Court Opinion

ID: 4311396
Source: CourtListenerOpinion
Date Created: 2018-09-11 22:07:03.068076+00
Date Added: 2024-06-11T14:44:18.783322
License: Public Domain

2018 IL App (3d) 170189

                              Opinion filed September 11, 2018
     _____________________________________________________________________________

                                                  IN THE

                                   APPELLATE COURT OF ILLINOIS

                                            THIRD DISTRICT

                                                   2018

     In re MARRIAGE OF                          ) Appeal from the Circuit Court
                                                ) of the 10th Judicial Circuit,
     JULIE A. SCHMIDGALL,                       ) Tazewell County, Illinois.
                                                )
            Petitioner, Third-Party Plaintiff-  )
     Appellee, and Cross-Appellant,             )
                                                )
            and                                 ) Appeal No. 3-17-0189
                                                ) Circuit No. 12-D-559
     TROY T. SCHMIDGALL,                        )
                                                )
            Respondent                          )
                                                )
                                                )
     (Shives, Inc.,                             ) Honorable
                                                ) Thomas A. Keith,
            Third-Party Defendant-Appellant and ) Judge, presiding.
     Cross-Appellee).                           )
     _____________________________________________________________________________

           PRESIDING JUSTICE CARTER delivered the judgment of the court, with opinion.
           Justice McDade concurred in the judgment and opinion.
           Justice Holdridge specially concurred, with opinion.
     _____________________________________________________________________________

                                                OPINION

¶1          The petitioner, Julie A. Schmidgall, filed a third-party complaint pursuant to section

     35(a) of the Income Withholding for Support Act (Act) (750 ILCS 28/35(a) (West 2014)) against

     third-party defendant, Shives, Inc. (Shives), alleging that Shives knowingly failed to withhold
     money owed for child support and maintenance payments from the wages of her ex-husband, the

     respondent, Troy T. Schmidgall, in accordance with an order/notice to withhold income for

     support (Notice to Withhold). The trial court assessed statutory penalties against Shives pursuant

     to section 35(a) of the Act, in the amount of $66,700. Shives appeals, arguing that no penalties

     should have been assessed because there was not proper service of the Notice to Withhold in

     order for section 35(a) penalties to be imposed. On cross-appeal, Julie argues the trial court erred

     in calculating the penalties assessed against Shives, contending that the penalties imposed should

     have been $150,000. We affirm as modified in part, vacate the trial court’s order imposing

     $66,700 in penalties against Shives, and remand with directions for the trial court to recalculate

     the penalties in accordance with this opinion.

¶2                                                 FACTS

¶3          Julie and Troy were married on August 29, 2002, and had five children during their

     marriage. The trial court entered a judgment of dissolution of their marriage on May 19, 2014.

     Julie was awarded custody of the children. The dissolution judgment ordered the payor of

     maintenance and child support (Troy) to pay maintenance and child support to the State

     Disbursement Unit for collection and distribution to the person entitled to payments.

¶4          Under Julie and Troy’s marital settlement agreement, Troy was to pay Julie $1400 per

     month in child support ($700 on the fifteenth and thirtieth of each month) and was to instruct his

     employer to write a check in the proper amount and send it to the State Disbursement Unit on his

     regular payday if his employer was not subject to a Notice to Withhold and, any time support

     was not withheld from Troy’s check, Troy “shall personally make payment to the State

     Disbursement Unit.” The marital settlement agreement indicated that Troy “shall pay” Julie

                                                      2
     $412.50 per month in maintenance ($206.25 on the fifteenth and thirtieth of each month), with

     no specific reference to the State Disbursement Unit.

¶5          On May 19, 2014, the trial court entered a uniform order for support, finding that Troy’s

     net monthly income was $2932.13 and ordering Troy to make child support and maintenance

     payments beginning on May 15, 2014, by sending the payments to the State Disbursement Unit

     and that a notice to withhold income “shall issue immediately and shall be served on [Troy’s]

     employer.”

¶6          On June 27, 2014, Julie’s attorney filed a “certificate of service,” in which she certified

     that she sent, via certified mail on May 28, 2014, a copy of the uniform order for support and a

     Notice to Withhold to Troy’s employer—“Shives, Inc., Attn: Payroll, 241 Ford Avenue,

     Hopedale, Illinois, 61747”—and it was returned to sender as “refused.” Julie’s attorney attached

     a copy of the returned certified mailing envelope, which indicated a “1st notice” on May 31,

     2014, a “2nd notice” on June 15, 2014, and a return to sender “refused” date of June 25, 2014.

     On June 27, 2014, Julie’s attorney had received the certified mailing back as “refused.”

¶7          On December 15, 2014, Julie filed a motion to add as third-party defendants Shives

     (Troy’s employer) and individually, Dwayne Schmidgall (president of Shives/Troy’s father).

     Julie argued that Shives had been properly served with the Notice to Withhold and willfully

     failed to comply, noting that to date no funds had been forwarded to the State Disbursement

     Unit. The trial court granted Julie’s motion to add Shives as a third party but reserved its ruling

     as to Dwayne, individually.

¶8                                        I. Third-Party Complaint

¶9          On March 6, 2015, Julie filed a third-party complaint against Shives, with the Notice to

     Withhold attached as an exhibit. Julie specified that she had sent the Notice to Withhold to

                                                       3
       Shives via certified and regular mail on May 28, 2014, with the certified mailing returned to her

       as refused. Pursuant to section 35(a) of the Act, an employer who has been served with an

       income withholding notice has a statutory duty to deduct the designated amount no later than the

       next payment of income 14 days following the date the income withholding notice was mailed.

