In re Marriage of Anderson ( 2010 )

No. 3-09-0829
_________________________________________________________________
Filed November 15, 2010
IN THE
APPELLATE COURT OF ILLINOIS
THIRD DISTRICT
A.D., 2010
In re MARRIAGE OF ) Appeal from the Circuit Court
MICHAEL ANDERSON, ) of the 10th Judicial Circuit,
) Tazewell County, Illinois,
Petitioner-Appellee, )
)
and ) No. 01-D-428
)
MOLLY A. MURPHY, f/k/a ) Honorable
Molly A. Anderson, ) Jerelyn D. Maher &
) J. Peter Ault,
Respondent-Appellant. ) Judges, Presiding.
_________________________________________________________________
MODIFIED UPON DENIAL OF REHEARING
JUSTICE LYTTON delivered the opinion of the court:
_________________________________________________________________
Respondent Molly Murphy, f/k/a Molly A. Anderson, appeals from
the postjudgment order resolving all pending issues and dissolving
her marriage to petitioner, Michael Anderson. On appeal, Molly
argues that the trial court erred in (1) calculating net income for
purposes of child support, (2) terminating maintenance, (3)
awarding attorney fees, (4) altering the percentage of
responsibility for the children’s medical expenses, (5) denying her
motion to return personal property, (6) relieving Michael of his
duty to file amended tax returns, and (7) modifying Michael’s
previously imposed financial reporting requirements. We affirm in
part, remand in part, reverse and remand in part, and vacate and
remand in part.
Michael Anderson and Molly Murphy were married in January of
1993. Molly gave birth to twin daughters, Janelle and Kaleigh, on
December 27, 1994.
During the marriage, Michael, who has a master's degree from
the University of Illinois, worked in the financial industry. In
1998, he was employed by Komatsu and earned a gross income of
$61,573. He also received a yearly dividend from stock he owned in
his family’s closely held corporation, AEC Holding Company.
Molly was diagnosed with fibromyalgia in 1990 and was employed
by Caterpillar. After she married Michael, she continued to work
for Caterpillar until the birth of the twins. Shortly thereafter,
she returned to work. In December of 1995, she was placed on
disability due to her illness. At that time, she was earning
$52,000 per year, plus incentives. Molly currently receives a
disability payment from Caterpillar, as well as social security
benefits.
Michael petitioned for dissolution of the marriage in July
2001. On February 13, 2002, an agreed order was entered awarding
custody of the girls to Molly. On August 25, 2004, a judgment of
dissolution of marriage was entered dissolving the marriage and
incorporating a stipulated visitation order. Under the terms of
the stipulation, Michael had visitation with the twins every other
2
weekend, every Wednesday evening and alternating holidays.
On September 2, 2004, the trial court entered a supplemental
judgment that addressed the marital property issues but reserved
determinations of child support and maintenance. According to the
terms of the supplemental judgment, the trial court awarded Mike
his AEC stock as nonmarital property for purposes of maintenance
and directed him to provide Molly with copies of his income tax
returns, including any attached schedules, W-2 forms and 1099
forms. For the children’s medical expenses, Michael was
responsible for 60% of the expenses not covered by insurance and
Molly was responsible for 40%. Marital investments were divided
equally between the parties, and the marital residence was
transferred to Molly in exchange for a $40,000 payment to Michael.
Michael was also ordered to inform Molly of any dividends he
received from his shares of AEC stock and pay 28% of his net
dividends as child support.
In December 2006, the trial court entered an order
establishing that Michael would pay the sum of $900 per month in
reviewable maintenance and that he would pay 28% of his statutory
net income for child support. At that time, Michael was employed
by Nextel, earning a salary of approximately $50,000 per year.
During the next two years, the parties filed numerous
petitions for rules to show cause and motions to modify the terms
of previous orders. In addition to the petitions, Molly filed a
3
"Motion for Return of Children’s Property." The motion alleged
that the girls had taken personal property to Michael’s residence
during their visits and that Michael refused to return the items.
The list of property included American Girl dolls, American Girl
accessories, Disney DVDs, board games, a basketball hoop and
clothing.
In September 2008, Michael filed a motion for review of
Molly’s $900 monthly maintenance award, as well as a petition to
modify the medical expense allocation. In response, Molly filed a
petition to modify child support and maintenance, seeking an
increase in both based on Michael’s new position with Habegger
Corporation, in which he earned approximately $62,500 per year.
