In re Marriage of Earlywine , 2013 IL 114779 ( 2013 )

2013 IL 114779
IN THE
SUPREME COURT
OF
THE STATE OF ILLINOIS
(Docket No. 114779)
In re MARRIAGE OF JOHN J. EARLYWINE, Petitioner, and
JESSICA A. EARLYWINE, Respondent (Thomas H. James,
Contemnor-Appellant).
Opinion filed October 3, 2013.
JUSTICE BURKE delivered the judgment of the court, with
opinion.
Chief Justice Kilbride and Justices Freeman, Thomas, Garman,
Karmeier, and Theis concurred in the judgment and opinion.
OPINION
¶1 In the course of dissolution of marriage proceedings, respondent,
Jessica A. Earlywine, filed a petition for interim attorney fees
pursuant to the “leveling of the playing field” provisions in the
Illinois Marriage and Dissolution of Marriage Act (Act). See 750
ILCS 5/501(c-1) (West 2010). The circuit court of Stephenson
County found that neither respondent nor petitioner, John J.
Earlywine, had the financial ability or resources to pay their
respective attorney fees and costs. Pursuant to section 501(c-1)(3) of
the Act, the court ordered petitioner’s attorney, Thomas James, to
turn over, or disgorge, to respondent’s attorney half the fees
previously paid to him. The court held James in “friendly” contempt
at his request so that he could appeal the turnover order. On appeal,
James argued that the fees were not subject to disgorgement because
they were held in an advance payment retainer and became his
property upon payment. The appellate court rejected James’
argument, affirmed the turnover order, and vacated the order of
contempt. 2012 IL App (2d) 110730. We now affirm the appellate
court.
¶2 Background
¶3 Petitioner filed his petition for dissolution of marriage on August
24, 2010. The parties had one son born of the marriage who was three
years old at the time of filing. On November 1, 2010, respondent,
through her attorney Richard Haime, filed a petition requesting
interim attorney fees in the amount of $5,000. Respondent asked the
court to order petitioner to pay her fees or to order disgorgement of
fees previously paid to petitioner’s attorney. In her affidavit
accompanying the petition, respondent stated that she was
unemployed and had no assets or cash to pay her attorney fees. In
response, petitioner stated that he had been unemployed for some
time, had no money to retain counsel, and that his parents had paid
his legal bills.
¶4 Both parties submitted financial disclosure affidavits. Respondent
stated that she had earned $300 from employment in 2010 and owed
$4,600 on a car. Petitioner stated that he was employed sporadically
and had received some unemployment payments. Petitioner listed
debts totaling more than $66,000. He stated further that he owed his
parents $8,750 for legal fees paid to his attorney on his behalf.
¶5 Following a hearing, the trial court issued a memorandum opinion
and order on April 26, 2011. The court found that there were
substantial debts from the marriage which neither party was able to
pay. The court further found that respondent’s requested interim fees
were reasonable due to the anticipated complexity of the case,
including a custody evaluation. Pursuant to section 501(c-1)(3) of the
Act, the court found that neither party had the financial ability or
access to assets or income to pay their respective attorney fees, nor
was petitioner able to pay any of respondent’s fees. Accordingly, the
court ordered James to turn over to Haime a portion of the fees paid
to him by petitioner’s parents, in the amount of $4,000.
¶6 Petitioner filed a motion to reconsider the disgorgement order,
arguing that because the attorney fees were placed in an advance
payment retainer, they were not subject to a disgorgement order by
the trial court. Attached to the motion was a copy of the attorney-
client agreement between James and petitioner, which indicates that
petitioner agreed that all fees paid to James would be considered an
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advance payment retainer, as that term is used in Dowling v. Chicago
Options Associates, Inc., 226 Ill. 2d 277 (2007). The agreement sets
forth the requirements of the advance payment retainer in compliance
with Rule 1.15 of the Illinois Rules of Professional Conduct of 2010
(eff. Jan. 1, 2010). Relevant to this appeal, the agreement identifies
the “special purpose” for the advance payment retainer as follows:
“(1) the special purpose for the advance payment retainer
and an explanation why it is advantageous to the client: In the
case of family law with obligors or putative obligors,
regardless of the source of obligation, the [Illinois Marriage
and Dissolution of Marriage Act] can cause a court order to
issue which will divide attorney retention funds which are
held in an attorney’s trust account because such funds are
owned by the client and thus are part of the marital estate.
