Premier Property Management, Inc. v. Chavez

728 N.E.2d 476, 191 Ill. 2d 101, 245 Ill. Dec. 394

• Court: Illinois Supreme Court
• Decided: April 26, 2000
• Docket: 86045
• Status: Published

Opinions

JUSTICE BILANDIC

delivered the opinion of the court:

Jose Chavez conveyed his interest in his personal residence to himself and his spouse, Claudia Chavez, as tenants by the entirety. Plaintiff, Premier Property Management, Inc. (Premier), a creditor of Jose Chavez, filed a complaint in the circuit court of Cook County seeking to have this conveyance set aside as fraudulent. Premier named Jose Chavez and Claudia Chavez as defendants. The circuit court dismissed Premier’s complaint with prejudice. The appellate court reversed this dismissal and remanded for further proceedings. No. 1 — 97—4066 (unpublished order under Supreme Court Rule 23). We affirm the judgment of the appellate court.

BACKGROUND

Premier and Jose Chavez had a business relationship. In May of 1995, Premier filed a separate lawsuit against Jose Chavez and El Torero, Inc. At that time, Jose Chavez held title to his residence in his name alone.

On or around June 1, 1996, Jose Chavez conveyed his interest in the residence from himself, as sole owner, to himself and his wife, as tenants by the entirety. This conveyance was recorded on July 19, 1996. In late 1996, a judgment was entered in the separate lawsuit in favor of Premier and against Jose Chavez and El Torero, Inc., for the amount of $190,566.30.

On May 27, 1997, Premier filed the instant action to set aside the conveyance. Premier contended that the conveyance should be set aside as fraudulent pursuant to the terms of the Uniform Fraudulent Transfer Act (hereinafter, Fraudulent Transfer Act) (740 ILCS 160/1 et seq. (West 1996)).

Defendants filed a motion to dismiss Premier’s complaint under section 2 — 619 (735 ILCS 5/2 — 619 (West 1996)) of the Code of Civil Procedure (735 ILCS 5/1 — 101 et seq. (West 1996)). Defendants argued that the tenancy by the entirety provision of the Code of Civil Procedure (735 ILCS 5/12 — 112 (West 1996)) protects their marital residence from being sold to pay a judgment entered against only one of the tenants. According to defendants, the tenancy by the entirety provision offers this protection regardless of whether the conveyance was made with fraudulent intent. In support, defendants relied on a decision of the Second District of the Appellate Court, E.J. McKernan Co. v. Gregory, 268 Ill. App. 3d 383 (1994), appeal allowed, 161 Ill. 2d 525 (1995), appeal dismissed with prejudice, No. 78487 (May 23, 1995).

Premier filed a response to defendants’ motion to dismiss. Premier maintained that a conveyance of property to tenancy by the entirety may be set aside where made with fraudulent intent. In support, Premier relied on In re Marriage of Del Giudice, 287 Ill. App. 3d 215 (1997), a decision of the First District of the Appellate Court. Premier also argued to the circuit court that it was required to follow Del Giudice, the decision in its district, because a conflict existed between Del Giudice and McKernan.

The circuit court determined that Del Giudice and McKernan are reconcilable on their facts. The circuit court then applied McKernan to the instant case, reasoning that McKernan is more factually analogous. Consequently, the circuit court granted defendants’ motion to dismiss Premier’s complaint with prejudice.

Premier appealed. The appellate court ruled that Del Giudice and McKernan are in direct conflict. No. 1 — 97— 4066 (unpublished order under Supreme Court Rule 23). The appellate court further ruled that the circuit court was bound to follow Del Giudice, the decision in its district. The appellate court therefore reversed the dismissal of Premier’s complaint and remanded the cause for additional proceedings. In doing so, the appellate court noted that the General Assembly had recently amended the tenancy by the entirety provision relied upon by defendants. We allowed defendants’ petition for leave to appeal (177 Ill. 2d R. 315).

ANALYSIS

Tenancy by the entirety is an estate in real property provided for by the Joint Tenancy Act (765 ILCS 1005/ 0.01 et seq. (West 1996)). Only spouses may hold property in this estate. 765 ILCS 1005/lc (West 1996). In addition, the estate is limited to homestead property. 765 ILCS 1005/lc (West 1996).

