Court Opinion

ID: 3147695
Source: CourtListenerOpinion
Date Created: 2015-10-22 18:35:56.930798+00
Date Added: 2024-06-11T11:55:19.512603
License: Public Domain

ILLINOIS OFFICIAL REPORTS
                                         Appellate Court

            Rush University Medical Center v. Sessions, 2011 IL App (1st) 101136

Appellate Court            RUSH UNIVERSITY MEDICAL CENTER, Plaintiff-Appellee, v.
Caption                    ROGER SESSIONS and JAMES L. ARNOLD, as Trustees of the
                           Sessions Family Trust, u/a dated February 1, 1994; and ROGER
                           SESSIONS, as Trustee of the Robert W. Sessions Revocable Living
                           Trust, u/a dated April 1, 2005, Defendants-Appellants.

District & No.             First District, Sixth Division
                           Docket No. 1-10-1136

Filed                      August 5, 2011

Held                       In an action to enforce decedent’s pledge to plaintiff university, the trial
(Note: This syllabus       court properly denied defendant trustees’ motion to substitute judge, the
constitutes no part of     entry of summary judgment for defendants on the count alleging that
the opinion of the court   decedent’s transfer of assets to his self-settled trust was per se fraudulent
but has been prepared      was error, and the appellate court lacked jurisdiction to review the order
by the Reporter of         denying defendants’ motion for summary judgment on the count alleging
Decisions for the          that the pledge was a valid, binding and enforceable contract that bound
convenience of the         decedent and his “assigns” and sought to reach the trust’s assets.
reader.)

Decision Under             Appeal from the Circuit Court of Cook County, No. 05-P-003595; the
Review                     Hon. Henry Budzinski and the Hon. James Kennedy, Judges, presiding.

Judgment                   Affirmed in part and dismissed in part; cause reversed and remanded in
                           part.
Counsel on                 Edward T. Joyce and Jennifer L. Doherty, both of Edward T. Joyce &
Appeal                     Associates, P.C., of Chicago, for appellants.

                           James R. Hellige, John T. Brooks, and Samantha E. Weissbluth, all of
                           Foley & Lardner, LLP, of Chicago, for appellee.

                           Lisa Madigan, Attorney General, of Chicago (Evan Siegel, Assistant
                           Attorney General, of counsel), for intervening appellee.

Panel                      JUSTICE CAHILL delivered the judgment of the court, with opinion
                           Presiding Justice Garcia and Justice McBride concurred in the judgment
                           and opinion.

                                              OPINION

¶1          Defendants Roger Sessions and James L. Arnold (trustees) appeal orders of summary
        judgment entered against them and in favor of plaintiff Rush University Medical Center
        (Rush). Defendants also appeal the court’s refusal to order the recusal of Judge Budzinski.
        We affirm in part, dismiss in part and reverse and remand in part.
¶2          In 1994, Robert W. Sessions (decedent) created the Sessions Family Trust, maintained
        in an offshore account in the Cook Islands. In 1995, decedent made an irrevocable pledge to
        Rush by letter for $1.5 million to build a new president’s house. In 1996, decedent sent Rush
        another letter, confirming the pledge:
                “I agree to provide in my will, living trust and other estate planning document ***
                that (1) this pledge, if unfulfilled at the time of my death, shall be paid in cash upon
                my death as a debt and (2) that if this pledge is unenforceable for any reason, a cash
                distribution shall be made under such will, living trust or other document to Rush
                University in an amount equal to the unpaid portion of such pledge at the time of my
                death.”
        Decedent executed successive codicils to his will, providing that any amount remaining
        unpaid on his $1.5 million pledge as of his death would be given to Rush on his death. In
        reliance on decedent’s pledge, Rush built a president’s house on the Rush University campus
        in 1996 at a cost in excess of $1.5 million.
¶3          In February 2005, decedent was diagnosed with cancer. He then executed the Robert W.
        Sessions Revocable Living Trust. On March 10, 2005, decedent executed a new will,
        revoking all previous wills and codicils. Decedent died on April 25, 2005. Before his death,
        decedent had made no payments toward the $1.5 million pledge to Rush.

