TRUSTEES OF THE CHICAGO REGIONAL COUNCIL OF CARPENTERS PENSION FUND, CHICAGO REGIONAL COUNCIL OF CARPENTERS WELFARE FUND, and CHICAGO REGIONAL COUNCIL OF APPRENTICE & TRAINEE PROGRAM FUND, Plaintiffs,
M.J. ANDERSON INTERIORS, INC., Defendant.
THE PATTERSON LAW FIRM LLC, and TRUSTEES OF THE CHICAGO PAINTERS PENSION FUND, Intervenors.
OPINION AND ORDER
JOAN H. LEFKOW, District Judge.
Plaintiffs, the Trustees of the Chicago Regional Council of Carpenters Pension Fund, the Chicago Regional Council of Carpenters Welfare Fund, and the Chicago Regional Council of Carpenters Apprentice and Trainee Program Fund ("the Carpenters"), filed an action to collect outstanding pension contributions from M.J. Anderson Interiors, Inc. ("M.J. Anderson") and obtained judgment in their favor in the amount of $118, 999.30. (Dkt. #16.) The Patterson Law Firm LLC represented M.J. Anderson in an unrelated action against A.J. Maggio Company ("A.J. Maggio") in the Nineteenth Judicial Circuit Court, Lake County, Illinois and obtained a settlement for $30, 000 ("the Lake County Action"). On October 2, 2012, the Carpenters filed a motion for turnover against A.J. Maggio. (Dkt. #21.) In it, the Carpenters argued that they had obtained a perfected lien on M.J. Anderson's property by serving a citation to discover assets on A.J. Maggio on February 8, 2010. Shortly thereafter, the Patterson Law Firm moved to intervene, opposing the motion. (Dkt. #26.) A.J. Maggio placed the disputed funds with the Clerk of the Circuit Court and filed an interpleader action against the Carpenters, the Internal Revenue Service ("IRS"), the Patterson Law Firm, and the Trustees of the Chicago Painters Pension Fund. ( See 12-CV-9483, Dkt. #2, Ex. A.) This case was removed to federal court, consolidated with the present action, and the funds at issue were placed with the Clerk of this court. The issue currently before the court is which entity is entitled to the funds. For the reasons that follow, the Carpenters are entitled to the money.
I. The Carpenter's Lien
On February 8, 2010, the Carpenters served a third party citation to discover assets on A.J. Maggio requesting that Raymond S. Maggio personally appear to give deposition testimony concerning any potential assets that his company held for the judgment debtor, M.J. Anderson. (Dkt. #50, Ex. A.) Shortly thereafter, counsel for A.J. Maggio, Matthew Sullivan, contacted counsel for the Carpenters, Daniel P. McAnally, and informed him that the amount due to M.J. Anderson from A.J. Maggio was currently being litigated in the Lake County Action. As such, the parties agreed to excuse the appearance of Mr. Maggio for the time being and to allow the citation to remain in effect until the Lake County Action was resolved. (Dkt. #50, Ex. B, McAnally Affidavit.) Mr. McAnally never spoke with Mr. Maggio, and Mr. Maggio never appeared for the citation examination. In September 2012, Mr. McAnally again spoke with Mr. Sullivan who informed him that the Lake County Action had been resolved and there was money available subject to the citation. ( Id. ) On October 2, 2012, the Carpenters filed the present motion.
II. The IRS's Tax Lien
The IRS represents that it assessed a tax delinquency against M.J. Anderson on April 5, 2010. On October 4, 2010, the IRS recorded a tax lien against M.J. Anderson with the Illinois Secretary of State. ( See Dkt. #26 page 6 of 20.) On January 4, 2011, the IRS served a Notice of Levy to A.J. Maggio in the amount of $111, 799.22, which included interest and late payment penalties running to February 3, 2011. (12-CV-9483, Dkt. #2, Ex. A4.) The notice instructed A.J. Maggio "that there is a lien for the amount that is owed" and that "[t]his levy requires you to turn over to us [M.J. Anderson's] property and rights to property... that you have or which you are already obligated to pay this person." ( Id. )
III. The Patterson Law Firm's Lien
The Patterson Law Firm represented M.J. Anderson in the Lake County Action for three years through settlement. It states that it executed an attorney's lien on the settlement fund, which it served upon A.J. Maggio on or about February 21, 2012. (Dkt. #48, Ex. C.) The Patterson Law Firm argues that its attorney's lien takes superpriority over the IRS's tax lien under 26 U.S.C. § 6323(b)(8), which protects an attorney's lien filed under state law against a filed federal tax lien. The Patterson Law Firm also argues that it is entitled to recover its fees under the common fund doctrine, which allows an attorney who recovers a common fund for the benefit of others to obtain a reasonable attorney's fee from the fund as a whole. See Scholtens v. Schneider, 671 N.E.2d 657, 662, 173 Ill.2d 375, 219 Ill.Dec. 490 (1996).
I. Date of Perfection
A. The Carpenters
The Carpenters argue that they obtained a perfected lien upon M.J. Anderson's property by properly serving A.J. Maggio with a citation to discover assets on February 8, 2010. Supplementary proceedings are governed by 735 Ill. Comp. Stat. 5/2-1402 and Illinois Supreme Court Rule 277. These proceedings allow a judgment creditor, such as the Carpenters, to "[examine] the judgment debtor or any other person to discover assets or income of the debtor not exempt from the enforcement of the judgment...." 735 Ill. Comp. Stat. 5/2-1402(a). The proper service of a citation to discover assets upon a third party creates a lien on "all personal property belonging to the judgment debtor in the possession or control of the third party or which thereafter may be acquired or come due the judgment debtor and comes into the possession or control of the third party to the time of the disposition of the citation." 735 Ill. Comp. Stat. 5/2-1402(m)(2). This lien is considered perfected on the date of service of the citation. Cacok v. Covington, 111 F.3d 52, 54 (7th Cir. 1997); In re Cannell, No. 12-71705, 2013 WL 2467787, at *4 (C.D. Ill. June 7, 2013); W. Bend Mut. Ins. Co. v. Belmont State Corp., No. 09 C 354, 2010 WL 5419061, at *6 (N.D. Ill.Dec. 23, 2010). Under Illinois Supreme Court Rule 277(f), a supplementary proceeding to enforce a judgment "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." Ill. Sup.Ct. R. 277(f).
Applying this rule, the Carpenters obtained a perfected lien on M.J. Anderson's property on February 8, 2010 upon service of a citation to discover assets on third party respondent A.J. Maggio. The IRS and the Patterson Law Firm argue that, by way of Rule 277(f), this lien automatically terminated six months after Mr. McAnally spoke with Mr. Sullivan and agreed to stay citation proceedings pending the resolution of the Lake County Action. Neither the IRS nor the Patterson Law Firm, however, provides any authority to support their position that an informal conversation between attorneys qualifies as a "personal appearance" under the rule. Rather, the case law indicates that something more formal is required. See, e.g., Textile Banking Co. v. Rentschler, 657 F.2d 844, 852 (7th Cir. 1981) ("The appearance contemplated by this statute is clearly more than mere physical presence within the judicial district."); United States v. Rogan, No. 02 C 3310, 2008 WL 4853478, at *2 (N.D. Ill. Nov. 3, 2008) (appearance through counsel and production of documents did not constitute "personal appearance" within the meaning of the rule); Flip Side Prods., Inc. v. Jam Prods., Ltd., No. 82 C 3684, 1990 WL 186777, at *3 ...