I. Tenancy by the Entirety Provision

According to the tenancy by the entirety provision of the Code of Civil Procedure, holding property in tenancy by the entirety protects spouses in that the property cannot be sold to satisfy the debt of only one spouse. 735 ILCS 5/12 — 112 (West 1998). At issue here is the extent of that protection when a creditor attempts to avoid a transfer of property to tenancy by the entirety, claiming that it was made with fraudulent intent.

When Jose Chavez conveyed his property to tenancy by the entirety on or around June 1, 1996, the tenancy by the entirety provision stated in pertinent part:

“Any real property, or any beneficial interest in a land trust, held in tenancy by the entirety shall not be liable to be sold upon judgment entered on or after October 1, 1990 against only one of the tenants.” 735 ILCS 5/12 — 112 (West 1996).

Premier asserts that Jose Chavez’s conveyance was fraudulent and may be set aside under the Fraudulent Transfer Act. The Fraudulent Transfer Act provides in relevant part that a creditor may avoid a transfer “if the debtor made the transfer *** with actual intent to hinder, delay, or defraud any creditor of the debtor.” 740 ILCS 160/5(a)(l) (West 1996). Our appellate court has reached conflicting conclusions as to whether the Fraudulent Transfer Act may be used against a debtor who is relying on the protection furnished by the tenancy by the entirety provision.

In McKeman, a husband and wife held their home in joint tenancy. A creditor obtained a judgment against the husband and initiated proceedings for a sale of the home. The husband and wife then transferred title to the home to tenancy by the entirety. The husband moved to restrain the sale based on the protection provided by the tenancy by the entirety provision. The creditor asserted that the transfer of title was fraudulent under the Fraudulent Transfer Act. McKernan, 268 Ill. App. 3d at 387-88.

The appellate court in McKeman held that the Fraudulent Transfer Act can never be applied to property held in tenancy by the entirety. According to the appellate court, the Fraudulent Transfer Act allows creditors to avoid transfers made with actual intent to defraud. Intent, however, “is irrelevant in a tenancy by the entirety conveyance because it simply cannot be fraudulent to engage in conduct that is specifically and unambiguously sanctioned by statute.” McKeman, 268 Ill. App. 3d at 390. The appellate court interpreted the statutes relating to tenancy by the entirety as authorizing transfers like the one at issue. A plain reading of those statutes “makes it clear that no mental state is required to use the tenancy’s protection.” McKernan, 268 Ill. App. 3d at 390. Further, the appellate court reasoned that the legislature intended tenancy by the entirety to shield the marital homestead from the creditors of one spouse. McKernan, 268 Ill. App. 3d at 390-91.

The appellate court in Del Giudice declined to follow McKernan. In Del Giudice, a husband and wife held their home in joint tenancy. A creditor obtained a judgment against the husband and initiated proceedings for a sale of the home. The husband and wife then transferred title to the home to tenancy by the entirety. The husband moved to restrain the sale based on the protection provided by the tenancy by the entirety provision. The creditor asserted that the transfer of title was fraudulent under the Fraudulent Transfer Act. Del Giudice, 287 Ill. App. 3d at 216.

The appellate court held that, pursuant to the terms of the Fraudulent Transfer Act, a creditor can avoid a transfer of property to tenancy by the entirety if that transfer was made with actual intent to defraud the creditor. The appellate court acknowledged that the statutes concerning tenancy by the entirety allow married couples to effect such transfers, and that the General Assembly intended tenancy by the entirety to shield a marital homestead from the creditors of one spouse. Nonetheless, the court found no indication in those statutes or their legislative history that the General Assembly intended to include fraudulent conduct within the scope of afforded protection. According to the Del Giudice court, because the Fraudulent Transfer Act may be used to invalidate an otherwise lawful transaction made with fraudulent intent, that Act may be used to invalidate an otherwise lawful transfer of property to tenancy by the entirety if made with fraudulent intent. Del Giudice, 287 Ill. App. 3d at 218.