       See id. The employer then has to make the payment to the State Disbursement Unit within 7

       business days after the date the amount would have been paid the obligor-employee, with the

       knowing failure to do so resulting in a penalty of $100 for each day the designated amount is not

       paid to the State Disbursement Unit after the 7 business day grace period expired. See id. Julie

       indicated that she did not receive payments from the State Disbursement Unit until February 5,

       2015, when she received a payment in the amount of $906.25. Julie requested a judgment against

       Shives “in the total amount of statutory penalties” for its willful failure to comply with the Act.

¶ 10                                                  II. Trial

¶ 11          At a bench trial on the third-party complaint, the trial court took judicial notice of the

       judgment for the dissolution of marriage, with the attached marital settlement agreement and

       uniform order of support. The trial court also took judicial notice of the certificate of service that

       was filed by Julie’s attorney on June 27, 2014, and the affidavit of the process server showing

       that on January 8, 2015, Shives was served with the motion to add Shives as a third-party

       defendant. The Notice to Withhold was attached as an exhibit to the motion. Evidence at trial

       showed that the first payment Julie received from the State Disbursement Unit was on February

       5, 2015.

¶ 12                                        A. Testimony of Paralegal

¶ 13          Christina Rook, a paralegal at the law firm of Julie’s attorney, testified that she prepared

       the certified mailing return receipt request and sent a file-stamped copy of the uniform order for

                                                         4
       support and a copy of the Notice to Withhold to Shives via the certified mailing on May 28,

       2014. The envelope for the certified mailing of May 28, 2014, showing the sender was the law

       firm of Julie’s attorney, was entered into evidence with the green certified mailing return receipt

       unsigned and still attached to the envelope. Christina testified that the certified letter was

       returned to the law firm as “refused” on June 27, 2014, with the original contents still in the

       envelope. Julie’s attorney instructed Christina to mail, via regular mail, another copy of the

       uniform order for support and Notice to Withhold, which Christina did on or around June 27,

       2014. The regular mailing of June 27, 2014, was never received back as undelivered.

¶ 14          Christina testified that on August 14, 2014, she sent another regular mailing and certified

       mailing to Shives, which showed the sender as the law firm of Julie’s attorney and containing a

       letter to Shives and the Notice to Withhold. The regular mailing was not returned to sender, but

       the certified mailing was returned as “unclaimed” on September 15, 2014. The letter in those

       mailings had indicated that enclosed was a Notice to Withhold pursuant to a uniform order for

       support that had been entered on May 19, 2014, and requested that Shives “immediately” begin

       withholding from Troy’s pay “the sum of $906.25 per semi-monthly pay period for current child

       support and maintenance” and that all payments should be made payable to and sent to the State

       Disbursement Unit, with the address for the State Disbursement Unit provided. The letter made

       no reference to any arrearages, Julie not receiving any prior payments, or the date or dates that

       Shives should have made previous payments. On September, 15, 2014, the certified mailing of

       August 14, 2014, was returned to the law firm of Julie’s attorney as “unclaimed.” The envelope

       for the certified mailing of August 14, 2014, and contents of the envelope were entered into

       evidence, with the green certified mailing return receipt unsigned and still attached to the

       envelope. The markings on the envelope indicated a first notice date of August 16, 2014, a

                                                         5
       second notice date of August 21, 2014, and a return to sender as “unclaimed” date of September

       2, 2014.

¶ 15          Christina testified that prior to the dissolution judgment being entered by the trial court,

       the law firm of Julie’s attorney had served Shives with a subpoena for Troy’s employment

       records. Christina spoke with Thelma Reed, who was the secretary of Shives, several times to

       obtain compliance with the subpoena. Christina testified that the law firm of Julie’s attorney had

       Shives served with a notice of hearing and the motion to add Shives as a third-party defendant in

       this case. The trial court took judicial notice of the affidavit of the special process server

       indicating service on January 8, 2015.

¶ 16          Christina further testified that due to the certified mailings being returned, she did a

       “postal trace” on April 2, 2015, to verify the mailing address for Shives which showed the post

       office box for Shives was linked with Shives’s physical address of 241 Ford Avenue, Hopedale,

       Illinois, 61747. The request form that had been submitted to the Hopedale postmaster for

       information regarding Shives’s physical address and post office box was submitted as evidence.

       Christina confirmed that she verified the address of Shives as 241 Ford Avenue, Hopedale,

       Illinois, 61747, from the subpoena that had been served on Shives for Troy’s employment

       records during the dissolution proceedings. Christina also testified that the data sheet attached to

       the uniform order for support, whitepages.com, and a Google computer search all indicated that

       the physical address for Shives was 241 Ford Avenue, Hopedale, Illinois, 61747.

