Midwest Commercial Funding, LLC v. Kelly , 2023 IL 128260 ( 2023 )

2023 IL 128260IN THE
SUPREME COURT
OF
THE STATE OF ILLINOIS
(Docket No. 128260)
MIDWEST COMMERCIAL FUNDING, LLC, Appellant, v. ROBERT
SYLVESTER KELLY (Heather Williams, Appellee).
Opinion filed March 23, 2023.
JUSTICE O’BRIEN delivered the judgment of the court, with opinion.
Chief Justice Theis and Justices Neville, Overstreet, Holder White, and
Cunningham concurred in the judgment and opinion.
Justice Rochford took no part in the decision.
OPINION
¶1 This case concerns a dispute between two judgment creditors over lien priority.
Midwest Commercial Funding, LLC (Midwest), and Heather Williams, each
creditors of Robert Sylvester Kelly, served citations to discover assets on Sony
Music Holdings, Inc. (Sony), which paid music royalties to Kelly. Sony received
Midwest’s citation by e-mail before it received Williams’s citation sent registered
mail, return receipt requested, through the United States Postal Service (USPS).
The Cook County circuit court found Midwest’s lien had priority over Williams’s
lien based on the electronic service. The appellate court disagreed, finding that
electronic service was not authorized for service of a citation to discover assets, so
Midwest’s electronic delivery of the citation to discover assets to one of Sony’s
attorneys did not perfect its lien prior to Williams. 2022 IL App (1st) 210644. It
reversed and remanded for entry of an order prioritizing Williams’s lien. We affirm
the judgment of the appellate court.
¶2 I. BACKGROUND
¶3 Williams obtained a $4 million judgment against Kelly in March 2020 for his
physical and sexual abuse of her when she was a minor. Midwest obtained a
$3,484,420.70 judgment against Kelly in July 2020 for breach of a commercial real
estate lease. Sony was not a party to either Williams’s or Midwest’s lawsuits against
Kelly. Williams and Midwest each sought to satisfy their judgments through
royalties Sony paid Kelly. At the time of the citation proceedings, Sony held
$1,544,333 in royalties due Kelly. Williams sent via registered mail a citation to
discover assets to Sony on August 17, 2020, with return receipt requested. On
August 19, 2020, Midwest e-mailed its citation to discover assets and also sent a
copy through the regular mail. Midwest’s e-mail was directed to David Castagna,
who was a member of Sony’s legal staff with whom Midwest had dealt on prior,
unrelated matters. On August 24, 2020, Williams’s citation was delivered to Sony.
Also on August 24, 2020, Castagna acknowledged receipt of the citation e-mailed
by Midwest. Castagna answered Midwest’s citation on August 27, 2020, via a
mailed response to Midwest. Castagna indicated Sony would appear on the citation
and informed Midwest that it had received Williams’s citation to discover assets on
August 25, 2020. However, Williams’s USPS receipt indicated delivery to Sony
occurred on August 24, 2020.
¶4 A. Trial Court Proceedings
¶5 Midwest intervened in Williams’s citation action and filed an adverse claim to
the royalties held by Sony. Williams intervened in Midwest’s citation proceeding
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and also asserted an adverse claim to the royalties. Williams challenged Midwest’s
priority claim, provided a USPS return receipt showing service on Sony occurred
on August 24, 2020, and argued that because Sony was served with both citations
on August 24, 2020, equity directed that her lien should be prioritized over
Midwest’s lien.
¶6 Following a hearing, the trial court found that Midwest’s lien was entitled to
priority. It noted that neither Midwest nor Williams had challenged whether service
was proper and that Sony accepted service and responded to both citations without
objecting to either service or the citations. Relying on Illinois Supreme Court Rule
12(c) (eff. July 1, 2017), the trial court concluded that Midwest’s citation was
entitled to priority because it was served on August 19, 2020, via e-mail, several
days prior to USPS delivery of Williams’s citation on August 24, 2020. The court
ordered Sony to satisfy Midwest’s lien before it could pay any royalties to
Williams.
¶7 Williams sought reconsideration of the trial court’s order and raised for the first
time in her motion to reconsider a challenge to the propriety of electronic service
of Midwest’s citation. She supplemented her motion with what she characterized
as new evidence, purported to reveal that Midwest was conspiring with Kelly to
hide funds from his creditors. The trial court denied Williams’s motion for
reconsideration, finding that she had waived her challenge to e-mail service by
raising the issue for the first time in her motion to reconsider. The court also rejected
her claims of new evidence.
