good morning all parties ready to proceed fundamental errors it entered judgment against appellants robert fein tain and anthony kasautii go who had never been served with a citation it held them responsible for the transfer of an asset that did not belong to the judgment debtor it failed to hold a hearing to determine if the asset was the property of the judgment debtor and it failed to conduct a contempt hearing and entered judgment instead against appellants rather than a finding of contempt which would have given appellants the opportunity to purge the contempt the post judgment supplementary proceeding statute fourteen o two and supreme court rule two hundred and seventy seven dollars b provide that a citation proceeding sh commenced by the service of a citation on the party against whom it is sought no citation was ever sought issued or served on appellants either personally or in a representative capacity for the judgment debtor i know of no illinois case allowing a judgment to be entered against an individual pursuant to a citation without service of the citation and that person entering a judgment on an individual never served is that in both cases the officers were served with citations either in their represented the capacity or individually or both the funds transferred after service on i read an i l d c were by all the rules of priority defacto exempt because they were subject to a prior perfected security interest that's subject was covered in depth by this court in b m o harris versus and seventeen therefore the transfer of funds subject to a prior secured lien or not property belonging to the judgment debtor in the st place or at a minimum the property was subject to a superior lien making it making it unreachable by the judgment creditor bank of aspen versus fox cartage held there is no punishment for transfer of an asset the did not belong to the judgment debtor in the st place but the trial court never held a hearing to determine priority that was air the secured party i m c was not allowed to intervene because the trial court ruled that a turnover order had not yet been sought and ruled that the issue of priority of liens was premature however contra reno clearly found that priority of liens can be determined by the trial court before a turnover order is sought if the trial court believed appellants should be held responsible for the transfers as corporate officers then as unserved representatives of the corporate debtor the proper remedy would have been a contempt proceeding shales versus manning concrete clearly provided that a corporate officer who violates a citation may be held in contempt but i found no illinois case holding that a judgment can be entered against an served corporate officer as though he were a rd party the trial court found appellants were rd parties even though they were never served in any capacity and even though they were brought before the court on a rule to show cause why they should be held in contempt nonetheless plaintive sought judgment against a palance who he referred to as quote kind of rd parties that's in the record at one hundred and ninety two but having never been served with a citation or restraining provision and although a corporate officer may be held in contempt when a served corporate entity wrongfully transfers funds there is no illinois case allowing judgement to be entered against the individual who has never been served with a citation the only documents served on fontayne and to sow show was plainest motion for rule to show cause a rule to show cause why a palace should not be held in contempt if appellants transferred non exempt funds with knowledge of the existence of the citation and restraining provisions the court could find them in contempt and enter an order providing a means by which a palace could either purge themselves of the contempt or risk being held responsible for the transfers but instead the court entered judgment against them as though they were rd parties under one hundred and forty dollars to f one even though a citation was never served on them this was error there is a substantial difference between being held in contempt vs being subject to a judgement a contempt hearing in this case would have allowed a palace to be heard and would have allowed the court to determine if the transfers were exempt and if not to enter an order finding appellants in contempt and providing a means for them to purge the contempt a judgement does not allow the accounts any such opportunity to purge the fried case emphasizes that the opportunity to purge a finding of contempt is absolutely critical and cannot be overlooked judgement should never have been entered against robert fontayne and anthony case ashu there was no evidentiary hearing the court never determined whether the transferred assets belonged to the judgment debtor in the st place if the transferred assets did not actually did belong to the judgment at or the proper procedure would have been to hold a contempt hearing to decide the issue of priority and if appropriate to set out specific conditions necessary to purge the content section one thousand four hundred and two provides absolutely no provision for entry of judgment against any person or entity not served with a citation either in a representative capacity or an individual capacity judgment against appellants should be reversed outright there is no question of fact for a trial court to determine in regard to whether the provisions of fourteen o two were followed they were not it is unquestionable appellants were never served with a citation a prerequisite required to invoke the print penalty provisions of  against a rd party there is no good faith question the transferred assets subject was subject to a prior preferred security interest and was therefore not the property of the judgment or there's no statutory provision legal theory or legal precedent that would allow a judgment rather than a finding of contempt to enter against a corporate officer not served with a citation and against whom a court order was never entered or violated in the alternative i would ask this matter be remanded to the trial court for a hearing on plaintiff's petition a rule for rule to show cause and for determination of whether the subject funds were exempt having been subject to a prior perfected security interest and  whether those funds would have been accessible to the judgment creditor in any event if the trial court should find it transfers were not exempt the trial court is authorized to enter a finding of contempt and provide conditions by which a palance could purge the contempt the bottom line is that the money transferred was subject to a prior perfected security interest and under counter reno the funds were not the property of the judgment debtor there's no question about that there is no question that the prior perfect in security interest was superior to plaintiff's judgment lien now plaintiff asked dischord to hold appellants responsible for the transfer of funds that could not possibly have been accessed by the judgment creditor that would not be justice under law or equity told appellants robert fontayne and