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Kaibab Ind., Inc. v. Fam. Rdy Homes





Appeal from the Circuit Court of Tazewell County; the Hon. Arthur H. Gross, Judge, presiding.


Rehearing denied February 16, 1983.

This case had its birth in the judicial system almost nine years ago, and this is its second appearance before this court. (See Kaibab Industries, Inc. v. Family Ready Homes, Inc. (1978), 80 Ill. App.3d 782, 372 N.E.2d 139.) The factual background of this litigation is set forth in the previous appeal; however, for the sake of clarity and continuity as we address the issues presented in this appeal we will reiterate the historical background of this appeal.

Kaibab, the plaintiff, obtained in Arizona a judgment for $133,269 against defendant B.F. Waldsmith on December 10, 1973. This judgment was subsequently entered in Peoria County under the Uniform Enforcement of Judgments Act (Ill. Rev. Stat. 1975, ch. 77, par. 88 et seq.). In 1975 citation proceedings were filed in Tazewell County to discover assets which the citation defendants Gary Waldsmith, Teren Waldsmith, Linda Waldsmith, now Linda Burke, might have fraudulently received from their father, B.F. Waldsmith, the judgment debtor. Rooster I Corporation is also a citation defendant whose role in this litigation will be more amply set forth as we confront the issues presented for determination.

After several evidentiary hearings, final judgment was entered by the circuit court of Tazewell County, which found that certain parcels of real estate in the name of Linda Waldsmith were subject to the claim of Kaibab against her father, B.F. Waldsmith, but the judgment held that the general assets of the citation defendants were not subject to the claim of Kaibab.

On January 19, 1978 (rehearing denied April 12, 1978), this court affirmed the Tazewell court's judgment as to the parcels of real estate but reversed the remainder of the judgment order and remanded the case to the trial court for further proceedings, to-wit, further discovery. This court in its 1978 opinion stated:

"The record does not indicate, however, whether any of the disputed funds were returned to one or both of defendant's corporations, or whether defendant's corporate holdings represent assets which could be reached by plaintiff. Therefore, in order to insure justice between the litigants, we believe the parties should be allowed further discovery, particularly as to the corporate records." Kaibab Industries, Inc. v. Family Ready Homes, Inc. (1978), 80 Ill. App.3d 782, 786.

After exhaustive discovery proceedings followed by a trial before the circuit court of Tazewell County, a judgment was entered for $103,507, being the amount of plaintiff Kaibab's judgment less set-offs, together with statutory interest from and after November 17, 1974, against citation defendants Gary Waldsmith, Teren Waldsmith, Linda Waldsmith and Rooster I Corporation. The trial court refused to declare certain residential property (909 Oakwood in East Peoria) to be subject to the claim of Kaibab. The trial court further dismissed garnishment proceedings against the citation-garnishee defendant Northwest Bank of Peoria.

A further recital of facts will be set forth as the same becomes necessary for a proper understanding and determination of the issues raised in this appeal.

The citation defendants Teren Waldsmith, Gary Waldsmith and Linda Waldsmith assert that the trial court improperly entered judgment against them for indebtedness owed to the plaintiff Kaibab by a third party, namely, their father, B.F. Waldsmith.

To place this issue in the proper perspective, the record discloses that the plaintiff Kaibab had a judgment against B.F. Waldsmith but repeated efforts to obtain service on the debtor for citation proceedings failed. At one time or another over the course of years the debtor B.F. Waldsmith was referred to as a wraith, a phantom and a nomadic judgment debtor. Unable to proceed directly against the debtor, the plaintiff Kaibab instituted supplemental proceedings against the children of the debtor and Rooster I Corporation in an effort to discover assets which could be used for the satisfaction of its claim. See Ill. Rev. Stat. 1981, ch. 110, par. 73, and Supreme Court Rule 277 (87 Ill.2d R. 277).

Through evidence adduced at various court hearings it was established that in the years of 1973 and 1974, but prior to November 14, 1974, certain cash deposits standing in the name of Rooster I Corporation and Projects Management Inc. *fn1 were placed in the name of the citation defendants Teren, Gary and Linda Waldsmith. As of November 14, 1974, there had been deposited in the names of said individuals the aggregate sum of $515,000 which was evidenced by a certificate of deposit at the Jefferson Trust and Savings Bank of Peoria, Illinois. On November 14, 1972, the certificate of deposit was exchanged in cash and the entire sum less $20,000 *fn2 was delivered to the president of Rooster I Corporation, namely, the judgment debtor B.F. Waldsmith. The amount of money on deposit in Jefferson Trust as of November 14, 1974, in the names of the citation defendants Teren, Gary and Linda Waldsmith was evidenced by promissory notes payable to Rooster I Corporation. Citations proceedings were not commenced against the citation defendants until April 11, 1975, or almost five months after Teren, Gary and Linda Waldsmith had, with the exception of $20,000, divested themselves of the funds. The Waldsmith children first explained this transaction by claiming that the money represented an investment pool of their money and was given by them to their father for purposes of investment. After remand of this case by this court in 1978, the Waldsmith children abandoned the "investment pool" explanation and in lieu thereof explained that they were handling corporate funds, to-wit, funds of Rooster I Corporation.

The foregoing transaction concerning the transfer of $515,000 was deemed by the trial court to constitute fraud upon the creditors of B.F. Waldsmith, and the court concluded that Gary, Teren and Linda Waldsmith were active participants in the fraud and consequently judgment was entered against them.

• 1 There may or may not have been a well-planned fraud perpetrated on the judgment creditor Kaibab. Our law attempts to provide a remedy for every wrong, but the remedy in the instant case is not to be found within the framework of section 73 of our ...

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