After Del Giudice was filed, the General Assembly amended the tenancy by the entirety provision. See Pub. Act 90 — 514, eff. August 22, 1997; 1997 Ill. Laws 5779. With that amendment, the tenancy by the entirety provision states in pertinent part:

“Any real property, or any beneficial interest in a land trust, held in tenancy by the entirety shall not be liable to be sold upon judgment entered on or after October 1, 1990 against only one of the tenants, except if the property was transferred into tenancy by the entirety with the sole intent to avoid the payment of debts existing at the time of the transfer beyond the transferor’s ability to pay those debts as they become due.” (Emphasis on language added by amendment.) 735 ILCS 5/12 — 112 (West 1998); 1997 Ill. Laws 5779.

The General Assembly also added language explaining that this amendment “is intended as a clarification of existing law and not as a new enactment.” 735 ILCS 5/12 — 112 (West 1998); 1997 Ill. Laws 5779.

Initially, we must determine whether the amended version of the tenancy by the entirety provision applies to Jose Chavez’s conveyance. This court in First of America Trust Co. v. Armstead, 171 Ill. 2d 282 (1996), set forth the approach that Illinois reviewing courts follow in deciding whether an amended statute applies on appeal to “pending suits or preexisting causes of action.” Dardeen v. Heartland Manor, Inc., 186 Ill. 2d 291, 295 (1999). Under Armstead, a reviewing court applies the law as it exists at the time of the appeal, unless doing so would interfere with a vested right. Armstead, 171 Ill. 2d at 290.

Defendants argue that applying the amended version of the tenancy by the entirety provision to them interferes with Claudia Chavez’s vested right to a property interest in her home. We disagree. Although not capable of precise definition, a vested right is an interest that is protected from legislative interference by our due process clause (Ill. Const. 1970, art. I, § 2), and has been described as “an expectation that is so far perfected that it cannot be taken away by legislation” or a “complete and unconditional demand or exemption that may be equated with a property interest.” Armstead, 171 Ill. 2d at 290. There is, however, “no vested right in the mere continuance of a law,” and the General Assembly “has an ongoing right to amend a statute.” Armstead, 171 Ill. 2d at 291.

The amendment to the tenancy by the entirety provision merely clarifies what protection is provided to spouses who hold property in that estate. The amendment clarifies that a creditor may break through that protection only where the property was transferred into tenancy by the entirety with the sole intent to avoid the payment of debts existing at the time of the transfer beyond the transferor’s ability to pay those debts as they become due. Defendants are asserting, in effect, that Claudia Chavez has a vested right to the preamended tenancy by the entirety provision, as it was interpreted by the McKernan court. As noted, however, there is no vested right in the mere continuance of a law. Armstead, 171 Ill. 2d at 291. Likewise, there is no vested right in the McKernan court’s interpretation of the law at issue. The General Assembly has the ongoing right to amend the tenancy by the entirety provision to clarify what protection it intends spouses who hold property in that estate to have. Consequently, because no vested right is at stake, we must apply the law as it now exists.

Having determined that the amended tenancy by the entirety provision applies here, we now address the primary issue before this court: whether the Fraudulent Transfer Act’s actual intent standard may be used to set aside a transfer of property to tenancy by the entirety. We hold that the answer is no, for the following reasons.

As amended, the tenancy by the entirety provision expressly includes its own standard to be used when a creditor challenges a transfer to that estate. Under the standard provided, property held in tenancy by the entirety cannot be sold to satisfy the debt of only one spouse, unless the property was transferred into tenancy by the entirety “with the sole intent to avoid the payment of debts existing at the time of the transfer beyond the transferor’s ability to pay those debts as they become due.” (Emphasis added.) 735 ILCS 5/12 — 112 (West 1998). This standard governs when a creditor challenges a transfer of property to tenancy by the entirety. Harris Bank St. Charles v. Weber, 298 Ill. App. 3d 1072, 1081 (1998); In re Stacy, 223 B.R. 132, 136 (N.D. Ill. 1998).