The motions and petitions were consolidated, and the trial
court conducted hearings for several days. Michael testified that
his shares of AEC stock had been purchased by the company as part
of a reverse stock split in an attempt to reduce the number of
outstanding shares. The reverse split affected all 11
shareholders. Those five shareholder who owned less than 5% of the
company’s outstanding shares were required to cash out their
holdings based on a fair market valuation. The company forced
Michael to sell all of his shares of stock because he owned only
2.16%. The reverse stock split went into effect on December 31,
2008. He received $192,780 as a result of the split and would no
longer receive AEC dividends.
4
Testimony and exhibits established that the income generated
by Michael’s shares of AEC stock had been substantial. In 2005, he
received dividend income in the amount of $171,760; in 2006, he
received $197,887; and in 2007, he received $190,845. The call of
the shares by the company resulted in Michael sustaining a capital
loss of $65,743. Michael testified that he used the proceeds from
the sale of the stock to purchase gold coins.
Michael further testified that most of the items listed in
Molly’s motion to return the children’s property were items he had
purchased for the girls or gifts they had received from his
parents. He never refused to return things the children brought
with them to his house. He stated that he packed all of the girls’
belongings up and gave them to Goodwill because he had not had
visitation with them for at least three years.
Molly testified that her medical condition and financial
situation have not changed since 1995. She and the girls have been
receiving social security benefits since 1996 due to her illness.
She testified that she handles all transportation and scheduling
for the children. At the time of the hearing, Michael had not seen
the girls or exercised his visitation for almost three years. The
trial court found that Michael had violated numerous court orders,
but reserved the issue of attorney fees.
In a later petition before the court, Molly again sought
attorney fees for the legal expenses she incurred. In support, she
5
submitted affidavits from four attorneys who represented her during
the divorce proceedings. Molly claimed that she incurred $74,547
in fees seeking to enforce previous court orders and responding to
Michael's motion to terminate maintenance.
Both parties filed financial affidavits in addition to their
testimony. Michael’s affidavit, dated December 1, 2008, indicated
that he was a territory manager for Habegger, earning a monthly
salary of $5,100. Minus deductions for state and federal taxes,
social security and child support, Michael reported a net monthly
earned income of $1,510. He also reported dividend income of
$1,966 from his AEC stock, for a total income of $3,476. His
monthly expenses totaled $3,673. Michael listed $314,578 in
nonmarital assets and $43,470 in nonmarital debt. He also stated
that he had $22,024 in marital assets and no marital debt.
Molly’s 2008 financial affidavit reported a net earned income
of $3,356 per month, plus additional monthly income from
maintenance and child support, for a total income of $7,024 per
month. Molly stated that she had monthly household expenses
totaling $4,034 and medical expenses equivalent to $772. Her total
monthly expenses for the house, the children and her equaled
$8,279. She listed her nonmarital assets at a value of more than
$676,500 and her nonmarital debt as $161,725. The affidavit
further stated that she had $42,000 in marital assets and no
marital debt.
6
The trial court issued a written order addressing all post-
dissolution motions. In its order, the court noted that the
parties had not communicated effectively to resolve any issues and
had not made good-faith efforts to comply with court orders. It
ordered Michael to pay $31,892.88 for past child support and
maintenance. Regarding income tax returns, the court stated that
Michael had not filed the amended returns he was instructed to file
for improperly claiming Kaleigh as a dependent when he failed to
pay child support. To remedy the disadvantage to Molly, the court
directed that Molly be allowed to claim both children as exemptions
on her income tax returns until the girls turned 18 or completed
high school. The court also modified Michael’s financial reporting
obligation to require him to provide Molly with a copy of his W-2
forms each April and to inform Molly of any changes in his
employment.
The trial court declined to treat the sale of Michael’s AEC
stock as income, concluding that the stock was nonmarital property
and that Michael had no control over the sale of the stock. Since
Michael was no longer receiving AEC dividends, the circuit court
found a substantial change in circumstances had occurred and
modified child support to the statutory percentage of Michael’s
current net income from his full-time employment, ordering him to
pay $528.53 every two weeks. The trial court also refused Molly’s
request to require Michael to pay child support based upon any
7
gifts he may receive from his family.
Further, the trial court modified the children’s uncovered
medical expense payment ratio to an equal 50% for both parties.
The court also denied Molly’s request for the return of various
toys and games that the girls kept at Michael’s house, finding that
most of the items were gifts from Michael or his parents.
On the issue of maintenance, the trial court found that the
stock sale dramatically reduced Michael's income and terminated
maintenance effective June 1, 2009. Last, the trial court ordered
Michael to pay $25,000 of Molly’s attorney fees.
ANALYSIS
I
Molly argues that the trial court erred as a matter of law in
determining Michael’s net income for purposes of child support
under section 505(a)(3) of the Illinois Marriage and Dissolution of
Marriage Act (Dissolution Act) (750 ILCS 5/505(a)(3) (West 2008).