¶ 17                          B. Testimony of Postmaster of Hopedale Post Office

¶ 18          The evidence deposition of the postmaster of the Hopedale post office, Kim Costa, was

       introduced into evidence. Kim testified she has been an employee of the United States Postal

       Service for 24 years and served as a postmaster for 11 years (three years as the postmaster in

                                                          6
       Hopedale, Illinois). Kim was familiar with Shives’s post office box that was located inside the

       Hopedale post office. Kim testified that for every post office box at the Hopedale post office

       there was an associated physical address in the computer system. If a piece of mail, including

       certified mail, was addressed to Shives at their physical address in Hopedale, Illinois, it is

       delivered to Shives’s post office box. With a certified letter, a postal employee would fill out a

       notice that indicated the post office was holding a certified piece of mail that needed to be signed

       for, the date the certified mail was received in the post office, and the sender’s name. The notice

       would then be placed in the post office box of the addressee. A regular piece of mail that was not

       certified would be placed directly in the post office box because no signature was required. Kim

       defined “refused mail” as the addressee refusing to accept that particular piece of mail by either

       writing “refused” on the piece of mail and placing it in the outgoing mail or by bringing it to a

       post office employee and indicating that it was being refused so that the post office employee

       would write “refused” on it before it was returned to the sender. When a certified letter came into

       the post office, a notice was placed in the post office box the first day, a second notice was

       issued five days later indicating the mail will be returned if it was not claimed, and a final notice

       is issued the 10th day, with the certified letter returned to the sender as “unclaimed” at the close

       of business if it was not claimed.

¶ 19          With a certified letter, the addressee or a person with a key to the post office box of the

       addressee could look at the notice for the certified letter, hand the notice to a post office

       employee, and inform the employee that the certified mail was being refused. In most incidents,

       either Kim or one of the three other employees of the post office would write the word “refused”

       on the envelope. Kim did not recall who refused the certified letter of May 28, 2014, at issue in

       this case, but the word “refused” was written on the letter in Kim’s handwriting. Kim testified

                                                         7
       that there would be no circumstance under which she would write the word refused on an

       envelope if the addressee or the representative of the addressee had not indicated it was being

       refused. Kim testified, “I would never refuse a letter that’s not mine.”

¶ 20                                     C. Motion for Directed Verdict

¶ 21          Shives motioned the trial court for a directed verdict, arguing that section 35(a) of the Act

       (id.), under which Julie was requesting statutory penalties, required a finding of the payor’s

       nonperformance to be “documented by a certified mail return receipt or a sheriff[ ] or private

       process server[ ].” The attorney for Shives argued that the applicable statute was “very clear that

       there are only two ways in which someone can be served and held accountable”—by proof of a

       certified receipt showing a signature for the document or by proof that a private process server or

       sheriff physically served the papers. Julie’s attorney argued that Shives should be charged with

       “constructive receipt” of the documents contained in the certified mailing because Shives was

       familiar with her office as representing Julie during Julie and Troy’s divorce proceedings and

       Shives refused the certified mailing from her law office. The trial court denied Shives’s motion

       for directed verdict.

¶ 22                                         D. Secretary of Shives

¶ 23          Shives’s attorney called Thelma Reed, the corporate secretary/treasurer of Shives to

       testify. Thelma testified that she was a corporate officer of Shives and had worked for Shives

       since 1978, becoming an officer or director of Shives shortly thereafter. As part of her duties,

       Thelma was in charge of payroll. She had received notices to withhold for two other employees,

       but those employees had brought the paperwork to her. Thelma was aware that Troy and Julie

       were going through divorce proceedings. Thelma was provided with a copy of the notice to

       withhold by Dwayne in late December 2014 or in January 2015, after Dwayne had placed the

                                                        8
       notice on her desk. Those papers consisted of two or three pages. Dwayne had told Thelma that

       he had been served with a subpoena the prior Saturday. Thelma did not receive the motion to add

       Shives as a third-party defendant with the Notice to Withhold papers that Dwayne had placed on

       her desk. Thelma began deducting the amount indicated in the Notice to Withhold the next

       payroll period. Thelma had never received any other notice to withhold. Thelma testified that she

       had never refused any mailings from the law firm of Julie’s attorney and all mail for Shives went

       to the post office. She indicated that Dwayne generally picked up the mail from the post office,

       but other employees—Clint Gordon, Kelly Bell, or Sarah Schmidgall (Dwayne’s daughter)—had

       also occasionally picked up the mail when Dwayne or Thelma gave them the key to do so.

       Dwayne and Thelma were the only two persons who had keys to the post office box. Thelma did

       not recall having any contact with or speaking with anyone from the law firm of Julie’s attorney

       during Troy and Julie’s divorce proceedings. Thelma indicated that Troy had requested his

       employment records during the divorce proceedings but she was never given a subpoena for

       those records.

¶ 24          Thelma testified that Troy has worked for Shives since he was 18 years old and Troy was

       one of Dwayne’s sons. Thelma testified that it was mostly only her that worked in her office, but

       she occasionally had some part-time help. Thelma would be the person that would be served by a

       process server during normal business hours (9 a.m. to 5 p.m.). In 2014, Shives employed eight

       or nine people.

¶ 25                                         E. President of Shives

¶ 26          Dwayne testified that he purchased Shives in 1977 and had since been the president of

       the corporation. Dwayne was served with papers by a process server in late December 2014 or

       early January 2015. He signed for the papers and laid them on Thelma’s desk without looking at

                                                       9
       the documents. Dwayne testified that he never refused any certified mail from the law firm of

       Julie’s attorney. He acknowledged that he “well [knew]” the law firm. Dwayne testified that he

       never received a Notice to Withhold pertaining to Troy. Dwayne was waiting for Troy to bring in

       the Notice to Withhold but Troy never did. Dwayne testified that he never knowingly failed to

       withhold income from Troy’s check for child support or maintenance. Dwayne was aware that

       Troy and Julie were getting a divorce but was not aware of the details of the proceedings because

       he did not want anything to do with it. Dwayne testified that Shives had paid for Troy’s attorney

       fees during the dissolution proceedings when the bills arrived because Troy was “lax” about

       paying his bills, but Troy did not discuss the details of the proceedings with Dwayne. Dwayne

       knew that Troy would have to pay child support. Dwayne acknowledged that he knew which law

       firm represented Julie during the divorce proceedings. Dwayne did not know when the divorce

       was finalized. Dwayne testified that he did not get involved with withholding child support or

       maintenance payments because Thelma “does all that.” Dwayne testified that he never received a

       Notice to Withhold other than the copy he received in late December 2014 or January 2015

       (when he was served with the motion to add Shives as a third-party defendant). Dwayne also

       testified that most of the time he is the person who picked up the mail from Shives’s post office

       box.

