Court Opinion

ID: 9297116
Source: CourtListenerOpinion
Date Created: 2022-11-29 20:04:27.531142+00
Date Added: 2024-06-11T17:13:24.111191
License: Public Domain

2022 IL App (2d) 210527-U
                                         No. 2-21-0527
                                Order filed November 29, 2022

      NOTICE: This order was filed under Supreme Court Rule 23(b) and is not precedent
      except in the limited circumstances allowed under Rule 23(e)(1).
______________________________________________________________________________

                                            IN THE

                             APPELLATE COURT OF ILLINOIS

                              SECOND DISTRICT
______________________________________________________________________________

In re MARRIAGE OF                      ) Appeal from the Circuit Court
MOLLY LEVY,                            ) of Lake County.
                                       )
      Petitioner-Appellee,             )
                                       )
and                                    ) No. 18-D-1518
                                       )
JOSH LEVY,                             ) Honorable
                                       ) Stephen M. DeRue,
      Respondent-Appellant.            ) Judge, Presiding.
______________________________________________________________________________

       JUSTICE BIRKETT delivered the judgment of the court.
       Justices Hutchinson and Schostok concurred in the judgment.

                                           ORDER

¶1     Held: The trial court properly denied respondent’s section 2-1401 petition seeking relief
             from a default judgment dissolving the parties’ marriage. First, respondent did not
             establish that his mental health issues or any misconduct by petitioner were a basis
             for relaxing section 2-1401’s due diligence requirement. Second, the default
             judgment’s terms on property division, maintenance, and child support were not
             substantively unconscionable given the evidence of respondent’s income when the
             judgment was entered.

¶2     Respondent, Josh Levy, appeals from an order of the circuit court of Lake County denying

his petition under section 2-1401 of the Code of Civil Procedure (Code) (735 ILCS 5/2-1401 (West
2022 IL App (2d) 210527-U

2020)) seeking relief from a default judgment dissolving his marriage to petitioner, Molly Levy.

We affirm.

¶3                                      I. BACKGROUND

¶4     Petitioner filed a petition for dissolution of marriage on September 13, 2018. The petition

was properly served on respondent, but he failed to answer or appear. On November 9, 2018,

petitioner moved for entry of a default judgment. On November 27, 2018, the trial court granted

the motion and entered a default judgment dissolving the parties’ marriage. The judgment included

the following pertinent findings: (1) the parties had two children: 10-year-old J.O.L and 7-year-

old J.U.L.; (2) petitioner was unemployed; (3) respondent was employed as a real estate broker by

an entity known as Levy Archer, LLC; and (4) according to the parties’ income tax returns,

respondent’s gross income was $112,397 in 2015, $194,138 in 2016, and $872,328 in 2017.

¶5     The judgment awarded petitioner (1) “the sole decision making authority and responsibility

for the parties’ minor children,” (2) exclusive possession of the former marital home (which was

a rental property) and “100% of the furniture furnishings and personal property contained therein

pursuant to 750 ILCS 5/503 [(West 2018)],” and (3) “100% of the parties’ retirement and non-

retirement accounts and investments, whether held jointly or in the name of either party pursuant

to 750 ILCS 5/503 [(West 2018)].” In addition, the judgment (1) provided, “If any additional

assets are located belonging to the parties’ [sic] which existed as of the date of the Judgment of

Dissolution of Marriage, they are awarded to [petitioner]”; and (2) awarded petitioner monthly

maintenance of approximately $22,000, representing 30% of respondent’s last known annual

income, and $5000 in monthly child support.

¶6     On February 5, 2020, petitioner filed a petition, seeking, inter alia, to relocate the parties’

minor children to Arizona. The trial court granted the petition on December 21, 2020.

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2022 IL App (2d) 210527-U

¶7     On April 6, 2020, respondent filed his section 2-1401 petition to vacate the default

judgment. As subsequently amended, the petition alleged that respondent suffered from mental

illness characterized by delusions. Further, petitioner was aware of respondent’s mental illness

but withheld that information from the court when she secured the default judgment. The amended

petition also maintained that the default judgment’s property distribution, maintenance, and child

support terms were unconscionable.

