FOU RTH DIVI SI ON August 12, 2010

No. 1-09-1789 In re MARRI AGE OF RONAL D G. VAU GHN, Petitioner, and J I L LK. VAUG HN, Respondent and Third- PartyPetitionerAppellant

v. (B lue Cross Blue Shield of I llinois , Third-Party

Respondent-Appe llee). ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) Appea l from the Circuit Court of Cook County No. 06 D3 30886 Honora ble Samuel J . Be tar I I I , J udg e Presiding

.

J USTI CE GAL L AGHER deliver ed the opinion of the c ourt: Respondent and third-pa

rty petitioner, J ill K. Vaughn (Ji ll), filed a c omplaint ag ainst

1 third-par ty responde nt, Blue Cross B lue Shield of I llinois (B lue Cross), for its failure to comply with the Income Withholding for Support Ac t (the Withhol ding A ct) (750 I L CS 28/ 1 et seq. (West 2006)). Pursuant to sec tion 2-619 of the I llinois Code of Civil P roce dure ( 735 I L CS 5/ 2-
The Withholdi ngAct provide s that an oblig ee ma y bringa civil ac tion ag ainst the payor 1 to collect the Withholding Act’ s penalty . 750 I L CS 28/ 35(a) (West 2006). Thus, since J ill joi ned this civil action with her dissolution of marria g e proc eeding , J ill is proper ly ref err ed to as a

third-par ty petitioner, and B lue Cross is properly ref err ed to as a

thirdparty responde nt. See 735 I L CS 5/ 2-406 (West 2006).1-09-1789

619(a) (9) ( West 2006)), the trial cour t involuntarily

dismiss ed Ji ll’s complaint beca use it found that J ill failed to prove that B lue Cross knowing ly violated the Withholdi ngAct. On a ppeal, Jil l contends that: (1) beca

use B lue Cross remits pay ments to a sole proprie torship, it is a “pa y or” under the statute and is re quired to comply with the income withholding notice it rece ived; (2) the complaint was imprope rly dismiss ed bec ause the arguments and af fidavits submitt ed by

Blue Cross do not constitut e a ba sis for dismissal on a section 2-619 motion; and (3) B lue Cross is subject to mandatory

penalties for

its failure to comply

with the Wit hholding Ac t. For the following rea sons, we re verse and re mand for f urther pr ocee dings. BA CKGROUND On April 24, 2008, a unifor m order of

support was e ntere d in the underlying dissolution of marr iag e ac tion requiringpetitioner, Dr. Rona ld G. Vaughn (Ronald), to pay J ill unallocated family support and medica l insurance premiums for the c ouple’s minor childre n. Ronald operates a c hiroprac tic business under the na me of Va ug hn Chiroprac tic and Athletic Perfor mance Center ( Vaughn Center) . Ronald is a Blue Cross prefe rre d provider a nd is list ed under the Blue Cross provider f inder a s “Dr. Rona ld G. Vaughn.” B lue Cross pay s a portion of the medica l expenses incurre d by its insureds to the provider groups or individual provider s who provide c overe d service s. On a we ekly basis, Blue Cross remits pay ments for the se rvice s Ronald provides to its insureds via an e lectronic funds transf er a ccount that wa s established in 2006. On May

1, 2008, pursuant to the Withholdi ngAct, Ji ll sent Blue Cross an inc ome withholding notice that require d Blue Cross to withhold and pay over the unallocate d support

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pay ments that Ronald owes Ji ll. Blue Cross re sponded to the withholding notice by stating, in part: “Plea se be a

war e we do not become involved in pe rsonal ca ses and a re not a llowed to set up this ty pe of c onvenienc e for

the provider .” Ji ll sent Blue Cross anothe r withholding notice , a copy of the orde r of support, a nd a copy of the re levant portion of the Withholding Ac t. She also informed B lue Cross that she would pursue the Withhol ding A ct’s statutory penalties if B lue Cross continued to disreg ard its duty to comply

with the withholding notice. B lue Cross ag ain responde d that it was “not allowe d to set up this ty pe of c onvenienc e for