¶8 B. Appellate Court Proceedings
¶9 Williams appealed, and the appellate court reversed the trial court’s decision. It
disregarded Williams’s forfeiture of the challenge to service, found that Williams
had standing to challenge Midwest’s e-mail service on Sony, and concluded that e-
mail service was not a recognized method for service of a citation to discover assets.
It further found that Williams’s citation was entitled to priority, as it was complete
four days after she mailed it based on Illinois Supreme Court Rule 12 (eff. July 1,
2017). The appellate court ordered the trial court to enter an order directing Sony
to turn over the royalty funds to Williams and to continue to turn over the royalties
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until Williams’s $4 million lien was satisfied. Midwest appealed.
¶ 10 II. ANALYSIS
¶ 11 A. Standing
¶ 12 We begin our analysis with a determination of whether Williams has standing
to challenge service on Sony. Midwest contends that Williams cannot object to
service on Sony’s behalf. In response, Williams maintains that she has a real interest
in the citation proceedings, which entitles her to challenge service on Sony. We
agree with Williams.
¶ 13 The standing doctrine “assures that issues are raised only by those parties with
a real interest in the outcome of the controversy.” Glisson v. City of Marion, 188
Ill. 2d 211, 221 (1999). Standing requires “some injury in fact to a legally
cognizable interest.” Id. The injury may be actual or threatened and “must be
(1) distinct and palpable; (2) fairly traceable to the defendant’s actions; and
(3) substantially likely to be prevented or redressed by the grant of the requested
relief.” Id. We review issues of standing de novo. Piccioli v. Board of Trustees of
the Teachers’ Retirement System, 2019 IL 122905, ¶ 12.
¶ 14 Williams has standing. She is asserting her own right to payment of the
royalties, not any rights that belong to Sony. She, herself, has a real interest in the
outcome of the citation proceeding involving Sony. Williams’s injury of losing her
lien priority is distinct and palpable, it can be traced to Sony’s actions, and the relief
she requested from this court would prevent or redress her injury. If Midwest’s
service of process on Sony via e-mail is deemed proper, she is prevented from
asserting a priority position to satisfy the judgment she obtained against Kelly. In
the alternative, if this court concludes Midwest’s service on Sony via e-mail is
invalid, her lien takes priority because notice of it was received before notice of
Midwest’s lien. Moreover, we agree with the appellate court’s conclusion that, if
we were to find Williams lacked standing, she and similarly situated judgment
holders would be barred from any opportunity to assert that their claims were
superior to a third party’s lien. We thus find that Williams has standing and the
appellate court did not err in concluding that she did.
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¶ 15 The cases on which Midwest relies do not warrant a different result. Midwest
looks to People v. Matthews, 2016 IL 118114, In re M.W., 232 Ill. 2d 408 (2009),
and Fanslow v. Northern Trust Co., 299 Ill. App. 3d 21, 29 (1998), as support for
its claim that Williams lacks standing to challenge service on Sony. In Matthews,
2016 IL 118114, ¶¶ 4-5, the defendant attempted to challenge the lack of service
on the respondent based on his own failure to properly serve respondent despite
him certifying that service was effectuated. This court found that the defendant
could not challenge his failure to properly serve the respondent because “[n]one of
the notice requirements at issue were designed to allow a petitioner to object to lack
of service on behalf of the opposing party.” Id. ¶ 15. Allowing the defendant to do
so would preclude a respondent’s right to waive service. Id. The court stated that
“ ‘a party may “object to personal jurisdiction or improper service of process only
on behalf of himself or herself.” ’ ” Id. ¶ 19 (quoting M.W., 232 Ill. 2d at 427,
quoting Fanslow, 299 Ill. App. 3d at 29).
¶ 16 In M.W., 232 Ill. 2d at 429-30, this court rejected a juvenile’s claim that the
failure to provide notice to her father violated his due process rights, finding the
juvenile’s father could waive service and did not claim error in the lack of service
and the juvenile could not claim error on his behalf. In Fanslow, 299 Ill. App. 3d at
25-26, a Pennsylvania court enjoined respondent despite a lack of service on
respondent in the injunction action. The Illinois Appellate Court, applying
Pennsylvania law, found that the petitioner lacked standing to assert respondent’s
challenge to the Pennsylvania court’s jurisdiction over it because service was
waivable. Id. at 30. Matthews, M.W., and Fanslow are distinguished from the
circumstances at bar, where Williams is not seeking to assert Sony’s waivable right
to notice but is seeking to enforce her own rights as a citation creditor. The
controversy here is not over whether Sony was properly given notice. Williams is
not seeking to challenge whether Sony has the right to accept service of Midwest’s
citation by e-mail. Williams is challenging whether Midwest’s method of service
to Sony in this circumstance can establish a lien priority over Williams’s lien.
