Court Opinion

ID: 3000014
Source: CourtListenerOpinion
Date Created: 2015-09-24 20:00:10.896161+00
Date Added: 2024-06-11T18:01:52.537970
License: Public Domain

In the
 United States Court of Appeals
               For the Seventh Circuit
                          ____________

No. 05-4354
JAMES M. MACDONALD, II, as Trustee and
sole beneficiary of the WALTER MIDDLETON
& COMPANY RETIREMENT PLAN and WALTER
MIDDLETON & COMPANY FROZEN RETIREMENT PLAN,
                                               Plaintiff-Appellant,
                                 v.

ESTATE OF JOSEPH W. GAYTON and MONICA M. GAYTON,
                                              Defendant-Appellee.
                          ____________
            Appeal from the United States District Court
       for the Northern District of Illinois, Eastern Division.
           No. 04 C 334—Blanche M. Manning, Judge.
                          ____________
 ARGUED NOVEMBER 2, 2006—DECIDED DECEMBER 1, 2006
                  ____________

 Before BAUER, RIPPLE, and MANION, Circuit Judges.
  BAUER, Circuit Judge. The facts in this case are not
in dispute. At some time prior to February 2, 2001,
James M. Macdonald II loaned Joseph Gayton $325,000. On
February 2, 2001 and before repaying his debt to Macdon-
ald, Gayton conveyed his interest in his family home to his
wife, Monica, by way of a quitclaim deed. Prior to this
transfer, Gayton and Monica had held the property as
joint tenants. The transfer was recorded with the Recorder
of Deeds on March 15, 2001.
2                                                No. 05-4354

  Macdonald, as Trustee and sole beneficiary of the Walter
Middleton & Company Retirement Plan and Walter Middle-
ton & Company Frozen Retirement Plan, filed a diversity
suit against Gayton on August 7, 2003 that alleged that
Gayton had failed to make payments on certain notes owed
by Gayton to the plans. Gayton died on November 26, 2003
without any assets. On December 22, 2003, the district
court entered judgment nunc pro tunc as of October 28,
2003 in favor of Macdonald in the amount of $357,139.89.
  On January 16, 2004, Macdonald filed the present action
against Gayton’s estate and Monica to set aside the prop-
erty transfer under the Illinois Uniform Fraudulent Trans-
fer Act, 740 ILCS 160/1 et seq. (“UFTA”). The district court
granted Monica’s motion for summary judgment, finding
that no relief was available to Macdonald under the UFTA
because Macdonald did not have a recorded lien against
Gayton’s family home prior to Gayton’s death. As a result,
the district court reasoned, even if the property transfer
was fraudulent, the property passed to Monica, Gayton’s
surviving joint tenant, extinguishing any rights that
Macdonald may have had to the property. Macdonald filed
this timely appeal. We affirm.

                      I. Discussion
  We review the district court’s grant of summary judgment
de novo. Durkin v. Equifax Check Services, Inc., 406 F.3d
410, 414 (7th Cir. 2005).
  The UFTA establishes a creditor’s right to file an action to
obtain the avoidance of a fraudulent transfer or obligation
to the extent necessary to satisfy the creditor’s claim. 740
ILCS 160/8(a)(1). The UFTA states, in part, that
    [a] transfer made or obligation incurred by a debtor
    is fraudulent as to a creditor, whether the creditor’s
    claim arose before or after the transfer was made or the
No. 05-4354                                                      3