anthony kasautii to personally liable for a judgment without service of a citation without a hearing on priority of liens without a finding of contempt and without provisions by which they could purge the contempt would be a fundamental violation of procedural due process evidence justice wheaton's final ruling on on the issue of priority was that it was premature because a trance a turnover order hadn't been requested there were a number of comments made along the way but that was that was her final ruling and under contrary no a turnover order does not need to be requested before you can have a hearing on priority because if the priorities are such that the asset doesn't belong to the judgment described by plaintiff as rd parties they were never joined as rd parties and they don't qualify as rd parties under rule two hundred and seventy seven b which defines a rd party as an entity that holds property of the judgment debtor in other words were they the ones who were i guess what the right word in charge of the payment that was going in and out of this account and the ets correct as officers of the party that was service i read i all d c they were the persons involved in the transfers of the assets and therefore if the transfers were incorrect which we don't know because we've never had a hearing on priority but if the transfers were incorrect then the officers can be held in contempt under shales versus manning concrete have a contempt hearing and an opportunity to purge contempt etc but isn't sir parties one where there's no accounting pass through provision that's correct but if the asset is subject to a prior perfected security interests then that becomes irrelevant because it's not the property of the judgment debtor in the st place judgment but it's not that simple we need to know if the property that was transferred was the property of the judgment debtor in the st place otherwise there is no penalty for transfer thank you i don't have any other questions at thi you and after the trial court well let me let me go down to hear you didn't raise rule two hundred and seventy seven f before the trial court shouldn't this be considered forfeited rule two hundred and seventy seven dollars is part of the supplementary proceeding statute and those rules apply across the board so i don't think that would be we most certainly claimed  the trial court that these were not rd parties and the rule two hundred and seventy seven dollars is identical in part to fourteen o two which says look at the entire proceeding begins with a service of a citation so if there's no only two exceptions pertaining to the supplemental proceeding whether the judgment debtor is in possession of the assets that should be applied or whether a rd party is holding to the asset in your brief you never argue that the funds transferred in that case fell within either exception the only argue that the funds transfer didn't belong to i read or i'll d c it correct because if the funds aren't the property of the judgment debtor then they don't fall under the citation at all the citation requires the person upon whom it served to preserve assets belonging to the judgment debtor until the court can decide what to do with them but if the asset doesn't belong to the judgment at all then the if the exceptions really don't apply because it's not property the judgment debtor and but in fact you do argue that the funds transferred were in the ordinary course of business but weren't these funds transferred in and out of i read in  operating accounts they were funds transferred in and out of the operating accounts but those funds were already subject to a specific prior superior lien and the terms of that l required i read in i l d c to do exactly what they did so what they did with the funds respectfully is somewhat irrelevant because those funds weren't their property is that if a clear violation by transfer fun clear violation of the citations restraining provision it would be if the property belonged to the judgment debtor but if it didn't belong to the judgment or then it's not a violation at all it's as if someone served me with a citation personally and concerning the house next door to me but i don't own the house next door to me so i rea read but doesn't that issue the proof of ownership of the funds goes to a subsequent issue we'll see but we wouldn't be having that discussion if the trial court had conducted a hearing on priority which it was asked to do i m c asked to come in and have this hearing and then the trial court would have determined undoubtedly would have determined that the prior perfected security interest was a superior lien and that this was not the property of the judgment debtor in the st place so then we wouldn't have to have that conversation at all but it didn't happen now let's assume just for the sake of discussion that the trial court didn't decide that it was a prior perfect and security interest then we then we would have to say well ok now we have to determine if either exempt even of of the exemptions apply but if they had had the hearing which they should have had which the trial court should have had to determine if the if there was a superior lien and that these this asset was never reachable by the judgment creditor then we wouldn't be having the conversation at all but we never had that we went straight to judgment i had one last question although the citations in this case were directed to i read to i read and all persons acting on their behalf are under their control well that's that's an interesting question because under the case law in illinois we don't have any case holding individuals even corporate officers personally liable who have never been served however they are responsible as corporate officers and if they transferred an asset that belonged to the judgment debtor then they could be held in contempt for doing that and then allowed to purge the contempt if they could if they couldn't then they'd be responsible for the entire transfer to use his bank account the bank account from which the transfers at issue were made subject to i am pledged account control agreement with i read in pan american bank i had to intervene to protect its collateral and the trial court denied the petition holding that until the right to the transfer funds is contested i m c did not have the right to intervene its ruling injured i read because to the extent any entity possesses a right to the transfer funds it's i judgment creditor that did not happen in this case i read was not generating any income it was not making money and hiding the money the transactions that are the issue once transferred to a judgment debtor by a rd party that are specifically earmarked for a different rd party do not belong to the judgment debtor and that's exactly what happened here the  funds were transferred to i read for the express purpose of being transferred to another rd party sometimes i read did not even have the funds for even twenty four hours they had no rights to keep the fun the funds did not belong to them so we resubmit that we don't even have to reach the question of priority because  you did not belong to irish the plaintiff is