¶ 17 B. Forfeiture
¶ 18 Having found Williams had standing to challenge service, we must next
consider whether she forfeited her challenge to service by raising the issue for the
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first time in her motion to reconsider in the trial court. The appellate court excused
the forfeiture, finding that the issue was fully briefed by both parties and that
Midwest was not prejudiced by consideration of the issue. We agree that forfeiture
should be excused. A reviewing court may “overlook general forfeiture principles
in a civil case and consider an issue not raised below if the issue is one of law, is
fully briefed and argued by the parties, and the public interest favors considering
the issue now.” Forest Preserve District of Du Page County v. First National Bank
of Franklin Park, 2011 IL 110759, ¶ 28. Here, the circumstances are such that
excusing forfeiture is necessary to reach a just result. See Hux v. Raben, 38 Ill. 2d
223, 225 (1967) (discussing that a reviewing court has a responsibility “for a just
result and for the maintenance of a sound and uniform body of precedent [which]
may sometimes override the considerations of waiver”). We will address
Williams’s challenge to Midwest’s service by e-mail of its citation to discover
Kelly’s assets held by Sony.
¶ 19 C. Propriety of E-mail Service
¶ 20 Midwest argues that the appellate court erred when it found that its service on
Sony via e-mail was not authorized and did not entitle Midwest’s lien to a priority
position over Williams’s lien. Resolution of this issue turns on statutory and rule
interpretation. We employ the same rules of interpretation in construing both
statutes and rules. In re Estate of Rennick, 181 Ill. 2d 395, 404 (1998). Our goal is
to give effect to the legislative intent, and the most reliable indicator of intent is the
plain language of the statute or rule. Id. at 404-05. We review de novo the lower
court’s construction of a statute or rule. Id. at 401.
¶ 21 Methods for service of a citation to discover assets are governed by section 2-
1402 of the Code of Civil Procedure (Code) (735 ILCS 5/2-1402 (West 2020)) and
Illinois Supreme Court Rule 277 (eff. Jan. 4, 2013). Section 2-1402(a) of the Code
provides that a judgment creditor may commence supplemental proceedings to
enforce a judgment by serving a citation to discover assets upon a judgment debtor
or any other person. 735 ILCS 5/2-1402(a) (West 2020). Illinois Supreme Court
Rule 277(a), (b) (eff. Jan. 4, 2013) provides that section 2-1402 supplemental
proceedings may be commenced at any time “by the service of a citation on the
party against whom it is brought.” Rule 277(c) states that a citation “shall be served
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and returned in the manner provided by rule for service, otherwise than by
publication, of a notice of additional relief upon a party in default.” Ill. S. Ct. R.
277(c) (eff. Jan. 4, 2013). Service upon a party in default is authorized by Illinois
Supreme Court Rule 105 (eff. Jan. 1, 2018), which states, in applicable part, that
notice may be served “(1) [b]y any method provided by law for service of
summons” or “(2) [b]y prepaid certified or registered mail addressed to the party,
return receipt requested.”
¶ 22 The plain language of the procedures established by the Illinois Supreme Court
Rules and the Code does not authorize service of a citation to discover assets by e-
mail. Service of a citation may be effected by “any method provided by law for
service of summons” or “[b]y prepaid certified or registered mail.” Ill. S. Ct. R.
105(b)(1), (2) (eff. Jan. 1, 2018). Midwest maintains that service by e-mail was
authorized by Illinois Supreme Court Rule 11 (eff. July 15, 2020). Contrary to
Midwest’s assertion, Rule 11 does not apply to citation proceedings. While e-mail
service is a “method provided by law for service” as identified under Rule
105(b)(1), it does not apply to the commencement of a citation proceeding. Indeed,
its very name precludes its application to citation proceedings. Rule 11 is captioned
“Manner of Serving Documents Other Than Process and Complaint on Parties Not
in Default in the Trial and Reviewing Courts.” Id.¶ 23 Although Rule 11 provides for service by e-mail, the scope of Rule 11 is limited
to parties who have made an appearance. The rule states that an e-mail address must
be included on attorney appearances and court-filed pleadings. Rule 11 further
states that “[u]nless otherwise specified by rule or order of court, documents shall
be served electronically.” Ill. S. Ct. R. 11(c) (eff. July 15, 2020). Even if Rule 11
were applicable to citation proceedings, it would not apply to Sony because Sony
was not a party in this case. Sony had not filed an appearance with the court or
provided an e-mail address to the court. It was mere happenstance that Midwest
knew Sony’s e-mail address from prior contacts between them. The rules
concerning service in a citation proceeding specify the methods by which service
must occur. Rule 105(b)(2) mandates service of a citation to discover assets via
registered or certified mail with return receipt requested. Ill. S. Ct. R. 105(b)(2) (eff.