Specifically, she claims that the trial court erred by ignoring
three sources of income: (1) the proceeds from the sale of the AEC
stock; (2) bonus/commission income from his new employer; and (3)
gifts and loans that Michael may receive from his parents.
Generally, the trial court’s net income determination and
child support award lie within its discretion. In re Marriage of
Deem, 328 Ill. App. 3d 453 (2002). However, Molly challenges the
court’s interpretation of section 505(a)(3) of the Dissolution Act.
8
The interpretation of a statute is not a matter left to the trial
court’s discretion; it presents a question of law that we review de
novo. Einstein v. Nijim, 358 Ill. App. 3d 263 (2005).
The primary goal of statutory interpretation is to ascertain
and give effect to the legislature’s intent. The best indicator of
legislative intent is the plain and ordinary language of the
statute itself. People v. Pack, 224 Ill. 2d 144 (2007). Where the
statutory language is clear, it must be given effect without resort
to extrinsic aids of interpretation. In re Marriage of Rogers, 213
Ill. 2d 129 (2004). Legislative intent can be ascertained from
consideration of the entire statute, its nature and objective, and
the consequences that would result from construing it one way or
the other. Fumarolo v. Chicago Board of Education, 142 Ill. 2d 54
(1990).
A. AEC Reverse Stock Split
Molly first claims that the reverse stock split proceeds
Michael received should be treated as income subject to child
support.
Section 505(a)(3) of the Dissolution Act defines net income as
"the total of all income from all sources," minus several
enumerated deductions. The statute does not define "income" for
purposes of determining child support. In such cases, courts give
undefined words their plain and ordinary meaning. See In re Estate
of Poole, 207 Ill. 2d 393 (2003).
9
In Rogers, the supreme court discussed the plain and ordinary
meaning of the term "income":
"As the word itself suggests, 'income' is simply
'something that comes in as an increment or addition ***:
a gain or recurrent benefit that is usu[ually] measured
in money ***: the value of goods and services received by
an individual in a given period of time.' Webster’s
Third New International Dictionary 1143 (1986). It has
likewise been defined as 'the money or other form of
payment that one receives, usu[ually] periodically, from
employment, business, investments, royalties, gifts and
the like.' Black’s Law Dictionary 778 (8th ed. 2004)."
Rogers, 213 Ill. 2d at 136-37.
Illinois courts have also defined "income" as "'"a gain or profit"
[citation] and is "ordinarily understood to be a return on an
investment of labor or capital, thereby increasing the wealth of
the recipient" [citations].'" In re Marriage of Worrall, 334 Ill.
App. 3d 550, 553-54 (2002).
Under these definitions, a variety of payments qualify as
income under section 505(a)(3). Courts have included individual
retirement account (IRA) disbursements representing deferred
employment earnings, receipt of company stock from employment stock
options, worker’s compensation awards and the proceeds from
pensions as income under the Dissolution Act. See In re Marriage
10
of Lindman, 356 Ill. App. 3d 462 (2005); In re Marriage of
Colangelo, 355 Ill. App. 3d 383 (2005); Department of Public Aid ex
rel. Jennings v. White, 286 Ill. App. 3d 213 (1997); In re Marriage
of Klomps, 286 Ill. App. 3d 710 (1997). However, using the same
statutory definition, other courts have determined that withdrawals
from self-funded IRAs and proceeds from the sale of residential
property do not constitute income under section 505(a)(3). See In
re Marriage of O’Daniel, 382 Ill. App. 3d 845 (2008); In re
Marriage of Baumgartner, 384 Ill. App. 3d 39 (2008).
In O’Daniel, the appellate court determined that the father’s
IRA disbursements did not constitute income because IRA accounts
are ordinarily self-funded by the individual account holder. The
court noted that "[w]hen an individual withdraws money he placed
into an IRA, he does not gain anything as the money was already
his. Therefore, it is not a gain and not income." O’Daniel, 382
Ill. App. 3d at 850. In reaching its conclusion, the court
reasoned that the only portion of the IRA that would constitute a
gain for the individual, and therefore income for purposes of child
support, would be the interest or appreciation earnings from the
IRA. O’Daniel, 382 Ill. App. 3d at 850; see also Baumgartner, 384
Ill. App. 3d at 57 (where parent sells home and uses proceeds to
purchase new home, proceeds are not actually available as income).
