Poplar Grove State Bank v. Powers

• Decision Date: 29 August 1991
• Docket Number: No. 2-90-1359,2-90-1359
• Parties: , 161 Ill.Dec. 230 POPLAR GROVE STATE BANK, Plaintiff-Appellant, v. Roger J. POWERS et al., Defendants-Appellees (Lynn A. Bullard et al., Defendants).
• Court: United States Appellate Court of Illinois

Page 588

578 N.E.2d 588

218 Ill.App.3d 509, 161 Ill.Dec. 230

POPLAR GROVE STATE BANK, Plaintiff-Appellant, v. Roger J. POWERS et al., Defendants-Appellees (Lynn A Bullard et al., Defendants).

No. 2-90-1359.

Appellate Court of Illinois Second District.

Aug. 29, 1991.

Criag P. Thomas and Wesley E. Lindberg, Reno, Zahm, Folgate, Lindberg & Powell, Rockford, for Poplar Grove State Bank.

Lois Cannell Ramon, Belvidere and Keith H. Hyser, Rockford, for Lynn A. Bullard, John R. Bullard, Roger J. Powers and John Powers.

Justice BOWMAN delivered the opinion of the court:

Plaintiff, Poplar Grove State Bank, obtained a money judgment against defendants Lynn A. Bullard and C. Bernice Bullard. Plaintiff then initiated a supplementary proceeding to discover assets belonging to Lynn and C. Bernice Bullard (see Ill.Rev.Stat. 1989, ch. 110, par. 2-1402), seeking in the process to set aside Bernice's allegedly fraudulent conveyance to defendant John Bullard of part of her interest in payments from defendant Roger Powers under an installment note. John Bullard entered a special appearance (see Ill.Rev.Stat.1989, ch. 110, par. 2-301) to object to the trial court's jurisdiction over him. The trial court held that it lacked in personam jurisdiction over John Bullard and dismissed him from the proceeding. Plaintiff then brought this appeal (see 134 Ill.2d R. 304(b)(4)).

On appeal, plaintiff argues that (1) John Bullard waived his jurisdictional objections by arguing matters other than in personam jurisdiction in his special appearance; and (2) the trial court erred in holding that John Bullard, a resident of Iowa at all relevant times, was not amenable to service of process pursuant to the Illinois "long-arm" statute (Ill.Rev.Stat.1989, ch. 110, par. 2-209). We affirm.

Plaintiff's complaint in the underlying action, filed September 8, 1988, alleged that Lynn Bullard and his mother, C. Bernice Bullard (Lynn and Bernice herein), had defaulted on payments under a note that they and plaintiff had executed on July 22, 1978. The note represented a loan of $30,279.08 that Lynn took out to finance his gasoline station, which he operated from 1984 to 1988 on Boone County property. The note was secured by the inventory, equipment and accounts of the station. Robert and Bernice signed the note as accommodation makers, but received no money under the loan. Robert Bullard died in January 1988.

Robert and Bernice originally owned the property on which Lynn's gas station stood. On or about August 1984, Robert and Bernice sold the property to Roger Powers, an Illinois resident. Lynn thereafter rented the property from Powers. The sale from the Bullards to Powers was secured by a note and mortgage of August 15, 1984. The note obligated Powers to pay Bernice $58,000 plus interest at the rate of $538 per month. The note was secured by a third mortgage on the property, with Powers as mortgagee and Bernice as mortgagor. The note specifies that all payments are to be made at an address in Machesney Park, Illinois. Although the mortgage describes Bernice as being from Winnebago County, she testified at the June 2, 1989, hearing that 1989 was "the sixth year" that she had resided in Lakeland, Florida, part of the year and Lake Mills, Wisconsin, part of the year.

In February 1988, Powers informed Lynn that the latter would have to vacate the property; as a result of his having to close the gasoline station, Lynn was unable to make the payments on the loan from plaintiff. Plaintiff brought the suit on the loan shortly thereafter. On June 8, 1989, the trial court entered judgment against Lynn and Bernice for $34,309.99, including principal, interest, and attorney fees.

Plaintiff next commenced a supplementary proceeding to discover assets, naming and serving Powers as citation defendant. On July 12, 1989, the court heard testimony in the supplementary proceeding. Powers testified that as of June 12, 1989, he owed Bernice $45,776.88 on the note.