Jan. 1, 2018). Rule 11 does not apply, and the appellate court properly rejected its
application.
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¶ 24 This same reasoning requires us to reject Midwest’s claim that the appellate
court’s decision is contrary to the encouragement of agreements between attorneys.
Midwest argues that it is established that parties may agree to both the manner and
method of service, citing National Equipment Rental, Ltd. v. Polyphasic Health
Systems, Inc., 141 Ill. App. 3d 343, 347 (1986) (“It is well-settled that a party may
not only agree to submit to the jurisdiction of a particular court which would not
otherwise have authority over him, but also to the manner and method of service
exercised upon him.”). We do not disagree with Midwest’s contention. However,
the ability of parties to agree to accept process and voluntarily appear at court does
not allow them to disregard the applicable rules governing service. Nor does the
ability of parties to accept process and voluntarily appear at court allow one party
to implicate the rights of other parties where, like here, the date of service of the
citation establishes lien priority for all parties. In Shipley v. Hoke, 2014 IL App
(4th) 130810, ¶ 94, this court instructed that “because issuance of a citation imposes
very real restrictions and affirmative duties upon a third party—backed by the threat
of contempt and monetary liability—the service and notice requirements set forth
in section 2-1402 of the Code and Rule 277(c) mirror the requirements of due
process.” The Shipley court reiterated that section 2-1402 and Rule 277 set forth
the service requirements in citation proceedings. Id. ¶ 92.
¶ 25 Contrary to the service requirements for litigants filing appearances referenced
in Rule 11, supplemental proceedings to discover assets are commenced by serving
notice. Rule 277(b) provides that a citation proceeding is commenced by service of
the citation. In this manner, service of the citation is akin to a summons,
commanding the citation respondent to appear in the proceedings. Because service
of the citation begins the supplemental citation proceeding against the third party
and establishes lien priority, adherence to the service rules ensures due process. See
Ill. S. Ct. R. 277(a) (eff. Jan. 4, 2013) (citation proceedings commenced by service
of citation); 735 ILCS 5/2-1402(m)(2) (West 2020) (when the citation is served on
a third party, the judgment becomes a lien on the debtor’s assets that the third party
possesses or controls). The procedure the rules and Code set forth for service in a
citation proceeding contributes to an even playing field for judgment holders. In the
instant case, Midwest had access to the e-mail of Sony’s attorney by happenstance
of prior dealings with him. Williams did not have access to that e-mail address.
Midwest was able to use its knowledge of Castagna’s e-mail address to obtain an
unfair advantage over Williams, despite the requirement that service for a citation
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be via registered or certified mail. Although we concur with Midwest’s belief that
agreement between attorneys is commendable and to be encouraged when
appropriate, the rules proscribe the limits of agreement in the instant circumstances.
¶ 26 The appellate court concluded that Illinois Supreme Court Rule 12 (eff. July 1,
2017) applied and provided that service of Williams’s citation was complete on
August 21, four days after she mailed it. See Ill. S. Ct. R. 12(c) (eff. July 1, 2017)
(“Service by U.S. mail is complete four days after mailing.”). Rule 105(b)(2)
provides that service is complete upon receipt. Rule 105(b)(2) requires service
specifically by certified or registered mail, while Rule 12(c) only references United
States mail and does not designate any particular type of USPS mail, such as
certified or registered mail. Because Rule 105(b)(2) is the more specific rule, it
governs when service is deemed complete rather than Rule 12. See Knolls
Condominium Ass’n v. Harms, 202 Ill. 2d 450, 459 (2002) (where statutory
provisions relate to the same subject, the more specific provision controls over the
general provision).
¶ 27 We hold that electronic service via e-mail is not authorized in citation
proceedings and that the appellate court properly rejected Midwest’s contention
that it had lien priority based on its service by e-mail to Sony. The electronic service
by Midwest on August 19, 2020, was not an authorized method of service in a
citation proceeding. As provided by rule and statute, Williams’s service of citation
was received by Sony on August 24, 2020, as established by the USPS return
receipt. Williams’s lien is entitled to priority.
¶ 28 III. CONCLUSION
¶ 29 For the foregoing reasons, the judgment of the appellate court, which reversed
the judgment of the circuit court, is affirmed.
¶ 30 Appellate court judgment affirmed.
¶ 31 Circuit court judgment reversed.
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¶ 32 JUSTICE ROCHFORD took no part in the consideration or decision of this
case.
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