Maher v. Harris Trust and Savings Bank, 2007 U.S. App. LEXIS 24928

[Faubillaud]

UNITED STATES COURT OF APPEALS FOR THE SEVENTH CIRCUIT

JEROME A. MAHER, Plaintiff-Appellee, v. HARRIS TRUST AND SAVINGS BANK,
HORIZON SAVINGS BANK AND RESOLUTION TRUST CORPORATION, Defendants. APPEAL OF
CADLE COMPANY, Judgment Creditor/Appellant.

2007 U.S. App. LEXIS 24928

No. 06-3565

June 8, 2007, Argued
October 25, 2007, Decided

PRIOR HISTORY: [*1]
Appeal from the United States District Court for the Northern District of
Illinois, Eastern Division. No. 90 C 5118--James B. Zagel, Judge.
Maher v. Harris Trust & Sav. Bank, 2006 U.S. Dist. LEXIS 61672 (N.D. Ill.,
Aug. 30, 2006)

COUNSEL: For JEROME A. MAHER, Plaintiff - Appellee: Camillo F. Volini,
Chicago, IL USA; James Maher, Chicago, IL.
For HARRIS N.A., Defendant: Maureen W. Fairchild, CHAPMAN & CUTLER, Chicago,
IL USA.
For HORIZONS SAVINGS BANK, RESOLUTION TRUST CORPORATION, Defendants: William
C. Herbert, FOLEY & LARDNER, Chicago, IL USA.
For CADLE COMPANY, Appellant: David O. Yuen, TRESSLER, SODERSTROM, MALONEY &
PRIESS, Chicago, IL USA.

JUDGES: Before POSNER, FLAUM, and MANION, Circuit Judges.

OPINION BY: MANION

OPINION

MANION, Circuit Judge. Jerome Maher ("Maher") and his wife, Mary, own shares
in a cooperative apartment as tenants by the entirety. A judgment was
entered against Maher individually, and Cadle Company ("Cadle") as owner of
the judgment filed suit to collect on that judgment. Cadle filed a motion
for turnover of Maher's stock in the cooperative. The district court granted
Cadle's motion, and Maher filed a motion for reconsideration which the
district court granted. Cadle appeals, and we affirm.

I.

Maher and his wife own 320 shares of stock in the 1630 N. Sheridan Road
Corporation ("Corporation"), [*2] which owns land located at 1630 N.
Sheridan Road, Wilmette, Illinois. These shares are registered in the names
of both Jerome and Mary Maher as a tenancy by the entirety. Along with their
co-op shares, the Mahers own the right to occupy unit # 3A of the building
located on the land during their lifetime under the terms of a proprietary
lease with the Corporation. The Mahers exercise this right and occupy unit #
3A as their residence claiming it as their homestead.

In 1993, the district court entered judgment in favor of Resolution Trust
Corporation against Maher in the sum of $ 42,000.00; Maher's wife has no
obligation under this debt. Cadle later purchased the judgment for
consideration. In January 2006, Cadle filed suit to collect the judgment
against Maher. After an examination of Maher's assets, Cadle filed a motion
for Maher to turn over his shares of stock in the Corporation to satisfy the
judgment. The district court granted Cadle's motion.

Maher filed a motion for reconsideration, arguing that because he and his
wife owned the stock as tenants by the entirety subject to the Corporation's
terms and conditions, the stock represented an interest in their homestead
under Illinois [*3] law. Maher further noted that his wife was not subject
to the judgment. In response, Cadle asserted that Maher's stock is personal
property and therefore not protected by a tenancy by the entirety and not
homestead property. Maher argued in reply that the stock represents an
interest in real property which constitutes his homestead and is exempt from
turnover. The district court granted Maher's motion, concluding that Maher's
stock in the cooperative represented an interest in a homestead property
which may be held in tenancy by the entirety, thereby precluding it from
transfer to satisfy personal debt of only one of the spouses. Cadle appeals.

II.

On appeal, Cadle challenges the turnover order. "The district court's
turnover order is a final judgment, which we review de novo ." Society of
Lloyd's v. Estate of McMurray, 274 F.3d 1133, 1134 (7th Cir. 2001) (citation
omitted).

Because the parties' substantive rights are based on Illinois property law,
we apply the law as the Supreme Court of Illinois has applied it. When the
Supreme Court of Illinois has not ruled on the issue before us, we look to
the decisions of the state appellate courts "unless there are persuasive
indications that [*4] the state supreme court would decide the issue
differently." Much v. Pac. Mut. Life Ins. Co., 266 F.3d 637, 643 (7th Cir.
2001) (citations omitted). Under Illinois law, statutes are to be
interpreted according to their plain language affording them their plain and
ordinary meaning. Moore v. Green, 219 Ill. 2d 470, 848 N.E.2d 1015, 1020-21,
302 Ill. Dec. 451 (Ill. 2006) (citations omitted). Statutes dealing with the
same subject under the doctrine of pari materia are to be interpreted "with
reference to one another to give them harmonious effect." People v. McCarty,
223 Ill. 2d 109, 858 N.E.2d 15, 31, 306 Ill. Dec. 570 (Ill. 2006). This
principle comports with the "fundamental rule of statutory interpretation
that all the provisions of a statute must be viewed as a whole." Id.
(citations omitted).