¶ 27                                            F. Julie Schmidgall

¶ 28          Julie testified that the dissolution judgment was entered on May 19, 2014, and pursuant to

       the order Troy was required to pay child support, maintenance, and medical expenses for the

       children. Julie testified that Troy periodically sent support payments directly to her. She testified,

       “I didn’t know when it was going to come. It was supposed to be on a schedule *** through the

                                                        10
       SDU, but so he would pay me here and there.” Julie testified that Troy began to fall behind in

       payments, she took him back to court, and he caught up on everything.

¶ 29          On December 15, 2014, Julie had filed a petition for rule to show cause alleging that Troy

       failed to pay his portion of the children’s medical expenses and school registration fees, failed to

       establish and maintain an account with the State Disbursement Unit, and failed to instruct his

       employer to withhold child support and maintenance payments and to forward those payments to

       the State Disbursement Unit. Julie testified that she had attached an affidavit and exhibit to the

       petition for rule to show cause, which showed that Troy had made payments directly to Julie for

       child support and maintenance in the amount of $1812.50 on June 5, 2014; $1812.50 on July 3,

       2014; $1812.50 on August 3, 2014; $1812.50 on September 1, 2014; and $1812.50 on October 4,

       2014. There was no indication regarding November or December payments for 2014, but Julie

       acknowledged that when she filed the petition for rule to show cause on December 15, 2014,

       Troy was not far behind in his child support and maintenance payments. The trial court took

       judicial notice of the order resulting from the petition for rule to show cause entered on February

       23, 2015, indicating Troy was in contempt of court per Julie’s petition for rule to show cause and

       indicating that Troy was to purge the contempt by paying $1500 of Julie’s attorney fees

       pertaining to the rule to show cause. There was no indication in the order that Troy was

       delinquent in his child support payments or maintenance payments or that there was any

       arrearage owed to Julie.

¶ 30                                         G. Trial Court’s Ruling

¶ 31          In ruling, the trial court found Christina, the paralegal for Julie’s attorney, was credible.

       The trial court did not believe that Dwayne was not aware “of any of this,” noting that Dwayne

       knew Troy had to pay child support. The trial court found that Dwayne “knew exactly what this

                                                        11
       was all about,” was astute, and was more involved than he indicated when he testified. The trial

       court found that Dwayne “knew exactly what was in those mailings,” knew where it was coming

       from, and affirmatively rejected the mail. The trial court noted that Dwayne rejected the certified

       mail but had received the other mailings, with all the mailings going to the same mailbox. The

       trial found that the mailings were delivered, Christina was credible in her testimony, and there

       had been prior contact between Shives and the law firm of Julie’s attorney. The trial court noted

       that Thelma testified that she did not receive the motion to add Shives as a third-party defendant

       or Julie’s petition for rule to show cause when she received the Notice to Withhold in December

       2014 or January 2015, which the trial court found gave rise to an inference that the Notice to

       Withhold that Thelma was given “was one of the previous mailings, probably one of the regular

       mail mailings.” The trial court found that Dwayne knew what was in the mailings, Dwayne had

       affirmatively refused the certified mailing containing the Notice to Withhold, and Dwayne had

       received the Notice to Withhold through regular mail. The trial court also did not believe that an

       employee sent to pick up the mail would have withheld any of the regular mailings that would

       have been delivered to Shives’s post office box. The trial court found that Dwayne went to the

       post office to pick up the mail almost every day and on the rare occasion when someone else did

       so, either Dwayne or Thelma had to give them the key. The trial court found that only when there

       was the threat of litigation of the motion to add Shives as a third-party defendant was the Notice

       to Withhold taken seriously. The trial court found that there were three dates of mailing of the

       Notice to Withhold in May, June, and August 2014, and the trial court imputed knowledge of the

       Notice to Withhold to Shives through the regular mailing of August 14, 2014.

¶ 32          The trial court held a separate hearing to determine the amount of the penalties to impose

       upon Shives. Julie argued the first applicable pay period for Shives to have withheld payments

                                                       12
       was June 15, 2014, after the initial certified mailing was sent on May 28, 2014, so that under

       section 35(a) of the Act the $100-dollar-per-day penalty would begin seven business days later

       on June 25, 2014. Julie argued that, thereafter, Shives did not withhold and submit payment to

       the State Disbursement Unit until Troy’s paycheck of January 30, 2015, creating 15 occasions of

       nonperformance. Julie argued that because Shives did not go back and “cure anything” (by

       paying all the payments that it should have made under the Notice to Withhold) the maximum

       penalty for each of the 15 pay periods of nonperformance was applicable and, but for the

       statutory limit of $10,000, Shives would be incurring penalties to this day. Julie argued for a

       $150,000 penalty because there had been 15 pay periods that Shives knowingly failed to comply

       with the Notice to Withhold, with the maximum penalty for each occurrence of nonperformance

       limited to $10,000. In response, Troy argued that there was “no cure available” because Troy had

       already paid Julie child support and maintenance, so that “[t]here is nothing to cure.”

