Illinois court holds that citation petitioner wins where assignees of shares had constructive notice of judgment.

At issue in FirstMerit Bank, N.A. v. McEnery, 2022 IL App (3d) 210306 (Dec. 21, 2022) was who had the right to shares of stock: the citation petitioner-bank who had recorded a judgment against its borrower who once owned the shares or certain trusts who claimed they were bona fide purchasers because they did not have actual notice of the bank’s judgment at the time they acquired the shares from the borrower. The court sided with the bank because the trusts had constructive notice of the bank’s judgment.

On June 10, 2010, the plaintiff bank obtained and recorded a money judgment for $1,843,129.14 against a borrower. A month later it brought a citation proceeding against the borrower. The court ordered the borrower to turn over his shares in a company. Sometime later the bank served a citation on the company.

In the meantime, on August 16, 2010, the borrower transferred 200 of his 500 shares in the company to a related trust which were subsequently reallocated between two trusts, the second of which held the other 500 shares (or 50% interest) in the company. The trusts claimed they had no knowledge of the citation or awareness that a citation was pending against the borrower and that the transfer of the shares was for value. The bank filed a motion for summary judgment, which the circuit court granted finding that the trusts had constructive notice of the citation proceedings and therefore were not bona fide purchasers.

On appeal, the trusts argued that they were bona fide purchasers without actual notice of the bank’s citation based on the plain language of section 2-1402(m) of the Illinois Code of Civil Procedure. (735 ILCS 5/2-1402(m)). That section provides that a judgment lien “does not affect the rights of bona fide purchasers or lenders without notice of the citation”. The appellate court, noting first that neither the Code nor any Illinois court defines notice, framed the issue of whether the notice under this section must be actual or constructive. Liberally construing the section, as it must, the court agreed with the bank that notice under this section includes constructive notice. This reading accords with the well-established case law relating to bona fide purchasers. A bona fide purchaser “is a person who takes title *** in good faith for value without notice of outstanding rights or interests of others” and cannot be a bona fide purchaser if he or she had actual or constructive notice of an outstanding right of another party.

Noting that the vast majority of jurisprudence surrounding bona fide purchasers pertains to real property, instead of personal property, the court observed that “notice” and “bona fide purchasers” are terms of well-known legal significance. As such they are presumed to have the same meaning in a statute without any further indication from the legislature. The court rejected the trusts’ invitation to consider article 8 of the Uniform Commercial Code, which governs investment securities, for its definition as to when a purchaser has notice of an adverse claim. Since the language of section 2-1402(m) has a common meaning there was no need to resort to other aids of statutory construction.

Turing to the facts of the case, the court agreed that the trusts did not have actual notice of the citation based on their unrebutted affidavits. But they had constructive notice due to the bank’s timely recording of the judgment in the public record. The court disagreed with the trust’s argument that the mere filing of a citation cannot constitute constructive notice because it would essentially nullify the bona fide purchasers’ exception in section 2-1402(m). By the plain language of the statute – which is supported by a transcript of legislative proceedings addressing an amendment to section 2-1402 — a creditor need not do anything other than serve a citation to the debtor or third party to perfect its lien against subsequent creditors or purchasers. Judgment for the bank was affirmed.


  • James Noonan

    Jim is a founding partner of Noonan & Lieberman. Jim has more than 25 years of experience in civil litigation on behalf of creditors, servicers, business and real estate owners.

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