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Newcourt Capital v. Holdings

December 18, 2009

NEWCOURT CAPITAL, ET AL., PLAINTIFFS,
v.
RJSS HOLDINGS, ET AL. DEFENDANTS.



The opinion of the court was delivered by: Frederick J. Kapala, District Judge

MEMORANDUM OPINION AND ORDER

Currently before the court are two matters: (1) an objection filed by third-party defendants R.D. Air, LLC and MD 87-936, LLC, to the magistrate judge's memorandum opinion and order dated November 6, 2009, pursuant to Federal Rule of Civil Procedure 72(a); and (2) a motion by plaintiffs to enforce an alleged oral settlement agreement. As discussed below, the Rule 72(a) objection is sustained; the motion to enforce settlement is denied.

I. BACKGROUND

Following a jury trial, plaintiffs received a judgment against defendant Rubloff Aviation Maintenance Services LLC in the amount of $269,647.09, which they are currently attempting to collect, along with post-judgment interest. As part of their collection efforts, plaintiffs (also referred to as the "judgment creditors") filed three motions for turnover of assets against the judgment debtor, third-party defendant R.D. Air, and third-party defendant MD 87-936. The motions for turnover of assets against the third-party defendants were based on evidence that these entities owed money to the judgment debtor. These motions were the subject of the magistrate judge's November 6 memorandum opinion and order. See Newcourt Capital, USA, Inc. v. Rubloff Aviation Maint. Servs., LLC, No. 05 C 50002, 2009 WL 3754023, at *1 (N.D. Ill. Nov. 6, 2009).

Of particular relevance for purposes of this order is the motion for turnover of assets filed against R.D. Air. In the motion, plaintiffs claimed that R.D. Air owed the judgment debtor approximately $1.24 million.*fn1 Plaintiffs therefore sought an order, pursuant to 735 ILCS 5/2-1402(c)(3), directing R.D. Air to turn over to plaintiffs any assets in its possession belonging to or owed to the judgment debtor in order to satisfy the judgment. R.D. Air objected to the motion, arguing, in part, that they did not have any "assets" of the judgment debtor, as that term is used in § 2-1402(c)(3), and that the more applicable statute was 735 ILCS 5/2-1402(c)(6), which authorizes "the judgment creditor to maintain an action against any person or corporation that... is indebted to the judgment debtor, for the recovery of the debt."

The magistrate judge agreed with R.D. Air that § 2-1402(c)(6) was the relevant statute for purposes of plaintiffs' motion for a turnover order and found that the judgment creditors had put forth sufficient evidence that the third-party defendants owed debts to the judgment debtor.*fn2 Newcourt Capital, 2009 WL 3754023, at *3. Accordingly, the magistrate judge denied the motion to the extent it sought relief under § 2-1402(c)(3), and granted the motion, pursuant to § 2-1402(c)(6), "insofar as the court finds that the Judgment Creditors may pursue actions against RD Air and Rubloff MD87 for recovery of debts that RD Air and Rubloff MD87 may owe to the Judgment Debtor." Id. The magistrate judge further ordered "RD Air and Rubloff MD87 to deliver to the Judgment Creditors any documents in their possession or control which relate to the alleged debts by November 19, 2009." Id.

II. RULE 72(A) OBJECTION

In their Rule 72(a) objection, the third-party defendants object only to the portion of the magistrate judge's order which requires them to deliver to the judgment creditors any documents in their possession or control which relate to the alleged debts owed to the judgment debtor. They argue that this is not authorized by § 2-1402(c)(6), and that the statute only provides that the court can direct the judgment debtor to produce such documents. Accordingly, the third-party defendants request that the memorandum opinion and order be modified by striking the contested language.

In response, plaintiffs argue that the third-party defendants are asserting an unduly narrow interpretation of § 2-1402(c)(6), and that the use of the word "debtor" within the section refers not to the judgment debtor, but rather to any person or corporation indebted to the judgment debtor. Specifically, plaintiffs argue that throughout section 2-1402, the Illinois Legislature "overwhelmingly employed the full phrase, 'judgment debtor,'" whenever referring to the judgment debtor, whereas there is only a single occurrence of the detached word "debtor" in the entirety of § 2-1402(c). From this, plaintiffs argue that the statute distinguishes between the judgment debtor and a third-party debtor owing a debt to the judgment debtor.

As an initial matter, the court notes that this issue concerning the interpretation of the word "debtor" within § 2-1402(c)(6) was not the primary issue before the magistrate judge, and in fact, it is not clear whether it was ever even raised, as there is no argument or discussion about the issue in any of the parties' briefs. Nevertheless, after review of the statute and consideration of the issue with the benefit of briefing, the court agrees with the position taken by the third-party defendants and concludes that § 2-1402(c)(6) does not authorize this court to require the third-party defendants to produce documents to be used against themselves in a subsequent action for recovery of debts allegedly owed to the judgment debtor. Accordingly, the objection is sustained and the magistrate judge's order will be modified, as discussed below.

