Court of Appeals of Illinois, First District, Sixth Division
from the Circuit Court of Cook County, No. 10 L 7059
Honorable Alexander P. White, Judge Presiding.
JUSTICE DELORT delivered the judgment of the court, with
opinion. Presiding Justice Hoffman and Justice Connors
concurred in the judgment.
1 This appeal arises from a third-party citation to discover
assets that the judgment creditor, plaintiff Williams
Montgomery & John Limited (WMJ), served on citation
respondent, Bradley Associates, LLC (Bradley), to collect a
debt owed by defendant Bret Broaddus. The citation
proceedings also resulted in an award of sanctions in favor
of WMJ and Bradley and against Broaddus; Stanley, LLC
(Stanley); and Broaddus's attorney, Bert Zaczek.
Broaddus, Stanley, and Zaczek now appeal from the trial
court's orders: (1) directing Bradley to turn over
certain of its assets to WMJ, (2) granting WMJ's motion
for sanctions, and (3) granting Bradley's motion for
sanctions. We affirm in part, vacate and remand in part, and
dismiss in part.
3 The allegations in the sanctions motions before this court
stem from an unrelated lawsuit prosecuted in federal court
between Broaddus and Kevin Shields. We summarize the
background of that lawsuit to provide necessary context to
our disposition of the sanctions motions.
4 The Shields Litigation
5 In May 2008, Broaddus sued Shields (the Shields
Litigation), alleging breach of fiduciary duty regarding the
sale of Broaddus's interest in Will Partners, LLC.
Shields removed the case to federal court. Shields's
response included a counterclaim for indemnification,
including attorney fees, based upon the fee-shifting
provisions in the Will Partners, LLC, operating agreement. In
June 2010, the federal district court granted Shields's
motion for summary judgment as to Broaddus's claim, and
in September 2010, the court also granted Shields's
motion for summary judgment as to his counterclaim for
6 In October 2010, Broaddus established the BNR Revocable
Trust (the Revocable Trust), a self-settled spendthrift
trust, granting Broaddus the right to: retain all trust
income, distribute the trust assets as he wished, and revoke
the trust. On December 9, 2010, Stanley was formed, with the
Revocable Trust holding a 99% interest and Broaddus's
daughter holding the remaining 1%. One week later, the
federal district court entered judgment in favor of Shields
and against Broaddus for $798, 619.16 plus postjudgment
7 Shields then issued citations to discover assets on Bradley
and two financial institutions: Wintrust Wealth Management
Company (Wintrust) and Lake Forest Bank & Trust Company
(Lake Forest). Bradley responded that it held approximately
$650, 000 in cash assets for Broaddus. Both financial
institutions responded that they had accounts either directly
in Stanley's name or "FBO [for the benefit of]"
Stanley. Shields also served citations on Stanley, the
Revocable Trust, and Broaddus, but none of the three
8 Shields then filed a motion for turnover, asking the
federal district court to direct Stanley, the Revocable
Trust, Broaddus, and the two financial institutions to
transfer certain assets to Shields to satisfy the judgment.
Broaddus responded, arguing in part that, since the funds
were in the name of Stanley and not Broaddus, Shields could
not recover them.
9 The district court rejected this argument. It first
determined that, upon examining the various factors under
section 5 of the Uniform Fraudulent Transfer Act (Act) (740
ILCS 160/5 (West 2010)), it was "clear that Broaddus
fraudulently transferred his assets to the Revocable
Trust." Specifically, the court found that
Broaddus's transfer of the assets to the Revocable Trust
was a transfer to an insider because Broaddus was the settlor
and had complete control over (and received all of) the
income and assets of the trust, including those assets he
transferred into the trust. In addition, the court found that
Broaddus knew that the court would soon impose a large
outstanding money judgment against him when he transferred
his assets to Stanley.
10 The district court further concluded that Broaddus created
the Revocable Trust and transferred assets to it to hide his
assets from Shields, the judgment creditor. It based this
conclusion upon a series of e-mail messages that Broaddus had
sent to Wintrust, demanding that Wintrust change the title of
the accounts so that they were neither in Broaddus's name
nor associated with Broaddus's taxpayer identification
number. The court also found that Broaddus received no
consideration for his transfer of funds to the Revocable
11 The court then found that, since Broaddus owned 99% of
Stanley through the Revocable Trust, Shields could reach the
assets of Stanley. In addition, the court noted that Broaddus
formed Stanley in December 2010, which was "well
after" the court had granted Shields's summary
judgment motion and ordered Broaddus to pay Shields's
attorney fees. The court concluded that "the
overwhelming evidence" was that Broaddus formed Stanley
"in a vain attempt to hide his assets from Shields"
after the entry of summary judgment. Finally, the court
commented on Broaddus's "history of dishonesty and
disregard for" the court's prior rulings. See
Broaddus v. Shields, No. 08 C 4420, 2012 WL 28694,
at *10 (N.D. Ill. Jan. 5, 2012).
12 WMJ's Proceedings Against Broaddus
13 On October 20, 2010, WMJ filed a complaint against
Broaddus seeking unpaid legal fees. On July 21, 2011, WMJ
obtained a judgment in the amount of $129, 538.39 against
Broaddus. WMJ began supplementary proceedings by filing a
third-party citation to discover assets, which was directed
to Bradley, among others.
14 On May 29, 2012, WMJ filed a motion for turnover, asking
the trial court to order Bradley, a real estate investment
company, to immediately transfer certain cash assets to WMJ.
Attached to WMJ's motion was an affidavit from Sherwin
Jarol, a limited partner of Bradley Associates, LP (the LP).
Jarol first noted that, in addition to being one of the
LP's limited partners, he was also the sole member of the
LP's general partner. Jarol further explained that,
although Bradley was an "affiliate" of the LP, he
referred to these entities collectively as "Bradley
Associates." Jarol then stated that, pursuant to