In this case, the proceeds from the reverse stock split of
Michael’s AEC shares did not involve a gain or recurring benefit or
11
employment compensation. Michael received the proceeds as a result
of an involuntary purchase of stock he owned, which resulted in a
capital loss. In reality, the forced sale reduced Michael’s wealth
because he no longer received the yearly dividends the stock
generated. While the dividends or earnings the stock produced
constituted income under section 505(a)(3), the sale of the stock
did not. The cash proceeds took the place of the former shares of
stock. Michael then used those proceeds to purchase gold coins.
The asset already belonged to Michael, and the proceeds were used
to purchase another investment asset. Accordingly, the proceeds do
not qualify as income for child support purposes.
In reaching our conclusion, we note that the distribution of
stock may constitute income for child support purposes if the stock
is sold pursuant to an employment bonus-based option. See
Colangelo, 355 Ill. App. 3d 383. Here, however, the sale of
Michael’s stock was necessitated by the company’s decision to
implement a reverse stock split of minority shareholders, a
decision over which Michael had no control.1 He then utilized the
1
The record indicates that the company forced all share-
holders who owned less than 5% to sell their stock. The letter
to the shareholders explicitly stated that all stockholders who
owned less than 5% "will be cashed out at the current appraised
value per share and will no longer own stock in AEC Holding
Company."
12
proceeds to purchase other investment assets. Under these
circumstances, the proceeds do not qualify as "net income" under
section 505(a)(3).
B. Gifts From Parents
Molly also argues that the trial court erred as a matter of
law in failing to include gifts that Michael may receive from his
family as income under section 505(a)(3) of the Dissolution Act.
In calculating net income, the trial court is required to
include all income, regardless of its recurring nature. Einstein,
358 Ill. App. 3d at 271. The relevant focus under section
505(a)(3) is the noncustodial spouse’s economic situation at the
time the child support calculations are made. If a parent receives
payments that would qualify as "income" under the Dissolution Act,
those payment may not be excluded on the basis that they might not
be received in the future. Rogers, 213 Ill. 2d at 138. The trial
court’s net income determination lies within its sound discretion.
Deem, 328 Ill. App. 3d at 457.
In Rogers, the noncustodial father received yearly gifts and
loans from his parents totaling more than $46,000, which he had
never been required to repay. The court concluded that the annual
gifts were income for purposes of determining child support because
they represented a valuable benefit to the father that enhanced his
wealth and facilitated his ability to support his son. Rogers, 213
Ill. 2d at 137.
13
In this case, Molly requested language in the court’s order
requiring Michael to include 28% of any gifts or loans he may
receive from his parents in his child support payments in
accordance with statutory guidelines. The evidence demonstrated
that Michael received significant annual gifts from his parents,
including substantial "loans" without repayment and a vehicle.
These gifts appear to represent a continuing source of income that
he has received over the course of his adult life. Moreover, they
are a valuable benefit to Michael that facilitate his ability to
support the girls. The trial court should not exclude such
payments simply because similar payments may not occur in the
future. See Rogers, 213 Ill. 2d at 138. Accordingly, any
substantial gifts from Michael's parents should have been included
in his net income, and the trial court abused its discretion in
failing to consider them for child support purposes. We therefore
remand the matter for the trial court to enter a modified child
support order to include as income gifts Michael receives from his
family.
C. Bonus/Commission
Next, Molly argues that the trial court improperly computed
Michael’s net income by failing to include any bonus or commission
that he may earn.
As with Michael's gifts, the trial court's refusal to include
28% of Michael's bonuses in its calculation of net income was an
14
abuse of discretion. In Einstein, the father maintained it was
unfair to include his $10,000 bonus in calculating net income
because it was not guaranteed from year to year. Einstein, 358
Ill. App. 3d 263. The Einstein court held that the bonus payment
he received, although possibly not recurring, should be included
for support purposes. Einstein, 358 Ill. App. 3d at 271. Like the
father in Einstein, Michael's bonus is not guaranteed. However,
Michael is entitled to one if he satisfies certain employee
expectations, and any bonus or commission he earns is income for
purposes of determining child support. Accordingly, the trial
court erred in refusing to include his bonus in the child support
award. On remand, the trial court should order Michael to pay 28%
of any bonus or commission he earns from his employer as child
support.
II through VII
The following material in sections II through VII is not to be
published pursuant to Supreme Court Rule 23. 166 Ill. 2d R. 23.
[THE FOLLOWING MATERIAL IS NOT PUBLISHED
PURSUANT TO SUPREME RULE COURT RULE 23.]
Molly claims that the trial court erred as a matter of law and
abused its discretion in terminating her maintenance award.
