Counts I, II, VII, VIII,
IX, and X.
In the alternative, Defendants argue that Counts I, II, VII, VIII, IX, and X should be

dismissed because Plaintiff has failed to allege that the property was transferred to a tenancy by
the entireties with the “sole intent” to avoid payment of the spouse’s debts, as required under 735
Ill. Comp. Stat. 5/12-112. That statute provides, in pertinent part:
Any real property, any beneficial interest in a land trust, or any
interest in real property held in a revocable inter vivos trust or
revocable inter vivos trusts created for estate planning purposes, 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. 4
As for Counts I and II, Plaintiff alleges that “the transfer of the North Washington
Property into a tenancy by the entirety was designed with the sole intent to avoid any creditors
4

As the Illinois Supreme Court has explained:

The sole intent standard provides greater protection from creditors for transfers of property to
tenancy by the entirety. Under the sole intent standard, if property is transferred to tenancy by the
entirety to place it beyond the reach of the creditors of one spouse and to accomplish some other
legitimate purpose, the transfer is not avoidable. Such a transfer, however, would be avoidable
under the actual intent standard, which only requires any actual intent to defraud a creditor. The
General Assembly, by adopting the sole intent standard, has made it clear that it intends to
provide spouses holding homestead property in tenancy by the entirety with greater protection
from the creditors of one spouse than that provided by the Fraudulent Transfer Act.
Premier Prop. Mgmt., Inc. v. Chavez, 191 Ill. 2d 101, 109 (2000) (emphasis in original).

13

pursuant to 735 ILCS 5/12-112.” 2d Am Compl. ¶¶ 89, 100–01. This is sufficient to withstand a
motion to dismiss.
As for Counts VII, VIII, IX, and X, Plaintiff argues that the higher standard is
unnecessary because those counts involve transfers into land trusts.

This is incorrect. The

Illinois statute provides that “[a]ny real property, [and] any beneficial interest in a land trust ...
held in tenancy by the entirety shall not be liable to be sold upon judgment . . . except if the
property was transferred into tenancy by the entirety with the sole intent to avoid payment of
debts existing at the time of the transfer[.]” 735 Ill. Comp. Stat. 5/12-112 (emphasis added).
Plaintiff alleges that Samson D, a land trust, is owned by RTG and Jill Gammonley as tenants by
the entirety. (2d Am. Compl. ¶ 18.) Likewise, the Second Amended Complaint states that
Samson C, also a land trust, is owned by RTG and Jill Gammonley as tenants by the entirety. (Id.
¶ 17.) Therefore, in order for Plaintiff to prevail on its claims with respect to Samson D and
Samson C, it must satisfy the “sole intent” requirement. See In re Werner, 410 B.R. 797, 806
(Bankr. N.D. Ill. 2009) (“[i]t is the standard elucidated in [735 Ill. Comp. Stat. 5/12-112], rather
than in the state or federal fraudulent transfer statutes, that determines whether a transfer of
property into tenancy by the entirety may be avoided.”).
That said, in federal court, allegations of fraud must be pleaded in conformance to federal
pleading standards specified in Fed. R. Civ. P. 9(b). Borsellino v. Goldman Sachs Group, Inc.,
477 F.3d 502, 507 (7th Cir. 2007). Under Rule 9(b), in “averments of fraud or mistake, the
circumstances constituting fraud or mistake shall be stated with particularity.” Id. The
“circumstances constituting fraud” include the identity of the person who committed the fraud,
the time, place, and content of the fraud, and the method by which the fraud was communicated
to the plaintiff. See Vicom, Inc. v. Harbridge Merch. Servs., Inc., 20 F.3d 771, 777 (7th Cir.

14

1994). This is also known as the “who, what, when, where and how . . .” standard. DiLeo v. Ernst
& Young, 901 F.2d 624, 626 (7th Cir. 1994). This requirement insures that defendants have fair
notice of plaintiffs’ claims and grounds, providing defendants an opportunity to frame their
answers and defenses. Reshal Assocs., Inc. v. Long Grove Trading Co., 754 F. Supp. 1226, 1230
(N.D. Ill. 1990).
Plaintiff’s factual allegations provide the necessary “who, what, when, where and how”
to satisfy the particularity requirement of Fed. R. Civ. P. 9(b) for these claims. See DiLeo, 901
F.2d at 626. In Counts VII and VIII, Plaintiff alleges that, on or about June 28, 2010, Defendants
fraudulently conveyed the Wabash Property to the Wabash Trust without receiving any
consideration in return. (2d Am. Compl. ¶¶ 158, 159.) Plaintiff alleges that Defendants’ transfer
was executed with the intent to hinder, delay, or defraud the Plaintiff. Id. In Counts IX and X,
Plaintiff alleges that, on or about June 28, 2010, Defendants fraudulently conveyed the Bluff
Road Property to the Bluff Road Trust without receiving adequate consideration in return. (Id. ¶¶
181, 193.) Plaintiff alleges that Defendants’ transfer was executed with the intent to hinder,
delay, or defraud the Plaintiff.

Id.

Taken as true for the purposes of this motion, these

allegations are sufficient at the pleading stage, and Defendants’ motion to dismiss Counts I, II,
VII, VIII, IX, and X is denied.
Conclusion
For the reasons provided in this Memorandum Opinion and Order, the Court denies
Defendants’ motion to dismiss the Second Amended Complaint [54].
SO ORDERED

ENTER: 3/6/15

__________________________
JOHN Z. LEE
United States District Judge

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