¶8     On February 17, 2021, petitioner filed a “Petition to Enforce Default Judgment for

Dissolution of Marriage; For Return of Children’s Funds, and For Other Relief” (petition to

enforce). The petition alleged, inter alia, that respondent “was the owner of a personal custodial

account *** holding slightly in excess of $100,000, for the benefit of [one of the parties’ minor

children].” (We note that it is undisputed that the account was a college savings plan established

pursuant to section 529 of the Internal Revenue Code (26 U.S.C. § 529 (2011)), and we hereafter

refer to it as “the section 529 plan.”) Petitioner alleged that in 2019 and 2020, respondent

“systematically withdrew all of the aforesaid funds from said personal custodial account totaling

$102,483.51 ***.” Petitioner sought entry of a judgment in that amount against respondent and in

favor of the minor child (or petitioner as custodian of the minor child).

¶9     The court heard respondent’s amended petition to vacate the default judgment on April 14,

2021. Petitioner testified as an adverse witness that on September 14, 2018, the parties entered

into a written agreement providing that if three certain events were to occur, respondent would

have the right of first refusal to have the children in his care during school vacations and certain

holidays. If the events did not occur, respondent would pay the rent necessary to permit petitioner

to reside in the marital home until J.U.L. completed fifth grade. The events were: (1) respondent

would prove that model and actress Elizabeth Hurley was his girlfriend, (2) respondent would

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2022 IL App (2d) 210527-U

appear on the cover of at least four nationally distributed magazines, and (3) respondent would

“establish that he is ‘Famous and Well Known in Hollywood.’ ” Petitioner testified that she

encouraged respondent to retain a lawyer. Respondent replied that he was waiting for the band

“Phish” to obtain a lawyer for him.

¶ 10   During this period, (1) petitioner had access to respondent’s business bank account

statements on his iPad, (2) respondent had about $500,000 in his business accounts, and

(3) respondent and Brett Katz were “partners” in Waukegan Lake, LLC, 1 which was engaged in a

project to develop a Chik-fil-A restaurant. Respondent and Katz said the project would make one

to two million dollars. However, in July or August of 2019, petitioner learned that the Chik-fil-A

project had fallen through.

¶ 11   Respondent testified that he did not earn regular income in December 2018. His 2018 tax

return reflected a negative income of $246,626, which included a loss of $231,113 from Waukegan

Lake, LLC. Respondent also reported $5285 of income from Western Adams Holdings, LLC, and

a $10,960 loss from 4406 Pulaski Holdings, LLC. Each of those businesses was established for

the development and sale of a Wendy’s restaurant in Chicago. Waukegan Lake, LLC, and Western

Adams Holdings, LLC, engaged various law firms in connection with the Chik-fil-A and Wendy’s

development projects.

¶ 12   Respondent’s 2019 tax return showed that he earned $58,862 as a real estate broker.

However, he reported a negative adjusted gross income of $232,231, reflecting, among other

things, significant business losses carried forward. Respondent testified that he earned nothing in

       1
           Throughout the report of proceedings, the business is also variously referred to as

“Waukegan Lake Cook, LLC” or “Waukegan Lake Cook Holdings, LLC.”

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2022 IL App (2d) 210527-U

2020. In 2021, he was employed by First American Properties, a business owned by his uncle.

His job entailed finding sites for retail development. He did not know how much he had earned

that year. At the time of the hearing, there was no money in the business account associated with

Waukegan Lake, LLC. Respondent testified that in 2019 or 2020, he withdrew amounts totaling

more than $100,000 from the section 529 plan.

¶ 13   On August 16, 2021, the trial court denied respondent’s section 2-1401 petition and granted

petitioner’s petition to enforce.    The court entered judgment for petitioner for $102,488,

representing the amount respondent withdrew from the section 529 plan. In denying the section

2-1401 petition, the trial court found that the terms of the default judgment of dissolution were not

unconscionable. Respondent filed his notice of appeal on September 9, 2021. Jurisdiction is

proper under Illinois Supreme Court Rule 304(b)(3) (eff. Mar. 8, 2016).

¶ 14                                      II. ANALYSIS

¶ 15   A party seeking relief under section 2-1401 from a default judgment ordinarily must

establish: (1) the existence of a meritorious defense, (2) due diligence in presenting the defense,

and (3) diligence in filing the section 2-1401 petition.         Warren County Soil and Water

Conservation Dist. v. Walters, 2015 IL 117783, ¶ 51. “Due diligence requires the section 2-1401

petitioner to have a reasonable excuse for failing to act within the appropriate time.” Smith v.

