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CEFALU v. VILLAGE OF ELK GROVE

United States District Court, N.D. Illinois, Eastern Division
Mar 26, 2001
No. 94 C 1990 (N.D. Ill. Mar. 26, 2001)

Opinion

No. 94 C 1990.

March 26, 2001.


ORDER


Plaintiffs Tyrone Cefalu and his father, William Cefalu, operated Logan Printing Company in the Village of Elk Grove. On February 19, 1993, the Cefalus were involved in an altercation with several police officers at the Logan Printing Company office. In this lawsuit, Plaintiffs alleged that Elk Grove officers violated their civil rights by arresting them and pursuing false charges. A jury concluded, however, that Plaintiffs had not proven their claims and returned a verdict for Defendants, the Village of Elk Grove and various individually-named officers. The Court of Appeals affirmed a judgment on that verdict, but remanded the case for a more generous award of costs than this court had originally taxed against Plaintiffs.

Defendants now seek to enforce the award of costs in the amount of $56,877.12, which includes: the costs originally taxed, plus interest; an additional award for the costs of multimedia evidence presentation, as directed by the Court of Appeals; and costs incurred on appeal. Because Plaintiffs have made no payments on the award, Defendants seek to compel application of the assets of Logan Printing Company toward the amount due them under the award of costs. Defendants believe those assets are jointly owned by William Cefalu and his wife (the mother of Tyrone), Anna Mae Cefalu.

Plaintiffs object. They contend that Anna Mae Cefalu is in fact the sole owner of the assets of Logan Printing Company and that those assets are therefore not subject to execution by Defendants here. Although the Company was once held by William and Anna Mae in partnership, Plaintiffs contend that William transferred his remaining interest in the partnership to his wife soon after the incident that gave rise to this lawsuit. In support of their position, the Cefalus have submitted various documents and the deposition testimony of Anna Mae Cefalu, taken on February 25, 2000. The Cefalus rely chiefly on the fact that William Cefalu granted his wife a Power of Attorney over all of his assets in April 1993. Having reviewed the materials submitted by both parties to this dispute, the court concludes that William Cefalu did not convey his assets to his wife in 1993. Mr. Cefalu in fact retained a 40% ownership interest in Logan assets as of the time that costs were awarded to Defendant, and Defendants are entitled to attach those assets to the extent of William's ownership interest.

DISCUSSION

At trial in this case, Plaintiffs argued that William Cefalu was entitled to recover damages measured, in part, by losses that Logan Printing Company allegedly suffered as a result of Defendants' wrongdoing. To explore that theory, Defendants devoted attention in the discovery phase of this lawsuit to the issue of whether and to what extent William Cefalu had an ownership interest in Logan Printing Company. As explained below, the evidence offered by Plaintiffs at that phase is quite different from what Anna Mae Cefalu now claims is the case.

Evidence Presented Prior to Judgment

The record reflects the following: On May 1, 1979, William J. Cefalu and Anna Mae Cefalu entered into a partnership agreement. The agreement recites that the Cefalus are "the sole owners" of the Logan Printing Company, that William J. Cefalu has contributed his ownership interest in the proprietorship known as Logan Printing Company and that Anna Mae Cefalu would contribute "all of her endeavors in the management" of the partnership.

It provides, further, that the partners would share profits and losses on a 60%/40% basis. (Partnership Agreement, Ex. 6 to Motion for Order Compelling the Application of Assets Toward the Payment of the Amount Due Under the Judgment, (hereinafter, "Defs.' Motion").)

In his March 9, 1995 deposition, Tyrone Cefalu testified that Logan Printing is "a partnership between my mother and father." (Tyrone Cefalu Dep. I, Ex. 8 to Defs.' Motion, at 43:12-13.) Similarly, William Cefalu testified on videotape that he purchased the Logan Printing Company building years ago. (William Cefalu Videotape Dep., Ex. 14 to Defs.' Motion, at 54:18-19.) He explained on December 12, 1995 that on February 19, 1993, he owned the Logan Printing Company building and had been in business at that location for "maybe 40 years." (William Cefalu Dep. I, Ex. 10 to Defs.' Motion, at 12:21-13:1.) He testified at a December 15, 1995 session that he and his wife Anna Mae each owned a percentage of Logan Printing Company ("I think she's got 60, and I've got 40.") and that this percentage of ownership was accurately reflected on the Company's tax returns. (William Cefalu Dep. II, Ex. 11 to Defs.' Motion, at 254:15-18.) He explained that the partnership was divided that way based upon the advice of an accountant and Anna Mae's own desire that she own an appropriate share of the business in the event of William's death. (Id. at 255:4-15.) In a November 4, 1997 session, William described Logan Printing Company as a "family-owned business," (William Cefalu Dep. III, Ex. 15 to Defs.' Motion, at 4:16), and testified that he, Tyrone, and Anna Mae take money from the business whenever they need some. (Id. at 4:20-5:21.) In this respect, the three of them "work it out the same now as it was then [in January 1993]." (Id. at 5:6-14.)