the provider .” On September

29, 2008, J ill filed a complaint to enfor ce sta tutory penalties a g ainst Blue Cross for its failure to comply with the Wit hholding Ac t. I n response , Blue Cross filed a sec tion 2-619 motion for involuntary dismiss al. B lue Cross moved to dismiss J ill’s complaint because it alleg ed that it did not pay income to Ronald. Alterna tively , Blue Cross moved to dismi ss J ill’s complaint beca

use it alleg ed that it did not knowingly violate the Withholdi ngAct. B lue Cross further elabor ated that a lthough it re ceive d withholding notices that require d it to withhol d and pay over the income it paid to Ronald, it had “no re ason to believe [t hat] itshould withhold and remit” the inc ome that it paid to Vaug hn Center. B lue Cross attache d an af fidavit and e x hibits t o its mot ion which showed that Blue Cross made its fund transfe rs payable to Va ug hn Center f

or Ronald’s treatment of Blue Cross’s insureds. J ill responded to B lue Cross’s motion by submitt ing a

n aff idavit from Ronald. In his aff idavit, Ronald stated that he oper ates Va ug hn Center a s a sole propr ietorship and that Va ug hn Center is a pse udony

m under whic h he does business. Ronald a lso stated that Blue Cross transmits the pay

ments directe d to Vaughn Center into his persona l chec king a ccount.

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On Fe bruar

y 20, 2009, the trial cour

t gr anted B lue Cross’s sec tion 2-619 motion for involuntary

dismiss al. The tria l court’s orde r does not cle arly identify the basis on which it g rante d Blue Cross’s section 2-619 motion. Howeve r, the trial c ourt stated at the c onclusion of the hea ringon the sec tion 2-619 motion t hat it found that J ill “failed to show that the r espondent, [ sic ] Blue Cross-B lue Shield, knowingly failed to c omply

with” the Withholdi ngAct. More over, the trial cour

t pointed out that Blue Cross’s e x hibits showed that Blue Cross wr ote che cks to Vaughn Center, a

nd J ill did notprese nt cre dible evidenc e that B lue Cross “had know ledg e that the funds that they

wer e tra nsfer ringwer e g oing to a

n individual who was [a] child support obligor .” Ji ll then filed a motion to reconside r, and the motion was denied. This appe al follows. ANALYSI S I . Interpre tation of the Word “Individual” in the Withhol ding A ct’s De finition of “I ncome” As an initial matter, the pa rties disag ree on whether

Blue Cross is subject to the Wit hholding Ac t. Although it is not clear from the r ecor d, beca

use the trial c ourt addre ssed whether Blue Cross knowingly

violated the Withholdi ngAct, it presumably first found that B lue Cross is Ronald’s pay or and thus subjec t to the Wi thholding Ac t’s require ments. Howeve r, beca use a de termination of whe ther the w ord “individual” in the Withholding Ac t includes a sole proprietor ship is a question of law, our standa rd of r eview is de novo , and we do not give the trial court’s inter

pretation any

defe renc e. See Ryan v . Board of Trust ees of the G eneral Assem bly Retireme nt System , 236 I ll. 2d 315, 319, 924 N.E.2d 970, 973 (2010). Courts should enforce an unambiguous statute as it is written. E.g., Ryan , 236 I ll. 2d at 319, 924 N.E.2d at 973. The Wit hholding Ac t require s a pay or, upon re ceipt of a

n income

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withholding notice, to de duct support pay ments from the income that the payor pay s to an obligor . 750 I L CS 28/ 35(a) (West 2006). The pa y or must then transmit the withheld amount to the State Disburseme nt Unit within s even busine ss day s after the date tha

t the amount would have be en paid to the oblig or. 750 I L CS 28/ 35(a) (West 2006). Ronald is undisputedly an obligor . Howeve r, the pa rties dispute whethe r B lue Cross is Ronald’s payor. The Withholdi ngAct def ines a “ payor” a s “any

payor of income to an obligor .” 750 I L CS 28/ 15(g ) (West 2006). Thus, in orde r for Blue Cross to be a “pa

