Page 6 - John Hundley 2014

P.A. 98-0557 amended 735 ILCS 5/2-1602 to include a subsection (h) which provides that such
proceedings “may continue to conclusion without revival of the underlying judgment so long as the
enforcement is done under court supervision and includes a wage deduction order or turn over order and
is against an employer, garnishee, or other third party respondent.” The provision applies to wage
withholdings under 735 ILCS 5/2-1402 as well as those under 735 ILCS 5/12-801 et seq.

The new act also makes clear that a court in a citation proceeding may enter any order that could be
entered under the Garnishment Statute, 735 ILCS 5/12-701 et seq. It further amends 735 ILCS 5/12-705
to provide that garnishment summonses may be served in the manner provided by Supreme Court Rule
105 for service of papers seeking additional relief against parties in default, except that publication service
may not be employed in the garnishment context.

Fraud on Court Voids Settlement Transfer Approvals

Settlement Funding, LLC – a major purchaser of structured settlements – has been found to have
committed fraud upon the court in obtaining approval of its purchase of two such annuity contracts.

In a case decided by a panel of the Fifth District upon special order of the Supreme Court, Settlement
Funding was found to have committed fraud upon the trial court by failing to disclose anti-assignment
provisions in those contracts. It also improperly venued its transfer-approval cases in the Fourth District
when they should have been filed in Cook County, and it apparently failed to serve the transferor with
process in the approval cases. Settlement Funding, LLC v. Brenston, 2013 IL App (4th) 120869.

In a structured settlement, the defendant typically agrees to provide a future income stream for the
injured party by purchasing one or more annuity contracts for the victim’s benefit. In Brenston, the
defendant purchased two such annuities for the plaintiff, and both contained anti-assignment provisions
which Settlement Funding did not reveal to the trial court in obtaining approval of assignment of those
contracts to it.

“[O]ur courts have consistently held that where a structured settlement agreement does not permit the
payee to assign her periodic payments, the trial court must enforce the anti-
assignment provision and it has no authority under the [Structured Settlement
Protection] Act [215 ILCS 153] to grant a petition seeking approval of the transfer
of structured payment rights”, the court said. It said that by failing to disclose the
anti-assignment provision to the trial court, Settlement Funding “conceal[ed] a
material fact . . . . [T]he transfer orders were procured by a fraud on the court and
. . . they are, therefore, void ab initio.”

Because the transfer judgments were procured by fraud on the court, they
could be challenged at any time, the panel said. It reversed the trial court’s
dismissals of the victim’s 735 ILCS 5/2-1401 petitions attacking those judgments, ordered that the
petitions be granted, and instructed that a hearing be held to restore her to the economic position she held
prior to the legally ineffective transfer of her annuities.

- John T. Hundley, jhundley@lotsharp.com, 618-242-0246
Brenda\SharpThinking\#109.pdf

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