¶ 33         The trial court indicated that because it had found that Shives had notice of its duty to

       withhold as of the regular mailing of August 14, 2014, the first applicable pay period for Shives

       to have withheld payments was August 30, 2014, so that there were 10 pay periods for which

       Shives failed to comply with the Notice of Withhold. The trial court found that the $100-per-day

       penalty was to stop on January 30, 2015, when Shives first complied with the Notice to

       Withhold. The trial court assessed a penalty of $66,700 against Shives.

¶ 34         Shives filed a motion to reconsider, arguing that the trial court’s finding of its

       nonperformance was not documented by a certified mail return receipt or a process server’s

       proof of service showing the date the income withholding notice was served as required by

       section 35(a) of the Act in order for the $100-per-day penalty to be imposed. The trial court

       denied Shives’s motion to reconsider.

                                                        13
¶ 35          Shives appealed. Julie cross-appealed.

¶ 36                                                 ANALYSIS

¶ 37           On appeal, Shives argues that no penalties should have been assessed against it because

       service of the Notice to Withhold was not properly made in accordance with the requirements of

       section 35(a) of the Act (id.), under which the penalties against Shives were imposed by the trial

       court. Julie argues that service on Shives of the Notice to Withhold was effectuated via the

       certified mailing of May 28, 2014, which had been refused by Shives.

¶ 38           Julie additionally filed a cross-appeal, arguing the trial court erred in calculating the

       penalty assessed against Shives. Specifically, Julie argues that the $100-per-day penalty under

       section 35(a) of the Act is mandatory and the penalty should have been assessed seven business

       days after the pay period of June 15, 2014, so that the initial $100-per-day penalty would have

       started accruing on June 25, 2014, with similar $100 penalties accruing for every pay period of

       noncompliance thereafter. Julie further argues that the trial court erred finding the penalties

       stopped accruing when Shives started withholding for the first time on January 30, 2015,

       contending that the penalties should have accrued until Shives remitted each and every payment

       to the State Disbursement Unit. Shives responds to Julie’s argument on cross-appeal by

       reiterating its argument that it had not been properly served in accordance with section 35(a) of

       the Act and, therefore, “the actual penalty under the [A]ct is zero.”

¶ 39           We review the legal effect of undisputed facts and the trial court’s interpretation of a

       statute de novo. In re Marriage of Chen, 354 Ill. App. 3d 1004, 1011 (2004). As for disputed

       facts, we will not disturb the findings of the trial court, as the trier of fact without a jury, unless

       the findings are against the manifest weight of the evidence. Id.

                                                          14
¶ 40           The fundamental rule of statutory construction is to ascertain and give effect to the intent

       of the legislature. Schultz v. Performance Lighting, Inc., 2013 IL 115738, ¶ 12. The best

       indicator of the legislature’s intent is the statutory language itself, given its plain and ordinary

       meaning. Id. We consider the statute in its entirety, bearing in mind the subject it addresses and

       the apparent intent of the legislature in enacting the statute. Id. To the extent there is any

       ambiguity, penal statutes and statutes that create “new liabilities” should be strictly construed in

       favor of persons sought to be subjected to their operation and will not be extended beyond their

       terms. Id. (citing Nowak v. City of Country Club Hills, 2011 IL 111838, ¶¶ 19, 27 (a statute

       creating a new liability is strictly construed in favor of the entity subjected to the liability)).

       Statutes in derogation of the common law are also strictly construed in favor of persons sought to

       be subjected to their operation. Id.

¶ 41                            I. Proof of Service Under Section 35(a) of the Act

¶ 42           Shives argues that in order for penalties to have been imposed pursuant to section 35(a)

       of the Act, its nonperformance had to be documented by certified mail return receipt or a

       sheriff’s or private server’s proof of service showing the date the Notice to Withhold was served.

¶ 43           Section 35(a) of the Act provides as follows:

                               “(a) It shall be the duty of any payor who has been served with an income

                       withholding notice to deduct and pay over income as provided in this Section. The

                       payor shall deduct the amount designated in the income withholding notice ***

                       beginning no later than the next payment of income which is payable or creditable

                       to the obligor that occurs 14 days following the date the income withholding

                       notice was mailed, sent by facsimile or other electronic means, or placed for

                       personal delivery to or service on the payor. *** The payor shall pay the amount

                                                          15
withheld to the State Disbursement Unit within 7 business days after the date the

amount would *** have been paid or credited to the obligor. If the payor

knowingly fails to withhold the amount designated in the income withholding

notice or to pay any amount withheld to the State Disbursement Unit within 7

business days after the date the amount would have been paid or credited to the

obligor, then the payor shall pay a penalty of $100 for each day that the amount

designated in the income withholding notice (whether or not withheld by the

payor) is not paid to the State Disbursement Unit after the period of 7 business

days has expired. The total penalty for a payor’s failure, on one occasion, to

withhold or pay to the State Disbursement Unit an amount designated in the

income withholding notice may not exceed $10,000. The failure of a payor, on

more than one occasion, to pay amounts withheld to the State Disbursement Unit

within 7 business days after the date the amount would have been paid or credited

to the obligor creates a presumption that the payor knowingly failed to pay over

the amounts. This penalty may be collected in a civil action which may be

brought against the payor in favor of the obligee or public office. An action to

collect the penalty may not be brought more than one year after the date of the

payor’s alleged failure to withhold or pay income. A finding of a payor’s

nonperformance within the time required under this Act must be documented by a

certified mail return receipt or a sheriff’s or private process server’s proof of

service showing the date the income withholding notice was served on the payor.