Section 510 of the Dissolution Act provides that orders for
the payment of maintenance may be modified by a trial court upon a
showing of a substantial change in circumstances. A "substantial
15
change in circumstances" is shown when either the needs of the
spouse receiving maintenance or the ability of the other spouse to
pay maintenance has changed. In re Marriage of Neuman, 295 Ill.
App. 3d 212 (1998). The statutory factors to consider when
reviewing maintenance include: (1) "the property, including
retirement benefits, awarded to each party under the judgment of
dissolution *** and the present status of the property"; (2) "the
increase or decrease in each party’s income since the prior
judgment"; and (3) "any other factors found to be just and
equitable." 750 ILCS 5/510(a-5)(6),(7) & (9) (West 2008). The
party seeking modification of a maintenance order bears the burden
of showing the change and presenting evidence of a motive other
than evasion of financial responsibility. In re Marriage of Imlay,
251 Ill. App. 3d 138 (1993).
In this case, the trial court terminated Michael’s $900 per
month maintenance obligation solely because Michael no longer
received AEC dividends. While the trial court recognized that
Michael no longer owned AEC stock, the court neglected to consider
the change in status of the property as a factor in maintenance
modification. The plain language of section 510(a-5) requires the
court to consider both marital and nonmarital property and the
current status of the property awarded in the dissolution judgment.
750 ILCS 5/510(a-5)(6) (West 2008). Accordingly, the trial court
erred as a matter of law in failing to consider all of Michael’s
16
nonmarital property in terminating Molly’s maintenance award. We
therefore remand this issue to allow the trial court to review
Michael’s request for modification of maintenance in light of the
factors enumerated in section 510(a-5), including the proceeds
Michael received from the reverse stock split.
III
Molly also argues that the trial court erred in altering the
percentage of responsibility for the children’s uncovered medical
expenses from 60%/40% to 50%/50%.
Initially, Molly claims that the court’s modification was
erroneous because the percentage was a "bargained for" provision of
the settlement agreement that was nonmodifiable. We disagree.
Sections 510(a)(1) and 510(a-5) of the Dissolution Act provide
that orders for the payment of child support may be modified by a
trial court. 750 ILCS 5/510(a)(1), 510(a-5) (West 2008). Health
care coverage is a form of child support that may be modified under
these provisions. 750 ILCS 5/505.2(b)(1) (West 2008); In re
Marriage of Turrell, 335 Ill. App. 3d 297 (2002). It is well
established that the trial court has the authority to modify a
child support provision in a dissolution judgment that was entered
in accordance with a settlement agreement. Blisset v. Blisset, 123
Ill. 2d 161 (1988). "[T]he statutory power of a court to reduce
the amount of *** child support is not defeated by the fixing of
the amount of the payments in a settlement agreement which was
17
incorporated in the decree." Lamp v. Lamp, 81 Ill. 2d 364, 370
(1980). Thus, the medical expense provision of the parties’
settlement agreement was modifiable.
Alternatively, Molly argues that the percentage modification
was inappropriate because Michael failed to show a substantial
change in circumstances.
Modifications to the provisions of the agreement pertaining to
the payment of medical expenses are governed by section 510(a) of
the Dissolution Act. 750 ILCS 5/510(a) (West 2008); Turrell, 335
Ill. App. 3d at 310. That section provides that the provision of
any judgment involving maintenance or support may be modified upon
a showing of a substantial change in circumstances. 750 ILCS
5/510(a) (West 2008). An economic change resulting from an
investment may constitute a material change in circumstances
sufficient to modify child support. In re Marriage of Hardy, 191
Ill. App. 3d 685 (1989). The determination that there has been a
substantial change in circumstances to warrant the modification
lies within the trial court’s discretion and will not be disturbed
absent an abuse of discretion. Turrell, 335 Ill. App. 3d at 307.
An abuse of discretion occurs when no reasonable person would agree
with the decision. In re Marriage of Mitteer, 241 Ill. App. 3d 217
(1993).
The record establishes that as a consequence of Michael’s loss
of his AEC stock, he will no longer receive the significant
18
dividends and pass-through income that have been distributed to
him. Michael’s 2008 financial affidavit indicated that he received
$1,940.50 per month from stock dividends. The company paid Michael
$192,780 to buy back the shares he owned in the reverse stock
split. Although these proceeds could be used to purchase other
income producing stocks, the income generated by the new
investments may not result in the significant dividend payments
Michael previously received. Moreover, Michael’s percentage of
responsibility was not dramatically reduced or terminated; he is
still responsible for 50% of the children’s uncovered health
expenses. In light of these circumstances, we cannot say that no
reasonable person would agree with the court's decision. The trial
court did not abuse its discretion by equally apportioning the
children’s uncovered medical expenses between the parties.
