PNC Bank, N.A. v. Hoffmann

• Decision Date: 08 July 2015
• Docket Number: No. 2–14–1172.,2–14–1172.
• Parties: PNC BANK, N.A., Plaintiff–Appellee, v. Camille O. HOFFMANN, Defendant–Appellant.
• Court: United States Appellate Court of Illinois

36 N.E.3d 971

PNC BANK, N.A., Plaintiff–Appellee

v.Camille O. HOFFMANN, Defendant–Appellant.

No. 2–14–1172.

Appellate Court of Illinois, Second District.

July 8, 2015.

David C. Gustman, Jill C. Anderson, and Devon J. Eggert, all of Freeborn & Peters LLP, Chicago, for appellant.

James M. Crowley, John F. Sullivan, and Christina M. Ripley, all of Crowley & Lamb, P.C., Chicago, for appellee.

OPINION

Justice SPENCE

delivered the judgment of the court, with opinion.

¶ 1 Plaintiff, PNC Bank, N.A. (PNC), brought suit against defendant, Camille O. Hoffmann, as guarantor of a multimillion-dollar loan. On December 11, 2013, the trial court entered judgment in PNC's favor for $10,613,320.14. PNC thereafter issued citations to discover assets on several parties, including Raymond James & Associates, Inc., where Hoffmann had an individual retirement account (IRA). Hoffmann sought to declare the retirement account exempt, and PNC initially took the position that she had not met her burden of proof for the exemption. Several weeks later, PNC agreed that the IRA was exempt. Hoffmann then sought damages under section 12–1005 of the Code of Civil Procedure (Code) (735 ILCS 5/12–1005 (West 2012)

), which allows for damages when a judgment creditor seizes exempt property. The trial court denied damages, ruling that there had been no seizure under the statute, and Hoffmann appeals this ruling. We affirm.

¶ 2 I. BACKGROUND

¶ 3 On April 24, 2014, PNC issued a citation to discover assets to West Suburban Bankcorp., Inc. (WSB). According to Hoffmann, her Raymond James IRA contained WSB stock, so when PNC issued the citation to WSB, her IRA was frozen. On July 3, 2014, Hoffmann filed a motion to declare the IRA exempt. She alleged that the IRA was established on June 2, 2010, before PNC filed suit, and thus the IRA was exempt from seizure under section 12–1006 of the Code (735 ILCS 5/12–1006 (West 2012)

). She stated that she was also reserving the right to request damages from PNC under section 12–1005.

¶ 4 On July 8, 2014, PNC issued a citation to discover assets to Raymond James.

¶ 5 The trial court held a hearing on Hoffmann's exemption motion on July 15, 2014. PNC's counsel stated that the IRA had about 2,158 shares of WSB stock, worth about $800,000, and additional cash. He stated that the IRA would be exempt if it complied with the Internal Revenue Code but that determining this would require looking at when it was established, how it was funded, and whether there were contributions and distributions. The trial court asked if he was saying that he would have no problem with a temporary order declaring the IRA exempt, but with leave for further discovery. PNC's counsel said that he was actually going to ask for a temporary order freezing the IRA, pending a final determination as to the exemption status. PNC's counsel stated that he had requested documents bearing on the good-faith intent as to both the establishment and the administration of the IRA. Hoffmann's counsel replied that the document request was made the previous day, and that he had brought some of the documents with him. The trial court took a break from the matter so that the attorneys could discuss the IRA and another issue. When the matter was called again, Hoffmann's counsel stated: “We have basically agreed to briefing schedules on both motions,” with the last reply being due on August 26, 2014.

¶ 6 PNC filed a response to Hoffmann's exemption motion on August 19, 2014, arguing that she had not sustained her burden of proof for the exemption. PNC argued, among other things, that the potential for litigation began before 2010; Hoffmann had transferred over $20 million in property in 2009; and the documents Hoffmann provided did not show when and in what amounts contributions and distributions were made to and from the IRA.

¶ 7 Hoffmann filed a reply on August 27, 2014, disputing PNC's assertions.

¶ 8 On September 4, 2014, the trial court held a hearing on Hoffmann's exemption motion. PNC's counsel stated that, unless and until he went through 40 years of tax records, he was “satisfied,” from what he had seen, that the IRA was exempt. He stated that in her reply Hoffmann had “finally” attached the pension plan and some of the operational records. Hoffmann's attorney argued that damages were appropriate because an exempt asset had been seized.

¶ 9 The trial court granted Hoffmann's motion to declare the IRA exempt. However, it denied damages under section 12–1005 without prejudice, on the basis that Hoffmann did not specifically request such damages in her original motion; the trial court stated that Hoffmann could raise the issue in a new motion. The trial court then granted PNC's request to dismiss the citation against Raymond James.

