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Pontikes v. Perazic

March 03, 1998



The opinion of the court was delivered by: Justice Cousins delivered the opinion of the court:

Appellants, George Pontikes, Mitchell Kreiger and Vista Trust, were judgment creditors of debtors Avdija Perazic, Osman Perazic and Bank One, Chicago N.A., as trustee under trust No. 10818. Appellants appeal from an order in which the trial court released three vehicles belonging to the debtors to appellee and third-party claimant Roger Duba. On appeal, appellants contend that: (1) the trial court committed reversible error in failing to conduct an evidentiary hearing, and (2) an injunction dated January 11, 1996, prevented the Judgement debtors' transfer of ownership of the vehicles to the appellee.


On August 29, 1995, appellee Roger Duba obtained a Judgement of $1,100,00 against Avdija Perazic (Perazic) in the circuit court of Cook County. Duba filed a citation to discover assets against Perazic, which was served on Perazic on September 6, 1995. On December 1, 1995, appellants, George Pontikes, Mitchell Kreiger and Vista Trust, secured a judgment against Perazic in the amount of $138,000 and, thereafter, filed a citation to discover assets against Perazic on December 10, 1995. Perazic was served with the citation later that day. The citation was a standard form that provided in relevant part:

"YOU ARE PROHIBITED from making or allowing any transfer or other disposition of, or interfering with, any property not exempt from execution or garnishment belonging to the Judgement debtor or to which the Judgement debtor may be entitled or which may be acquired by or become due to the Judgement debtor ***."

A hearing was held on January 11, 1996, after which the trial court ordered that Perazic pay the outstanding Judgement of $138,000 on or before January 31, 1996. In addition, the trial court prohibited Perazic from transferring or disposing of any property that could become due under the Judgement to appellants until further order of the court or termination of the proceedings.

On January 31, 1996, appellants' citation proceedings were stayed when Perazic began bankruptcy proceedings in federal court. On October 7, 1996, Perazic sold three of his vehicles to Duba. The bills of sale for vehicles were dated October 7, 1997. Thereafter, Perazic moved to dismiss the proceedings and, on October 10, 1996, the bankruptcy proceedings were dismissed. Appellants filed a petition for a rule to show cause in which they argued that Perazic and Duba should be held in contempt of court because certain property belonging to Perazic had been transferred to Duba in violation of the January 11, 1996, order. In response to the petition, Perazic stated, inter alia, that, while certain documents were executed prior to the order of dismissal, the vehicles were not actually delivered to Duba until after the bankruptcy court dismissed Perazic's suit on October 10, 1997. The bankruptcy court denied appellants' petition.

On October 28, 1996, appellants filed an execution and levy in the circuit court of Cook County on three vehicles belonging to Perazic. Appellants also secured an order permitting the sheriff to use a locksmith to remove locks on Perazic's garage and enter the garage. Thereafter, the sheriff took possession of Perazic's vehicles and scheduled a sale for November 15, 1996.

Roger Duba and Mercedes Benz Credit Corporation (Mercedes) objected to the sale and claimed ownership of the vehicles. Duba claimed that, prior to the dismissal of his petition for bankruptcy relief, he disclosed to the bankruptcy court that he and Perazic agreed that he would lend Perazic $70,000 so that Perazic could pay the administrative costs due to the court and dismiss the bankruptcy proceedings. As a result of their agreement, Perazic was to transfer all of his assets to Duba. Duba argued that appellants did not object when Duba informed the court of this agreement. Duba also stated that "the Bankruptcy Court approved the transfers, including the legal transfer of the automobiles [at issue]." Duba concluded that appellants were therefore estopped from challenging the transfer of the vehicles to Duba.

A trial of right of property was held in the circuit court on January 6, 1997. The trial court found that Mercedes had a perfected lien on one of the vehicles, a 1994 Mercedes E 320, and that it was yet to be determined which party had a superior lien subject to Mercedes' lien. At trial, Duba argued that appellants were estopped from asserting rights to the vehicles because Perazic had assigned Duba all of his property. Appellants argued that the January 11, 1996, order precluded Perazic from transferring any of his property. The trial court concluded that appellants failed to bring the circuit court's January 11, 1996, order to the bankruptcy court's attention and failed to object to the agreement between Duba and Perazic. The trial court stated:

"I would subscribe to a principle that where a party has an obligation to speak and does not speak, that that party becomes barred from asserting what should have been asserted at the time the speaking should have taken place.

It seems to me that from what has been read here to me by [counsel for Duba] that the Judge knew what was taking place, recalled what was taking place and said yes, that's the way it's supposed that Mr. Duba gets these cars because there is some logic in this.

The Judge turned your client's request for a rule to show cause down and in doing, so seems to reaffirm that he understood that yes Duba is paying 70 thousand dollars. He gets everything *** and he salvages whatever possible opportunities for recovery exist in all these creditors by not allowing Perazic to get a discharge.

I think you had an obligation to bring that to the attention of the bankruptcy court. You stood by and remained silent when you had an obligation to speak."

The trial court ruled that Duba had priority in his lien on the vehicles and ordered that the vehicles be released to Duba.

On April 21, 1997, the parties appeared before the bankruptcy court. At the hearing, the bankruptcy court stated the following:

"I have to say, [counsel for Duba], I didn't approve any agreement between your client and the debtors respecting any transfer of property prior to the time that this was ordered. In fact when a similar problem arose earlier, I said that there was no violation of the automatic stay in the entering into of any such agreement because it wasn't done prior to the time the bankruptcy case was dismissed. What the transcripts reflect is what my understanding was: That if the cases were being dismissed and the creditors, all of the creditors, would be able to pursue whatever remedies they had outside of bankruptcy.

I did nothing to prefer your client over any other creditors.

So nobody got notice of any transfers and any opportunity to object to that, nor did I approve them. *** ll I did was dismiss the case with the understanding that the ...

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