trying to do an end run around the statute to collect a judgment against an entity that did not have any assets and with not generating any income e seminal case obviously is is errata leasing and the court said in this case the citation served on respondent will in his capacity as defendants corporate officer and in his individual capacity expressly prohibited him from transferring or allowing transfers of funds that did not happen here they were not served either in their individual capacity or they were not certainly were not served as defendants corporate officer the citations were served upon c t corp system as registered agent also in errata leasing respondents iran's he was a personal guarantor of the loans and made the transfers to operate the business to continue the business and the bonds were not  i'm hearing a lot of feedback too i don't know where that's coming from there it goes there it stopped mr cohen i have a few questions were all of the fun transfers through i read the cow due to real estate sales the midwest rehab series l l z i believe many of them were your honor but i don't i don't think all of them but i do believe th was mentioned that the original hearing that they were potentially rd party to correct it which would it with hearing your honor the plea i think was the original hearing where the in the original motion one triumph argued to the trial court that the corporate office is the rd party under the statute and you never responded that time let's move on to caution vs rent you cite that for the proposition that a restraining provision of a citation or discover at that does not violated when the funds transferred don't belong to the debtor correct that's correct your  incompetent this court actually found that the rd party citation respondent bank violated the citation restraining provision but then went on to hold that the bank was not responsible to the judgment credit for creditor for the amounts transferred because judgment creditor did not provide sufficient proof that the fund belonged to the judgment that or so doesn't that case actually stand for the proposition that the issue of whether the funds actually belong to the judgment debtor is secondary the issue of whether the citation was violated in other words doesn't kaufman support the proposition that the citation restrain for visions were violated so kaufman involved a  rd party by fusion responded it was like they do the bank the bank in that he was served with a rd party citation and the bank was considered a rd party under the statute and the question there was whether the bank transferred funds out of the judgment debtors account in violation of the restraining provisions and the court sort of split its decision which is what we are applying to the court to do here in that is there were certain buns which the court said yes these funds certainly belonged to the judgment debtor and the transfer of those specific buns by a lease the restraining provision however there are some other bonds here which we're not sure whether or not the do belong to the judgment debtor and appellant have cited bacchis for the proposition that only funds that belong to the judgment debtor are subject to a citation restraining provision and its opponents argument that the funds transferred out of the irate account did not belong to them for two reasons st of all they were transferred to them for the sole purpose of being transferred to a rd party they had no right to hold those funds invest those funds operate with those funds dispose of those bonds other than to transfer them directly to another  party based on in re fridge and nd if if those funds did belong to them then they were subject to a prior protected security interest right ok is did the sons belong to i read that is did they have unfettered control over these funds to do you what they want with that and the the answer to that question is no steve did thank you think your honor then after you have any question well maybe stay with us last thought about the funds being transferred and when these funds were transferred up a line they were transferred through i read the subsidiary lost control over the fun and somebody had to have are some entity had to have control over these funds and it was i've read was it not i read funds for the brief period of time but had no right to no right to hold them they were transferred i read with the express purpose of being transferred to a rd party the court did not request further investigation or an evidentiary hearing on that point plaintiffs so on in other words the trial court did not decide whether these transfers i don't i don't think you can your honor but i think it's appropriate if if this court house holds that the funds did belong to i read that the transfers violated the restraining provisions shield could be held personally liable that i am see with not entitled to intervene to contest fired each of those funds if this were to find all of those things then we would think it would be appropriate to re mand to decide whether or not those transfers were in fact prejudicial to the plaintiffs because if they weren't plaintiffs just getting a windfall on an otherwise on collectible judgment prior interest in the bank account at issue i m c has a perfected security interest in that bank account but it's really more than that i read his transfer complete possession and control of the bank account to i m c in the record one of the security documents which is really key and can be found at  eleven of the record is the pledged account control agreement in that agreement i read transferred its interest in the bank account at issue directly t the words the pledge or that's i read understands that the collateral that's the bank account is in the possession of or in the control of the secured party that's i m c or its affiliates or designee and agrees that notwithstanding anything to the contrary in the pledged accounts documents the depository institution  no authority to release any collateral to the pledge or until such time as any such release is authorized by the secured party now i read that language to the core here because this was on the record before judge wheaton but she never even focused on it she found that when the funds that issue hit the account i read they belonged to use of the loose word two i read because i read it had control over them this agreement said the contrary but the court erd because it would not allow c to come before the court and prove its interest and its error was based on the fact that the funds that issue had hit the account and only were in the account momentarily dollars know to say about intervention it says if it appears that any property any property chosen action credit or effect discovered or any interest the rent is claimed by any person the court shall permit or require the claimant to appear and maintain his or her right now what's important about those plain and ambiguous words here's what it is it does not say if it appears that any property is discovered and that property has not already been transferred in violation of bush training permission it doesn't have that additional clause in