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¶4         Rush filed a claim against the Sessions estate (estate) to enforce the $1.5 million pledge.
       The estate contested Rush’s claim to the $1.5 million and litigation ensued. Rush moved for
       summary judgment against the estate on it’s claim, which was granted on August 31, 2005.
       The estate appealed, and we affirmed the circuit court in a summary order (In re Estate of
       Sessions, No. 1-07-0202 (2007) (unpublished order under Supreme Court Rule 23).
¶5         The Sessions estate was found to contain less than $100,000. On April 4, 2006, Rush
       filed a supplementary claim against the Sessions Family Trust and the Robert W. Sessions
       Revocable Living Trust (trusts). Count I alleged that decedent transferred assets to the trusts
       with the actual intent to hinder, delay and defraud Rush in the collection of its claim against
       the estate. Count I was based on section 5(a)(1) of the Illinois Uniform Fraudulent Transfer
       Act (Fraudulent Transfer Act) (740 ILCS 160/1 et seq. (West 2006)). Count II alleged that
       decedent’s pledge to Rush was a valid, binding and enforceable contract that bound decedent
       as well as his “assigns” and sought to reach the assets of the trusts.
¶6         Count III alleged that decedent’s transfer of assets to his self-settled trust was per se
       fraudulent under the holdings in Crane v. Illinois Merchants Trust Co., 238 Ill. App. 257
       (1925), and Barash v. McReady (In re Morris), 151 B.R. 900, 906-07 (Bankr. C.D. Ill. 1993),
       and that Rush should be entitled to reach the assets of the trusts to satisfy the $1.5 million
       pledge.
¶7         The trusts filed motions for summary judgment on counts II and III of Rush’s complaint.
       Rush filed a cross-motion for partial summary judgment on count II. The supplemental
       proceeding was stayed pending the outcome of the estate’s appeal. Rush later added a fourth
       count to its amended complaint, alleging constructive fraud under section 5(a)(2) of the
       Fraudulent Transfer Act. Counts I and IV were not part of the parties’ motions for summary
       judgment.
¶8         As a result of the estate’s appeal decided in favor of Rush, Rush became a creditor of the
       estate. After mediation failed, the court set a hearing date for the trusts’ motion for summary
       judgment on counts II and III and Rush’s cross-motion for partial summary judgment on
       count II.
¶9         On October 21, 2008, the trial court, with Judge Budzinski presiding, heard oral
       argument on the parties’ cross-motions for summary judgment. The court granted Rush’s
       cross-motion for summary judgment on count II, finding that the pledge bound decedent’s
       “assigns.” The court explained that “[t]he language is clear *** that in [decedent’s] letter to
       the hospital he indicated that [the] pledge was binding on his heirs, successors and assigns.
       And even the trust provides the payment of the pledge if it hasn’t been satisfied.” The court
       denied the trusts’ motion for summary judgment on counts II and III.
¶ 10       On November 25, 2008, the trusts filed a petition under section 2-1001(a)(3) of the Code
       of Civil Procedure (735 ILCS 5/2-1001(a)(3) (West 2006)) to substitute judge for cause. The
       trusts argued that allowing Judge Budzinski to continue hearing the matter would prejudice
       defendants because he appeared to have reached a conclusion on counts I and IV of Rush’s
       complaint without having heard evidence on those issues or allowing defendants to complete
       discovery. The trusts pointed to Judge Budzinski’s finding at the October 21 proceeding that
       decedent had intended to defraud Rush, though counts II and III do not contain fraud