This division or allocation is in a judge’s discretion that
provides the authority to allocate all of said funds should such
facts portend such a result. The use of the ‘advance payment
retainer’ avoids the problem of having to pay your counsel
twice due to a fee allocation order albeit a Court may still
order such a payment from the client directly. The benefit of
the advanced payment retainer is that it avoids what can at
times be the financial adversity with the attorney which you
have hired due to a fee allocation order’s mandating
allocation from an attorney’s trust account to the party on the
other side of the lawsuit.”
¶7 In support of the motion to reconsider, petitioner’s mother, Joyce
M. Earlywine, submitted an affidavit stating that she, her fiancé,
petitioner’s father, and petitioner’s father’s wife had paid all of the
attorney fees to petitioner’s attorney on his behalf.
¶8 The trial court issued a memorandum opinion and order on May
25, 2011, denying the motion to reconsider the turnover order. The
court made the following findings:
“The stated policy of 501(c-1)(3) is to achieve ‘substantial
parity between the parties.’ That section further expressly
designates ‘retainers *** previously paid’ as a source for
disgorgement ***. Public policy allowing divorce litigants to
participate equally should override the advance payment
retainer device of protecting the fees of one side. To allow
John to shelter the fees paid on his behalf as an advance
payment retainer defeats the purpose of the ‘substantial
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parity’ provisions of the Illinois Marriage and Dissolution of
Marriage Act. Divorce court is a court of equity, in which the
court has a substantial amount of discretion ***. This court
does not find that the findings of Dowling, as cited by John,
apply or were meant to apply to divorce cases.”
¶9 James filed a motion for an entry of friendly contempt in
connection with the fee disgorgement order. On June 21, 2011, the
trial court granted the motion and fined James $50. James
subsequently filed his notice of appeal.
¶ 10 The appellate court affirmed the trial court’s turnover order and
vacated the contempt order. 2012 IL App (2d) 110730. The court held
that the plain language of section 501(c-1)(3) of the Act allows a trial
court to order disgorgement of retainers previously paid to an attorney
in the event that the court finds that both parties lack the financial
ability and resources to pay reasonable attorney fees and costs. Id.
¶¶ 19-21. The legislature’s use of the general term “retainers,” in the
court’s opinion, encompassed an advance payment retainer. Id. ¶ 21.
The court further held that allowing a party to avoid disgorgement
through use of an advance payment retainer would defeat the purpose
of the “leveling the playing field” provisions in section 501(c-1). Id.
¶¶ 15, 22.
¶ 11 This court allowed James’ petition for leave to appeal pursuant to
Illinois Supreme Court Rule 315 (eff. Feb. 26, 2010). We granted
leave to matrimonial lawyers Paul L. Feinstein and Michael G.
DiDomenico to file a brief amicus curiae in support of James. See Ill.
S. Ct. R. 345 (eff. Sept. 20, 2010).
¶ 12 Analysis
¶ 13 At the outset, we note that no appellee’s brief has been filed in
this case. Nonetheless, we will address the merits of this appeal under
the principles set forth in First Capitol Mortgage Corp. v. Talandis
Construction Corp., 63 Ill. 2d 128, 133 (1976) (in the absence of an
appellee’s brief, a reviewing court should address an appeal on the
merits where the record is simple and the claimed errors are such that
the court may easily decide the issues raised by the appellant).
¶ 14 At issue is whether the trial court had discretion to order James to
turn over to Haime funds held in an advance payment retainer. James
contends that because the funds in the advance payment retainer
became his property upon payment and were placed in his general
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account, they were not subject to disgorgement under the leveling of
the playing field provisions in the Act.
¶ 15 This court first recognized advance payment retainers in Dowling,
which involved a judgment creditor who sought to satisfy a judgment
by accessing funds held in an advance payment retainer by the
debtor’s attorney. Dowling, 226 Ill. 2d 277. We held that the retainer
was not subject to turnover to the judgment creditor because it was
the property of the debtor’s attorney. Id. at 298. Prior to Dowling,
only two types of retainers were explicitly allowed in Illinois. Id. at
292. The first type, a “general,” “true,” or “classic” retainer, is paid
to a lawyer to secure his or her availability during a specified time or
for a specified matter. Such a retainer is earned when paid and
immediately becomes the property of the lawyer, whether or not the
lawyer ever performs any services. Id. at 286. The second type of
retainer is a security retainer, which remains the property of the client
until the lawyer applies it to charges for services actually rendered.
