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appoint an investigating receiver in citation proceedings because such a receiver could be
appointed in garnishment proceedings. See 735 ILCS 5/12-718. The court further relied upon the
“necessary and equitable” powers applicable under that provision in garnishment proceedings, and the
appellate panel affirmed on that point. “[T]he trial court did not abuse its discretion in appointing a
receiver to make inquiries of Freed, DDL and third parties about income and assets and to collect any
indebtedness due to the Bank and to take possession, sell or otherwise dispose of any other property”,
the Freed panel said.

The guardianship case was In re Estate of Denten, 2012 IL App (2d) 110814. There a bank had
instituted foreclosure proceedings on one of the ward’s properties when a guardian was appointed to
manage her affairs, including representation in the foreclosure case. The foreclosure case proceeded to
judgment and sale, which resulted in a $4,646,360 deficiency judgment. The bank recorded the judgment
against the ward’s other real estate and served a citation in an attempt to perfect a lien against personal
property under § 2-1402(m) and related case law.

Attorneys for the estate resisted the bank’s attempt to be treated as a “secured” creditor, arguing that
guardianship estate assets are immune under the in custodia legis (in custody of the law) doctrine. The
appellate court rejected that argument and ruled that the bank became entitled to secured creditor
treatment as to realty upon recording of the deficiency judgment and as to personalty upon
service of the citation upon the ward and the guardian.

In so ruling, the panel noted that the Probate Act says the Civil Practice Law (of which the citation
statute is a part) applies in probate proceedings (755 ILCS 5/1-6).

Having found that the bank was entitled to treatment as a secured creditor, the
panel next moved to the question whether there was any basis for avoiding the general
rule that secured creditors have priority. The estate’s response on this issue centered
on an argument that the priority scheme which applies in decedent estates (755 ILCS
5/18-10, 5/18-13) should apply in guardianship estates and provide that
“administrative” claims are paid first. This dispute was not de minimis; at issue were
over $200,000 in attorneys’ fees previously approved by the trial court but never
paid by the estate. Noting a Supreme Court statement that “a guardianship
proceeding is not governed by the priority schedule established in” §§ 18-10 and 18-13
(Estate of Gebis, 186 Ill.2d 188 (1999)), the appellate panel said the estate was “trying
to invent a legislative priority scheme which does not exist”.

The panel further rejected an argument that 755 ILCS 5/18-15, providing that
claims allowed against guardianship estates “shall be paid by the representative as he
has funds therefor”, entitled the claimants to priority for the previously-allowed claims.
Other provisions of the Probate Act also were ruled irrelevant to the issue of priority, as
was the fact that the guardian had recorded a lis pendens against the realty at issue.

The panel noted the “harsh consequences of this ruling” but said that changes in
the Probate Act “must occur in this state’s legislature and not in its courtrooms.”

John\Sharp Thinking\#68.doc

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