For purposes of this Act, a withheld amount shall be considered paid by a payor

on the date it is mailed by the payor, or on the date an electronic funds transfer of

                                 16
                      the amount has been initiated by the payor, or on the date delivery of the amount

                      had been initiated by the payor.” (Emphases added.) 750 ILCS 28/35(a) (West

                      2014).

¶ 44          The language of Section 35(a) of the Act places a statutory duty on a payor who has been

       served with an income withholding notice to deduct and pay over income to the State

       Disbursement Unit the amount designated in the income withholding notice. Id. Under Section

       35(a) of the Act, a $100-per-day penalty is imposed on a payor who “knowingly fails” to

       withhold the income of an obligor as directed under a income withholding notice where either a

       certified mail return receipt or a process server’s proof of service shows the date the Notice to

       Withhold was served on the payor. Id.

¶ 45          In this case, the evidence showed that the officers of Shives (Dwayne and Thelma) knew

       that Troy and Julie were getting a divorce and that Troy would have to pay child support. While

       there is question of proof of service in regard to proof of the date of service for section 35(a)

       penalties, the evidence shows that under section 20(g) of the Act, Shives had received actual

       notice of its duty to withhold when the Notice to Withhold was sent via regular mail on May 28,

       2014, which was addressed to Shives and to the attention of “payroll” and which indicated it was

       sent from the law firm of Julie’s attorney. See id. § 20(g) (the obligee or public office may serve

       the income withholding notice on the payor by ordinary mail). On the same day that the regular

       mailing was sent, a similar envelope was sent to Shives via certified mail. The regular mailing,

       along with the notice for the certified mailing, would have been placed into Shives’s post office

       box, with the certified mailing notice indicating the sender was the law firm of Julie’s attorney.

       The certified mailing notices were placed in Shives’s post office box on May 31, 2014, and on

       June 15, 2014, with Shives eventually refusing the certified mailing on or about June 25, 2014,

                                                        17
       almost a month after it was mailed. The postmaster would not have written “refused” on the

       certified mailing envelope unless someone who had received the notice from the post office box

       of Shives had instructed her to do so. Only officers of Shives (Dwayne and Thelma) had keys to

       the post office box. Based on these facts, the trial court’s finding that the certified mailing on

       May 28, 2014, was sent to Shives but affirmatively refused by Shives was not against the

       manifest weight of the evidence.

¶ 46          In reviewing the record in this case, we conclude that there was sufficient proof within

       meaning of section 35(a) of the Act that Shives was served with the Notice to Withhold via the

       certified mailing of May 28, 2014, where the evidence showed that Shives knew that it would

       have to withhold income for Troy as support payments resulting from his divorce from Julie;

       Shives had been sent a regular mailing to the attention of its payroll department containing the

       Notice to Withhold; Shives knew, by way of the notices in the post office box, that the law firm

       of Julie’s attorney was attempting to send its payroll department a certified letter (at the same

       time the Notice to Withhold was sent via regular mail and presumably also placed in the post

       office box); and Shives refused the certified mailing. See Helland v. Larson, 138 Ill. App. 3d 1,

       4-5 (1985) (deeming a tenant to be in constructive receipt of a notice to terminate his tenancy

       and finding the owners complied with the applicable statute requiring a return receipt from the

       addressee as constituting proper notice where the tenant was aware that he would be sent a notice

       of termination, the postal service notified the tenant of the certified letter, and the tenant did not

       pick up the certified letter at the post office). Consequently, the trial court’s finding that Shives

       did not have notice of its duty to withhold until August 14, 2014, was against the manifest

       weight of the evidence where, as discussed, the evidence showed that Shives was properly served

       within meaning of section 35(a) of the Act via the certified mailing of May 28, 2014, with the

                                                         18
       first applicable pay period of withholding on June 15, 2014. Accordingly, we affirm the trial

       court’s finding that Shives was properly served with the Notice to Withhold in accordance with

       section 35(a) of the Act but modify the date Notice to Withhold was served on Shives for section

       35(a) purposes to May 28, 2014—the date the “refused” certified mailing was sent to Shives and

       addressed to the attention of “payroll.”

¶ 47          In concluding that the $100-per-day penalty was triggered on May 28, 2014, we note that

       Shives did not raise any issue, either in the trial court or on appeal, with respect to the validity of

       the Notice to Withhold. Under the Act, the “obligee” (Julie) was required to serve the Notice to

       Withhold on the payor (Shives) and the obligor (Troy) (see 750 ILCS 28/20(g) (West 2014)),

       with certain information included. See id. § 20(c); Schultz, 2013 IL 115738, ¶¶ 14-15 (the

       obligee’s signature is the only requirement under section 20(c) of the Act that is expressly

       deemed an exception from affecting the validity of the notice of withholding). Our review of the

       record indicates that the duties of the payor and the fines and penalties for a failure to withhold

       were provided in the Notice to Withhold, but this information was not set forth “in bold face

       type,” as required under the amendments to the Act that had become effective on August 17,

       2012. See 750 ILCS 28/20(c)(7) (West 2014) (providing that the income withholding notice shall

       “in bold face type, the size of which equals the largest type on the notice, state the duties of the

       payor and the fines and penalties for failure to withhold and pay over income”). The

       consequence for failing to comply with the requirements of section 20(c) of the Act (other than

       the signature requirement of section 20(c)(11)) is that the notice be rendered invalid. Schultz,

       2013 IL 115738, ¶¶ 14-15. However, since no issue with respect to the validity of the notice has

       been raised, the notice has implicitly been conceded to be valid. See id. ¶ 27 (noting that no issue

       with respect to the validity of the notice was raised in the case of In re Marriage of Gulla, 382

                                                         19
Ill. App. 3d 498, 502-03 (2008), so that the notice was conceded to have been valid).

       Consequently, we take no position on whether the failure to provide the requisite bold-face type

       in the Notice to Withhold would render the notice invalid.

