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West Bend Mutual Insurance Co. v. Belmont State Corp.

September 9, 2010


The opinion of the court was delivered by: Amy J. St. Eve, District Court Judge


Before the Court is Plaintiff West Bend Mutual Insurance Company's ("West Bend") motion to enforce judgment, request for imposition of constructive trust, and request for order of turnover of funds paid to MJG Enterprises Corp. ("MJG"). For the following reasons, the Court grants West Bend's motion in part.


West Bend's Amended Complaint in this case alleges claims for, inter alia, fraud, conspiracy, RICO claims, and breach of contract arising out of West Bend's issuance of a bond to Defendant Belmont State Corporation ("Belmont") for public projects and Belmont's ensuing failure to pay its subcontractors and suppliers. The subcontractors and suppliers made claims on West Bend's bond, and West Bend paid the claims. On September 17, 2009, the Court entered default judgment against Belmont and the individual defendants, Mark Gizynski ("Gizynski") and Peter Wala, in the amount of $2,150,333.60. (R. 26-1, Default Judgment). The Court vacated the default as to Defendant Wala on April 16, 2010, and dismissed him from the case on August 19, 2010. (R. 74-1, Minute Entry; R. 118-1, Minute Entry.)

With respect to MJG, West Bend served MJG with a third party citation to discover assets on October 28, 2009. Mark Pastucha ("Pastucha"), past owner and president of MJG, appeared on behalf of MJG for a citation deposition. Due to the existence of six checks drawn on Belmont's account at U.S. Bank totaling $58,500.00 and allegedly paid to MJG by deposit into its account at Plaza Bank, West Bend sought to impose a constructive trust against MJG for its uncollected judgment and requested turnover of the funds. The Court denied that motion (R. 78-1, Minute Entry), and West Bend later filed a motion for reconsideration of that ruling. Based on the newly discovered evidence presented in the motion for reconsideration, the Court granted West Bend's motion for reconsideration and scheduled an evidentiary hearing to determine whether to impose a constructive trust on the funds or to impose judgment against MJG. (R. 111-1, Minute Entry).

The Court held a hearing regarding West Bend's motion on August 24, 2010 and August 25, 2010. During the hearing, Pastucha, Thomas Cannon, a prior MJG employee, and Gizynksi testified.


West Bend initiated these post-judgment proceedings pursuant to Federal Rule of Civil Procedure 69(a), "which instructs district courts to follow the law of supplementary proceedings of the state in which they sit." Laborers' Pension Fund v. Pavement Maint., Inc., 542 F.3d 189, 191 (7th Cir. 2008); Fed. R. Civ. P. 69(a). Accordingly, the Court proceeds under the Illinois statute governing supplementary proceedings, 735 ILCS 5/2-1402. The statute permits a judgment creditor "to prosecute supplementary proceedings for the purposes of examining the judgment debtor or any other person to discover assets or income of the debtor not exempt from the enforcement of the judgment... and of compelling the application of non-exempt assets or income discovered toward the payment of the amount due under the judgment." 735 ILCS 5/2-1402(a) (emphasis added). As one district court in the Northern District of Illinois has explained:

Under Illinois law, "A district court may... summarily compel the application of discovered assets to satisfy a judgment." Society of Lloyd's v. Estate of McMurray, 274 F.3d 1133, 1135 (7th Cir. 2001) (citing Matthews v. Serafin, 319 Ill. App. 3d 72, 77, 253 Ill. Dec. 201, 744 N.E. 2d 934 (2001); Mid-American Elevator Co. v. Norcon, Inc., 287 Ill. App. 3d 582, 587, 223 Ill. Dec. 202, 679 N.E. 2d 387 (1996)). Illinois procedure under 735 ILCS 5/2-1402 "vests courts with broad powers not only to order discovery, but also to compel application of discovered assets to satisfy a judgment." Id. (citing Kennedy v. Four Boys Labor Servs., 279 Ill. App. 3d 361, 216 Ill. Dec. 160, 664 N.E. 2d 1088 (1996)). In addition, proper service on a third party of a citation to discover assets creates a judgment lien that binds all "personal property belonging to the judgment debtor in the possession or control of the third party." 735 ILCS 5/2-1402(m); Cacok v. Covington, 111 F.3d 52, 54 (7th Cir. 1997). Joseph Stephens & Co. v. Cikanek, 588 F. Supp. 2d 870, 872 (N.D. Ill. 2008). "The provisions of section 2-1402 are to be liberally construed, and the burden lies with the petitioner to show that the citation respondent possesses assets belonging to the judgment creditor." Schak v. Blom, 334 Ill. App. 3d 129, 133, 777 N.E. 2d 635, 639, 267 Ill. Dec. 832, 836 (Ill. App. Ct. 2002).

In addition, "[u]nder Illinois law, 'a constructive trust is imposed to prevent unjust enrichment by imposing a duty on the person receiving [a] benefit to convey the property back to the person from whom it was received.'" Dexia Credit Local v. Rogan, 624 F. Supp. 2d 970, 983 (N.D. Ill. 2009) (citing Martin v. Heinold Commodities, Inc., 163 Ill. 2d 33, 56, 643 N.E. 2d 734, 745, 205 Ill. Dec. 443 (1994)). "In order to impose a constructive trust, it is sufficient that a party has received money properly belonging to another under circumstances that, in equity, the party ought not be allowed to retain." Jackson v. Callan Publ'g, Inc., 356 Ill. App. 3d 326, 334, 826 N.E.2d 413, 423, 292 Ill. Dec. 272 (2005). "A trust may be imposed even when the ultimate recipient of the property is an innocent party." Dexia Credit Local, 624 F. Supp. 2d at 983.


I. Illinois Supreme Court Rule 277(f)

As an initial matter, MJG argues that the citation to discover assets issued against it has expired. Illinois Supreme Court Rule 277(f), however, provides:

A proceeding under this rule continues until terminated by motion of the judgment creditor, order of the court, or satisfaction of the judgment, but terminates automatically 6 months from the date of (1) the respondent's first personal appearance pursuant to the citation or (2) the respondent's first personal appearance pursuant to subsequent process issued to enforce the citation, whichever is sooner. The court may, however, grant extensions beyond the 6 months, as justice may require. Orders for the payment of money continue in effect notwithstanding the termination of the proceedings until the judgment is satisfied or the court orders otherwise.

Ill. Supreme. Ct. Rule 277(f). Directly contrary to MJG's assertion that Rule 277(f) is not qualified by any discretionary authority, ...

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