Pursuant to the Illinois Rules of Professional Conduct, a security
retainer must be deposited in a client trust account and kept separate
from the lawyer’s own funds. Id. (citing Ill. R. Prof. Conduct R.
1.15(a)).
¶ 16 In contrast to a general retainer or a security retainer, an advance
payment retainer “consists of a present payment to the lawyer in
exchange for the commitment to provide legal services in the future.”
Dowling, 226 Ill. 2d at 287. Ownership of an advance payment
retainer passes to the lawyer immediately upon payment.
Accordingly, the funds must be deposited in the lawyer’s general
account and may not be placed in a client’s trust account due to the
prohibition against commingling funds. Id.
¶ 17 Although this court recognized advance payment retainers as one
of three retainers available to lawyers and clients in Illinois, we
cautioned that such retainers “should be used only sparingly, when
necessary to accomplish some purpose for the client that cannot be
accomplished by using a security retainer.” Dowling, 226 Ill. 2d at
293. As we explained, in most cases a security retainer is the best
vehicle to protect the client’s funds:
“The guiding principle, however, should be the protection of
the client’s interests. In the vast majority of cases, this will
dictate that funds paid to retain a lawyer will be considered a
security retainer and placed in a client trust account, pursuant
to Rule 1.15. Separating a client’s funds from those of the
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lawyer protects the client’s retainer from the lawyer’s
creditors. [Citation.] Commingling of a lawyer’s funds with
those of a client has often been the first step toward
conversion of a client’s funds. In addition, commingling of a
client’s and the lawyer’s funds presents a risk of loss in the
event of the lawyer’s death. [Citation.]” Id. at 292-93.
¶ 18 Examples of appropriate uses of advance payment retainers
include the circumstances in Dowling, in which a debtor hired
counsel to represent him in proceedings against a judgment creditor;
a criminal defendant whose property remains subject to forfeiture;
and a debtor in a bankruptcy case. Id. at 288-89, 293. In each of these
examples, a security retainer would disadvantage the client because
the funds remain the client’s property and are subject to the claims of
the client’s creditors. Thus, the client may have difficulty hiring legal
counsel if the attorney fees cannot be shielded from those with legal
claims to the client’s property. Id.
¶ 19 Subsequent to our decision in Dowling, this court repealed the
former Illinois Rules of Professional Conduct and replaced them with
the Illinois Rules of Professional Conduct of 2010 (eff. Jan. 1, 2010).
Subsection (c) of Rule 1.15 of the new rules sets forth the
requirements for advance payment retainers consistent with those
prescribed in Dowling. Ill. R. Prof. Conduct (2010) R. 1.15(c) (eff.
Jan. 1, 2010).
¶ 20 Relying on Dowling and Illinois Rule of Professional Conduct
1.15, James contends that the public policy of Illinois is to recognize
the freedom of a client to contract for an advance payment retainer if
it is for the client’s benefit. The benefit of an advance payment
retainer in this context, according to James, is to avoid exposure of
the client’s funds to the “obligee” spouse and her counsel. He argues
that divorce and family law cases are similar to debtor-creditor cases,
in that the “leveling of the playing field” rules in the Marriage Act
make it difficult for a client to secure legal representation in the
absence of an advance payment retainer. Thus, James contends that
a party to a dissolution case ought to be able to use an advance
payment retainer to shield attorney fees from being turned over to
opposing counsel. For the following reasons, we disagree.
¶ 21 First, James’ use of an advance payment retainer to “protect” his
client’s funds from turnover undermines the purpose of the leveling
of the playing field rules in the Act and renders these rules a nullity.