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       elements. The trusts also argued Judge Budzinski’s findings were contrary to the evidence
       and demonstrated bias in favor of Rush.
¶ 11       The petition to substitute Judge Budzinski for cause was transferred to Judge James
       Kennedy for a hearing. On May 5, 2009, Judge Kennedy denied the petition, finding that
       “[o]pinions formed by the judge on the basis of facts introduced or events occurring in the
       course of the current proceeding or prior proceeding do not constitute a basis for a partiality
       motion unless they display a deep-seated favoritism or antagonism that would make fair
       judgement impossible. *** I don’t think Judge Budzinski displayed a deep-seated favoritism
       or antagonism that would make fair judgment impossible.”
¶ 12       On May 15, 2009, the trusts asked Judge Kennedy for a finding under Illinois Supreme
       Court Rule 304(a) (Ill. S. Ct. R. 304(a) (eff. Feb. 26, 2010)) or, in the alternative, for
       certification under Supreme Court Rule 308 (Ill. S. Ct. R. 308 (eff. Feb 26, 2010)). The trusts
       contended that: (1) if this court overturned the circuit court’s denial of the petition, all orders
       entered by Judge Budzinski after May 5, 2009, would be null and void; and (2) there was no
       just reason for delaying appeal. Judge Kennedy denied the trusts’ motion and remanded the
       matter to Judge Budzinski.
¶ 13       Rush then filed a motion for summary judgment on count III of its complaint. On March
       24, 2010, Judge Budzinski granted the motion, finding the trusts void as to Rush’s $1.5
       million judgment on its claim against decedent’s estate, plus statutory interest, and the trusts
       liable for payment to Rush on the pledge.
¶ 14       On appeal, defendants contend that: (1) the court erred in denying the trusts’ motion for
       summary judgment on counts II and III; (2) the court erred in granting Rush’s motion for
       summary judgment on count III; (3) Judge Kennedy erred in not recusing Judge Budzinski
       because Judge Budzinski prejudged the counts involving decedent’s fraudulent intent where
       such counts were not before the court; and (4) the orders entered by Judge Budzinski since
       May 5, 2009, should be determined null and void.
¶ 15       We first address defendants’ claim that the court erred in refusing to grant their motion
       to substitute Judge Budzinski for cause.
¶ 16       A trial judge is presumed to be impartial, and the burden is on the party alleging partiality
       to overcome this presumption. Eychaner v. Gross, 202 Ill. 2d 228, 280, 779 N.E.2d 1115
       (2002). The party making the charge of prejudice must present evidence of prejudicial trial
       conduct and evidence of the judge’s personal bias. Eychaner, 202 Ill. 2d at 280.
¶ 17       “Where bias or prejudice is invoked as the basis for seeking substitution, it must
       normally stem from an extrajudicial source, i.e., from a source other than from what the
       judge learned from her participation in the case before her.” In re Estate of Wilson, 238 Ill.
       2d 519, 554, 939 N.E.2d 426 (2010).
¶ 18       “ ‘[O]pinions formed by the judge on the basis of facts introduced or events occurring
       in the course of the current proceedings *** do not constitute a basis for a bias or partiality
       motion unless they display a deep-seated favoritism or antagonism that would make fair
       judgment impossible.’ ” (Emphasis added.) Eychaner, 202 Ill. 2d at 281 (quoting Liteky v.
       United States, 510 U.S. 540, 555 (1994)).
¶ 19       “ ‘A reviewing court will not reverse a determination on allegations of judicial prejudice