IV
Molly also claims that the trial court erred in determining
that Michael was not obligated to return the children’s personal
property.
The disposition of property rests within the sound discretion
of the trial court and will not be disturbed on appeal absent an
abuse of discretion. See In re Marriage of Scafuri, 203 Ill. App.
3d 385 (1990).
In her motion for return of property, Molly sought an order
from the court directing Michael to return certain personal
19
property to the children. At the hearings, Michael testified that
all of the personal items in Molly’s motion were given to the girls
by him or his parents. He further testified that the girls only
used them when they stayed at his house. Since the girls had not
stayed with him for more than three years, Michael donated the
items to Goodwill. It was therefore impossible for Michael to
return the personal property. Given these facts, we find no error
in the trial court’s order denying Molly's request.
V
Next, Molly contends that the trial court abused its
discretion in awarding $25,000 in attorney fees under sections
508(a) and 508(b) of the Dissolution Act.
Attorney fees are primarily the responsibility of the party
for whom the services are rendered. In re Marriage of Walters, 238
Ill. App. 3d 1086 (1992). Section 508(a) allows the court, after
considering the financial resources of the parties, to order a
spouse to pay the fees necessarily incurred by the other party.
750 ILCS 5/508(a) (West 2008). The party seeking an award under
section 508(a) must show an inability to pay and an ability to pay
by the other spouse. Walters, 238 Ill. App. 3d at 1100.
In March 2009, Molly petitioned the court for the attorney
fees she incurred after the trial court's December 28, 2006, order.
Her interim petition sought fees for numerous petitions for rules
to show cause as well as her response to Michael's motion to
20
terminate maintenance. In support, Molly included affidavits from
four attorneys. Attorney Richard Zuckerman submitted affidavits
for fees showing that he expended 14.8 hours for work he performed
on various petitions for rules to show cause and 70.8 hours in
pursuit of issues of child support and maintenance. Attorney
Jeffery Rock filed an affidavit demonstrating that Molly’s attorney
fees with his firm for the months of May and June of 2008 equaled
$3,784.68. Attorney Judith Seritella’s affidavit indicated that
Molly incurred $4,935 in legal fees in the fall of 2008. Finally,
Attorney Steven Wakeman submitted affidavits, totaling more than
$42,886 in fees.
In considering Molly's request, the trial court reviewed the
financial affidavits of assets and expenses submitted by both
parties. Molly's affidavit demonstrated that she had substantial
nonmarital assets, owned the marital home and had no marital debt.
In light of the parties' financial resources, the trial court did
not abuse its discretion in balancing their attorney fees and
determining that Michael had the ability to pay $25,000 of Molly's
fees under section 508(a).
Nevertheless, Molly argues that the trial court should have
awarded additional attorney fees under section 508(b).
Section 508(b) of the Dissolution Act provides:
"In every proceeding for the enforcement of an order or
judgment when the court finds that the failure to comply
21
with the order or judgment was without compelling cause
or justification, the court shall order the party against
whom the proceeding is brought to pay promptly the costs
and reasonable attorney’s fees of the prevailing party."
750 ILCS 5/508(b) (West 2008).
Section 508(b) is mandatory, not discretionary, and does not allow
for the court to exercise its discretion as to payment if the
defaulting party’s conduct was without cause or justification. 750
ILCS 5/508(b) (West 2008); Walters, 238 Ill. App. 3d at 1098. An
award under section 508(b) does not depend on a party’s inability
to pay the fee or the other party’s ability to pay. Walters, 238
Ill. App. 3d at 1098. However, the fee awarded is subject to a
determination of reasonableness based on factors such as time
spent, the ability of the attorney, and the complexity of the work.
See Richardson v. Haddon, 375 Ill. App. 3d 312 (2007). "[W]here
the allowance of attorney’s fees is contested and a hearing is
requested, the trial court should conduct a hearing on the
question." Scott v. Scott, 72 Ill. App. 3d 117 (1979).
Without conducting a separate hearing, the trial court found
the attorney fees reasonable but awarded Molly an arbitrary sum of
$25,000. However, pursuant to section 508(b), Molly was entitled
to fees for the amount spent in securing child support back
payments, seeking income reporting information, forcing proper
income tax return reporting, and seeking the disclosure of various
22
assets. Under section 508(b), a hearing should have been conducted
to determine the amount of fees she incurred in pursuing petitions
to enforce court orders. See In re Marriage of Eberhardt, 387 Ill.
App. 3d 226 (2008) (separate hearing required to determine fees
under section 508(b)). We therefore reverse the trial court’s
award of attorney fees and remand for a hearing on this issue.