In arguing for reversal, Cadle asserts that it has the right to obtain
Maher's shares in the cooperative apartment to satisfy the judgment.
Specifically, Cadle contends that stock in the cooperative apartment is
personal property and that only real property or a land trust may be held in
tenancy by the entirety. At oral argument, Cadle conceded that Maher's stock
ownership in the cooperative is entitled to a homestead exemption from
judgment, but only up to $ [*5] 15,000. This concession comports with
Illinois law. See 735 ILCS 5/12-901 ("Every individual is entitled to an
estate of homestead to the extent in value of $ 15,000 of his or her
interest in a farm or lot of land and buildings thereon, a condominium, or
personal property, owned or rightly possessed by lease or otherwise occupied
by him or her as a residence, or in a cooperative that owns property that
the individual uses as a residence . . . . [Homestead property] is exempt
from attachment, judgment, levy, or judgment for sale for payment of his or
her debts or other purposes. . . .") (emphasis added).

Cadle claims, though, that Maher's homestead exemption in the Corporation
stock is limited to $ 15,000 under 735 ILCS 5/12-901 because the stock is
personal property that cannot be held as a tenancy by the entirety. We
disagree. The Illinois Tenancy Act provides in relevant part:

Whenever a devise, conveyance, assignment, or other transfer of property,
including a beneficial interest in a land trust, maintained or intended for
maintenance as a homestead by both husband and wife together during
coverture shall be made and the instrument of devise, conveyance,
assignment, or transfer expressly [*6] declares that the devise or
conveyance is made to tenants by the entirety, or if the beneficial interest
in a land trust is to be held as tenants by the entirety, the estate created
shall be deemed to be in tenancy by the entirety. 765 ILCS 1005/1c (emphasis
added). The Illinois Tenancy Act specifically provides that property
maintained as a homestead may be held as a tenancy by the entirety, and it
does not differentiate between real or personal property. n1

- - - - - - - - - - - - - - Footnotes - - - - - - - - - - - - - - -1

We note that the statute specifically includes land trusts which Illinois
courts have recognized as being similar to cooperative apartments. See
Brandzel v. Koretzky, 66 Ill. App. 3d 717, 384 N.E.2d 128, 130, 23 Ill. Dec.
492 (Ill. App. Ct. 1978) (noting that "[w]hether title is in a land trust or
held by a corporation is merely a matter of the convenience of the parties;
the essence of the cooperative is the agreement among the co-owners.").

- - - - - - - - - - - - End Footnotes- - - - - - - - - - - - - -

The Illinois courts have not addressed the issue presently before us about
whether shares in a cooperative apartment may be held as a tenancy by the
entirety. However, we conclude that in reviewing the Illinois homestead and
tenancy statutes the state courts would similarly conclude that because
Maher's interest in the cooperative [*7] qualifies as a homestead and that
interest is "maintained . . . as a homestead by both husband and wife . . .
the estate created shall be deemed to be in tenancy by the entirety." 765
ILCS 1005/1c.

Our analysis does not end here, however, but continues pursuant to Federal
Rule of Civil Procedure 69(a), "which governs the collection proceedings in
the federal courts, [and] adopts whatever procedures are followed by the
state courts in which the collection is sought, here [Illinois], unless
there is an applicable federal statute expressly regulating the execution of
judgments." Vukadinovich v. McCarthy, 59 F.3d 58, 62 (citation omitted).
There is no applicable federal statute regulating the execution of the
judgment against Maher as it relates to his interest in the Corporation, so
we look to 735 ILCS 5/12-112, "What [is] liable to enforcement," which
provides that,

[a]ny real property, or beneficial interest in a land trust, held in tenancy
by the entirety shall not be liable to be sold upon judgment entered on or
after October 1, 1990 against only one of the tenants, except if the
property was transferred into tenancy by the entirety with the sole intent
to avoid the payment of debts [*8] existing at the time of the transfer
beyond the transferor's ability to pay those debts as they become due.As we
stated above, Maher's interest in the Corporation is held in tenancy by the
entirety, and there are no allegations that Maher fraudulently transferred
his stock to a tenancy by the entirety to avoid payment of his judgment.