Anna Mae Cefalu herself testified on February 7, 1996 in response to a subpoena that required her to bring with her all documents relating to the ownership of Logan Printing Company. (Notice of Deposition, Ex. 12 to Defs.' Motion.) Mrs. Cefalu brought with her the 1979 partnership agreement, but not the Power of Attorney executed in 1993. She testified that beginning in 1979 she had a 60% partnership interest in the printing company and retained such an interest "as of 1993." (Anna Mae Cefalu Dep., Ex. 13 to Defs.' Motion, at 10:16-19, 11:11-12; 12:3-4.) At trial on January 29, 1998, she confirmed that the situation remained the same:

Q. (By MS. HIRSCH): What percentage of the partnership do you own?

A. 60 percent.

Q. What percentage of the partnership does William Cefalu own?

A. 40 percent.

(Trial Transcript, Ex. 16 to Defs.' Motion, at 161:4-8.)

William and Anna Mae Cefalu held themselves out as 60% and 40% owners, respectively, in Logan Printing Company in Logan's partnership tax returns for the years 1993, 1994, and 1996. (Tax Returns, Exs. 19, 20, 21 to Defs.' Motion.) Anna Mae Cefalu refers to herself as the sole owner of Logan for the first time in the 1998 return. (Tax Return, Ex. 22 to Defs.' Motion.) The 1994 accounts payable register for Logan Printing Company shows that William Cefalu received a draw from Logan Printing Company separate from the draw for his wife Anna Mae, in proportion to his 40% partnership interest. (Logan Printing 1994 Ledger, Ex. 7 to Defs.' Motion.)

Defendants have also furnished the court with a copy of a report prepared by Plaintiffs' accounting expert, setting forth the expert's opinion concerning the damages suffered by William Cefalu as a result of the February 19, 1993 incident. That report demonstrates Plaintiffs' expert's understanding that William and Anna Mae were joint owners of Logan Printing: the report referred to the "joint tax return filed by the two partners of Logan Printing" and stated the opinion that William Cefalu was entitled to recover lost profits of Logan Printing "as both an owner and a spouse of an owner." (Report of Christopher J. Leisner, Ex. 17 to Defs.' Motion, at 2.) In addition, Defendants have submitted Plaintiffs' proposed final pre-trial order materials, including Plaintiffs' motion to bar admission in evidence of "the partnership agreement between Anna Mae Cefalu and Bill Cefalu." In that motion, Plaintiffs argued that the partnership agreement is "irrelevant" because "Bill Cefalu, under said agreement, is a General Partner in Logan Printing and, as such, is both 100% responsible for any and all debts of the business as well as entitled to pursue and recover on behalf of himself and any other partners any and all losses that the partnership sustained." (Plaintiffs' Final Pretrial Submission, Ex. 18 to Defs.' Motion, at 128.) Evidence Presented in Post-Judgment Proceedings

In the face of this evidence, Plaintiffs face a difficult burden in establishing that Anna Mae Cefalu has in fact been sole owner of Logan Printing Company since April 1993. In this court's view, Mrs. Cefalu's February 25, 2000 deposition, the chief evidence offered by Plaintiffs on this issue, is insufficient to meet that burden. Mrs. Cefalu testified that five years earlier, she had become the sole beneficiary of the land trust that holds title to the Cefalu home at 901 South Greenwood in Park Ridge, Illinois. (Deposition of Anna Mae Cefalu, 2/25/00, at 9:17-21.) In 1999, Mrs. Cefalu sold that home and purchased a home in Hoffman Estates, Illinois. (Id. at 13:5-6.) At the time of Mrs. Cefalu's deposition, her husband William was hospitalized. (Id. at 14:15-16.) He had not been at the Logan Printing Company facility since the previous November and has not driven a car since 1993. (Id. at 15: 2-4, 20-22.) According to Mrs. Cefalu, Logan Printing Company has not been "100 percent in operation" since 1993 (id. at 17:21-23), but she was making efforts at that time to start the business again. (Id. at 18: 4-8.) As of the time of her deposition, Mrs. Cefalu testified that the title to Logan Printing Company's building in Elk Grove is held in her name. (Id. at 19:15-17.)

