DOCTORS OXYGEN SERVICE, INC., d/b/a Medgas Solutions, Plaintiff-Appellee,
CANNON MANAGEMENT GROUP, LLC, Defendant Friedler Construction Company, Intervenor-Appellant.
from the Circuit Court of Du Page County. No. 16-MR-201
Honorable Bonnie M. Wheaton, Judge, Presiding.
McLAREN JUSTICE delivered the judgment of the court, with
opinion. Justices Schostok and Burke concurred in the
judgment and opinion.
1 This appeal comes to us from supplementary proceedings
instituted by plaintiff, Doctors Oxygen Service, Inc., doing
business as Medgas Solutions (Doctors), to enforce an
underlying judgment totaling $105, 551.71 against
defendant, Cannon Management Group, LLC (Cannon). Doctors
filed a citation to discover assets and a motion for
turnover. Intervenor, Friedler Construction Company
(Friedler), alleged superior rights to the same funds and
moved for turnover. The trial court granted Doctors'
motion for turnover and denied Friedler's motion. On
appeal, Friedler argues that: (1) the funds at issue were not
subject to Doctors' judgment lien, because the funds were
not an "asset" of Cannon; (2) even if the funds
were an "asset" of Cannon, the funds should have
been awarded to Friedler, under the doctrine of equitable
subrogation; and (3) the trial court erred by determining
that Friedler had a legitimate remedy, which was to make a
claim against the surety. We affirm.
2 I. BACKGROUND
3 A. Doctors' Citation to Discover Assets Against Cannon
4 On December 1, 2015, Doctors obtained a default judgment
against Cannon in the United States District Court for the
Northern District of Illinois in the amount of $105,
551.71. On February 16, 2016, Doctors registered the
default judgment with the trial court and filed a citation to
discover assets against Cannon. On March 2, 2016, Thomas
Cannon, a purported disabled veteran and the owner of Cannon,
was served with the citation. Thomas Cannon failed to appear,
and the trial court issued a rule to show cause. After Thomas
Cannon was served by special service, he appeared on August
4, 2016. On August 17, 2016, Doctors moved for a temporary
restraining order (TRO), alleging that Thomas Cannon had
fraudulently transferred Cannon funds to accounts held by Vet
Tec Mechanical (Vet Tec), Cannon's successor entity. On
August 18, 2016, the trial court granted Doctors' motion,
freezing any and all funds held by Fifth Third Bank and any
account held by Cannon, Thomas Cannon, or Vet Tec.
5 On August 29, 2016, at Thomas Cannon's direction, the
United States Department of Veterans' Affairs (VA)
wire-transferred $79, 599.19 to the Vet Tec account
at Fifth Third Bank. On August 31, 2016, the trial court
entered an order requiring Fifth Third Bank to disburse all
funds into an "interest on lawyer trust account"
(IOLTA) held by Doctors' counsel, and the trial court
ordered that those funds not be distributed.
6 B. Friedler Moves to Intervene
7 On September 8, 2016, Friedler filed an "Emergency
Petition to Intervene and To Amend and Modify the Temporary
Restraining Order." Friedler alleged and argued the
following. Cannon had been hired by the VA to work on a
construction project in North Chicago (the VA project). The
VA required Cannon to obtain a performance-and-payment bond.
Zurich American Insurance Company (Zurich) and its
subsidiaries, including Fidelity and Deposit Company
(Fidelity) (collectively, the surety) provided the bond. In
October 2009, the surety and Friedler entered into a contract
wherein Friedler agreed to indemnify the surety from any and
all claims asserted on any construction projects in which the
surety provided bonds in favor of Cannon (indemnity
8 Friedler also alleged that in July 2015 Cannon abandoned
and defaulted on the VA project. The VA declared Cannon in
default and made a claim to the surety on the bond. In
accordance with the indemnity agreement, Friedler completed
the construction work on the VA project. Cannon agreed and
acknowledged that the remaining $121, 286.52 due and
owing on the VA project was owed to Friedler because Friedler
and its subcontractors fully performed the remaining work on
the VA project. Friedler had informed the VA that it was
performing the remainder of the work on the project, but the
VA refused to pay Friedler directly. The $79, 599.19
that the VA transferred into Cannon's account on August
29, 2016, was part of the money that Cannon owed to Friedler.
Because the aforementioned funds never belonged to Cannon,
such funds were not an "asset" of Cannon, could not
be used pay Doctors, and should not be subject to the TRO.
Friedler moved to intervene and to amend and modify the TRO
to provide that all monies paid to Cannon for work performed
by Friedler be distributed to Friedler.
9 Friedler attached to its pleading the indemnity agreement,
which indicated that Thomas Cannon, the "President"
of Cannon, was the named "Contractor" and that
Thomas Cannon and Friedler were the "Indemnitors."
Friedler also attached to its pleading a July 9, 2015, letter
from Thomas Hardy, a VA contracting officer, addressed to
Paul Greco, a representative of the surety, stating:
"[T]he Government considers [Cannon] to be in default of
the contract. After issuance of a show cause notice on
Tuesday, July 7, 2015, [Cannon] sent the Contracting Officer
the following e-mail:
I'm pulling off the site……deal with it in
[VA] interprets this communication as a repudiation of the
contract. Therefore[, the] VA is entitled to ...