y or,” it must pay

Ronald “income.” The Withholdi ngAct def ines “income ,” in per

tinent part, as “ any

form of pe riodic pay ment to an individual, reg ardle ss of source .” 750 I L CS 28/ 15(d) ( West 2006). Blue Cross argues that it does not pay Ronald income bec ause it pay s Vaug hn Center. B lue Cross further contends that Va

ug hn Center is not an “ individual” under the Wit hholding Ac t’s definitions of “income” and “oblig or.” H oweve r, the a ffidavit submitted by Ronald establishes that Ronald is a sole proprie tor and Va

ug hn Center is a le g al nonentity . “[A] s ole proprie torship has no leg al identity separ ate f

rom that of the individual who owns it.” Vernon v. Sc huster , 179 I ll. 2d 338, 347, 688 N.E.2d 1172, 1176-77 ( 1997). More over, e ven if a sole proprie tor does business under a fic titious name, the sole proprietor has not cre ated a

separ ate leg al entity

. Vernon , 179 I ll. 2d at 347-48, 688 N.E.2d at 1176-77. Thus, the word “ individual” in the Wit hholding Ac t’s definition of “inc ome” include s a sole proprietorship. See Shively v . Bellev ille Tow nship High School District No. 201 , 329 I ll. App. 3d 1156, 1165-66, 769 N.E.2d 1062, 1070 (2002) (interpr eting “individuals” in the School Code’s prof essional servic es exemption (105 I L CS 5/ 10-20.21(a )(i) (West 2006)) to re fer

“to the ones pe rfor

ming the se rvice , not the ones with whom the contra ct is

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made” beca

use, if “individuals” r efe rre d to the latter, sole pr oprietorships, but not corporations, would fall under

the exemption). Blue Cross also argues that the income it pay s to Vaug hn Center be longs to its insureds, not Ronald, and if it complied with the income withholding notice it could be sued by its pay ee (Va ug hn Center) and/or its insureds. This argument has no merit. F irst, the income B lue Cross pay s to Vaughn Center doe s not belong to its i nsureds. It is pay ment made to Ronald for

cover ed service s he has pr ovided to Blue Cross’s insureds. Second, if B lue Cross complied with the withholding notice, it would be pa ying the same amount of income for the same se rvice s but would mere ly

be sendinga portion of that income to the State Disbursement Unit. I f an employ er r ece ives a withholding notice and w ithholds a portion of an employ ee’ s salary , that employ ee c annot claim that he w as not paid his full salary just because some of it was withheld pursuant to a c ourt order . As for B lue Cross’s insureds, ther e is no rea son that they would even be aw are that a portion of the mone y paid to Ronald was sent to the State Disburse ment Unit. An explanation of benef

its statement sent to an insured would simply show the amount cove red a nd the amount paid to the provide r. Consequently , beca use B lue Cross pay s Vaug hn Center income , it was requir ed to comply with the withholding notice that it rece ived from Jil l. I I . The Sec tion 2-619 Motion Next, J ill argues that the trial c ourt improperly dismiss ed her

complaint ag ainst Blue Cross pursuant to Blue Cross’s section 2-619 motion. Although it is not entirely clea r, the trial court e ssentially

rea d Blue Cross’s motion to i nvoluntarily dismiss J ill’s complaint as arguing that even if

Blue Cross was pay

ing Rona ld, it did not knowing ly violate the statute be cause it did

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not know that it was pay

ing Rona ld. “A motion for involuntary dismiss al under

section 2-619 a dmits t he leg al suffic iency of the plaintiff' s claim but asserts ‘a ffirmative matter’ outside of the pleadingthat defe ats the claim.” Czarobski v. Lata , 227 I ll. 2d 364, 369, 882 N.E.2d 536, 539 (2008). “ The phra se ‘af firmative matter ’ enc ompasses any defe nse other tha

n a neg ation of the e ssential alleg ations of the plaintiff' s cause of ac tion.” Kedzie &103rd Currency Ex change , Inc. v . Hodge , 156 I ll. 2d 112, 115, 619 N.E.2d 732, 735 (1993) . Howeve r, “where the af firmative matter

is merely evidenc e upon which de fenda nt expects to contest an ultimate fac t stated in the complaint, section 2-619( a)( 9) should not be used.” A.F.P. Enterprises, Inc . v. Cresce nt Pork, Inc