    obligation was incurred, if the debtor made the transfer
    or incurred the obligation: (1) with actual intent to
    hinder, delay, or defraud any creditor of the debtor. . . .
740 ILCS 160/5. To the extent that a transfer is voidable in
an action by a creditor, the creditor may obtain a judgment
for the value of the asset transferred or the amount neces-
sary to satisfy the creditor’s claim, whichever is less. 740
ILCS 160/9(b). This judgment may be entered against either
the first transferee of the asset or the person for whose
benefit the transfer was made. 740 ILCS 160/9(b)(1).
Macdonald argues that if he establishes that Gayton’s
transfer of his interest in his family home to Monica was a
fraudulent transfer, he is entitled to obtain a judgment
against Monica for the amount necessary to satisfy Macdon-
ald’s claim. We disagree.
  Assuming that Gayton’s transfer of his interest in his
family home was fraudulent, the UFTA would nullify the
transfer and the property would be restored to the
joint tenancy with right of survivorship. See Gayton v.
Kovanda, ___ NE.2d ___, 2006 WL 3026035, at *4 (Ill. App.
Ct. Oct. 25, 2006) (stating that fraudulent transfer of a joint
tenant’s interest in property does not sever the joint
tenancy) (citing Gilbert Bros., Inc. v. Gilbert, 630 N.E.2d
189, 258 Ill. App. 3d 395 (Ill. App. Ct. 1994)).1 In other

1
   Macdonald asks us to depart from the decision of the First
District Appellate Court of Illinois in Gayton v. Kovanda, which
addresses the same issue raised in the instant appeal: whether,
pursuant to the UFTA, a creditor of Gayton may reach property
fraudulently transferred to Monica to satisfy a judgment when the
judgment lien was not recorded until after Gayton’s death. 2006
WL 3026035. The Illinois appellate court, like the district
court, answered this query in the negative. 2006 WL 3026035,
at *4. Macdonald argues that the sole authority cited by the
Illinois appellate court for its decision is Judge Manning’s
                                                     (continued...)
4                                                       No. 05-4354

words, we would treat the property as though the fraudu-
lent transfer had not occurred. Id. (citing DeMartini v.
DeMartini, 52 N.E.2d 138, 141, 385 Ill. 128, 134 (1943) (a
fraudulent conveyance is void only as against creditors and
the conveyance is treated as though it had not occurred)).
After Gayton transferred his interest in the property to
Monica and before his death, Gayton and Monica held the
property as joint tenants. Once Gayton died, his interest in
the property passed to Monica as a joint tenant through
rights of survivorship.
  For Macdonald to reach the property for the purpose
of satisfying the $357,139.89 judgment, he must have
perfected a lien on the property while Gayton held an
interest in the property. Under Illinois law, a judgment only
becomes a lien on the real estate of the person against
whom it is entered once the judgment is filed with the
recorder of deeds in the county in which the real estate is
located. Id. (citing 735 ILCS 5/12-101, Cochran v. Cutler,
350 N.E.2d 59, 62, 39 Ill. App. 3d 602, 607 (Ill. App. Ct.
1976)). Since Macdonald did not record a lien against
the property while Gayton was alive, the property passed to
Monica unencumbered by the judgment at Gayton’s death.
Neither the UFTA nor the district court’s entry of judgment

1
   (...continued)
slip opinion, which is the subject of the instant appeal. He further
asserts that the Illinois appellate court offers no other analysis or
explanation for the proposition that when Gayton died, the
property passed to Monica as a joint tenant through rights of
survivorship. This argument not only misrepresents the basis of
the Illinois appellate court’s decision, which cited to Judge
Manning’s opinion in further support of its decision rather than
as the basis of its decision, it fails to recognize that we defer to an
Illinois court’s interpretation of state law. See City of Chicago v.
Morales, 527 U.S. 41, 61, 119 S.Ct. 1849, 144 L.Ed.2d 67 (1999);
Gresham v. Peterson, 225 F.3d 899, 908 (7th Cir. 2000). As such,
we will follow Kovanda in deciding Macdonald’s appeal.
No. 05-4354                                               5

nunc pro tunc cures Macdonald’s inability to file a judgment
lien while Gayton held an interest in the property. Thus,
the district court properly granted summary judgment to
Monica because the UFTA affords Gayton no relief.

                     II. Conclusion
  For the foregoing reasons, we AFFIRM the judgment of the
district court.

A true Copy:
      Teste:

                        ________________________________
                        Clerk of the United States Court of
                          Appeals for the Seventh Circuit

                   USCA-02-C-0072—12-1-06