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       unless the finding is against the manifest weight of the evidence.’ ” Barth v. State Farm Fire
       & Casualty Co., 371 Ill. App. 3d 498, 506, 867 N.E.2d 1109 (2007) (quoting Jacobs v. Union
       Pacific R.R. Co., 291 Ill. App. 3d 239, 244, 683 N.E.2d 176 (1997)).
¶ 20        Defendants claim they have satisfied the “two-part test” for disqualification because
       Judge Budzinski prejudged Rush’s fraudulent intent theories in counts I and IV because he
       found decedent never intended to fulfill his pledge, even though counts II and III did not
       contain fraud elements and discovery had not yet been completed on Rush’s fraudulent intent
       theories in counts I and IV. Defendants point to Judge Budzinski’s comments at the October
       21, 2008, hearing:
                “The Court is going to rule that it was the intent of the decedent to not fulfill his
                pledge because he did everything to avoid the payment.
                                                  ***
                    But he never intended to pay the pledge. As all the evidence clearly shows, he did
                everything that is possible to avoid the payment of the pledge.
                                                  ***
                    I think the facts are strong and clear that the decedent never intended to fulfill his
                pledge, and every course of action he took was with the intent to avoid the fulfillment
                of the pledge.
                    He even went so far as to defraud the hospital by transferring all of his assets into
                trusts so they could not be reached by the hospital.
                    So when he died, he had very little, if any, assets in his name with which to pay
                the pledge, and he was aware of that and I think he did defraud the hospital in that
                sense. It’s not only the intent but also it’s [fraud].
                    Your Motion for Summary Judgment as to Counts II and III is denied.”
¶ 21        We believe the trial court properly denied the request to substitute Judge Budzinski. First,
       there is no allegation that Judge Budzinski’s comments stem from an extrajudicial source.
       See In re Estate of Wilson, 238 Ill. 2d at 554. Next, though counts I and IV were not before
       the court and did involve fraudulent intent, the issues concerning intent and fraud were
       learned by Judge Budzinski “from [his] participation in the case before [him].” Wilson, 238
       Ill. 2d at 554; see also Alcantar v. Peoples Gas Light & Coke Co., 288 Ill. App. 3d 644, 650,
       681 N.E.2d 993 (1997). For example, at the October 21, 2008, hearing, defense counsel
       admitted that “[decedent] made up his mind in 2005 when [he was] diagnosed with cancer
       that he didn’t want to honor the pledge anymore.”
¶ 22        Defendants are correct that prejudice may be proven aside from a showing that the
       court’s comments stem from an extrajudicial source. But, we do not believe Judge
       Budzinski’s comments in this case were “so extreme as to display clear inability to render
       fair judgement” or show a “deep-seated favoritism or antagonism that would make fair
       judgment impossible.” Liteky, 510 U.S. at 551, 555. Rather, Judge Budzinski’s comments
       concern his observations about the merits of the allegations in the case up to that point. See
       Liteky, 510 U.S. at 551. Defendants state that the court “granted Rush relief that Rush did not
       request,” but this is simply not true as counts I and IV were not before the court. Defendants

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       have not met their burden to prove a lack of impartiality. In re Estate of Hoellen, 367 Ill.
       App. 3d 240, 248, 854 N.E.2d 774 (2006).
¶ 23        Defendants cite People v. Robinson, 18 Ill. App. 3d 804, 310 N.E.2d 652 (1974), but the
       requirement of proof beyond a reasonable doubt distinguishes that case. See Robinson, 18
       Ill. App. 3d at 807 (“it is universally held that a judge who, before hearing a criminal case
       expresses conviction that the accused is guilty, cannot give that accused a fair and impartial
       hearing, and is thereby disqualified to sit as a trial judge”).
¶ 24        Next, we lack jurisdiction to review the portion of the court’s October 21, 2008, order
       denying defendants’ motion for summary judgment as to count II. An order denying a motion
       for summary judgment is interlocutory in nature and not appealable. In re Estate of Funk,
       221 Ill. 2d 30, 85, 849 N.E.2d 366 (2006); Arangold Corp. v. Zehnder, 187 Ill. 2d 341, 357-
       58, 718 N.E.2d 191 (1999). Counsel for defendants conceded at oral argument that this court
       lacks jurisdiction to consider the circuit court’s ruling on count II. We dismiss that part of
       the appeal addressing the denial of summary judgment on count II of the complaint.
¶ 25        We have jurisdiction under Illinois Supreme Court Rule 304(a) to consider the circuit
       court’s March 24, 2010, order granting Rush’s motion for summary judgment as to count III
       because the court made an express finding that there was no just reason for delaying appeal
       of that order. We will also consider the trial court’s October 21, 2008, denial of defendants’
       motion for summary judgment on count III because it involves the same claim on which
       Rush’s motion for summary judgment was granted in the March 2010 order. Arangold, 187
       Ill. 2d at 358.
¶ 26        We review de novo the trial court’s grant of summary judgment. Weather-Tite, Inc. v.
       University of St. Francis, 233 Ill. 2d 385, 389, 909 N.E.2d 830 (2009). Summary judgment
       is proper where the pleadings, depositions, admissions and affidavits show that there is no
       genuine issue of material fact, and that the moving party is entitled to judgment as a matter
       of law. 735 ILCS 5/2-1005(c) (West 2006); Village of Palatine v. Palatine Associates, LLC.,
       406 Ill. App. 3d 973, 978, 942 N.E.2d 10 (2010). We may affirm the trial court on any basis
       supported by the record. Palatine Associates, 406 Ill. App. 3d at 979.
¶ 27        Count III of Rush’s complaint alleged that decedent’s transfer of assets to his self-settled
       trust was per se void under Crane, 238 Ill. App. 257, and Barash, 151 B.R. at 906-07, and
       that Rush should be entitled to reach the trust assets to satisfy the $1.5 million pledge.
¶ 28        In Crane the court held that self-settled spendthrift trusts are fraudulent and per se void
       and may be reached by other creditors. Crane, 238 Ill. App. at 262-63. Rush cites cases for
       the proposition that this principle in Crane has been subsequently adopted. See Dexia Credit
       Local v. Rogan, 624 F. Supp. 2d 970, 976 (N.D. Ill. 2009); In re Marriage of Chapman, 297
       Ill. App. 3d 611, 620, 697 N.E.2d 365 (1998); Grochocinski v. Kennedy (In re Miller), 148
       B.R. 510, 519 (Bankr. C.D. Ill. 1992).
¶ 29        Defendants contend that summary judgment against defendants and in favor of Rush was
       improper because the common law principle that self-settled trusts are per se fraudulent was
       supplanted by the Fraudulent Transfer Act (740 ILCS 160/1 et seq. (West 2006)), which
       provides specific mechanisms for proving a transfer by a debtor was fraudulent. Defendants
       maintain that the Fraudulent Transfer Act no longer makes self-settled trusts per se