there it simply does not it says if you find property and someone claims that what i am see does under the pledge to count control agreement you shall permit that party to intervene and have its claim tried and determine now had that occurred we wouldn't be before this court today i also in my brief time want to talk more about the the mo harris contra reno case that's been mentioned by other counsel that is really the critical authority on the intervention point now they're a citation discover assets was served on a property manager who was collecting rent as the agent for a group of secured lenders under an assignment of rents and a written forbearance agreement so that's very analogous to what happened here you've got i read and it's bank account at pan american bank who are holding it but holding it pursuant to the right of i m c to control it all have relinquished control through i m c back to being all terrorist country no in that case the secured creditors were allowed to intervene in the suit by the judgment creditor the judgment creditor was trying to grab those rents that were being collected by the rd party the court allowed the secured creditors come in even more similarly to the situation if you read contra reno you will see that the rd party collecting the rents had been dispersing the rents back to the secured creditors and the words paying them out in what the plaintiff here would say was in violation of the restraining provisions and yet and fact in that case the the judgment creditor be more harris was arguing that these were violations and there should be sanctions but the nd district nonetheless hell that the lenders had a prior perfected interest in the rents that was sapir year to any lien interest created by the judgment creditors citation and i'm just go read from paragraph sixty a couple of lines from the court's come on so i apologize for interrupting you but your time as a lapsed so i could just finish respect to paragraph sixty just to wrap up your argument i most certainly will and it what it says there is bus given the adverse claimants that secured creditors control over th pursuant to the forbearance agreements between themselves the judgment debtor and this rd party no citation lien can attach to the rents creek collected by the rd party that's our transferred there's no issue as to any current funding need count doesn't that make country no distinguishable from the present paid no because contrary no also involved funds that were transfers and the court i mean it is a whether fund painting cassio violated the restraining provisions and whether they should be punished how is any interest of yours still a dispute considering the fund transfers the party taken by well we're harmed because the adversely impact our right to recover this twenty million dollars we say we say look that bank account was assigned to us it was in our exclusive possession and control we authorized those transfers because we benefited from those prancer because under our note mortgage not sorry not mortgage under our note and security documents we got twenty percent of the proceeds of these midwest real estate sales that occurred at the subsidiary level so we're hurt if we can't defend this transaction we're going to be implicated down the road thank you thank  precisely and it says in the event this court were to reverse because that's what happened in that case there was a reversal and underlying dispute then right our intervention is live because it's no it's not moot in any sense and it's also not moot your honor because we have an interest in seeing that if there is to be a sanction against go and pain it will be by way of contempt giving them the right to purge their contempt because the money at issue can then be returned to that account and at that point the trial courts rationale would be of course at that point it's proper for there to be a contest between authorized under this control agreement provision that i read to you it says until such time as such release is authorized by the secured party so the way this works the way this agreement in the record works it's hey you know that's our money in our control not their control but if we allow it it's ok and we allowed it because that's how we got our twenty percent of every real estate sale to pay down the twenty million dollar that well but in that sense i mean it's almost a legal fiction though is it not if they had actual control over the money how do we know that you know the judgment debtor wasn't harmed in some way by what happened or could it happen to the money so if it's not a legal fiction your honor because it's it's this is what is required under analogous to the forbearance agreements that existed in the country no case it's the same thing you know it's it's you have something which is here the argument of the u c c it says if you have a pledge to count control agreement you have the rights to that bank account whether the court wants to view that as a legal fiction given this this consent process that's ok but it's a fully authorized by law  provision that ensures that the secured creditor that its interest in the account cannot be adversely affected by a judgment creditor like this rise ok all right thank you i don't have any further questions at this time for rebuttal and we're going to move on to the apple e's argument and so many house you may begin your argument ok thank you good morning everyone number of parties involved all the arguments made on appeal and addressed here today from our perspective this is a very straightforward case it's a i represent a judgment creditor who obtained a judgment production of documents but for more than two years the judgment debtors refused to produce any documentation of their assets they claimed instead they didn't have to because their assets were subject to this alleged prior affected security interest finally in the spring of twenty teens their objections were overruled and he produced documents including bank statements and that is when we st learned that the judgment debtors had been transferring funds through out through their accounts the entire time  minutes which sounds like a long time but when we get into your shoes that are really in dispute in the in the case law that's really in dispute i think it's going to go fast so with that i want to i st take a look at the you know as an initial matter too i don't know if this was clear right away but the parents already concede that the funds that were transferred from the iowa d c bank account did violate the restraining provisions so we're not we're not talking about those transfers and so from now on we're talking about the transfer talking about those in the i read account and i want to jump straight to the controlling case on this issue because it hasn't been mentioned yet here today and that's the national life versus lotto case  seventeen case and in scarlatti the prevailing factor there was whether the loan proceeds along i'm sorry in determining whether the loan proceeds along to the judgment that it was whether the debtor had any control or any ability at all to control the funds remember the debtor was only one of