On June 1, 1997, the legislature amended the Act, substantially
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rewriting the rules with regard to attorney fees in marriage and
custody cases. See Pub. Act 89-712 (eff. June 1, 1997); In re
Marriage of Beyer, 324 Ill. App. 3d 305, 310 (2001). These
amendments are commonly referred to as the “leveling of the playing
field” rules. See A General Explanation of the “Leveling of the
Playing Field” in Divorce Litigation Amendments, 11 CBA Rec. 32
(1997). Among other things, the amendments added a separate
provision, section 501(c-1), governing “temporary” or “interim” fee
awards. Id. “[I]nterim attorney’s fees and costs” are defined by the
statute as “attorney’s fees and costs assessed from time to time while
a case is pending, in favor of the petitioning party’s current counsel,
for reasonable fees and costs either already incurred or to be
incurred.” 750 ILCS 5/501(c-1) (West 2010).
¶ 22 The statute allows a court, after consideration of relevant factors,
to order a party to pay the petitioning party’s interim attorney fees “in
an amount necessary to enable the petitioning party to participate
adequately in the litigation.” 750 ILCS 5/501(c-1)(3) (West 2010).
Prior to doing so, the court must find that the petitioning party lacks
sufficient access to assets or income to pay reasonable attorney fees,
and that the other party has the ability to pay the fees of the
petitioning party. Id.
¶ 23 Where, as in this case, the court finds that both parties lack the
financial ability or access to assets or income to pay reasonable
attorney fees and costs, the court may order disgorgement of fees
already paid to an attorney. Specifically, “the court (or hearing
officer) shall enter an order that allocates available funds for each
party’s counsel, including retainers or interim payments, or both,
previously paid, in a manner that achieves substantial parity between
the parties.” (Emphasis added.) Id. The order terminates at the time
the final judgment is entered. 750 ILCS 5/501(d)(3) (West 2010).
¶ 24 Whether funds held in an advance payment retainer are subject to
disgorgement as part of an interim fee award is an issue of law, which
is subject to de novo review. See In re Marriage of Nash, 2012 IL
App (1st) 113724, ¶ 15 (quoting In re Marriage of Beyer, 324 Ill.
App. 3d 305, 309 (2001)). Our primary goal in construing a statute is
to give effect to the intention of the legislature. People v. Collins, 214
Ill. 2d 206, 214 (2005). To ascertain that intent, “ ‘we may properly
consider not only the language of the statute, but also the purpose and
necessity for the law, and evils sought to be remedied, and goals to be
achieved.’ ” Id. (quoting People ex rel. Sherman v. Cryns, 203 Ill. 2d
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264, 280 (2003)). The statutory language is the best indicator of the
legislative intent. Id.
¶ 25 In enacting section 501(c-1), the legislature did not specify what
types of “retainers” previously paid to an attorney are subject to
disgorgement. However, the policy underlying the interim fee
provisions was clearly spelled out by the legislature. As part of the
“leveling of the playing field” amendments, the following italicized
language was added to the underlying purposes of the Act:
“This Act shall be liberally construed and applied to promote
its underlying purposes, which are to:
***
(5) make reasonable provision for spouses and minor
children during and after litigation, including provision for
timely awards of interim fees to achieve substantial parity in
parties’ access to funds for litigation costs[.]” (Emphasis
added.) 750 ILCS 5/102(5) (West 2010).
¶ 26 Other courts and commentators have expanded on the purposes
and goals of the interim fee provisions in the Act. “In enacting section
501(c-1), the legislature’s goal was to level the playing field by
equalizing the parties’ litigation resources where it is shown that one
party can pay and the other cannot.” In re Marriage of Beyer, 324 Ill.
App. 3d 305, 315 (2001) (citing In re Marriage of DeLarco, 313 Ill.
App. 3d 107, 113 (2000)). “[The] new interim fee system was an
attempt to address the problem of the ‘economically disadvantaged
spouse,’ where one spouse uses his or her greater control of assets or
income as a litigation tool, making it difficult for the disadvantaged
spouse to participate adequately in the litigation.” In re Minor Child
Stella, 353 Ill. App. 3d 415, 419 (2004) (citing A General
Explanation of the “Leveling of the Playing Field” in Divorce
Litigation Amendments, 11 CBA Rec. 32 (1997)). Prior to the
amendments, “[divorce] cases frequently entailed strenuous efforts to
‘block’ access by the other side to funds for litigation.” Id. All too
frequently, the “economically advantaged spouse” would apply his or
her greater access to income or assets as a tool, making it difficult for
the disadvantaged spouse to retain counsel or otherwise participate in
litigation. Id. Thus, the new interim fee system was designed to
ameliorate this problem by streamlining the process for obtaining
interim attorney fees. Id.