Much of Mrs. Cefalu's deposition was devoted to discussing the Special Power of Attorney and Agreement executed by William Cefalu on April 22, 1993. Mrs. Cefalu testified that she understands that in that document her husband "transferred, or gave, me all his interest in all of his assets in my name only." (Id. at 21:3-6.) Mrs. Cefalu did not receive any money in connection with that purported transfer (id. at 21:9-12), nor did she pay her husband anything for the Logan Printing Company equipment. (Id. 58:15; 84:6-15.) She testified that William Cefalu owned no interest in Logan Printing Company in 1998 (id. at 27:11-16), but acknowledged she did not remember having testified at trial that he owned 40% of the business at that time. (Id. at 27:18-28:6; 29:9-10.)

Mrs. Cefalu testified that she now believes she is the sole owner of Logan Printing Company and its equipment. The Company owns two large Miehle press machines; although her husband owned them at one time, Mrs. Cefalu believes they now belong to her. (Id. 40:17-21; 41:17-18; 42:3.) In addition, Logan Printing Company equipment includes two small presses acquired by William Cefalu in 1946 (Id. 44:24-45:15), a "cutter," once owned "[m]aybe by both of us" (id. 47:2), "folder," "stitcher," Perfect binding machine, and plastic binder, each of which was originally purchased by William and Anna Mae Cefalu, but now, in her view, owned by herself alone. (Id. 47:3-17; 49:3-10; 51:5-14; 57:19-58:2.) Mrs. Cefalu has taken out loans, at least one of which was a $300,000 loan from The Money Store, to purchase or replace equipment for Logan Printing. These purchases include the "step and repeat machine" (id. 40:14-16), a "platemaking machine," (id. at 52:1-14) a "processor" (id. 54:4-18) and computer equipment. (Id. 54:24-55:9.)

Analysis

Before considering whether Defendants are entitled to an order compelling application of Logan Printing Company assets against their claim, the court pauses to address Plaintiffs' preliminary arguments. Plaintiffs have asserted that this proceeding makes Anna Mae Cefalu a party to the case, entitled to service of process. They have argued, in addition, that Mrs. Cefalu did not consent to proceed before the magistrate judge, and that Magistrate Judge Sidney I. Schenkier therefore lacked jurisdiction over this matter. Defendants urge that they did serve notice upon Mrs. Cefalu. In any event, she appeared voluntarily for her deposition on February 25, 2000 (Transcript of Anna Mae Cefalu Dep., 2/25/00, at 5:18-20), so the court concludes the issue is moot. The consent matter has also been resolved: to eliminate any challenge on this basis, the case has been returned to me. Although I conducted the trial in this case on consent in my role as magistrate judge, I have since that time been elevated to the position of district judge. There is no continuing dispute concerning jurisdiction.

Turning to the merits of the dispute: Plaintiffs' arguments rest on Anna Mae Cefalu's understanding of the Special Power of Attorney and Agreement, executed by William Cefalu in April 1993. According to Plaintiff, the Power of Attorney was drawn up "at the insistence of William Cefalu as he was preparing for heart surgery." (Anna Mae Cefalu's Memorandum in Opposition to the Village of Elk Grove's Motion (hereinafter, "Anna Mae Memo"), at 4 § 5.) Indeed, it is not uncommon for an individual facing a serious illness or potential incapacity to execute a power of attorney, giving a trusted friend or family member the authority to manage his or her affairs. Such an instrument gives the agent (here, Mrs. Cefalu), the authority to control the principal's (here, Mr. Cefalu's) assets; it does not convey the assets to her. See, e.g., In re Estate of Morys, 17 Ill. App.3d 6, 307 N.E.2d 669 (1st Dist. 1974) (friend of deceased took a power of attorney to pay taxes on the deceased's property; there was no indication that deceased intended to convey the property to her). Although her lawyer now suggests that the Power of Attorney in this case by itself transferred title in the assets to Mrs. Cefalu, at her deposition, counsel acknowledged the document has no such effect: "If you want to talk about particular assets and — notwithstanding her statement, this document [the Power of Attorney] didn't transfer a thing." (Transcript of Anna Mae Cefalu Dep., 2/25/00, at 21:14-17.)