three kobar words alone proceeds repeated directly to rd parties and not to the judgment debtor and the loan agreement restricted the debtors access to the proceeds still some of the loan proceeds did pass to an account of an l l c of which the debtor was the managing member and that was sufficient for the pelt court to determine that the loan proceeds and belong to the judgment debtor and i want to dive into that opinion a little bit more because there are some very similar parallels to this case is something very important to courts reasoning that makes it particularly optical clickable and that is the degree of the judgment debtors control of the funds didn't matter the court acknowledged that the judgment  not legally permitted to use the funds for his own personal use and if he did he could be sued by the banker violating a loan agreement this is similar to the argument that was made by fontayne and raised by to mr cohen here today that i read and i see we're not legally able to keep the funds that were in there in their accounts but the court in skaar loudest it didn't matter it was only relevant that it was possible for the debtor to use the but here is that the dissenting opinion of justice mixed but should be adopted the dissenting opinion focused on the degree of the judgment debtors control of the funds and relied heavily on the use of hindsight to determine whether the funds ever did actually come into the exclusive possession of the judgment debt or the majority opinion address this and concluded that that's not that's not proper in the analysis they should use the benefit of hindsight and that makes the most sense because otherwise the judgment debtor could keep control of the assets view the funds at issue in our case were transferred again squarely into the operating account and certainly justice mikvah would agree that the loan proceeds in the scar a lot of case would have belonged to the judgment better if they actually did end up in the judgment debtors personal  as well so there's some overlap there's a couple points i want to make st the exercise of control under the commercial code as a means of perfecting the security interest in the bank account isn't the same type of control that's contemplated in star lotto when you're talking about whether the assets belong to the judgment that are control under the commercial code is not actual exclusive control or or transfer of title to the account control under the commercial code can be factually to by simply executing the control agreement as we've seen between the creditor the debtor and the bank where it's located but just because the creditor perfects it security interest in this fashion in a teen some control of the account doesn't mean that the creditor is now the owner of the account and the owner of the funds in it it just means that the creditors lien is now part perfected and the secured creditor may then just direct disposition of the funds the commercial code does not provide the funds and account no longer belong to the account holder lotto you know something similar happened although it didn't involve a security interest perfected by control the court noted there but the language in the loan agreement did allow the lending bank to control the funds and to direct their disposition but the concluded that such language didn't remove the judgment debtors control but merely gave the bank's control as well so in other words the loan proceeds still belong to the borrower as long as the borrower had some control in our case a the from the control agreement on the record that took control away from ira it also is evidence by fantine fun team citation exam testimony and by the bank statements i read did in fact continue to have control of the account after that time that the control agreement was executed all right since we're talking about i m c security interest i want to say way into the next being an issue here and this is it more of an overlapping issue again is that what is the effect of i m c s alleged perfected security interest on the supplementary proceedings and the answer here in this is why this is a simple case is that it's no the perfect security interest has no effect now the issue here of c's alleged security begins security interest begins and ends with the vend company versus stoner case this is the most important controlling case in this in our appeal here and i think it resolves all of the all of the issues raised on appeal citation proceeding the bank liquidated the note transferred the proceeds the creditor found out about the transferees transfers and filed a motion against the bank for judgment against the amount of the transfers the bank's officer testified that he didn't think the treasury note subject to the citation because it had been pledged to the bank as security for the loan the bank argued as the holder of the security interest that it had a right to set off and therefore it could only be held liable for the amounts transferred in excess of the value of the bank security interest this should sound very familiar because it's exactly what's happened in our case the court and the court acknowledged in scar a lot of that the bank held a prior perfected security interest and would have been entitled to a status if the judgment i'm sorry if the bank had disclosed the asset and if the judgment creditor had sought to turn over before it was dissipated but the court stated that the question presented was only whether the bank violated the restraining provision by failing to disclose the note and instead liquidated it and transferred it to itself and other rd parties the court held that the property subject to a prior perfected security interest is not exempt from disclosure or from the citation restraining provision the court upheld the trial court's entry of judgment against the bank for the full amount of the treasury notes in violation of the restraining provisions importantly and i think this is this is language that should be ado here as well with the vento court and concluded that other that holding otherwise would foster non disclosure of property held by citation respondent contrary to the clear purposes of the statute are cases identical to venue to vento like the bank invented the judgment debtors here failed to disclose any of their assets for more than two years when they finally did produce requests of documents concerning their assets they revealed that there had been more than one point two million dollars in transfers of undisclosed funds throughout the account through the accounts of the judgment debtors like the bank invent oh the appellant's mistakenly believed that i am sees alleged perfected security interest meant yes it did not have to obviously that's like comparing apples to oranges it's not it's not the vento bank's failure to disclose the security interest or set off rights that got them into trouble it was their failure to disclose the asset the treasury note itself who should be comparing that failure so under vendue it's not appropriate for the trial court to st determine whether triumphal would have been entitled to recover those funds had they not been transferred in light of