¶ 27 It is clear from the attorney-client agreement that the advance
payment retainer in this case was set up specifically to circumvent the
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“leveling of the playing field” rules set forth in the Act. To allow
attorney fees to be shielded in this manner would directly undermine
the policies set forth above and would strip the statute of its power.
If we were to accept James’ argument, an economically advantaged
spouse could obtain an unfair advantage in any dissolution case
simply by stockpiling funds in an advance payment retainer held by
his or her attorney.
¶ 28 Furthermore, the reasons expressed in Dowling for allowing
advance payment retainers are not pertinent to a dissolution case in
which one or both parties lacks the financial ability or access to funds
to pay their attorneys. In Dowling, we held that advance payment
retainers should be used “sparingly” and only when necessary to
accomplish a special purpose for the client which could not be
accomplished with a security retainer. Dowling, 226 Ill. 2d at 293. In
bankruptcy and forfeiture cases, for example, a client may have
difficulty hiring legal counsel if the funds for attorney fees are subject
to the claims of the client’s creditors. See Dowling, 226 Ill. 2d at 293.
¶ 29 In divorce cases, however, there are two clients, both of whom
require access to legal counsel. Shielding assets so that one spouse
may easily hire an attorney has the direct effect of making it difficult
for the other spouse to hire his or her own attorney. This would defeat
the purpose and goals of the Act, which is to enable parties to have
equitable access to representation. See Alison G. Turoff, Recovering
Attorney Fees from the Opposing Party in Illinois Divorce Cases, 92
Ill. B.J. 462, 463 (2004) (the interim fee provision “supplies a
valuable tool for the attorney contemplating representing a client who
individually would have difficulty paying the fees for a divorce but
whose marital estate or spouse could afford such fees”). Accordingly,
we hold that advance payment retainers in dissolution cases are
subject to disgorgement pursuant to section 501(c-1)(3) of the Act. To
hold otherwise would defeat the express purpose of the Act and
render the “leveling of the playing field” provisions powerless.
¶ 30 To the extent that James argues that the funds in his advance
payment retainer were obtained from John’s parents and are not
marital property, we note that the statute does not distinguish between
marital property and nonmarital property for the purpose of
disgorgement of attorney fees. The statute contemplates that retainers
paid “on behalf of” a spouse may be disgorged. See 750 ILCS
5/501(c-1)(1) (West 2010) (a responsive pleading by the
nonpetitioning party must set out the amount of “each retainer or
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other payment or payments, or both, previously paid to the responding
party’s counsel by or on behalf of the responding party” (emphasis
added)). Furthermore, the statute’s repeated references to the parties’
“access” to funds for litigation implies that funds may come from any
source. See 750 ILCS 5/102(5), 501(c-1)(1)(A), (3) (West 2010).
¶ 31 We note, too, that one factor to be considered by the trial court in
making an interim award is the “alleged non-marital property within
access to a party.” (Emphasis added.) 750 ILCS 5/501(c-1)(1)(A)
(West 2010).1 Thus, we find it irrelevant for purposes of interim fee
awards whether the funds for attorney fees derived from marital or
nonmarital property.2
¶ 32 Alternatively, James argues that section 501(c-1)’s provision for
disgorgement of attorney fees irreconcilably conflicts with Rule 1.15
1
See also Beyer, 324 Ill. App. 3d at 319 (interim fees pursuant to
section 501(c-1) apply to marital and nonmarital property); David H.
Hopkins,“Leveling the Playing Field” in Divorce: Questions and Answers
About the New Law, 85 Ill. B.J. 410, 413 (1997) (“Questions about
disgorgement can also arise if a third party—a parent, for example—is
funding the divorce litigation for one of the parties. Consistent with the
basic principles of these reforms, attorney’s fees paid by parents for one
spouse might sometimes be ordered disgorged in favor of the other spouse’s
counsel at an interim fee award hearing. When that possibility exists, it
should be considered at the outset, and perhaps the initial retainer should
be higher than usual to account for this risk.”).
2
It is important to note that interim fees are, by definition, temporary.