. , 243 I ll. App. 3d 905, 912, 611 N.E.2d 619, 624 (1993)

. The trial c ourt must resolve any fac tual disputes in a complaint that is broug ht ag ainst a payor under

the Withhol ding A ct. 750 I L CS 28/ 50(a) (West 2006). On a se ction 2-619 motion, when ther e is no rig ht to a jury trial in the ac tion, “the cour t may , in its di scre tion, decide questions of fac t upon the hear ing of the motion.” Crescent Pork , Inc. , 243 I ll. App. 3d 905, 913, 611 N.E.2d 619, 624 (1993) ; 735 I L CS 5/ 2-619(c ) (West 2006). Howe ver, in de cidingthe motion’s merits, “a trial c ourt ca nnot determine disputed f actua l issues solely

upon aff idavits and counter aff

idavits. I f the a ffidavits pre sent disputed fac ts, the parties must be af forde d the opportunity

to have a n evidentiar

y hear ing.” Crescent Pork , Inc. , 243 I ll. App. 3d 905, 913, 611 N.E.2d 619, 624 (1993) ; 735 I L CS 5/ 2-619(c ) (West 2006). Alter natively , the trial cour

t “may deny the motion without prejudice to the rig ht to raise the subjec t matter of the motion by

answe r.” Etten v. Lane , 138 I ll. App. 3d 439, 443, 485 N.E.2d 1177, 1180 (1985). When the

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trial court c hooses to decide the disputed fac tual matter that wa s prese nted in conflicting aff idavits on the section 2-619 motion, and holds an evide ntiary hear ing to do so, “ our duty on appea l is to review not only the law, but also the f

acts, a nd to reve rse the c ircuit court' s order if it is clear ly ag ainst the manifest we ight of the evidenc e.” Etten , 138 I ll. App. 3d at 443, 485 N.E.2d 1177, 1180. Howe ver, if the trial court dismisses the ca use of a ction on the pleading s and aff idavits, as was the c ase he re, our duty on appea l is to determine “whe ther ther e is a g enuine issue of mater ial fac t and whethe r the de fenda nt is entitl ed to judg ment as a matter of law .” 4 I ll. L . & Pra c. Civil Practice BeforeTrial § 41.9 (2d ed. 2009) ; In re M arriage of Musa , 103 I ll. App. 3d 189, 193, 430 N.E.2d 727, 730 (1982)

. At the conc lusion of the arguments of counse l on the motion to i nvoluntarily dismiss , the trial court state d that it found that “petitioner [ sic ] has failed to show that the re spondent, [ sic ] Blue Cross-Blue Shield, knowingly failed to c omply

with” the Withholdi ngAct. F urther elabor atingon its ruling, the tria l court pointed out that Blue Cross’s exhibi ts showed that B lue Cross wrote c hecks to Va ug hn Center, a

nd J ill did not prese nt cre dible evidenc e that B lue Cross “had know ledg e that the f unds that they

wer e tra nsfer ringwer e g oing to a

n individual who was [a] child support obligor .” Blue Cross submit ted an a ffidavit statingthat it made pay ments to Vaug hn Center. Jil l then submitted an aff

idavit from Ronald stating that the pay ments from B lue Cross wer e dire ctly deposited into Ronald’s persona l chec king a ccount. We agree with J ill that if thi s dispute had been pr operly

befor e it, and if this fac t was mater ial, the trial cour t should not have g rante d a section 2-619 motion wher e the c ountera ffidavits ra ised a fa ctual dispute and no e videntiary

