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Preservation Holdings, LLC v. Norberg

Court of Appeals of Illinois, First District, Sixth Division

June 14, 2019

PRESERVATION HOLDINGS, LLC, Plaintiff-Appellee,
v.
KARL NORBERG; PAMELA GLEICHMAN; GLEICHMAN & COMPANY, INC.; GN HOLDINGS, LP; and HARBOR HILLS ASSOCIATES, LP, Defendants-Appellants Richard P. Olson, as Trustee of the Promenade Trust, Intervening Plaintiff-Appellee.

          Appeal from the Circuit Court of Cook County No. 14 L 50823 The Honorable Alexander P. White, Judge Presiding.

          PRESIDING JUSTICE DELORT delivered the judgment of the court, with opinion. Justices Cunningham and Connors concurred in the judgment and opinion.

          OPINION

          DELORT PRESIDING JUSTICE

         ¶ 1 Defendants-appellants Karl Norberg, Pamela Gleichman (Gleichman), Gleichman & Company, Inc., GN Holdings, LP, and Harbor Hills Associates, LP, appeal from an order of the circuit court that approved the judicial sale of certain partnership interests to partially satisfy judgments entered in favor of appellees Preservation Holdings, LLC (Preservation Holdings), and Promenade Trust (Promenade). We affirm.

         ¶ 2 I. BACKGROUND

         ¶ 3 The underlying judgments resulted from litigation brought in Maine state courts. The final judgments of the Maine courts were registered in the circuit court of Cook County pursuant to the Uniform Enforcement of Foreign Judgments Act (735 ILCS 5/12-650 et seq. (West 2016)). The Maine courts also entered charging orders against the distributional and transferable interests of Gleichman in 51 specified limited liability companies and limited partnerships.

         ¶ 4 The only issue before us on this appeal is whether the circuit court erred in approving the sale of partnership interests to partially satisfy the Maine judgments. Therefore, we omit discussion of the Maine court proceedings and the procedural history leading up to when the circuit court of Cook County domesticated the Maine judgments. At that point, the Maine judgments were still unsatisfied, so the plaintiffs pursued Illinois judicial remedies to collect the balances due on them. On February 22, 2016, as the Maine court had done before, the circuit court imposed charging orders against the distributional and transferable interests of Gleichman in 51 specified limited liability companies and limited partnerships, pursuant to section 703(a) of the Uniform Limited Partnership Act (2001) (805 ILCS 215/703(a) (West 2016)) and section 30-20 of the Limited Liability Company Act (805 ILCS 180/30-20(a) (West 2016)).

         ¶ 5 After the circuit court granted plaintiffs' joint motion to foreclose on Gleichman's interests, plaintiffs filed a joint petition to set the terms of the foreclosure sale, which provided detailed proposed terms of the sale. The petition included copies of certificates evidencing Gleichman's percentage interests in the limited liability companies and limited partnerships. And, as is relevant to this appeal, the petition contained a proposed order providing that the Cook County sheriff would sell, at a public sale, Gleichman's interests in 2 limited liability partnerships (Stanford Management, LLC (Stanford), and Acadia Maintenance, LLC (Acadia)) and 46 specifically named limited partnerships. The proposed order provided that the interests would be sold seriatim in the sequence specified in the order. According to the draft order, Preservation Holdings held a judgment against Gleichman for about $800,000, and Promenade Trust held judgments in the approximate amounts of $31 million, $5 million, and $440,000.

         ¶ 6 Gleichman objected to the petition. Among other things, she claimed she had no transferable interest in Stanford Management, LLC, because only an entity known as the "SNH [Scarcelli-Nordberg Holdings] Trust" and an individual, Rosa Scarcelli, did. Plaintiffs argued that the text of the SNH Trust agreement demonstrated that it was a revocable trust created by Gleichman for her own benefit, in which Gleichman held a distributional interest. As such, they claimed, Gleichman's creditors could reach any assets in the SNH Trust. They also noted that the court had already addressed the same dispute in an earlier order and had ruled against Gleichman's position. Holding consistently with its prior order, the circuit court overruled Gleichman's objections to the petition and entered an order of sale in the form proposed by plaintiffs.

         ¶ 7 On October 31, 2017, the Cook County sheriff held a judicial sale and sold Gleichman's distributional interests in the two LLCs and 46 limited partnerships, as a single group, to the Promenade Trust for $4.8 million. The proceeds were far less than the amount of the outstanding judgments in favor of Promenade, and it moved to confirm the judicial sale. Gleichman objected, arguing inter alia that there were irregularities in the sale and that the sale price was unconscionably low. Gleichman supported her argument with an affidavit from Sean Hamilton, an expert in the sale and valuation of apartment buildings. Hamilton opined, in pertinent part:

"7. I have been asked to determine the value of the economic interest of Pamela Gleichman in a portfolio of properties in which she is the developer, General Partner and, in some cases, the Limited Partner. The portfolio includes properties in Pennsylvania and Maine in which Gleichman owns from 50% to 100%. A portion of the portfolio (in the Multifamily Preservation and Revitalization ('MPR') program) has restrictions as to the timing for which they can be sold until 2027. ***
9. My opinion, to a reasonable degree of certainty in the field of low income, multifamily residential rental property valuation, of the fair market value of Pamela Gleichman's economic interest for the unrestricted properties on Chart A is $21,864,650 million [sic] (including the cash reserves on hand) and $3,634,924 for the restricted properties, with cash on hand, based on the value of the real estate held (net of mortgages and expected 6% sales commissions) by each entity listed, for a total net present value of Pamela Gleichman's economic interests of $25,499,574.
10.In order to achieve the highest and best price, the sale of these properties should be conducted through a qualified and experienced broker in the field. Through my work in this field, I have identified over 2,000 different entities and individuals who have expressed interest in buying low-income properties across the country. Any sale of Gleichman's interests that does not, at a minimum, notify the top brokers of low-income properties (such as Marcus & Millchap, Massey Knakal, Newmark Grubb Knight Frank, Rosewood Realty Group, Cushman & Wakefield, CBRE, Hendrix, ARA, ...

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