Airoom, Inc., 114 Ill. 2d 209, 222 (1986). However, “where justice and good conscience may

require it a default judgment may be vacated even though the requirement of due diligence has not

been satisfied.” Id. at 225. For instance, “the due diligence requirement may be waived if the

result is unfair, unjust or unconscionable” (In re Marriage of Halas, 173 Ill. App. 3d 218, 224

(1988)) or “when it is clear from all the circumstances that a party has procured an unconscionable

advantage through the extraordinary use of court processes or where some fraud or fundamental

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2022 IL App (2d) 210527-U

unfairness has been shown” (internal quotation marks omitted) (In re Marriage of Harnack, 2014

IL App (1st) 121424, ¶ 60).

¶ 16      Respondent contends on appeal that the default judgment awarding 100% of the marital

property to petitioner and ordering him to pay $27,000 monthly in maintenance and child support

is unconscionable. He emphasizes his mental health issues, which were known to petitioner and

gave rise to various delusions, such as that a well-known musical group would secure

representation for him. He claims that these issues constituted a reasonable excuse for his failure

to appear in the original action. Respondent, however, did not present any testimony from a mental

health expert. Moreover, he cites no authority that his mental health issues warrant relaxing section

2-1401’s due diligence requirements. “Arguments without citation of authority are forfeited.”

Porter v. Cub Cadet LLC, 2020 IL App (2d) 190823, ¶ 9; Ill. S. Ct. R. 341(h)(7) (eff. Oct. 1, 2020).

¶ 17      Respondent also urges us to consider that petitioner secured an extremely favorable default

judgment while failing to inform the trial court of respondent’s mental health issues. However,

absent authority that respondent’s mental health issues would excuse his failure to answer

petitioner’s petition or appear in the dissolution proceedings, we are unwilling to hold that

petitioner’s failure to disclose this matter is a sufficient equitable ground for relief under section

2-1401. That said, we note that petitioner’s testimony that she encouraged respondent to secure

legal representation suggests that she did not seek to take unfair advantage of his mental health

issues.

¶ 18      Respondent also cites People v. Richardson, 237 Ill. App. 3d 1067, 1080 (1992), which

observed:

                 “An unconscionable bargain has been defined as one ‘which no man in his senses,

          not under delusion, would make, on the one hand, and which no fair and honest man would

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2022 IL App (2d) 210527-U

       accept, on the other.’ [Citation.] In determining whether the parties’ relative economic

       positions are unconscionable, courts employ commercial concepts of unconscionability: an

       absence of a meaningful choice on the part of one of the parties combined with terms

       unreasonably favorable to the other party. [Citations.] Unconscionable terms are also

       defined as improvident, totally one-sided and oppressive. [Citations.]”

Here, however, unlike in Richardson (which involved the validity of a postnuptial agreement),

there was no bargain between the parties, so the applicability of these principles is debatable. In

any event, the facts in Richardson are markedly different from the facts of this case. In Richardson,

when the wife entered into the postnuptial agreement, she “labored under an extraordinary amount

of duress” (id. at 1082). Among other things, the husband disingenuously assured the wife, in

effect, that the agreement would save their marriage. The husband also attempted to substitute an

attorney with little experience in matrimonial law for the wife’s prior attorney. The Richardson

court found “deplorable” the husband’s attempts to arrange an attorney for the wife. Id. In

addition, the husband misrepresented the value of certain assets. Thus, respondent’s reliance on

Richardson is misplaced.

¶ 19   We have concluded that the default judgment was not secured through misconduct on

petitioner’s part.    Next, we consider whether the default judgment was substantively

unconscionable, i.e., “totally one sided” (see In re Marriage of Arjmand, 2013 IL App (2d)

120639, ¶ 30). Section 503(d) of the Illinois Marriage and Dissolution of Marriage Act (Act) (750

ILCS 5/503(d) (West 2018)) provides, “In a proceeding for dissolution of marriage *** the court

shall assign each spouse’s non-marital property to that spouse. It also shall divide the marital

property without regard to marital misconduct in just proportions considering all relevant

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2022 IL App (2d) 210527-U

factors[.]” Section 503(d) sets forth a non-exclusive list of 12 factors relevant to the division of

marital property. Id. § 503(d).

¶ 20   In arguing that the judgment was unconscionable, respondent insists that “it is simply not

possible to have a Judgment more one-sided than the one in this case.” Respondent complains that

the judgment awarded all the parties’ marital and nonmarital property to petitioner. According to

respondent, “[t]he Judgment awarded [petitioner] literally 100% of all assets, known or later

discovered.” 2 However, in denying respondent’s section 2-1401 petition, the trial court remarked

that petitioner was awarded 100% of “what appeared to be *** very little or close to nothing. The

court noted that “no property of note has been identified by [respondent] who carries the burden

under [section] 2-1401 in showing [the] judgment [of dissolution] is unconscionable.”