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hear ing w as held to re solve this disput e. Howeve r, B lue Cross’s ar g ument that it did not 2 knowing ly

violate the Withholdi ngAct ca nnot properly

be ra ised in a sec tion 2-619 motion for two separ ate r easons. First, eve n if Blue Cross did not knowingly violate the Withholdi ngAct, an unknow ing violation is notan af

firmative matter

but merely

a neg ation of an e ssential element of J ill’s cause of ac tion ag ainst Blue Cross unde r the Withholdi ngAct. See 750 IL CS 28/ 35(a) (West 2006); Hodge , 156 I ll. 2d at 115, 619 N.E.2d at 735. Thus, B lue Cross’s alleg ed unknowingviolation of the Withhol ding A ct could not be the ba sis of its section 2-619 motion for involuntary dismiss al. See Hodge , 156 I ll. 2d at 115, 619 N.E.2d at 735. Second, as a

matter of la

w, the ar g ument that Blue Cross did not knowingly violate the Wit hholding Ac t beca

use it did not know that it was pay ing Rona ld is not a valid defense to this action. See 750 I L CS 28/ 35(a) (West 2006). The Withholding Act imposes a pe nalty on a payor “[i] f the pa

y or knowing ly

fails to withhold the amount desig nated in the income withholding notice or to pa

y any amount withheld to the State Disbursement Unit.” 750 I L CS 28/ 35(a) (West 2006). Howe ver, “ knowing ly ” re fer s to a payor’s omissions that occur a fter the payor re ceive s a withholding notice a

nd presumably

rec og nizes that itpay s income to the individual. 750 I L CS 28/35(a) ( West 2006); compare Thomas v. Diene r , 351 I ll. App. 3d 645, 656, 814 N.E.2d 187, 196 (2004) ( holding that a n employ er who was “ cog nizant” of forw ardingthe child support pay ments within the require d time period but for two “ innocent” ove rsig hts, did not knowingly

We further

note that once J ill subm itted Ronald’s aff idavit, Blue Cross de finitively knew 2 it was paying a

sole proprie tor. 91-09-1789

violate the Ac t), with In re M arriage of Miller , 227 I ll. 2d. 185, 202, 879 N.E.2d 292, 302 (2007); In re M

arriage of Gulla , 382 I ll. App. 3d 498, 503, 888 N.E.2d 585, 589 (2008) ( holding that employ ers knowing ly violated the Ac t where they essentially

disreg arde d the withholding notices that they

rec eived)

. In other wor ds, the Wit hholding Ac t’s penalty provision assumes that a withholding notice is serve d on an ac tual payor and that the payor re alizes that it pay s income to the individual designated in the notice. See Dunaheev. Chenoa W elding &Fabrication, Inc. , 273 I ll. App. 3d 201, 208, 652 N.E.2d 438, 444 (1995) ( stating that a prior ve rsion of the Withholdi ng Act’s leg islative history

indicates that the Withholding Ac t’s penalty applies “only

wher e the employ er knewit was withholding a child support pay

ment from” the oblige e (e mphasis in orig inal)). Thus, the Withholding Ac t assumes that a pa y or re alizes whom it i s paying, a nd its penalty provision simpl y

addre sses whethe r a pa

y or should be pena liz ed if the pa yor re cklessly

or neg lige ntly

does not then withhold the desig nated amount or pay over the withheld amount. See 750 I L CS 28/ 35(a) (West 2006); Thomas , 351 I ll. App. 3d at 656, 814 N.E.2d at 196. The ref ore, even if a payor does not re alize that its pay ee is in fa ct the oblig or name d in the notice, that fa ct would not provide a va lid defense that would exempt it from the Withholding Act’ s penalty provision. See 750 I L CS 28/ 35(a) (West 2006); see a lso Burrs v. Burrs , 66 Ohio App. 3d 628, 632, 585 N.E.2d 918, 920 (1991) (holding that the words “ knowing ” and “ knowing ly ” in a statutory provision that imposed liabili ty on employ ers if the y

knowing ly

failed to notify

a child support enfor ceme nt ag ency of any lump-sum pay

ment made to an e mploy ee did not allow a n employ er to de fend on the basis of its lack of know ledg e of a lump-sum pay

ment it made to its

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own employ ee) . In sum, “knowing ly ” does not re fer to knowledg e of a