This sole intent standard stands in contrast to the actual intent standard of the Fraudulent Transfer Act. Under the Fraudulent Transfer Act, a creditor may avoid a transfer if the debtor made the transfer with actual intent to hinder, delay, or defraud any creditor of the debtor. 740 ILCS 160/5(a)(l) (West 1996). Section 5(b) of that Act lists 11 factors that may be considered in determining the debtor’s actual intent in making the transfer. 740 ILCS 160/5(b)(l) through (b)(ll) (West 1996). If a sufficient number of the factors are present, the requisite actual intent may be found.

The sole intent standard of the amended tenancy by the entirety provision is substantially different from the actual intent standard of the Fraudulent Transfer Act. The sole intent standard provides greater protection from creditors for transfers of property to tenancy by the entirety. Under the sole intent standard, if property is transferred to tenancy by the entirety to place it beyond the reach of the creditors of one spouse and to accomplish some other legitimate purpose, the transfer is not avoidable. Such a transfer, however, would be avoidable under the actual intent standard, which only requires any actual intent to defraud a creditor. The General Assembly, by adopting the sole intent standard, has made it clear that it intends to provide spouses holding homestead property in tenancy by the entirety with greater protection from the creditors of one spouse than that provided by the Fraudulent Transfer Act. Accordingly, the Fraudulent Transfer Act’s actual intent standard is not to be used to avoid transfers of property made to tenancy by the entirety. Harris Bank St. Charles, 298 Ill. App. 3d at 1081; In re Stacy, 223 B.R. at 136.

Given that Del Giudice applied the actual intent standard of the Fraudulent Transfer Act, Del Giudice is not consistent with the sole intent standard of the amended tenancy by the entirety provision, nor is McKernan, which held that intent is never relevant. Hence, Del Giudice and McKernan are no longer correct statements of the law and should be disregarded. Harris Bank St. Charles, 298 Ill. App. 3d at 1080-81.

In the present case, Premier’s complaint to set aside Jose Chavez’s conveyance relied upon the Fraudulent Transfer Act and, ultimately, Del Giudice. Defendants’ motion to dismiss Premier’s complaint relied upon McKernan. Applying McKernan, the circuit court granted defendants’ motion to dismiss with prejudice. We hold, however, that the amended tenancy by the entirety provision governs this case, to the exclusion of the actual intent standard of the Fraudulent Transfer Act, Del Giudice and McKernan. In light of this holding, Premier must be given the opportunity to amend its complaint to reflect the amendment to the tenancy by the entirety provision. This cause is therefore remanded to the circuit court of Cook County. The circuit court is directed to enter an order dismissing Premier’s complaint without prejudice and to afford Premier the opportunity to file an amended complaint.

II. Single Subject Rule

Defendants next contend that the amended version of the tenancy by the entirety provision cannot be applied to them because the General Assembly enacted that amendment in violation of the single subject rule. The amendment at issue was included within Public Act 90— 514 (Pub. Act 90 — 514, eff. August 22, 1997). According to defendants, Public Act 90 — 514 violates the single subject rule because it consists of two subjects: tenancy by the entirety and tax collector’s scavenger sales.

The Illinois Constitution provides that bills “shall be confined to one subject.” Ill. Const. 1970, art. IY § 8(d). The term “subject” as set forth therein is liberally construed in favor of upholding a legislative enactment. Arangold Corp. v. Zehnder, 187 Ill. 2d 341, 352 (1999). Although the single subject rule prohibits an enactment from clearly embracing more than one subject on its face, an enactment satisfies the rule so long as the matters included within it have a natural and logical connection to a single subject. Arangold Corp., 187 Ill. 2d at 351, 354-55.

The General Assembly named Public Act 90 — 514 “AN ACT in relation to property.” 1997 Ill. Laws 5775. The entire enactment consists of two sections. The first section amends the Property Tax Code (35 ILCS 200/ 1 — 1 et seq. (West 1996)) regarding the frequency with which a county tax collector is required to offer mineral rights for sale after having filed a “Scavenger Sale Application” with the court and obtaining a judgment thereon. 1997 Ill. Laws 5775-79. The second section is the amendment to the tenancy by the entirety provision, quoted above. 1997 Ill. Laws 5779. Both of these matters have a natural and logical connection to the subject of property. Therefore, defendants’ single subject challenge is rejected.