¶ 21   The court reasoned:

                 “Here awarding [petitioner]100 percent of the marital property with all the facts

       before the Court, could be found[,] based off of facts before the Court, the awarding of

       property in just proportions. [Petitioner] was a stay-at-home wife caring for the children,

       2
           That statement suggests that the trial court awarded all of respondent’s nonmarital

property to petitioner. We do not read the judgment that way. The judgment provided that

petitioner was awarded furniture, furnishings, personal property, accounts, and investments

“pursuant to 750 ILCS 5/503.” (Emphasis added.) Section 503(d) of the Act provides that marital

property will be distributed in just proportions and each spouse’s nonmarital property will be

assigned to that spouse. 750 ILCS 5/503(d) (West 2018). We read the judgment as providing for

the distribution of property in accordance with these principles.

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2022 IL App (2d) 210527-U

       no employment, no income. [Respondent] was the wage earner who has [sic] and still has

       the higher income earning potential as clearly displayed on his past earnings.

               Arguably, the only tangible financial account which has been identified in this

       matter is the personal custodial account for the parties *** which previously held in excess

       of $100,000 for the benefit of the parties’ minor child. This account is subject to separate

       litigation based upon [respondent’s] alleged withdrawals subsequent to the dissolution and

       liquidation of said account.” (Emphasis added.)

¶ 22   Respondent disputes the trial court’s finding that petitioner was awarded 100 % of “what

appeared to be *** very little or close to nothing.” He contends that “[a]t the time the Judgment

was entered, *** assets [awarded to petitioner] included [the section 529 plan] with a balance of

$100,000, [respondent’s] business accounts with balances of approximately $500,000, and all the

parties’ personal property.”

¶ 23   Respondent’s assertion that his “business accounts” were awarded to petitioner is incorrect.

Respondent testified that he had only one business account used to operate Waukegan Lake, LLC.

That business was established to undertake an ultimately unsuccessful project to develop a Chik-

fil-A restaurant. The funds in the account were used for earnest money, and architectural,

engineering, and legal fees. There is no evidence that the account was respondent’s property as

opposed to the property of Waukegan Lake, LLC. Illinois law clearly states that membership in a

limited liability company does not confer any ownership interest in the LLC’s property, real or

personal. Peabody-Waterside Development, LLC v. Islands of Waterside, LLC, 2013 IL App (5th)

120490, ¶ 9. Thus, we cannot read the judgment of dissolution as awarding petitioner any interest

in the business account. Furthermore, the record does not appear to support respondent’s claim

that at the time of judgment, the business account held approximately $500,000. The page of the

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record respondent cites for that proposition merely indicates that petitioner was aware that

respondent had business accounts with about $500,000, at the time the dissolution proceedings

were pending. 3 Respondent points to no evidence showing how much remained in the account

when the court entered its judgment of dissolution.

¶ 24   The trial court’s treatment of the section 529 plan is more problematic. The court stated,

“The Court cannot find that this account, which is solely for the benefit of the minor child of the

parties affects this Cort’s [sic] analysis in any way.” Although the account may be for the benefit

of the minor child, the account is not necessarily the child’s property. The record does not reveal

whether Illinois or another state sponsored the section 529 plan. For illustration, we note that

Illinois sponsors a section 529 education savings program that operates under regulations that

clearly distinguish between account owners and designated beneficiaries. See 23 Ill. Adm. Code

§ 2500.20 (eff. Feb. 8, 2022). The account owner is “[a]ny person or entity who has opened an

account or to whom ownership of an account has been transferred, as allowed by the Code, and

who has authority to withdraw funds, direct withdrawal of funds, change the designated

beneficiary, or otherwise exercise control over an account.” Id. A designated beneficiary is “[a]ny

individual designated as the beneficiary of an account *** by an account owner.” Id. Funds

       3
           Respondent also cites an exhibit as evidence that the account contained approximately

$460,000 at the time of judgment. The exhibit in question is a custody evaluation report, which

states that petitioner shared with the evaluator “copies of [respondent’s business] bank account in

September 2018, which showed an available balance of $459,677.”             However, the default

judgment was not entered until November 27, 2018.

