Appellate Court Does Not Have Jurisdiction to Review Order Denying Judgment in Supplementary Proceeding

by Uri Abt

As a general rule, the Illinois appellate court only has jurisdiction to review final judgments.  Ill. Sup. Ct. R. 303(a).  When there are multiple claims and parties, and there has been a final judgment as to one or more but fewer than all of them, the appellate court has jurisdiction to review that judgment if the circuit court makes “an express written finding that there is no just reason for delaying either enforcement or appeal or both” or, absent a special finding, in six specified circumstances.  Ill. Sup. Ct. R. 304.  One of those circumstances is “a final judgment or order” entered in a supplementary proceeding to discover and obtain the assets of a judgment debtor.  Ill. Sup. Ct. R. 304(b)(4).  The appellate court recently explored the meaning of this important section of the rule in National Life Real Estate, LLC v. International Bank of Chicago, 2016 IL App (1st) 151446.

The plaintiff, National Life, obtained a judgment against Ronald Scarlato for nearly $3.5 million.  It then served International Bank of Chicago with a citation to discover Scarlato’s assets that included a provision requiring the bank to freeze any of Scarlato’s assets that were not exemptfrom collection.  After receiving the citation, the bank entered into a loan with Scarlato for $3.5 million.  The bank dispersed the loan proceeds directly to third-parties, not to Scarlato.  National Life moved for judgment against the bank for violating the citation.  After an evidentiary hearing, the circuit court held that the loan proceeds were never in Scarlato’s individual possession, and therefore were not subject to the freeze order in the citation.  It denied National Life’s motion.  National Life appealed. 

Addressing the jurisdictional issue, the appellate court framed the question before it as whether the order denying National Life’s motion was “final.”   It recognized that there is not much case law illustrating what constitutes a final order in the context of a supplementary proceeding, although the court previously held that “an order in [a supplementary proceeding] is said to be final when the citation petitioner is in a position to collect against the judgment debtor or a third-party, or the citation petitioner has been ultimately foreclosed from doing so.”  Id. at ¶ 10 (quoting D’Agostino v. Lynch, 382 Ill. App. 3d 639, 642 (2008)).

The court ultimately looked to In re Marriage of McElwee, 230 Ill. App. 3d 714, 719 (1992) for precedential guidance.  McElwee held that an order denying a motion to dismiss a nonwage garnishment proceeding was not final for purposes of Rule 304(b)(4).  Dispositive in McElwee was the fact that the order did not end the garnishment proceeding—there were many additional procedural safeguards left before the subject property would be subject to collection—so, the effect of the order “was simply to allow that garnishment to go forward[;] it merely placed the parties at the beginning of the garnishment process, not at the end.”  National Life, 2016 IL App (1st) 151446, ¶ 13 (quoting McElwee, 230 Ill. App. 3d at 719).

Turning to the matter before it, the appellate court held that the order denying National Life’s motion for judgment against the bank did not “ultimately foreclose” it from collecting against the bank under some other theory, or collecting against a different third-party citation respondent.  Indeed, the court noted that the record showed that the citation proceedings against the bank had continued while the appeal was pending.  It followed, the appellate court reasoned, that, like McElwee, the order at issue “simply allowed the supplementary proceeding to go forward and placed the parties at the beginning of the third-party citation proceedings, not the end.”  As the order was not final, the appellate court dismissed the appeal for lack of jurisdiction.