PNC Bank v. Udell
| Decision Date | 13 August 2017 |
| Docket Number | Case No. 16 C 5400 |
| Parties | PNC BANK, NATIONAL ASSOCIATION, successor to National City Bank, Plaintiff, v. GLENN UDELL, et al., Defendants. |
| Court | U.S. District Court — Northern District of Illinois |
PNC Bank, N.A., successor to National City Bank, has sued Glenn Udell, Pamela Udell, Sorrento Management, Inc., Chicago Title and Trust, and Sorrento Enterprises, LLC, as well as entities called Sorrento Enterprises, LLC Series A through R,1 to set aside what PNC contends are fraudulent transfers of assets by the Udells to avoid paying a judgment against Glenn Udell in a state foreclosure action. The defendants have moved for summary judgment on counts 1 through 4 of PNC's complaint. The defendants have also moved to dismiss counts 5through 7 of PNC's amended complaint. For the following reasons, the Court denies defendants' motions, except as to Count 2, on which the Court grants summary judgment for defendants.
The Court takes the following facts from the exhibits and statements filed inconnection with defendants' motion for summary judgment.
This case concerns a number of assets belonging to Glenn and Pamela: 1) a series of partnerships and corporations—5331 S Cicero, LLC; GLU, LLC; MSP, LLC; PVPFO, LLC; New Trier Real Estate Partners, LP; Max and Benny's, LLC; Minooka Land Investment, LLP; Security National Warranty, LLC; Hazel Ravine Partners, LLC; Skokie Curragh, LLC; Kaufman & Udell Investments; and 2015 W Irving, LLC (collectively, "Udell Entities"); 2) real estate at 2-4 Cedar Rail Trail, Galena, Illinois ("Galena Property"); 3) five whole life insurance policies issued by New York Life in the amounts of $200,000, $100,000, $100,000, $500,000, and $500,000, respectively; and 4) Glenn's salary from the law firm of Brown, Udell, Pomerantz, and Delrahim, Ltd. for his work as an attorney.
On July 6, 2007, PNC made a loan to in the principal amount of $4,185,000 to 9362 Joint Venture, LLC, secured by a mortgage on certain real estate. Glenn was the manager of GLU, LLC, which in turn was the manager of 9362 Joint Venture, LLC. Glenn personally guaranteed repayment of PNC's loan to 9362 Joint Venture, LLC.
On April 18, 2008, Glenn and Pamela formed Sorrento Enterprises and its Series. From that point forward, Glenn's salary from his law firm was deposited directly into bank accounts held by one of the Sorrento Series entities. On March 1, 2009, Glenn transferred ownership of five whole life insurance policies issued by New York Life to Sorrento Enterprises and its Series. In May 2009, Glenn transferred his interest in the Udell Entities to Sorrento Enterprises and its Series. And, on July 9, 2009, Glennand Pamela quitclaimed their interest in the Galena Property to a land trust and named Sorrento Enterprises, LLC as the trust's sole beneficiary.
In December 2008, 9362 Joint Venture, LLC failed to pay monthly interest on its note and failed to pay property taxes. On April 23, 2009, PNC sent a notice of default and acceleration to 9362 Joint Venture, LLC. On May 21, 2009, PNC filed a mortgage foreclosure action in the Circuit Court of Cook County against 9362 Joint Venture, LLC and Glenn.
On April 21, 2011, during the foreclosure proceedings and in an effort to reach a settlement, Glenn provided to PNC a current personal financial statement (PFS) and a copy of his 2009 tax return (collectively, "April 2011 Disclosures"). Glenn and Pamela's 2009 joint tax return reported $350,000 in wages. The return also reported that Pamela was self-employed in 2009 and that she netted earnings in the amount of $8,740. Thus the $350,000 figure represented, largely or entirely, the wages Glenn earned as a partner at his law firm.
Glenn's PFS and tax return contained several references to Sorrento Enterprises, LLC. For example, the PFS reported that Glenn had one whole life insurance policy in the amount of $900,000, as well as three term life insurance policies in the amounts of $2,900,000, $2,000,000, and $2,000,000; Sorrento Enterprises, LLC owned the life insurance policies; and Glenn had a tenancy by the entirety interest in Sorrento Enterprises, LLC—fifty percent ownership with a market value of $1.2 million. The following statement also appeared on Glenn's PFS: "[a]ll interest in the assets listed in this statement are owned by Glenn L. Udell as a co-member in Sorrento Enterprises,LLC, a Delaware limited liability company." Dkt. no. 15 at 6. The tax return reported several instances of pass-through income from corporations and partnerships, including, Brown, Udell, Pomerantz, and Delrahim, Ltd.; "Skokie Curragh, LLC - Sorrento Enterprises"; Sorrento Enterprises; and "Security National Warranty, LLC - Sorrento Enterprises." Id. at 24, 28, 33. The return also reported that pass-through income from GLU, LLC and Minooka Land Investments LLP was transferred to "Sorrento Enterprises" for activities involving rental real estate. Id. at 25, 27. Similarly, the return reported that Sorrento Enterprises, LLC's pass-through income involved rental real estate activities. Id. at 30-31. Finally, the return's schedule E form reported that Glenn and Pamela received income or losses from many entities, including "Security National Warranty, LLC - Sorrento Enterprises," "Skokie Curragh, LLC - Sorrento Enterprises," and three other line items bearing the name Sorrento Enterprises LLC.