The plain language of the document at issue in this case can only be interpreted that way. It provides that "This power shall include the authority to conduct any transactions regarding the transfer of any and all interests/assets that I may have to Anna Mae Cefalu." (Special Power of Attorney Agreement, Ex. B to Anna Mae Memo, at 1.) The document then continues by setting forth Mrs. Cefalu's authority with respect to a wide variety of transactions and assets: Under the Power of Attorney, Mrs. Cefalu may dissolve the Logan Printing Company partnership; transfer bank accounts, stocks, or bonds; transfer ownership in three vehicles and two boats owned by Mr. Cefalu; collect debts "owed to [Mr. Cefalu] as a partner in Logan Printing Company"; sell real estate; sign contracts; obtain credit or borrow money; manage and control the Company business; and prepare and submit government documents. (Id. at 1-3.) The Power of Attorney explicitly permits Mrs. Cefalu to make gifts to herself. (Id. at 3, ¶ 9.) None of these provisions would be necessary at all if the Power of Attorney itself constituted a transfer of Mr. Cefalu's assets to Mrs. Cefalu.

Plaintiffs now argue that the partnership was dissolved by mutual agreement on April 22, 1993. (Anna Mae Memo at 5-6.) Again, the language of the Power of Attorney signed on that day is inconsistent with that version of events: It gives the Agent (Mrs. Cefalu) the power to dissolve the partnership. (Id. at 1 ¶ 1.) If the partnership were dissolved on April 22, there would be no reason for Mr. Cefalu to authorize Mrs. Cefalu to take such action on his behalf in the future. Nor is other evidence consistent with this theory. Mrs. Cefalu argues that "For personal reasons, . . . [she] decided to keep the physical plant of Logan Printing while winding up the affairs of the Partnership." (Anna Mae Memo at 8.) There was no testimony that Mrs. Cefalu ever considered selling the plant; to the contrary, in recent years she has attempted to resume operations. (Transcript of Anna Mae Cefalu Dep., 2/25/00, at 18:2-9.)

Most significantly, all of the evidence on the issue of ownership supports Defendants' assertion that William Cefalu was 40% owner of Logan Printing Company at the time that judgment was entered in this case. In 1995, Tyrone Cefalu called the business "a partnership between my mother and father." Also in 1995, William Cefalu testified that he and his wife owned Logan Printing in a 40/60 ratio. At the trial in this case in January 1998, Mrs. Cefalu herself testified under oath that she owned 60 percent of the partnership and that her husband William owned 40 percent. Mrs. Cefalu now argues that this testimony should be discounted as a reflection of the Cefalus' "family partnership" "mindset." (Anna Mae Memo, at 11.) The court is not persuaded that Mrs. Cefalu did not intend for the court and jury to understand that she and her husband were, as of 1998, each part owners of their business.

Nor is the court's conclusion on this score dependent completely on the Cefalus' own testimony. As noted earlier, in 1994, the Cefalus took draws from Logan Printing Company in 1994 in proportion to their partnership shares. Logan Printing Company filed partnership tax returns in 1993, 1994, and 1996. The first return reflecting Mrs. Cefalu's status as a sole proprietor was filed for 1998, well after entry of judgment and award of costs in this case. See Cefalu v. Village of Elk Grove, No. 94 C 1990, 1998 WL 9881393 (N.D. Ill. July 15, 1998). The Cefalus' expert witness and their lawyers both insisted that William Cefalu was one of "two partners of Logan Printing," "an owner" (expert report) and "a General Partner in Logan Printing." (Final Pretrial Submission.)

Mrs. Cefalu may now be sole owner of Logan Printing, solely responsible for its debts and the sole title holder to its assets. The court concludes that Mr. William Cefalu remained part owner of Logan in 1998 when this case was tried and when judgment was entered. Defendants are entitled to recover the costs awarded in their favor against Plaintiffs as of the time of entry of the award in 1998. To the extent the assets of Logan Printing Company were transferred to Mrs. Cefalu after the date of entry of that award, they remain subject to collection by Defendants.

CONCLUSION

Defendants' motion (330-1) is granted. The court hereby orders that assets of Logan Printing Company be applied to payment of the award of costs in this case, to the extent of Mr. William Cefalu's 40% ownership share, including the following equipment: (a) Two Miehle presses; (b) two small presses; (c) cutter; (d) folder; (e) stitcher; (f) binding machine; (g) plate processor; (h) two binders; (i) step and repeat machine; (j) plate-making machine; and (k) computer equipment.


Summaries of

CEFALU v. VILLAGE OF ELK GROVE

United States District Court, N.D. Illinois, Eastern Division
Mar 26, 2001
No. 94 C 1990 (N.D. Ill. Mar. 26, 2001)
Case details for

CEFALU v. VILLAGE OF ELK GROVE

Case Details

Full title:WILLIAM CEFALU AND TYRONE CEFALU, Plaintiffs, v. VILLAGE OF ELK GROVE, et…

Court:United States District Court, N.D. Illinois, Eastern Division

Date published: Mar 26, 2001

Citations

No. 94 C 1990 (N.D. Ill. Mar. 26, 2001)