some alleged security interest if i m c to do so would in the words of the bendo court foster non disclosure property held by the citation responded contrary to the clear purposes of the statute you know other words if the rule required the judgment creditor to prove that it would have prevailed over an  party adverse claimant then the citation respondents would always transfer assets without disclosing them without any penalty because then it just places the burden on the judgment creditor to find these undisclosed transfer assets and then prove their superior right to then even though the assets are already gone that's not the law it's not going to assess and the erato leasing case emphasizes the judgment creditors are justified and entitle to rely on the citation restraining provision so this discussion since we're talking about i am c s security interest is a good opportunity to discuss their  o and when you consider vento in these principles that we've just discussed here it becomes clear that i am c's mechanical approach in their in their appellate briefs to intervention falls apart in the transferred funds before they were transferred in i m c is viewed like everybody like all the other accounts if they had a superior lien interest than the transfers did not violate the restraining provision in other words they want to intervene so that they could have judge reconsider her order that the transfer is had violated their straining provision so again the st problem here is that this is not i am c s argument to make nd and more importantly vento says their legs lean interest is irrelevant to the issue of whether the transfers violated the restraining provision so i can see simply had no standing and no just issued will claim at the time they granting an assignment of rents for a debt had required recording recording of the document for perfection of the lien on the right to collect rents but for the creditor to actually enfo and collect the rents the creditor under an assignment of rents would have to take possession of the property because the rents and profits doctrine means that the income from the property should be used by the person who's in control of the property and responsible for maintaining the conveyances act was amended in response to that doctrine to put to permit rent collection agreements which which are separate from the assignment of rents documents that say that secure was that the debtor no longer had a right to collect the rents collection of the rents was now the exclusive right of a secured creditor that's why the court held that the rents that the rents were not property of the debtor because that the  judgment debtor no longer had the right to collect those the rent collection agreement transferred those rights completely to the judgment creditor our case does not involve the rents or profits doctrine or the conveyances act in recollection agreements our case involves it lead to curate agreement and the alleged control agreement but neither of those agreements terminate the judgment debtors rights to the funds in the bank accounts the agreements merely gifts i am in additional right to control them and that was for the purpose of perfecting their security interest not for teaching the asset as as their own before dingley the funds in our case were still property of the debtor after this so called control agreement was executed the day before the judgment was entered my new art now final issue here i want to discuss is the this issue of whether or not the correct remedy was law this is an issue where the statute pretty much says what it says and you have to look at the language of the statute in the language of the sta the party is a rd party may enter the judgment against him or or her in the amount of the unpaid portion of the judgment and cost a lot of under this section or the amount of the value of the property transfer whichever is lesser that only rd party citation respondents that have a judgment entered against them then it would have said so now there's something else that mr churchill had mentioned in his is argument that i want to address to the i think it's particularly important and that is number one the officers couldn't have a judgment against them because they were never served personally but the basis for and this is stated in the initial motion for entry of judgment these officers recall are required to follow the citation directives they control remedies as against these officers now judge wheaton did acknowledge that that she wanted them before the court before she could enter any judgment against them she felt that having that not be and petition for a little cause that we had served on then was that jurisdictional requirement but the fact that the officers themselves were not served personally and they were in the erato the same case is not yellow siac only permits service on its registered agent or the secretary of state that's it not an authorized agent like like for corporations so i wanted to point that out it's not like we chose to not alert the officers secondly mr feinstein was intimately involved in the citation proceedings he actually appeared personally for the citation examination presented by mr cohen he was sworn under complete rd party who had no idea what was going on in the case and any rate they were served they were personally brought into the  and the st thing i'll note here is that there is no legal authority cited in that section and the only fact and the only facts cited to the record there is that funny kasautii our treasurer president if i read respectively but i can see it goes on to so the purpose of the citation statute is not to provide judgement others with a mechanism to avoid having to pay their judgments it's there to assist judgment creditors to locate assets and  to forestall judgment or citation respondents from dissipating and transfer assets that might be used to satisfy the judgment but for more than five years now it's been the appellant's approach here was reading from when he said that the word that defined term pledge or was i read and if you just go to the top of that page the st page of the record page for forty  or is defined as midwest residential rehab it's not defined as i read so even if this were even if we had gotten to the point where the security interest in the control agreement were an issue it's not true that the records conclusively shows that i am c had a prior perfect security interest at any rate i do ask the court to up hold the rule of law set forth in section set to yes fourteen o two in the principles adopted in scarlatt bread and ideals these accounts can maybe violate the citation restraining provision even if i m c had a priority perfected interest in those transfer these assets were in the possession of i read and fantine could not you know although they are not i read which makes them rd parties are in control of irish bank accounts so i you know i yes absolutely because again vent will says that the prior protective security interest has no bearing whatsoever on whether whether a citation restraining provision was violated but that's why this is a simple one doesn't say that a