Plaintiff introduced an exhibit that Powers identified as an assignment from Bernice to her son John. The assignment, dated January 10, 1988, stated that Bernice thereby assigned 40% of her right, title and interest in the note to John Bullard of Cedar Rapids, Iowa, with all payments on the note to be made to Bernice at the Bank of Lake Mills in Wisconsin. Underneath Bernice's signature, Powers signed to acknowledge that he received the assignment and accepted its terms. Powers testified that one of the Bullards, possibly Bernice's son Frank, called him and asked if he would object to signing the document; Powers had no objection and did so on January 10, 1988. Powers had previously sent his checks to Bernice's account with plaintiff, but now sent them to her bank in Wisconsin. In March 1989, a member of the Bullard family called Powers and asked him to start making out the checks to John or Bernice and sending the checks to John in Iowa, as he would be handling Bernice's money for her. Powers complied.

On July 17, 1989, the court entered an order requiring Bernice, after taking a $2,000 statutory exemption from judgment to convey 60% of her payments from Powers to plaintiff. The court reserved ruling on the validity of the assignment of the other 40% to John Bullard. The court then granted plaintiff leave to commence supplementary proceedings against John Bullard.

On August 2, 1989, plaintiff filed a citation to discover assets directed to John Bullard. The citation was dated July 14, 1988. The citation was served on John Bullard at Cedar Rapids on July 19, 1989. John was not served with process again, although on August 28, 1990, plaintiff filed a notice to John Bullard of a hearing on the supplemental proceeding. On August 4, 1989, John Bullard wrote directly to plaintiff's attorney. He stated that his attorney had told him that, as a resident of Iowa, he need not appear at the supplementary proceeding. He then explained that he had, after years of effort, persuaded Bernice to agree to the assignment so that Bernice would not end up giving away all of her assets to Lynn Bullard.

On August 28, 1990, shortly after obtaining a judgment against Lynn Bullard in a supplementary proceeding, plaintiff filed its "Complaint and Amended Supplemental Proceedings under section 2-1402" naming Bernice Bullard, John Bullard and Roger Powers as defendants. Plaintiff alleged that the assignment from Bernice to John Bullard was a fraudulent conveyance. It asked that the court declare the assignment void and turn over the obligation thereunder to plaintiff, to be applied against the judgment in the original suit.

On September 11, 1990, John Bullard filed his "Special and Limited Appearance," moving to quash service on him. He stated that he had been a resident of Cedar Rapids, Iowa, for over 10 years and had done no act that would subject him to the jurisdiction of Illinois courts pursuant to the Illinois "long-arm" statute (Ill.Rev.Stat.1989, ch. 110, par. 2-209). He also argued that because plaintiff itself had admitted that John Bullard had no property of the judgment debtor in his possession, plaintiff could not bring a supplementary proceeding under section 2-1402 against John Bullard; that the court had ruled, on August 23, 1989, that a prior attempt to bring John Bullard before the court in a supplementary proceeding had been ruled invalid; and that plaintiff had not obtained leave of court to commence another supplementary proceeding against John Bullard.

The court heard arguments on John Bullard's objection to personal jurisdiction. The parties also submitted briefs on the matter, but these are not part of the record on appeal. Plaintiff's attorney stressed that the court had jurisdiction over John Bullard because John had transacted business in Illinois (see Ill.Rev.Stat.1989, ch. 110, par. 2-209(a)(1)) and also argued that the assignment was void as a fraudulent conveyance. John Bullard's attorney argued that the court had no jurisdiction over him because he lacked sufficient contacts and also because a supplementary proceeding under section 2-1402 was not a permissible way to set aside an allegedly fraudulent conveyance. The trial judge suggested that, by making this latter argument, John Bullard's attorney might be waiving his jurisdictional argument. The attorney responded that because plaintiff had brought both a supplementary proceeding and a complaint directed toward the allegedly fraudulent conveyance under the same proceeding, she had to address the jurisdictional question under both headings. She argued that John Bullard could not be brought into court for the supplementary proceeding unless it was undisputed that he held assets of the judgment debtor.

On November 2, 1990, the trial court issued a "memorandum of decision" dismissing the proceeding against John Bullard for lack of personal jurisdiction. The judge explained first that although he did not accept John Bullard's argument that a fraudulent conveyance could not be set aside by a supplementary proceeding, John Bullard had not waived his objection to jurisdiction by making this argument. This argument was part of the objections to both in personam and in rem jurisdiction.

The judge explained next that, as John Bullard had properly been served with the citation, the only issue was his amenability to process under the Illinois "long-arm" statute. The judge concluded that John had committed none of the acts listed in the statute as constituting submission to the jurisdiction of Illinois courts (see Ill.Rev.Stat.1989, ch. 110, par. 2-209(a)). The judge stated further that, although neither party had raised the issue, he had also considered the latest amendment to the statute, effective September 7, 1989, allowing a court to exercise jurisdiction on any basis permitted by the Illinois and Federal Constitutions (see Ill.Rev.Stat.1989, ch. 110, par. 2-209(c)). The judge concluded that, even stretched to the limits of due...