Section 2-1402(c)(6) provides that the court may, after it is determined that a third party is indebted to the judgment debtor, enter the following orders: (1) "[a]uthorize the judgment creditor to maintain an action against any person or corporation that, it appears upon proof satisfactory to the court, is indebted to the judgment debtor, for the recovery of the debt," (2) "forbid the transfer or other disposition of the debt until an action can be commenced and prosecuted to judgment," (3) "direct that the papers or proof in the possession or control of the debtor and necessary in the prosecution of the action be delivered to the creditor or impounded in court," and (4) "provide for the disposition of any moneys in excess of the sum required to pay the judgment creditor's judgment and costs allowed by the court." 735 ILCS 5/2-1402(c)(6). In the November 6 memorandum opinion and order, the magistrate judge properly authorized plaintiffs to maintain an action against R.D. Air and MD 87-936 to recover the debts that these entities allegedly owed to the judgment debtor, pursuant to the first provision of § 2-1402(c)(6). This provision allows plaintiffs to step into the shoes of the judgment debtor and attempt to collect the debts that are owed by the third-party defendants. In a separate order, the magistrate judge also acted properly by barring the third-party defendants from transferring or otherwise disposing of the debt, in accordance with the second provision of § 2-1402(c)(6), in order to give plaintiffs time to prosecute the necessary actions to recover the debts.

The objection raised by the third-party defendants concerns whether the magistrate judge exceeded his authority under the third provision of § 2-1402(c)(6), which relates to the delivery of "papers or proof in the possession or control of the debtor and necessary in the prosecution of the action" authorized by § 2-1402(c)(6). Specifically, the issue is whether the term "debtor" as used in the third provision of § 2-1406(c)(6) refers to the judgment debtor, as the third-party defendants contend, or the debtor of the judgment debtor, as the magistrate judge assumed and as plaintiffs contend. "In construing the meaning of a statute, our primary objective is to ascertain and give effect to the intent of the legislature." Ready v. United/Goedecke Servs., Inc., 232 Ill. 2d 369, 375 (2008). Here, the term "debtor" within the third provision of § 2-1406(c)(6) is susceptible to more than one meaning, and thus, the court finds the statute to be ambiguous. See id. at 377 ("A statute is ambiguous when it is capable of being understood by reasonably well-informed persons in two or more different senses."). "[I]f the language of a statute is ambiguous, courts may look to tools of interpretation to ascertain the meaning of a provision." Id. at 375. For the reasons discussed below, the court concludes that the term "debtor" refers to the judgment debtor.

First, plaintiffs emphasize that the word "debtor" in the third provision of § 2-1402(c)(6) is not preceded by the word "judgment," and then argue that, because this modifier is missing, the term "debtor" must refer to the party who is indebted to the judgment debtor. The court is not persuaded by this argument because that same provision also uses the term "creditor" without the modifier "judgment." See 735 ILCS 5/2-1402(c)(6) (requiring the documents of the "debtor" be "delivered to the creditor or impounded in court"). If, as plaintiffs suggest, the word "debtor" refers to the party indebted to the judgment debtor (R.D. Air), then, by the same logic, the word "creditor" would refer to the judgment debtor, or the party to whom the "debtor" owed a debt. This construction results in an absurd outcome, that is, § 2-1402(c)(6) would authorize the court to direct the third-party defendant to turn over evidence in its possession to the judgment debtor, even though the judgment creditor would be the one authorized to maintain the action to collect the debt. Under Illinois law, it is a well-established principle of statutory interpretation that "no statute should be construed in a manner which will lead to consequences which are absurd, inconvenient, or unjust." McMahan v. Indus. Comm'n, 183 Ill. 2d 499, 513-14 (1998). Accordingly, the court declines to impose such a construction on the statute.

Second, when interpreting the words in a statute, the court must look to the surrounding words and phrases to ensure the word is read within the proper context. See U.S. Nat'l Bank of Or. v. Indep. Ins. Agents of Am., Inc., 508 U.S. 439, 454 (1993) (explaining that "text consists of words living a communal existence... the meaning of each word informing the others and all in their aggregate taking their purport from the setting in which they are used" (alteration and quotation marks omitted). Here, the language of the statute immediately following the word "debtor" demonstrates that the term refers to the judgment debtor. Specifically, the statute requires the "debtor" to provide to the judgment creditor papers or proof that are "necessary in the prosecution of the action." 735 ILCS 5/2-1402(c)(6) (emphasis added). Because the judgment debtor is the party who normally would be the one prosecuting the action against the third-party defendants for recovery of the debts, the judgment debtor is the party who must deliver to the judgment creditor whatever documents it has that are necessary for the prosecution of the action. This provision merely assures that when the judgment creditor is authorized by ยง 2-1402(c)(6) to step into the shoes of the judgment debtor, the judgment creditor is placed in exactly the same position that the judgment debtor would have been in with respect to collecting the debt, including having access to all of the evidence that the judgment debtor would have ...


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