¶ 48          We further note that also effective August 17, 2012, subsection 45(j) was added to the

       Act, which provides:

                      “If an obligee who is receiving income withholding payments under this Act does

                      not receive a payment required under the income withholding notice, he or she

                      must give written notice of the non-receipt to the payor. The notice must include

                      the date on which the obligee believes the payment was to have been made and

                      the amount of the payment. The obligee must send the notice to the payor by

                      certified mail, return receipt requested.” 750 ILCS 28/45(j) (West 2014).

¶ 49          Under section 45(j), the obligee has a statutory duty to provide written notice of

       nonpayment to the payor. See id. After receiving a written notice of nonreceipt of payment, the

       payor “must,” within 14 days, either notify the obligee of the reason for the nonreceipt of

       payment or make the payment, with 9% interest calculated from the date on which the payment

       of income should have been made, with the payor’s failure to do so resulting in the payor being

       subject to the $100-per-day penalty provided in section 35(a) of the Act. Id. Here, Julie failed to

       provide proper written notice to Shives of her nonreceipt of payments following the initial

       certified mailing of the Notice to Withhold. Presumably, Julie did not give notice to Shives that

       she did not receive a payment as required Notice to Withhold because she did, in fact, receive the

       payment directly from Troy. Nonetheless, Shives does not raise the issue of whether Julie’s

       failure to provide written notice of nonreceipt of payment pursuant to section 45(j) should

       preclude Julie from seeking the $100-per-day penalty and, therefore, we will not address the

                                                       20
       issue. For this reason, we also take no position on whether section 45(j) of the Act requires a

       written notice to be sent to the payor for each separate pay period where the obligee did not

       receive payment.

¶ 50                                       II. $100-Per-Day Penalties

¶ 51          On cross-appeal, Julie disputes the amount of penalties imposed by the trial court against

       Shives arguing the $66,700 in penalties should have been $150,000. Shives responds by

       contending that service of the Notice to Withhold in order for section 35(a) penalties to be

       imposed was not proper and, therefore, no penalties should have been imposed. As discussed

       above, we reject the argument of Shives regarding service and affirm the trial court’s finding that

       there was proof of service as require by section 35(a), as modified to the effective date of May

       28, 2014.

¶ 52          Under section 35(a) of the Act,

                      “[i]f the payor knowingly fails to withhold the amount designated in the income

                      withholding notice or to pay any amount withheld to the State Disbursement Unit

                      within 7 business days after the date the amount would have been paid or credited

                      to the obligor, then the payor shall pay a penalty of $100 for each day that the

                      amount designated in the income withholding notice (whether or not withheld by

                      the payor) is not paid to the State Disbursement Unit after the period of 7 business

                      days has expired.” Id. § 35(a).

       The $100-per-day penalty is assessed for each violation of the Act. In re Marriage of Miller, 227
Ill. 2d 185, 194 (2007). “ ‘A separate violation occurs each time an employer knowingly fails to

       remit an amount that it has withheld from an employee’s paycheck.’ ” Id. (quoting Grams v.

       Autozone, Inc., 319 Ill. App. 3d 567, 571 (2001)).

                                                        21
¶ 53           Our supreme court has provided an example for calculating the penalties for multiple

       violations by stating:

                                “To illustrate: If an employee is paid weekly, and the employer fails to

                       remit child support withheld from the employee’s paycheck in week one, the

                       employer is subject to a penalty at the rate of $100 per day. If the employer also

                       fails to remit the next support payment withheld in week two, and the first

                       payment is still outstanding, the employer is subject to two $100 penalties each

                       day that both payments remain outstanding.” Id.

¶ 54           In Miller, the employer was subject to numerous $100 penalties on any given day

       because he was frequently several weeks in arrears with turning over child support payments

       withheld from his employee’s wages—“one for each support payment he had failed to remit”—

       so that over the course of 2½ years, the employer was able to accumulate 11,721 penalties,

       ultimately resulting in a judgment against him in the amount of $1,172,100. Id. 1 The supreme

       court noted that the employer could have avoided the imposition of any penalties simply by

       complying with his statutory obligation and it was the employer who controlled the extent of the

       penalty. Id. at 202. The supreme court in Miller reversed the judgment of the appellate court and

       affirmed the judgment of the circuit court entered against the employer for $1,172,100 in

       statutory penalties. Id. at 206.