On May 28, 2013, June 3, 2013, November 12, 2013, and November 14, 2013, PNC requested additional tax returns and personal financial statements from Glenn. Glenn did not provide PNC with these documents. Ultimately, Glenn and PNC could not reach a settlement.
On October 31, 2014, the Circuit Court of Cook County entered a judgment in favor of PNC and against Glenn in the amount of $5,272,886.87.
On November 21, 2014, PNC served Glenn with a citation to discover assets. On August 18, 2015, PNC served a third-party citation to discover assets on Sorrento Enterprises, LLC.
On September 15, 2015, Glenn disclosed the assignments of his interests to particular entities in the Sorrento Series. Specifically, Glenn disclosed that 1) he transferred his interest in the New York Life policies to Sorrento Enterprises - Series P; 2) he and Pamela transferred their interest in the Galena Property to Sorrento Enterprises - Series O; 3) he transferred his interest in the Udell Entities to Sorrento Enterprises Series A through L and N2; and 4) he and Pamela transferred their personal property to Sorrento Enterprises, LLC - Series R. Id. at 46. Glenn did not disclose the entity in which he was depositing his wages.
On May 19, 2016, PNC filed this action. In its original complaint, PNC asserted that 1) Glenn and Pamela made fraudulent transfers to Sorrento Enterprises and its Series in violation of the Illinois Uniform Fraudulent Transfers Act (UFTA), 740 ILCS 160; 2) Pamela aided and abetted Glenn in making the alleged fraudulent transfers to Sorrento Enterprises and its Series; and 3) Glenn and Pamela conspired to defraud PNC by transferring assets to Sorrento Enterprises and its Series. PNC also sought to pierce the corporate veil of Sorrento Enterprises and its Series.
On July 21, 2016, defendants filed a motion to dismiss or, in the alternative, stayPNC's federal proceedings pending the conclusion of state court litigation. The Court denied the motion on September 21, 2016. See dkt. no. 34.
On November 30, 2016, defendants moved for summary judgment on PNC's original complaint, arguing that PNC's claims are time-barred. On January 5, 2017, PNC amended its complaint to add three additional counts. First, PNC sought a declaratory judgment that Sorrento Enterprises and its Series hold title to Glenn's assets as his nominee (Count 5). Second, PNC asserted an unjust enrichment claim against Pamela and Sorrento Enterprises and its Series (Count 6). Third, PNC asserted a successor liability claim, specifically a judgment holding Sorrento Enterprises and its Series liable for Glenn's debts (Count 7). Defendants have moved to dismiss the new claims.
Defendants seek summary judgment on counts one through four of PNC's amended complaint, arguing that PNC's claims challenging the asset transfers to Sorrento Enterprises and its Series and its claims of aiding and abetting a fraudulent transfer and conspiracy to defraud are time-barred. Defendants also argue that Illinois law prohibits PNC from levying on Glenn's wages or life insurance policies to satisfy PNC's judgment. Finally, defendants argue that PNC cannot bring a veil-piercing claim to reach the assets of Sorrento Enterprises and its Series because that would constitute a reverse veil-piercing claim, which is not recognized by Delaware law, under which the entities were formed.
PNC argues that its claims are timely and that even if they were filed outside thelimitations period, the claims survive based on the doctrines of equitable estoppel and equitable tolling. Finally, PNC contends that it is not asserting a reverse veil-piercing claim, but, if the claim is read that way, Delaware law permits such a claim.
Summary judgment is proper where the moving party "demonstrates that there is no genuine issue as to any material fact and [that it] is entitled to a judgment as a matter of law." Tsareff v. ManWeb Servs., Inc., 794 F.3d 841, 844 (7th Cir. 2015). A genuine issue of material fact exists "if the evidence is such that a reasonable jury could return a verdict for the nonmoving party." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). In making this determination, a court must "construe all facts and inferences in favor of the party against whom the motion under consideration was made." Tsareff, 794 F.3d at 844.
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