contempt hearing needs to occur because the persons vote who violated the restraining provision are not the judgment debtors they're rd party so i don't believe that a contempt hearing is required but back to your question as to whether or not there needs to be a determination as to whether or not the prior perfected secured interest at least  belief as to whether or not they were entitled to transfer the assets look i think they i think they ran the they ran the risk by not disclosing these assets upfront in seeking the cour termination a point out that the sectarian statute does permit the judgment debtors to come in even earlier than the return date on the citation and ask for a ruling as to whether or not property is exempt  you cite kaufman versus rent correct yes the proposition that a restraining provision of a citation to discover assets is not violated when the funds transfer do not belong to the judgment  the court actually found that the rd party citation respondent bank violated the citation restraining provision then went on to hold that bank was not responsible to the judgment creditor for the amount transferred doesn't judgment creditor did not provide sufficient proof that the funds belonged to the judgment so doesn't that case actually sam for the proposition that the issue whether the funds actually belong your judgment debtor is secondary to the issue of whether the citation was these these funds did belong to the judgment debtor or whether they were exempt if you recall there was a substantial amount of the funds in the old counts right that were exempt disability funds and then the remainder of the funds were determined to a well i don't know that they determine that they didn't belong to the judgment got or the reason why they didn't hold the judgment was he coached the judgment creditor never presented any evidence that the remaining funds did belong to the judgment that i think that's that's quite different in our case because that's an adult account which you know well yeah that's different right it's a little bit different risk but in our case the funds were could the plaintiffs ever reach the fun in iran's bank account if they were subject to control i m c pursuant to this control agreement for a number of reasons and i'll tell you that question would be answered in the trial court if this if the funds were in the account and they were disclosed because that's when that issue comes to a head then i'd be able to try to earliest decide whether or not we want to challenge this alleged security interests and i gave a preview in the trial court as to how that might look we may have defenses to perfection we may have a defense or we may have a claim for that the perfection of the security interest was a fraudulent transfer there may be some other reason to subordinate the lien of the alleged lien of i and c n n on some other bases such as that they're well because they operate to judgment debtors in the judgment debtors were validly served with citations they discover assets in orders directed and subpoenas orders citations directed at a corporation or l l c those who operate those entities are required to follow those orders and therefore fontayne contract you were required to comply with the restraining provision yet they didn't and they are legislative discussion as to why the statute reads like this and it turns out the language goes back pretty far and there's some other discussion in other briefs that can be dug up here and there that basically you know so that the whole point about dividing up who is who may be punished with a justice who may be punished for contempt seems to suggest that you can't read or you just can't because they argued several times in the case throughout the case that they were rd parties if they weren't their parties why did we have to serve them with a with a petition constant bring them firstly into the case if they were not rd parties why did they have a right to substitute judge assume that they were brought into the case which they did several times and we ended up with judges and so they took the position repeatedly that they were rd parties and yet for the purposes of four can go on air for one they're not rd parties somewhere in the middle but they're not the judgment debtors so that makes the rd party under that provision in my view and so it's your position that they it prevents them from arguing that they are that they are not they are not their party now i think what gives the court authority to do this is that they're not the judgment or any reading of that case from one thousand nine hundred and two which show that it's a very narrow holding we had outright deceit and non disclosure by the bank which also ended up with the bank gaining from their deceit and then kasautii of course i'm not gain anything and several times plaintiff has said today that i read failed to produce documents for two years that's very misleading document requests were made and appropriate motions were made before the court for ruling on those requests there were certainly any number of flint and steel ways which i'm not going to go into here but there's no comparison between i read just closure of documents if and when they were supposed to and the in the very narrow holding of stone or the case that essentially although it didn't say it overrules stone or the case   for the court by justice jorgensen clearly indicated that a prior perfect security interest is not something that can be obtained by a judgment creditor because because it doesn't belong to the party that is being sought to obtain an asset from plaintiff says well this is sort of a nuanced situation no it's not fourteen no two is not nuanced you cannot have a proceeding against an individual or an entity that hasn't been served those are the opening words of twenty one thousand four hundred and two a the proceeding as initiated and commenced by the service of a citation this particular situation could have been and should have been clearly resolved in one way or another by following through on the contempt proceeding that plaintiff ask for in a contempt proceeding fontayne and because sasha would have had the opportunity to show cause if any they had as it said why they shouldn't be held in contempt well for example because those funds w property of the judgment debtor then the court could figure out if that's correct or incorrect but it didn't happen here the procedure was complete it was respectfully the trial court's procedure was completely wrong and in that in being wrong in that way it deprived fine tain and pistachio of procedural due process the court simply jumped to the simple conclusion look there was a citation some money was transferred therefore you must be guilty and and her judgment against them well the fourteen o two is not strict liability if assets are transferred and they were here but they aren't the property of the judgment debtor in the st place then there is no liability for that under it can't a rino or or as many of the other cases that have been cited so this was simply done wrong but it was done wrong mostly because proper procedure wasn't followed there should have been a