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       fraudulent and that Rush was required to plead under either section 5(a)(1) or section 5(a)(2)
       of the statute. Those sections provide:
                    “(a) 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 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; or
                    (2) without receiving a reasonably equivalent value in exchange for the transfer
                or obligation, and the debtor:
                    (A) was engaged or was about to engage in a business or a transaction for which
                the remaining assets of the debtor were unreasonably small in relation to the business
                or transaction; or
                    (B) intended to incur, or believed or reasonably should have believed that he
                would incur, debts beyond his ability to pay as they became due.” 740 ILCS
                160/5(a)(1), (a)(2) (West 2006).
¶ 30       “[A] statute will not be construed as taking away a common-law right existing at the time
       of its enactment unless the preexisting right is so repugnant to the statute that the survival
       of the common-law right would in effect deprive the statute of its efficacy and render its
       provisions nugatory.” Callahan v. Edgewater Care & Rehabilitation Center, Inc., 374 Ill.
       App. 3d 630, 634, 872 N.E.2d 551 (2007) (citing Texas & Pacific Ry. Co. v. Abilene Cotton
       Oil Co., 204 U.S. 426, 437 (1907)).
¶ 31       We agree with defendants that the Fraudulent Transfer Act and the common law cannot
       exist in harmony. Crane and its progeny stand for the principle that self-settled trusts are per
       se fraudulent, but the Fraudulent Transfer Act requires a creditor to satisfy the conditions of
       either section 5(a)(1) or section 5(a)(2) to bring a successful fraudulent transfer claim. If the
       legislature intended self-settled trusts to remain per se fraudulent under the common law, it
       would not have promulgated a statute defining the conditions required to prove a transfer was
       fraudulent. See Moore v. Green, 219 Ill. 2d 470, 488, 848 N.E.2d 1015 (2006) (we presume
       the legislature did not intend legislation to be rendered superfluous or vaguely advisory).
¶ 32       Here, count III did not allege that decedent made a transfer to the trusts “with actual
       intent to hinder, delay, or defraud” Rush or that when decedent made his transfers to the trust
       he did not have the ability to pay his bills or made the transfer to avoid paying a future
       obligation. See 740 ILCS 160/5(a)(1), (a)(2) (West 2006).
¶ 33       We believe that a party is required to allege the elements contained in the Fraudulent
       Transfer Act to properly plead a fraudulent transfer claim. Having reversed the trial court on
       this basis, we need not address defendants’ other contentions related to count III of Rush’s
       complaint.
¶ 34       For the aforementioned reasons, we lack jurisdiction to review the portion of the trial
       court’s order denying defendants’ motion for summary judgment on count II of Rush’s
       complaint, the motion to substitute judge was correctly denied, and the trial court’s entry of
       summary judgment in favor of defendants on count III of Rush’s complaint was error.

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¶ 35   Affirmed in part and dismissed in part; cause reversed and remanded in part.

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