¶ 10 On September 12, 2014, Hoffmann filed a motion for damages under section 12–1005. She argued that PNC had wrongly seized the IRA, denying her the benefit of the exempt asset for over two months. Hoffmann maintained that under section 12–1005 she was entitled to double the value of the property seized.

¶ 11 In PNC's response, it argued that: Hoffmann had failed to produce documents supporting her exemption claim; there was no seizure under section 12–1005; and, even if a seizure had occurred, PNC could not be liable for damages, because its objection to the exemption was filed in good faith.

¶ 12 A hearing on the section 12–1005 motion took place on November 6, 2014. Hoffmann's counsel argued, inter alia, that, at the initial hearing on the exemption motion, although he had documents that he believed clearly showed that the IRA was exempt, PNC asked for a five-week briefing schedule, filed a response stating that Hoffmann had not met her burden, and then conceded the motion. PNC's counsel argued, in relevant part, that he asked for the briefing schedule partly so that he could review the documents that Hoffmann had brought. He stated that, because PNC had issued the citation to discover assets to Raymond James, it had received up to a thousand more pages of documents that would take some time to review. He further stated that Hoffmann had attached additional documents to her reply, which finally established a prima facie case for exemption. He stated that PNC decided that it did not want to review 40 years' of documents to find out whether the IRA was operationally compliant with the revenue code, so at the final hearing on the exemption motion he had stated that PNC was not going to further challenge Hoffmann's exemption claim.

¶ 13 The trial court denied Hoffmann's motion for damages. It stated that Hoffmann's position was that, once PNC was aware of prima facie evidence that the IRA was exempt but continued to pursue the citation, its actions constituted a seizure. The trial court stated that section 12–1005 seemed to require a party to file a civil action for damages, but since PNC did not raise an argument as to whether the motion was procedurally appropriate, the trial court would not consider it. The trial court continued that, in considering the statute's plain language:

“I am finding that in this particular case there was no taking and there was no seizing even though there was an infringement on the right of Mrs. Hoffman [sic ] to dispose of her property as she sees fit. And I do recognize there was. But that is our process and that was done legally.”

The trial court stated that a party with a good-faith basis should have the right to investigate and respond to an exemption motion and that PNC's request was reasonable under the circumstances. The trial court stated that it allowed about two months to explore the issue and that the rules were appropriately followed.

¶ 14 Hoffmann's counsel asked the trial court if it believed that its ruling was final and appealable. PNC's counsel stated that he did not believe it was, so Hoffmann's counsel asked for language under Illinois Supreme Court Rule 304(a)

(eff. Feb. 26, 2010). The trial court stated that, if Hoffmann's counsel believed that such language was necessary, he could file a motion within 30 days of the order. Hoffmann ultimately did not seek such language.

¶ 15 Hoffmann filed a notice of appeal on November 21, 2014.

¶ 16 II. ANALYSIS

¶ 17 A. Jurisdiction

¶ 18 PNC contends that we lack jurisdiction over this appeal, so we first address that issue. Hoffmann argues that we have jurisdiction under Illinois Supreme Court Rule 304(b)(4)

(eff. Feb. 26, 2010), which allows the appeal of a “final judgment or order entered in a proceeding under section 2–1402 of the Code of Civil Procedure.” Section 2–1402 governs supplementary proceedings in which a judgment creditor can seek to discover and recover assets of the judgment debtor to satisfy the judgment. 735 ILCS 5/2–1402 (West 2012) ; Village of Lake in the Hills v. Niklaus, 2014 IL App (2d) 130654, ¶ 19, 381 Ill.Dec. 663, 11 N.E.3d 26. Hoffmann sought damages under section 12–1005, which states:

“If any officer by virtue of any judgment or process, or any other person by any right of distress takes or seizes any of the articles of property exempted from levy and sale, as provided in Part 10 of Article XII of this Act, such officer or person shall be liable in a civil action to the party damaged for double the value of the property so illegally taken or seized and costs of the action.” 735 ILCS 5/12–1005 (West 2012)

.

¶ 19 PNC argues that the supplementary proceeding that gave rise to Hoffmann's section 12–1005 motion was the Raymond James citation proceeding. PNC maintains that the September 4, 2014, order granting Hoffmann's exemption motion and dismissing the Raymond James citation concluded that supplementary proceeding and had the effect of foreclosing PNC from collecting any of the judgment from Raymond James. PNC cites Shipley v. Hoke, 2014 IL App (4th) 130810, ¶ 110, 387 Ill.Dec. 424, 22 N.E.3d 469

, where the court stated that, once underlying supplementary proceedings have automatically terminated, all other collateral proceedings must...