Dominick's Finer Foods, Inc. v. Makula

217 B.R. 550, 1997 WL 827477
CourtDistrict Court, N.D. Illinois
DecidedJanuary 9, 1997
Docket97 C 3731
StatusPublished
Cited by5 cases

This text of 217 B.R. 550 (Dominick's Finer Foods, Inc. v. Makula) is published on Counsel Stack Legal Research, covering District Court, N.D. Illinois primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Dominick's Finer Foods, Inc. v. Makula, 217 B.R. 550, 1997 WL 827477 (N.D. Ill. 1997).

Opinion

MEMORANDUM OPINION AND ORDER

LEINENWEBER, District Judge.

This is an appeal by Dominick’s Finer Foods, Inc. (“Dominick’s”) from a decision entered by the bankruptcy court on April 7, 1997 granting summary judgment as to Count I in favor of the bankruptcy trustee (“trustee”) and denying Dominick’s cross-motion for summary judgment. The summary judgment motions arose in the context of an adversary proceeding regarding the respective rights of the estate and Dominick’s in a partnership interest held by John G. Makula *552 (“Makula”). For the following reasons, the court affirms the decision of the bankruptcy court.

BACKGROUND

The facts of this case are undisputed. In the summer of 1992, a suit was pending in the Circuit Court of Cook County by which Dominick’s sought to enforce a guarantee Makula had signed on a lease. Dominick’s moved for summary judgment and, on July 31, 1992, the Circuit Court granted Dominick’s motion.

Pursuant to Illinois state procedure, on August 31, 1992, Makula filed a motion for reconsideration and a motion to vacate the judgment, which was served on September 9, 1992. Also on August 31, 1992, Dominick’s obtained a citation to discover Makula’s assets. This citation was never served. Instead, on September 25, 1992, Dominick’s secured leave to serve an alias citation. On September 29, 1992, the clerk of the court issued this citation, which required Makula to appear for an examination as to his assets on October 29, 1992. On October 19, 1992, the citation was served.

Makula, however, believed that the alias citation was invalid. According to Makula, an alias citation cannot issue until the judgment becomes enforceable. Since there was a pending motion for reconsideration which stayed enforcement of the judgment, Makula argued that the alias citation was impermissibly obtained. Thus, rather than agreeing to appear for the examination, Makula filed a motion to quash service of the alias citation. This motion was continued by court order until March 25, 1993. Before the court was able to consider the motion to quash, however, on March 11, 1993, the court denied Ma-. kula’s motion for reconsideration and motion to vacate the judgment.

Even if Makula was correct that the earlier citation was invalid, once the motion for reconsideration was denied and the judgment became enforceable, Dominick’s could have reapplied for another citation and served it on Makula. However, Dominick’s did not do this, instead it relied on the original alias citation.

On March 24, 1993, Makula, through his attorney, agreed to appear on April 8,1993 in order to be examined pursuant to the citation to discover assets. At the time, the motion to quash was still pending and, by agreed order, the motion was continued from March 25, 1993 until April 19, 1993. However, Makula did not appear on April 8, 1993 for examination and did not appear in court on April 19, 1993 for the hearing on the motion to quash. Consequently, the Circuit Court struck the motion to quash and ordered Makula to appear on May 17, 1993 to show cause why he should not be held in contempt for failure to appear in response to the citation.

This rule to show case was never served on Makula. Instead, on May 17,1993, the court issued an alias rule which was returnable on June 10,1993. This alias rule was served on Makula on May 26,1993. Nevertheless, Ma-. kula failed to appear. Instead, on June 10, 1993, Makula’s attorney appeared on his behalf to file a motion to quash service of the rule to show cause based on improper service of process. The court continued the motion to June 21, 1993 for an evidentiary hearing on the motion to quash service. However, on June 18, 1993, before the hearing could be held, Makula filed a bankruptcy petition which stayed further proceedings. Richard Mason was appointed to serve as successor trustee.

In the bankruptcy court, Dominick’s argued that it had a valid lien on 67 Class A partnership units that Makula owned in the Thomas Harvey Company, an accounting partnership, because of the service of the citation to discover assets. The trustee claimed, however, that there was no lien. First, the trustee argued that the citation was invalid since it was obtained while Makula had a motion to vacate pending which stayed enforcement of the judgment. Second, the trustee argued that the citation could not have created a lien on the partnership interest since the citation was served upon Makula rather than the partnership. Third, the trustee argued that a citation to discover assets does not create a lien under Illinois law. Finally, the trustee argued that the trustee could undue the lien through the *553 use of his strong-arm powers or as a preference.

The bankruptcy court found for the trustee. According to the court, while the citation was unenforceable since there was a pending motion to vacate which stayed enforcement of the judgment, the trustee was equitably estopped from asserting this argument because Makula agreed to appear. Furthermore, the court held that service of the citation upon Makula, and not the partnership, was sufficient. However, even though the citation could not be challenged, the court found that, under Illinois law, the citation did not create a lien. Therefore, the court ruled in favor of the trustee without reaching the question regarding the preference provisions of the bankruptcy code or the strong-arm powers of the trustee.

ISSUES PRESENTED ON APPEAL

Several issues are presented on.appeal. The first issue is whether, under Illinois law, service of the citation was valid and enforceable. If the citation is determined to be unenforceable, the second question is whether Makula, and hence the trustee, is estopped from arguing that the citation was unenforceable or whether Makula waived this argument. If the citation is valid, or if Makula is prohibited from arguing unenforceability, the next issue the court would have to consider is whether the citation was validly served. If it was validly served, then the next issue is whether a citation to discover assets created a lien under then-existing Illinois law. The final issue, which was not reached by the bankruptcy court, is whether, if a lien is created, it can be undone pursuant to either the trustee’s strong-arm powers or pursuant to the preference provisions of the Bankruptcy Code.

STANDARDS

According to Federal Rule of Bankruptcy Procedure 7056, summary judgment shall be granted whenever there is “no issue as to any actual fact and the moving party is entitled to judgment as a matter of law.” Fed. R.Bankr.P. 7056. ■ This rule incorporates Federal Rule of Civil Procedure 56. There is no general issue of material fact if “the record taken as a whole could not lead a rational trier of fact to find for the non-moving party.” Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587, 106 S.Ct. 1348, 1356, 89 L.Ed.2d 538 (1986).

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Bluebook (online)
217 B.R. 550, 1997 WL 827477, Counsel Stack Legal Research, https://law.counselstack.com/opinion/dominicks-finer-foods-inc-v-makula-ilnd-1997.