Cadle relies upon New York law for its assertion that ownership in a
cooperative is not real property and is always treated as personal property.
Even in New York, though, courts note,

The ownership interest of a tenant-shareholder in a co-operative apartment
is sui generis. It reflects only an ownership of a proprietary lease, and
therefore arguably an interest in a chattel real, conditional however upon
his shareholder interest in the co-operative corporation, an interest always
treated as personal property. The leasehold and the shareholding are
inseparable. For some special purposes, the real property aspect may
predominate.State Tax. Comm'n v. Shor, 43 N.Y.2d 151, 371 N.E.2d 523, 524,
400 N.Y.S.2d 805 (N.Y. 1977) (citations omitted, emphasis added). Even under
New York law it appears that the case before us involves such a purpose.

"A 'cooperative apartment house,' frequently referred [*9] to in this
connection simply as a 'cooperative,' is a multi-unit dwelling in which each
resident has (1) an interest in the entity owning the building, and (2) a
lease entitling the resident to occupy a particular apartment within the
building." 15A Am. Jur. 2d Condominiums and Cooperative Apartments § 62
(2007). In other words, "[s]hares of stock [ ] are sold to persons who will
occupy the housing units, the number of shares [ ] depending on the value of
the particular apartment or unit. 'Proprietary' leases are issued by the
corporation to the shareholders." Sinnissippi Apartments, Inc. v. Hubbard,
114 Ill. App. 3d 151, 448 N.E.2d 607, 610, 69 Ill. Dec. 889 (Ill. App. Ct.
1983) (citation omitted). Because an individual's stock ownership and
proprietary lease are intertwined, Illinois courts have acknowledged the
unique, hybrid nature of cooperative apartments. See, e.g., Harper Square
Hous. Corp. v. Hayes, 305 Ill. App. 3d 955, 713 N.E.2d 666, 669-70, 239 Ill.
Dec. 135 (Ill. App. Ct. 1999); Quality Mgmt. Servs. v. Banker, 291 Ill. App.
3d 942, 685 N.E.2d 367, 369, 226 Ill. Dec. 264 (Ill. App. Ct. 1997). They
have recognized that "[t]he primary interest of every stockholder in such a
corporation is the long term propriety lease and the stock is incidental to
such purpose and merely affords the practical [*10] means of combining an
ownership interest with the method of sharing proportionately the
assessments for maintenance and taxes." Sinnissippi Apartments, Inc., 448
N.E.2d at 611 (citation omitted). Further, the Illinois homestead statute
lists an individual's interest in a cooperative, separate and distinct from
personal property, which also may qualify as a homestead, belying Cadle's
assertion that an interest in a cooperative is always treated as personal
property. Other evidence that a cooperative member's interest in the
cooperative has aspects of an interest in real estate is illustrated by the
Illinois Property Tax Code. 35 Illinois Compiled Statute 200/15-175 and 35
Illinois Compiled Statute 200/15-170 direct cooperatives to credit to the
qualifying cooperative members the appropriate pro-rated amount of the
homestead and senior citizen homestead real estate property tax exemptions
the cooperative receives. Also, while the Illinois Code of Civil Procedure
does not define "real property," other sections of the Illinois statutory
code include such interests as lifetime proprietary leases in their
definitions of real property. See 315 ILCS 25/3 & 315 ILCS 20/3-8 (defining
real property [*11] to include "lands, lands under water, structures and .
. any rights, legal or equitable, including terms for years . . . ."
(emphasis added)). Finally, the purposes of homestead and tenancy by the
entirety are similar in that they protect an individual's interest in his
home beyond the reach of creditors: to a limited extent in the case of
homestead (up to $ 15,000) and completely with a tenancy by the entirety,
"the primary purpose of [which] is to protect the ability of a married
couple to retain occupancy of the marital homestead against the creditors of
only one spouse while the marriage is intact . . . ." In re Tolson, 338 B.R.
359, 368 (C.D. Ill. 2005). See People v. One Residence Located at 1403 East
Parham Street, 251 Ill. App. 3d 198, 621 N.E.2d 1026, 1031, 190 Ill. Dec.
573 (Ill. App. Ct. 1993) ("[T]he purpose of the homestead exemption is to
secure to the homesteader a shelter beyond the reach of his improvidence.")
(citing Holterman v. Poynter, 361 Ill. 617, 198 N.E. 723, 725 (Ill. 1935)).
In light of the nature and characteristics of ownership in a cooperative
apartment, including the proprietary lease, the fact that such ownership may
be held in tenancy by the entirety under the Illinois Tenancy Act, and the
purposes [*12] of the Illinois homestead and tenancy by the entirety
exclusion from judgment statutes, we conclude that the Mahers' ownership
interest in the Corporation constitutes real property for the purposes of
735 ILCS 5/12-112 and is therefore excluded from satisfaction of Jerome
Maher's judgment.

III.

Because Maher owns his shares in the Corporation with his wife in tenancy by
the entirety, turnover of that stock to Cadle to satisfy Maher's judgment is
impermissible under Illinois law. Accordingly, we AFFIRM the district
court's denial of Cadle's motion for turnover of Maher's stock.