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03/09/89 Mary Lee Rozycki, v. Gitchoff

March 9, 1989





536 N.E.2d 130, 180 Ill. App. 3d 523, 129 Ill. Dec. 446 1989.IL.294

Appeal from the Circuit Court of Madison County; the Hon. Wendell Durr, Judge, presiding.


JUSTICE GOLDENHERSH delivered the opinion of the court. HARRISON and HOWERTON, JJ., concur.


Plaintiff, Mary Lee Rozycki, appeals from the judgment of the circuit court of Madison County dismissing her complaint to recover assets from an allegedly fraudulent conveyance between defendant, Virginia Gitchoff, and plaintiff's deceased ex-husband, Walter Rozycki (Walter). The trial court entered summary judgment for defendant, and for the reasons stated herein, we affirm.

In a three-count complaint, plaintiff alleged that Walter, in his personal capacity and as president of Walter Rozycki Realty Company, Inc. (company), transferred his and the company's interest in judgments in his favor and against James Green and Green Construction Company to defendant. The complaint further alleged that Walter and the company were insolvent at the time of, or were made insolvent by, the transfer, that plaintiff was a creditor of both Walter and the company, that an intimate personal relationship existed between Walter and defendant, and that the transaction was a preferential transfer to one creditor, defendant, to avoid paying another creditor, plaintiff. Fraud, inadequate or no consideration, and ineffective transfer of the company's interest were also alleged.

In 1975, plaintiff began divorce proceedings against Walter and obtained an injunction enjoining transfer of jointly owned property. The parties' marriage was dissolved in September 1981 by a final order which designated assets and liabilities of the company and the corporation stock as marital property. This order distributed those assets, liabilities and stock as well as judgments in favor of Walter or the company equally between Walter and plaintiff and noted that the court could not adjudicate claims of creditors such as defendant. From June 1978, to May 1980, defendant loaned Walter a total of $39,759.56 and received six promissory notes, all of which were in default by May 1980. On May 14, 1980, defendant took a mortgage from Walter on various parcels of real estate as consideration for her forbearing to file suit on the notes. By the spring of 1981, the notes were still in default, and defendant had discovered that her 1980 mortgage was junior to a 1978 mortgage from Walter to plaintiff. While preparing to commence foreclosure proceedings, defendant took an assignment from Walter and his company of all interest in judgments in their favor and against James Green and Green Construction Company as partial payment, and no foreclosure was instituted. The date of assignment was May 20, 1981.

On November 1, 1981, Walter died. Defendant and Walter's brother were named co-executors of Walter's estate, but in time the public administrator was appointed. Plaintiff was a creditor of Walter's estate.

Walter's administrator filed a petition against defendant alleging Walter's transfer of his interest in the Green judgments was a preferential transfer. That action was settled by defendant's payment of $9,000 to the estate. In October 1984, the probate court approved the settlement, but within 30 days, plaintiff moved to vacate the order. Her motion was denied, and plaintiff took no further action. Subsequently, plaintiff was appointed successor administrator and closed the estate. A few days after the estate was closed, plaintiff filed the instant action.

Defendant raised the October 1984 probate order approving settlement of the estate's claim as a bar to plaintiff's claim. The trial court characterized the instant suit as "a collateral attack upon the administration of the Estate and upon the now Final Order entered in the Estate settling these claims" and granted defendant's motion for summary judgment. Plaintiff appealed to this court.

The dispositive issue in this appeal is whether plaintiff's failure to pursue her claim in the probate case bars plaintiff's cause. Plaintiff suggests it does not, arguing that her claim is independent of the estate's claim against defendant and, further, that plaintiff is not bound by the probate order. Defendant urges the probate order as res judicata, arguing that a probate court order is a final judgment for purposes of res judicata, that the subject matter of the probate action and this action were the same, and that a court-approved settlement operates as res judicata the same as a trial on the merits.

The estate of Walter Rozycki, plaintiff's ex-husband, was administered pursuant to the Probate Act of 1975 (Ill. Rev. Stat. 1987, ch. 110 1/2, par. 1-1 et seq.). One purpose of that Act is to insure that "controversies and the rights of the parties may be speedily and finally determined." (Ill. Rev. Stat. 1987, ch. 110 1/2, par. 1-9.) Consistent with this purpose, the Act requires that any claim that might be filed within the contemplation of the Act, whether based on contract, tort, or otherwise (see Ill. Rev. Stat. 1987, ch. 110 1/2, par. 18-1), must be filed within the limitations period which the Act provides (see Ill. Rev. Stat. 1987, ch. 110 1/2, par. 18-12). If such a claim is not filed, it will be barred (Bricker v. Borah (1984), 127 Ill. App. 3d 722, 725, 469 N.E.2d 241, 243) and cannot be pursued in a separate proceeding after the estate is closed (see Abrams v. Schlar (1960), 27 Ill. App. 2d 237, 240-41, 169 N.E.2d 583).

In this case, plaintiff's complaint makes clear that she seeks recovery for fraudulent conveyance based on her status as a creditor of her deceased ex-husband. Both the administrator's action and this case were attempts to set aside and recover the proceeds of a conveyance alleged to be in fraud of other creditors of decedent. Concerning the administrator's action, however, plaintiff argues that the administrator stands in the place of and derives his rights from the decedent who, as a participant in a fraudulent transaction, was bound by the terms of that transaction. While there is authority for plaintiff's position (Hoyt v. Northup (1912), 256 Ill. 604, 606, 100 N.E. 164, 165; White v. Russell (1875), 79 Ill. 155, 158), a creditor of the estate is not similarly bound and may pursue a fraud action separate and apart from the administrator. Because she was a creditor, she was an "interested person" entitled to file her own petition for discovery and recovery of assets against defendant while administration of the estate was still underway. (Ill. Rev. Stat. 1987, ch. 110 1/2, par. 16-1; Keshner v. Keshner (1941), 376 Ill. 354, 361-62, 33 N.E.2d 877; In re Estate of Arnold (1986), 142 Ill. App. 3d 258, ...

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