One issue that arises often in our great State of Illinois is that an appeal is dismissed because there was no final judgment. This case – see below – is one such case. National Life issued a citation to discover assets to International Bank. A citation to discover assets can be issued when a party has a judgment. The citation requires the responding party to certify whether or not it has any assets. The responding party must answer the citation under oath. If there are assets, those assets must be frozen until the court can determine what to do with them.
The facts are fairly straightforward. National Life obtained a judgment against Ronald Scarlato and two LLCs. National Life then served a citation upon IBC. IBC, believing that it had no assets of Scarlato, disbursed certain loan proceeds to third parties.
The court explains the procedural history as follows:
¶ 3 On either November 14, 2012 or November 28, 2012,[1] National Life obtained a judgment in the amount of $3,424,228.97 against Scarlato and two limited liability corporations, jointly and severally. Subsequently, National Life initiated supplementary proceedings. On April 12, 2013, National Life filed a third-party citation to discover assets directed to IBC. The citation was served via certified mail on April 13, 2013. The citation that was served upon IBC contained the following prohibitive provision:
“[You are prohibited] from making or allowing any transfer or other disposition of, or interfering with, any property not exempt from execution or garnishment belonging to the judgment debtor or to which the judgment debtor may be entitled or which may be acquired by or become due to the judgment debtor and from paying over or otherwise disposing of any money not so exempt, which is due or becomes due to the judgment debtor, until further order of court or termination of the proceedings. You are not required to withhold the payment of any money beyond double the amount of the judgment.”
¶ 4 On August 1, 2013, Scarlato, Bellwood Place, LLC (BP), and Scarlato Holdings Bellwood Place, LLC (SHBP) entered into a construction loan agreement and promissory note with IBC wherein IBC agreed to loan $3.5 million to Scarlato, BP, and SHBP. From August 2013 to March 2014, IBC disbursed $3.5 million in loan proceeds to various third-parties. None of the loan proceeds were disbursed to Scarlato.
¶ 5 On July 18, 2014, National Life filed a motion for entry of judgment against IBC for violating the third-party citation to discover assets that was served on April 13, 2013. The motion sought judgment pursuant to section 2-1402 of the Code (Id.) and argued that IBC violated the prohibitive provision of the citation and the lien created thereby when it transferred $3.5 million in assets that belonged to Scarlato. On July 30, 2014, IBC filed its response and asserted that it never violated the citation because the loan proceeds never amounted to Scarlato’s “property” as contemplated by the citation’s prohibitive provision. National Life filed its reply on August 19, 2014, and the court held an evidentiary hearing on December 16, 2014.
¶ 6 The court set forth its ruling in a written memorandum decision and order that was entered on April 15, 2015. The court’s order denied National Life’s motion for entry of judgment against IBC, finding that the loan proceeds were not Scarlato’s individually. Specifically, the court’s order read, “[T]he checks clearly show the amounts were delivered to entities and not Scarlato individually. The [c]ourt recognizes the frustration in this matter. However, the parties do have remedies remaining.”
¶ 7 National Life filed its timely notice of appeal on May 14, 2015.
The problem, of course, was that the appeal was dismissed because there was no final judgment. National Life could still proceed with its citation. There was thus no final resolution of the issue and no final judgment. Thus, the time spent on the appeal was wasted.
Edward X. Clinton, Jr.
Illinois Procedure and Sanctions Decisions 