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Docket No. 86045-Agenda 33-May 1999.

PREMIER PROPERTY MANAGEMENT, INC., Appellee, v. JOSE CHAVEZ et al., Appellants.

Opinion filed February 17, 2000.

JUSTICE BILANDIC delivered the opinion of the court:

Jose Chavez conveyed his interest in his personal residence to himself and his spouse, Claudia Chavez, as tenants by the entirety. Plaintiff, Premier Property Management, Inc. (Premier), a creditor of Jose Chavez, filed a complaint in the circuit court of Cook County seeking to have this conveyance set aside as fraudulent. Premier named Jose Chavez and Claudia Chavez as defendants. The circuit court dismissed Premier's complaint with prejudice. The appellate court reversed this dismissal and remanded for further proceedings. No. 1-97-4066 (unpublished order under Supreme Court Rule 23). We affirm the judgment of the appellate court.

BACKGROUND

Premier and Jose Chavez had a business relationship. In May of 1995, Premier filed a separate lawsuit against Jose Chavez and El Torero, Inc. At that time, Jose Chavez held title to his residence in his name alone.

On or around June 1, 1996, Jose Chavez conveyed his interest in the residence from himself, as sole owner, to himself and his wife, as tenants by the entirety. This conveyance was recorded on July 19, 1996. In late 1996, a judgment was entered in the separate lawsuit in favor of Premier and against Jose Chavez and El Torero, Inc., for the amount of $190,566.30.

On May 27, 1997, Premier filed the instant action to set aside the conveyance. Premier contended that the conveyance should be set aside as fraudulent pursuant to the terms of the Uniform Fraudulent Transfer Act (hereinafter, Fraudulent Transfer Act) (740 ILCS 160/1 et seq. (West 1996)).

Defendants filed a motion to dismiss Premier's complaint under section 2-619 (735 ILCS 5/2-619 (West 1996)) of the Code of Civil Procedure (735 ILCS 5/1-101 et seq. (West 1996)). Defendants argued that the tenancy by the entirety provision of the Code of Civil Procedure (735 ILCS 5/12-112 (West 1996)) protects their marital residence from being sold to pay a judgment entered against only one of the tenants. According to defendants, the tenancy by the entirety provision offers this protection regardless of whether the conveyance was made with fraudulent intent. In support, defendants relied on a decision of the Second District of the Appellate Court, E.J. McKernan Co. v. Gregory, 268 Ill. App. 3d 383 (1994), appeal allowed, 161 Ill. 2d 525 (1995), appeal dismissed with prejudice, No. 78487 (May 23, 1995).

Premier filed a response to defendants' motion to dismiss. Premier maintained that a conveyance of property to tenancy by the entirety may be set aside where made with fraudulent intent. In support, Premier relied on In re Marriage of Del Giudice, 287 Ill. App. 3d 215 (1997), a decision of the First District of the Appellate Court. Premier also argued to the circuit court that it was required to follow Del Giudice, the decision in its district, because a conflict existed between Del Giudice and McKernan.

The circuit court determined that Del Giudice and McKernan are reconcilable on their facts. The circuit court then applied McKernan to the instant case, reasoning that McKernan is more factually analogous. Consequently, the circuit court granted defendants' motion to dismiss Premier's complaint with prejudice.

Premier appealed. The appellate court ruled that Del Giudice and McKernan are in direct conflict. No. 1-97-4066 (unpublished order under Supreme Court Rule 23). The appellate court further ruled that the circuit court was bound to follow Del Giudice, the decision in its district. The appellate court therefore reversed the dismissal of Premier's complaint and remanded the cause for additional proceedings. In doing so, the appellate court noted that the General Assembly had recently amended the tenancy by the entirety provision relied upon by defendants. We allowed defendants' petition for leave to appeal (177 Ill. 2d R. 315).

ANALYSIS

Tenancy by the entirety is an estate in real property provided for by the Joint Tenancy Act (765 ILCS 1005/0.01 et seq. (West 1996)). Only spouses may hold property in this estate. 765 ILCS 1005/1c (West 1996). In addition, the estate is limited to homestead property. 765 ILCS 1005/1c (West 1996).

I. Tenancy by the Entirety Provision

According to the tenancy by the entirety provision of the Code of Civil Procedure, holding property in tenancy by the entirety protects spouses in that the property cannot be sold to satisfy the debt of only one spouse. 735 ILCS 5/12-112 (West 1998). At issue here is the extent of that protection when a creditor attempts to avoid a transfer of property to tenancy by the entirety, claiming that it was made with fraudulent intent.

When Jose Chavez conveyed his property to tenancy by the entirety on or around June 1, 1996, the tenancy by the entirety provision stated in pertinent part:

"Any real property, or any 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." 735 ILCS 5/12-112 (West 1996).