VI
Molly further claims that the trial court improperly resolved
Michael’s failure to file amended tax returns for the 2005 through
2008 tax years.
According to the terms of the parties’ settlement agreement,
Michael was allowed to claim Kaleigh as a dependent provided he
paid child support as ordered. Michael subsequently claimed
Kaleigh as a dependent but failed to meet his support obligation.
As a result, the trial court ordered Michael to file amended
returns for 2005 through 2008, the years in which he violated the
judgment. In its final order, the trial court found that Michael
failed to file the amended income tax returns, but relieved him of
the requirement to do so, noting that amended returns may subject
the parties to an audit and would not be "in anyone’s best
interests." To remedy the disadvantage to Molly, the trial court
allowed her to claim both children as dependents on her income tax
return until the children turned 18 or completed high school.
Under these circumstances, the trial court’s decision is an
23
abuse of discretion. Michael was ordered to pay child support
before claiming an exemption, found in contempt for failing to
follow that agreement, ordered to file amended returns to remedy
the situation, and failed to comply with that order as well. That
a party has failed to comply with a divorce decree constitutes
prima facie evidence of contempt and the burden then shifts to the
contemner to show that the conduct objected to was not willfully
committed. See Palacio v. Palacio, 33 Ill. App. 3d 1074 (1975).
Here, the trial court found Michael’s conduct willful. The trial
court abused its discretion when it relieved him of the duty to
amend his tax returns and to simply switch the years of allowed
exemptions based on mere convenience. Moreover, the trial court's
alternative remedy fails to account for any tax advantage Michael
previously received, the future fluctuation in the parties' income,
or Molly's ability to claim both girls as dependents for all four
subsequent tax years. We therefore vacate that portion of the
trial court’s order allowing Molly to claim both children as
dependents on her income tax returns for the next four years. We
remand to the trial court to direct Michael to file his amended tax
returns as previously ordered.2
2
If, on remand, Molly's loss on her tax returns for 2005
through 2008 can be determined, the court may simply award her a
lump sum payment for that amount without requiring Michael to
file amended tax returns.
24
VII
Last, Molly maintains that the trial court erred in modifying
the full income reporting requirements previously imposed on
Michael.
The dissolution of marriage is entirely statutory in origin
and nature, and courts in dissolution cases must exercise their
powers within the limits of the Dissolution Act. In re Marriage of
Rhodes, 326 Ill. App. 3d 386 (2001). Section 510(a) of the Act
provides in relevant part that the provisions of any judgment
respecting maintenance or support may be modified only upon a
showing of a substantial change in circumstances. 750 ILCS
5/510(a) (West 2008). The determination of the equities of
discharge of obligations will not be reversed on appeal absent an
abuse of discretion. Hardy, 191 Ill. App. 3d 691-92.
Under the dissolution judgment in this case, Michael was
ordered to provide Molly with annual copies of his income tax
returns, including all supporting schedules, W-2 forms and 1099
forms. Although neither party requested a change in Michael’s
reporting requirements, the trial court modified Michael’s
obligation in the final supplemental judgment to allow him to only
provide a copy of his W-2 form from his employer.
We can find no substantial change in circumstances that permit
this modification of the prior order. The record indicates that
Michael owned various stocks and other assets and that he had
25
previously failed to disclose certain brokerage accounts and trust
property. By allowing Michael to provide only his W-2 forms, the
trial court stripped Molly of any ability to review other sources
of income Michael might receive for support purposes. We find that
the trial court’s decision to reduce Michael income reporting
obligation was an abuse of discretion. We vacate the modification
and remand the matter to the trial court to reinstate the prior
reporting requirements. On remand, the court shall direct Michael
to provide Molly with copies of his income tax returns and all
supporting schedules, W-2 forms and 1099 forms, from the date of
his last full annual report under the previous order.
[The preceding material is not to be published pursuant to
Supreme Court Rule 23. 166 Ill. 2d R. 23.]
CONCLUSION
For the foregoing reasons, we affirm and remand for
modification of the May 27, 2009, support order regarding any gifts
and bonuses Michael receives, retroactive to the date of the order.
For the remaining unpublished issues, we remand for reconsideration
of Michael's request to modify maintenance in light of the stock
proceeds. We reverse the award of attorney fees and remand for a
separate hearing to determine the amount of fees related to the
petitions for rules to show cause. We vacate that part of the
court’s order that relieved Michael of his duty to file amended tax
returns for the years 2005 through 2008 and remand with further
26
instruction. We also vacate that portion of the trial court’s
order modifying Michael’s income reporting obligation and reinstate
the previous reporting requirements. We otherwise affirm the trial
court’s order resolving the remaining issues in the dissolution
proceeding. See Walters, 238 Ill. App. 3d 1086.