pay ee’ s exi stence or identity , or whe ther the notice rec ipient believes it is a “pa y or” a s defined in the Wihholding Ac t. “Knowing ly ” re fer s to a knowingfailure to comply with the withholding notice. Blue Cross rec eived a

withholding notice that was prope rly completed a

nd sent ac cording to the Wit hholding Ac t’s provisions. Howeve r, instead of complying w ith the notice or filinga decla ratory judgme nt action to challeng e its identification as a payor in the under lying c ase, B lue Cross sent a re sponse to J ill in which it s tated that it is “not allowed to set up this ty pe of convenie nce f

or the provide r.” This is ana logous to the e mploy ers in Miller , 227 I ll. 2d at 202, 879 N.E.2d at 302, a

nd Gulla , 382 I ll. App. 3d at 503, 888 N.E.2d at 589, who disre g arde d the withholding notices the y

rec eived. B lue Cross cannot avoid the Wit hholding Ac t by mere ly stating that it is not allowed to offe r a “ convenie nce” to a provider when it is require d by

statute to do so and has re ceive d proper notice. Thus, bec ause whether Blue Cross knew it was pa ying the obligor

is not a valid defe nse to this action, the trial cour t errone ously

g rante d Blue Cross’s motion to di smiss. Finally , we note that the statutory penalty for a knowingviolation of the Wit hholding Ac t is mandatory , not discretionar y . See Miller , 227 I ll. 2d 185, 879 N.E.2d 292 (re versingthe appe llate cour t for re mandingthe ca se to the trial cour t to determine a

less sever e penalty ). CONCLUSI ON For the fore g oing r easons, we hold that Blue Cross is a pa y or and is subjec t to the Wit hholding Ac t. Moreover , beca use an unknow ing violation is not an af firmative matter

and beca use “know ingly” in the statute doe s not refe r to whethe r or not B lue Cross knew it was a

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payor, the trial c ourt err ed in g rantingBlue Cross’s section 2-619 motion. We remand this ca se for f urther pr ocee dings c onsistent with thi s opinion. Reverse d and re manded. NEVI L L E, J ., concur s. O’B RI EN, J., s pecia lly concur s.

12JUSTICE O'BRIEN, specially concurring:

"What a tangled web we weave..." This case could have been resolved with a phone call between the attorneys. The attorney for Blue Cross-Blue Shield said at oral arguments they would have paid the sums if the notice had been properly entitled; the Withholding Act provides that either party could have petitioned the court to do that. A phone call and agreed order could have solved this problem. Instead, countless hours and dollars were spent on this

case. Very disheartening. I concur on the law and the result and am disheartened at the use of the courts in this manner.1-09-1789 REPORTER OF DECI SI ONS - I L L I NOI S APP EL L ATE COURT (F ront Sheet to be Attac hed to Eac h case )

_____________________________________________________________________________ In reMARRI AGE OF RONAL D G. VAU GHN,

Petitioner, and J I L LK. VAUG HN,

Respondent and Third- Party Petitioner-Appellant

v. (B lue Cross Blue Shield of I llinois ,

Third-Party

Respondent-Appe llee).

____________________________________________________________________________ No. 1-09-1789 Appellate Court of

I llinois First District, F ourth Division August 12, 2010

_____________________________________________________________________________

J USTI CE GAL LAGHER deliver ed the opinion of the c ourt.

NEVI L L E, J ., concur s. O’B RI EN, J., s pecia lly

concur s.

_____________________________________________________________________________ Appea l from the Circuit Court of Cook County

. Honora ble Samuel J . Be tar I I I , J udg e Presiding

.

_____________________________________________________________________________ For APPEL L ANT, Ann C. B rady , Palatine, I Land Jerome Marvin Ka plan, Chicag o, I L (Ann C.
131-09-1789

Br ady , J erome Marvin Ka plan, of c ounsel). For APPEL L EE, Pugh, Jones, J ohnson & Q uandt, P.C., Chi cag o, I L(Kathleen R. PasulkaBr own, of c ounsel).

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