Premier asserts that Jose Chavez's conveyance was fraudulent and may be set aside under the Fraudulent Transfer Act. The Fraudulent Transfer Act provides in relevant part that a creditor may avoid a transfer "if the debtor made the transfer *** with actual intent to hinder, delay, or defraud any creditor of the debtor." 740 ILCS 160/5(a)(1) (West 1996). Our appellate court has reached conflicting conclusions as to whether the Fraudulent Transfer Act may be used against a debtor who is relying on the protection furnished by the tenancy by the entirety provision.

In McKernan, a husband and wife held their home in joint tenancy. A creditor obtained a judgment against the husband and initiated proceedings for a sale of the home. The husband and wife then transferred title to the home to tenancy by the entirety. The husband moved to restrain the sale based on the protection provided by the tenancy by the entirety provision. The creditor asserted that the transfer of title was fraudulent under the Fraudulent Transfer Act. McKernan, 268 Ill. App. 3d at 387-88.

The appellate court in McKernan held that the Fraudulent Transfer Act can never be applied to property held in tenancy by the entirety. According to the appellate court, the Fraudulent Transfer Act allows creditors to avoid transfers made with actual intent to defraud. Intent, however, "is irrelevant in a tenancy by the entirety conveyance because it simply cannot be fraudulent to engage in conduct that is specifically and unambiguously sanctioned by statute." McKernan, 268 Ill. App. 3d at 390. The appellate court interpreted the statutes relating to tenancy by the entirety as authorizing transfers like the one at issue. A plain reading of those statutes "makes it clear that no mental state is required to use the tenancy's protection." McKernan, 268 Ill. App. 3d at 390. Further, the appellate court reasoned that the legislature intended tenancy by the entirety to shield the marital homestead from the creditors of one spouse. McKernan, 268 Ill. App. 3d at 390-91.

The appellate court in Del Giudice declined to follow McKernan. In Del Giudice, a husband and wife held their home in joint tenancy. A creditor obtained a judgment against the husband and initiated proceedings for a sale of the home. The husband and wife then transferred title to the home to tenancy by the entirety. The husband moved to restrain the sale based on the protection provided by the tenancy by the entirety provision. The creditor asserted that the transfer of title was fraudulent under the Fraudulent Transfer Act. Del Giudice, 287 Ill. App. 3d at 216.

The appellate court held that, pursuant to the terms of the Fraudulent Transfer Act, a creditor can avoid a transfer of property to tenancy by the entirety if that transfer was made with actual intent to defraud the creditor. The appellate court acknowledged that the statutes concerning tenancy by the entirety allow married couples to effect such transfers, and that the General Assembly intended tenancy by the entirety to shield a marital homestead from the creditors of one spouse. Nonetheless, the court found no indication in those statutes or their legislative history that the General Assembly intended to include fraudulent conduct within the scope of afforded protection. According to the Del Giudice court, because the Fraudulent Transfer Act may be used to invalidate an otherwise lawful transaction made with fraudulent intent, that Act may be used to invalidate an otherwise lawful transfer of property to tenancy by the entirety if made with fraudulent intent. Del Giudice, 287 Ill. App. 3d at 218.

After Del Giudice was filed, the General Assembly amended the tenancy by the entirety provision. See Pub. Act 90-514, eff. August 22, 1997; 1997 Ill. Laws 5779. With that amendment, the tenancy by the entirety provision states in pertinent part:

"Any real property, or any 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 existing at the time of the transfer beyond the transferor's ability to pay those debts as they become due." (Emphasis on language added by amendment.) 735 ILCS 5/12-112 (West 1998); 1997 Ill. Laws 5779.

The General Assembly also added language explaining that this amendment "is intended as a clarification of existing law and not as a new enactment." 735 ILCS 5/12-112 (West 1998); 1997 Ill. Laws 5779.

Initially, we must determine whether the amended version of the tenancy by the entirety provision applies to Jose Chavez's conveyance. This court in First of America Trust Co. v. Armstead, 171 Ill. 2d 282 (1996), set forth the approach that Illinois reviewing courts follow in deciding whether an amended statute applies on appeal to "pending suits or preexisting causes of action." Dardeen v. Heartland Manor, Inc., 186 Ill. 2d 291, 295 (1999). Under Armstead, a reviewing court applies the law as it exists at the time of the appeal, unless doing so would interfere with a vested right. Armstead, 171 Ill. 2d at 290.

Defendants argue that applying the amended version of the tenancy by the entirety provision to them interferes with Claudia Chavez's vested right to a property interest in her home. We disagree. Although not capable of precise definition, a vested right is an interest that is protected from legislative interference by our due process clause (Ill. Const. 1970, art. I,