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invested in a section 529 account may be withdrawn and used for noneducational purposes, but

doing so will result in adverse tax consequences:

       “If you use 529 account withdrawals for qualified higher education expenses or tuition for

       elementary or secondary schools, earnings in the 529 account are not subject to federal

       income tax and, in many cases, state income tax. However, if 529 account withdrawals are

       not used for qualified higher education expenses or tuition for elementary or secondary

       schools, they will be subject to state and federal income taxes and an additional 10% federal

       tax penalty on earnings.” U.S. Securities and Exchange Commission, Investor Bulletin:

       An     Introduction      to   529     Plans      (May     29,     2018)     (Available     at

       https//www.investor.gov/introduction-investing/general-resources/news-alerts/alerts-

       bulletins/investor-bulletins-11 (last visited Oct. 27, 2022) [https://perma.cc/6622-PE5B].

¶ 25   On the other hand, it appears that custodial funds can be invested in a section 529 plan

under the Illinois Uniform Transfers to Minors Act (760 ILCS 20/1 et seq. (West 2020)). See

generally, “The Investment of Custodial Funds in Section 529 Qualified Tuition Programs: Tax

Advantages and Fiduciary Concerns,” David M. Pfefferkorn, 30 Estate Planning 571, 575 (2003).

In that case, the funds might be considered property of the minor, rather than marital or nonmarital

property of the parties. Id. at 575-76 (“The transfer of custodial funds to a 529 account that names

the minor as the designated beneficiary should not be considered a further gift because the minor

already owns the custodial property.” (Emphasis added)) We note that petitioner’s petition to

enforce characterized the section 529 account as a custodial account. However, no evidence was

presented supporting that characterization. It is thus unclear whether the funds in the section 529

plan should be considered property of the minor child or marital property subject to distribution

under section 503 of the Act.

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2022 IL App (2d) 210527-U

¶ 26   That said, the question before us is not simply whether the trial court erred in the

disposition of marital property, but whether its judgment was unconscionable. We cannot say that,

given the pertinent considerations, including, (1) “the relevant economic circumstances of each

spouse” (750 ILCS 5/503(d)(5) (West 2018)), (2) the “station, occupation, amount and sources of

income, vocational skills, employability, estate, liabilities, and needs of each of the parties (id.

§ 503(d)(8)), and (3) “the reasonable opportunity of each spouse for future acquisition of capital

assets and income” (id. § 503(d)(11)). Despite considerable business reversals, respondent was

apparently still able to earn income as a real estate developer and he was employed at the time of

the denial of his section 2-1401 petition. Petitioner, in contrast, was a stay-at-home parent without

employment or a source of income.

¶ 27   Respondent also complains about the monthly amounts of maintenance (approximately

$22,000) and child support ($5000) that the default judgment of dissolution awarded. The trial

court awarded maintenance equal to 30% of respondent’s income in 2018. Respondent argues

that, at the prove-up hearing on petitioner’s motion for a default judgment, the trial court was not

made aware of the fluctuations in respondent’s income.            However, the default judgment

specifically recited his income for 2015 through 2018. We note that it is a matter within the trial

court’s discretion whether to award maintenance based on the obligor’s average income or income

for a single year. See In re Marriage of Evanoff, 2016 IL App. (1st) 150017, ¶ 27 (“It is within

the sound discretion of the [trial] court to determine whether income averaging is necessary and

such a decision will not be disturbed absent an abuse of that discretion.”) Moreover, at the time,

respondent was engaged in a business project to develop a Chik-fil-A restaurant. Respondent,

expected the project to make one to two million dollars. Given the facts that the court knew when

it entered the default judgment, we cannot say petitioner’s maintenance amount was

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2022 IL App (2d) 210527-U

unconscionable. Although the project fell through, respondent was not without remedy—he could

have moved to modify maintenance based on a substantial change of circumstances. See 750 ILCS

5/510(a-5)(7) (West 2018).

¶ 28    The same reasoning applies to respondent’s child support obligation. The trial court was

not obligated to base child support on respondent’s three-year average income rather than his most

recent known income. Moreover, as with maintenance, respondent could have moved to reduce

child support based on his decreased income. See 750 ILCS 5/510(a)(2)(A) (West 2018).

¶ 29    Accordingly, we cannot say the trial court erred in denying respondent’s section 2-1401

petition.

¶ 30                                   III. CONCLUSION

¶ 31    For the preceding reasons, we affirm the judgment of the circuit court of Lake County.

¶ 32    Affirmed.

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