As such, they may be accounted for, as debts or otherwise, upon the final
division of the marital estate. See 750 ILCS 5/501(c-1)(2) (West 2010)
(“[a]ny assessment of an interim award *** shall be without prejudice to
any final allocation and without prejudice as to any claim or right of either
party or any counsel of record at the time of the award”); 750 ILCS 5/508
(West 2010); In re Marriage of Johnson, 351 Ill. App. 3d 88, 97 (2004)
(“By definition, a disgorgement order is never a final adjudication of the
attorney’s right to fees—it merely controls the timing of payment, with no
effect on whether, or how much, the attorney is entitled to collect at the
conclusion of his services”); Attorney Fees in Domestic Relations Cases:
The 2009 Amendments to “Leveling of the Playing Field,” 98 Ill. B.J. 136,
137 (2010) (“Less judicial caution was appropriate for granting interim fees
in pre-decree divorce cases because the trial court could adjust (or ‘true
up’) the ultimate division of the marital estate at the end of the case to
account for attorney fee payments by each party.”).
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of the Illinois Rules of Professional Conduct. He argues that this
alleged conflict must be resolved in favor of the supreme court rule,
pursuant to the separation of powers doctrine established in article II,
section 1, of the Illinois Constitution of 1970. We are unpersuaded by
this argument. Article II, section 1, provides: “The legislative,
executive and judicial branches are separate. No branch shall exercise
powers properly belonging to another.” Ill. Const. 1970, art. II, § 1.
“[T]his court possesses rulemaking authority to regulate the trial of
cases.” Strukoff v. Strukoff, 76 Ill. 2d 53, 58 (1979). Where a statute
conflicts with a supreme court rule, it infringes upon the power of the
judiciary, and the rule must prevail. McAlister v. Schick, 147 Ill. 2d
84, 94 (1992); People v. Joseph, 113 Ill. 2d 36, 45 (1986). However,
“[t]his court has repeatedly recognized that the legislature may
impose reasonable limitations and conditions upon access to the
courts.” McAlister, 147 Ill. 2d at 95. The legislature has broad powers
to regulate attorney fees and the attorney-client relationship, so long
as a statute does not purport to limit the scope of a court’s authority
over those matters. Bernier v. Burris, 113 Ill. 2d 219, 250 (1986).
¶ 33 Upon examination of both Rule 1.15 and section 501(c-1) of the
Act, we find no conflict between the rule and the statute. Rule 1.15,
which incorporates the Dowling decision, sets forth the requirements
for advance payment retainers. The rule provides that the attorney-
client agreement must state a special purpose and explain why this
type of retainer is advantageous to the client. Ill. R. Prof. Conduct
(2010) R. 1.15(c) (eff. Jan. 1, 2010). Section 501(c-1), on the other
hand, provides for awards of interim attorney fees and costs in
proceedings arising under the Illinois Marriage and Dissolution of
Marriage Act and sets forth the procedures to be followed by the
parties and the court. The statute does not infringe upon the court’s
authority to regulate court matters. Rather, it leaves to the discretion
of the court whether, and in what amount, interim attorney fees may
be awarded. We see no direct conflict between the statute and the rule
and, thus, no violation of the separation of powers clause in the
Illinois Constitution.
¶ 34 Finally, James argues that the disgorgement order violates the first
amendment, in that it infringes upon a client’s access to the courts
and the right to retain counsel. However, we find that James lacks
standing to make this argument because he is not the person whose
rights are allegedly being infringed. See Members of the City Council
v. Taxpayers for Vincent, 466 U.S. 789, 798 (1984) (“constitutional
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adjudication requires a review of the application of a statute to the
conduct of the party before the Court”); People ex rel. Shockley v.
Hoyle, 338 Ill. App. 3d 1046, 1055 (2003) (a party lacks standing to
assert the alleged deprivation of another individual’s constitutional
rights).
¶ 35 Conclusion
¶ 36 For the foregoing reasons, we affirm the judgment of the appellate
court affirming the circuit court’s turnover order. We also affirm the
vacation of the contempt order. See In re Marriage of Beyer, 324 Ill.
App. 3d 305, 321-22 (2001) (where a refusal to comply with a court’s
order constitutes a good-faith effort to secure an interpretation of an
issue without direct precedent, it is appropriate to vacate a contempt
order on appeal).
¶ 37 Appellate court judgment affirmed.
¶ 38 Circuit court judgment affirmed in part and vacated in part.
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