contempt hearing fontayne in kasautii should have been allowed to present their defenses to contempt if the court found that they were wrong and if the court found that there wasn't a prior perfected security interests which remove this asset from consideration the court could have entered a contempt finding and in which case the court was obliged to provide provisions so that fontayne and cosat show could purge that can to kept and if they couldn't purge the contempt then they might end up being liable for the transfers that's the procedure but it wasn't done here so many things were skipped over it to put it mildly at the very beginning not even serving them with a citation how can that be that's not nuanced that's completely wrong respectfully  can be brought into court on a rule to show cause why he or she shouldn't be held in contempt but if you want a personal judgment against the officer from the get go and no contempt proceeding whatsoever then yes you'd have to serve them with a citation either personally or as a representative of the entity but an l l c operate by virtue of the right and that right in any other way correct yes i mean so in that are you are they have the or from the beginning only if you want a personal judgment against the officers yes they have to be served if you want to judgment against the l o c or if you want to hold the officers or members we should say in an l l c in contempt well then you're going to have to serve them ok but they can certainly be held in contempt if they do something that they're aware of a citation and restraining provisions if they do something they're not supposed to do they can certainly be held in contempt go through the contempt hearing the purging fail to purge then then they can be held liable for the for the entire amount but if you want to jump right straight to judgment against them yes then they'd have to be served thank you thank you missed their fair share i have no further questions of you either thank you sir thank you you may proceed with your rebuttal thank you your honor much of what mr betting house are doing this morning really shows that the court should have allowed i m c to intervene and shows that the case should be reversed and remanded to allow i m c to intervene and then actually have an evidentiary hearing on who is st should this citations ever have attached to this bank account given i am sees security interest mr bennett how start his argument by referring to i am sees alleged prior perfected interest he then pointed out a document discrepancy later on relating to the pledged account control agreement a being in the name of an entity other than i read these are all matters that could have been the subject of evidence before the court this betting house talked extensively about how the debtor still had an ability to control money in the bank account despite the pledged account control agreement that i read entered into again that's a question that never got a hearing here he cited to this court the scarlatti oks and tried to analogize to a bank loan that the court found the debtor had a sufficient amount of control over that it should have been subject to a citation once again we never had the opportunity to litigate exactly what was the nature extent scope custom and practice that was associated with this security interest he went on to argue to the court that the commercial code does not prevent ownership from remaining with i read despite the security interest here but to three of the uniform commercial code says that an interest perfected in a bank account is in forcible against rd parties and that's exactly what they're trying to avoid they're trying to say i'm the rd party but i get to jump ahead of of i m c in this case when it came to how is i m c harm and mr bett issues because at the very initial pleading stage when my client filed a motion for permission to intervene file it's petition and then move to a hearing is  forks you know to prove up all these things we were shot down so in conclusion we would ask the court to reverse remand with directions that i am seen a lot intervene and then a that isn't the priority going to be a priority of the creditors going to be flushed out in that hearing because the court wouldn't be able to find that their behavior was contemptuous if in fact the priority required them to deal with a yes i don't know other words even if it's going to be flushed out even if you aren't allowed to intervene at the rd party it should be your honor but we should be allowed to intervene as a rd party because as i said  and two says if somebody claims an interest in a discovered asset not discovered asset that's still in the hands of the debtor just undiscovered assets they have a right to participate and account well that's that's the question that should be decided in a contempt hearing right or it would have been better if the prior secured interest had been brought forward but that wasn't practically possible here your honor because when the transfers occurred in connection with these real estate sales of the midwest residential real estate level these were instant peanuts this wasn't a situation where money sat in i read to account for days or weeks or months while the citation was pending this was a transaction down at the midwest residential real estate level where as the record describes the money went up various corporate levels and then back down again so the transfer would occur it just occurred instantaneously and yet but here the seeking the relief against feinstein for violating the restraining provisions so under what basis would i m c get to enter the if this was to be said back well it's because you know in contra reno exactly the same thing happened your honor there were transfers after the strike action was served on this agent who was collecting the rent and there the court even though there were motions pending to sanction that party for having transferred those funds after service the court allowed intervention by the secured creditors because it was going to determine and as it did that those secured creditors control over the rents meant no citation lien could attach and that those those are the words of the court the appellate court couldn't attach and that's the reason why you can't ignore the secured interest of i m c in connection with did and just consider in the abstract the question of did find tainted wrong by allowing these transfers to go forward but i'm like kind to reno are there any additional funds currently in the i read i read i pray to count and if there aren't any it would seem that be would have no further interest in this case well i don't know your honor and the record doesn't tell us whether there are funds that went into the i read account after the funds that are the subject of this working with i read in its subsidiaries to get paid there will be more transactions down at the subsidiary level and this issue could very well  it well the court thanks all parties for your argument this morning the case will be taken under advisement and a disposition will be rendered in due course mr clerk you may close the case and terminate the proceeds thank you