Affirmed in part; remanded in part; reversed and remanded in
part; and vacated and remanded in part.
CARTER, J., concurs.
JUSTICE McDADE, concurring in part, dissenting in part:
I am in general agreement with the majority’s analysis and conclusions regarding each of the
issues on review save one. For the reasons that follow, I believe the trial court erred in concluding
that the proceeds of the sale of Michael’s AEC stock did not constitute income, and further believe
that those proceeds should be considered in the recalculations of child support and maintenance on
remand. I would reverse the trial court’s order on that issue and, therefore, respectfully dissent from
the majority’s contrary decision.
Molly argues first that the trial court erred in treating the sale as an exchange of one form of
property for another form of property. Instead she contends the funds are income for child support
purposes because income includes "a valuable benefit *** that enhance[]s wealth and facilitate[]s
ability to support." In re Marriage of Rogers, 213 Ill. 2d 129, 137, 820 N.E.2d 386, 390 (2004).
Molly concedes that the stock itself was an "intangible" and "non-spendable" "non-producing asset."
However, once Michael sold it, he acquired "something [he] could spend as he saw fit." Molly asks
this court to order him to pay 28% of those funds as child support. Second, Molly asserts that under
section 510(8) of the Dissolution Act the income from the sale of the stock is property that trial court
27
should have considered in determining Michael’s maintenance obligation.
Michael responds Rogers is distinguishable because the sale of his stock was not a "gift" and
the proceeds of the sale are not income because "[t]he cash proceeds from the stock purchase ***
took the place of the former shares of stock, as another form of property." Michael notes the
property in its former form (shares of stock) was non-marital property, and he relies on In re
Marriage of O'Daniel, 382 Ill. App. 3d 845, 850, 889 N.E.2d 254, 258 (2008), for the proposition
that because the "property" already belonged to him as non-marital property the change in form of
the property from stock to cash does not make the cash "income."
In O’Daniel, the question was whether an IRA distribution constituted income. The court
held that:
"[w]hen an individual withdraws money he placed into an IRA, he
does not gain anything as the money was already his. Therefore, it is
not a gain and not income. The only portion of the IRA that would
constitute a gain for the individual would be the interest and/or
appreciation earnings from the IRA." O'Daniel, 382 Ill. App. 3d at
850, 889 N.E.2d at 258.
I find Michael’s argument to be unpersuasive. As his non-marital property, the stock
represented an investment. Thus, O’Daniel actually supports Molly’s position that Michael’s
earnings from the investment constitute income. O’Daniel holds that any appreciation in value of
the stock "would constitute a gain." Michael notes he suffered a capital loss from the transaction.
Under O’Daniel, the amount of the capital loss goes to the question of whether, as a result of the
transaction, his wealth was enhanced, and may reduce the amount of real income generated from the
proceeds of the sale. However, a capital loss would not change the nature of the earnings generated
by the asset, which in this case constitutes cash proceeds of sale, from income to property. See also
In re Marriage of Colangelo and Sebela, 355 Ill. App. 3d 383, 392, 822 N.E.2d 571, 578 (2005)
28
(“even though the unrealized stock options were allocated to the parties as marital property, the
realized stock distribution met the definition of ‘income’ for purposes of determining child
support”).
Michael also notes that the company required him to cash out his shares as a result of its
decision to institute a reverse stock split. While the fact that Michael did not choose to sell his asset
but was forced to sell is relevant to the question of his good faith in the transaction, it is irrelevant
to the question of whether the transaction generated spendable earnings that enhanced his wealth.
Michael contends that "[t]he concept of property is distinct from income; otherwise, all
property transactions, which naturally result in another form of property, would be considered
income." However, if cash proceeds are held to be just another form of property, then no sale of a
capital asset would ever generate income. As our supreme court has noted:
"As the word itself suggests, ‘income’ is simply ‘something
that comes in as an increment or addition ***: a gain or recurrent
benefit that is usu[ually] measured in money ***: the value of goods
and services received by an individual in a given period of time.’
Webster's Third New International Dictionary 1143 (1986). It has
likewise been defined as ‘[t]he money or other form of payment that
one receives, usu[ually] periodically, from *** investments, royalties,
gifts and the like.’ Black's Law Dictionary 778 (8th ed.2004)."
(Emphases added.) Rogers, 213 Ill. 2d at 136-137, 820 N.E.2d at
390.
I believe this court should hold that the proceeds of Michael’s stock sale constitute income.
29