The partial dissent asserts that an enactment must satisfy two requirements to satisfy the single subject provision of our constitution. The partial dissent is mistaken. The single subject rule provides that “[bjills *** shall be confined to one subject.” Ill. Const. 1970, art. IV § 8(d). In enforcing this constitutional provision, this court has always applied the same test: i.e., an enactment satisfies the rule so long as the matters included within it have a natural and logical connection to a single subject. Arangold Corp., 187 Ill. 2d at 351-56 (and cases cited therein).

According to the partial dissent, a “second requirement” provides that, to satisfy the single subject rule, the provisions within an enactment must bear, beyond their relationship to a single subject, a relationship to one another. The partial dissent claims that this court’s recent decision of People v. Cervantes, 189 Ill. 2d 80 (1999), “resuscitated” this so-called second requirement by stating that “a legislative act violates the single subject rule when the General Assembly ‘includes within one bill unrelated provisions that by no fair interpretation have any legitimate relation to one another’ ” (Cervantes, 189 Ill. 2d at 84, quoting People v. Reedy, 186 Ill. 2d 1, 9 (1999)). The partial dissent further claims that Cervantes thereby overruled, sub silentio, the holding in Arangold Corp. v. Zehnder, 187 Ill. 2d 341, 356 (1999), that this second requirement does not exist.

The partial dissent misconstrues the language in Cervantes. This language in Cervantes in no way repudiates Arangold. Language like that used in Cervantes has often been used in this court’s jurisprudence when explaining the natural and logical connection test. For example, this court has oft repeated: See also Reedy, 186 Ill. 2d at 9; Johnson v. Edgar, 176 Ill. 2d 499, 515 (1997).

“ ‘ “Nor is the constitutional provision [that bills shall be confined to one subject] a limitation on the comprehensiveness of the subject; rather, it prohibits the inclusion of ‘discordant provisions that by no fair intendment can be considered as having any legitimate relation to each other.’ ” ’ ” Arangold Corp., 187 Ill. 2d at 352, quoting People ex rel. Ogilvie v. Lewis, 49 Ill. 2d 476, 487 (1971), quoting People ex rel. Gutknecht v. City of Chicago, 414 Ill. 600, 608 (1953), quoting People ex rel. City of Chicago v. Board of County Commissioners, 355 Ill. 244, 247 (1934).

This court in Arangold was asked to determine whether such language imposes a second requirement that the provisions within an enactment be related to each other. After reviewing all of the applicable precedent, we clarified that no such second requirement had ever existed. Arangold Corp., 187 Ill. 2d at 354-56 (and cases cited therein). We explained, “This court has never held that the single subject rule imposes a second and additional requirement that the provisions within an enactment be related to each other.” Arangold Corp., 187 Ill. 2d at 356, 361 (Freeman, C.J., specially concurring). Likewise, this court in Cervantes did not rely on any such second requirement in rendering that decision. Rather, we struck down the public act at issue there because its diverse provisions concerning crime, the civil Women, Infants and Children Vendor Management Act, and the Secure Residential Youth Care Facilities Licensing Act had no natural and logical connection to a single subject. Cervantes, 189 Ill. 2d at 91-98. Accordingly, we reject the partial dissent’s assertion that Cervantes somehow “resuscitated” this second requirement. This second requirement has never existed and, thus, there is nothing to resuscitate. Cervantes and Arangold are consistent.

CONCLUSION

The circuit court dismissed Premier’s complaint with prejudice. For the reasons set forth above, we reverse that judgment. We remand this cause to the circuit court of Cook County with directions that Premier be afforded the opportunity to file an amended complaint under the amended tenancy by the entirety provision. Accordingly, although for different reasons than those expressed by the appellate court, we affirm the judgment of the appellate court, which reversed the judgment of the circuit court.

Appellate court judgment affirmed; circuit court judgment reversed; causé remanded with directions.