¶ 55           In this case, Shives failed to withhold support from Troy’s wages on 15 applicable pay

       periods, beginning with the pay period of June 15, 2015. The issue to be determined in this case,

       however, is at what point should the $100-per-day penalties stop being assessed against Shives

               1
                Subsequent to Miller, the legislature amended section 35(a) of the Act to limit the total penalty
       to $10,000 for a payor’s failure, on one occasion, to withhold or pay over to the State Disbursement Unit
       an amount designated in the income withholding notice. See 750 ILCS 28/35(a) (West 2014).
                                                          22
       for Shives knowingly failing to withhold support from Troy’s wages. The Act does not define the

       term “knowingly.” Section 35(a) provides, “a withheld amount shall be considered paid by payor

       on the date it is mailed by the payor, [or when an electronic funds transfer has been initiated], or

       on the date delivery of the amount has been initiated by the payor.” However, the Act is silent as

       to the scenario that has arisen in this case, wherein an obligee (Julie) has repeatedly accepted

       direct payments from the obligor (Troy) rather than receiving payments through the State

       Disbursement Unit but still seeks $100-per-day penalties against the payor/employer (Shives) for

       its failure to withhold and turn over payments to the State Disbursement Unit, even for the time

       after the obligee (Julie) had accepted those funds directly from the obligor (Troy).

¶ 56          The $100-per-day penalty provision under which Julie is seeking $100-per-day penalties

       against Shives was enacted to ensure a simple and speedy method of withholding wages in

       response to the nationwide crisis of delinquent child support. Chen, 354 Ill. App. 3d at 1015

       (citing Dunahee v. Chenoa Welding & Fabrication, Inc., 273 Ill. App. 3d 201, 205 (1995)). The

       purpose of allowing a plaintiff to recover the $100-per-day penalty for each day of a knowing

       violation is to punish parties that violated the Act and to discourage future violations. In re

       Marriage of Murray, 2014 IL App (2d) 121253, ¶ 45. Given that section 35(a) is penal in nature

       and creates a new liability on the part of payor, we will strictly construe the Act in favor of the

       persons sought to be subjected to its operation and will not extend the Act beyond its terms. See

       Schultz, 2013 IL 115738, ¶ 12.

¶ 57          In looking to the Act in its entirety, we note that section 20 of the Act requires that a

       withholding notice be prepared and served immediately upon the payor by the obligee, “unless a

       written agreement is reached between and signed by both parties providing for an alternative

       arrangement, approved and entered into the record by the court, which ensures payment of

                                                        23
       support.” 750 ILCS 28/20(a)(1) (West 2014) (where a court-approved written agreement for an

       alternative arrangement is in place, the order for support shall provide that an income

       withholding notice is to be prepared and served only if the obligor becomes delinquent in paying

       the order for support). Section 20(c)(12) of the Act mandates that the income withholding notice

       “direct any payor to pay over amounts withheld for payment of support to the State

       Disbursement Unit.” Id. § 20(c)(12).

¶ 58          In this case, the withholding notice and the underlying support order both indicated that

       the support payments were to be paid over to the State Disbursement Unit, with the uniform

       order for support specifying that payments made by Troy should be made payable to and

       forwarded to the State Disbursement Unit. Julie testified that Troy paid her directly and she

       accepted those payments, although no approved written agreement was in place for such an

       arrangement and despite the support order and Notice of Withholding directing the support

       payments to be made through the State Disbursement Unit. While there is no indication that

       Shives knew Julie had been paid directly by Troy, it was Julie’s statutory duty, pursuant to

       section 45(f), to provide Shives with such notice. See id. § 45(f) (providing, “[t]he obligee or

       public office shall provide notice to the payor and Clerk of the Circuit Court of any other support

       payment made, including but not limited to, a set-off under federal and State law or partial

       payment of the delinquency or arrearage, or both”). There also is no indication that Julie

       provided notice of nonpayment to Shives pursuant to section 45(j) of the Act. See id. § 45(j).

¶ 59          Under our reading of the Act, strictly construing the Act in favor of Shives and not

       extending the Act beyond its terms, we must disagree with Julie’s position that Shives should

       continue to be assessed $100-per-day penalties for each period of nonperformance until Shives

       forwards every payment to withhold to the State Disbursement Unit that it had failed withhold

                                                        24
       and forward previously, even though Julie had already accepted those payments directly from

       Troy and failed to provide notice to Shives pursuant under section 45(f) regarding her receipt of

       those payments or notice to Shives pursuant section 45(j) upon any initial nonreceipt of payment.

       See id. §§ 45(g), 45(j). Thus, based on the circumstances of this case, when we construe section

       35(a) strictly in favor of Shives, we cannot say that Shives “knowingly” failed to withhold and

       pay over to the State Disbursement Unit funds after the point that Julie had accepted those same

       funds directly from Troy.

¶ 60          Therefore, based on the specific circumstances of this case, we hold that the imposition of

       the $100-per-day penalty for any of the 15 pay periods of Shives’s nonperformance under the

       Notice to Withhold should be limited to the days that Julie went without the support payment

       after the statutory seven business day grace period for forwarding the payment to the State

       Disbursement Unit expired. See id. § 35(a). The uniform order of support in this case indicated

       that bimonthly support payments were to begin on May 15, 2014, and the evidence showed that

       Julie received payment from Troy on June 5, 2014, in the amount of $1812.50, presumably for

       the pay periods of May 15 and May 30, 2014. The Notice to Withhold was sent via certified mail

       to Shives on May 28, 2015, making June 15, 2014, the first applicable pay period for

       withholding. It does not appear that Julie received payments for the pay periods of June 15 and

       30, 2014, until Troy paid her on July 3, 2014. While Julie’s receipt of the payment for June 30,

       2014, appears to have been within the grace period, her receipt of the payment for June 15, 2014,

       appears to have fallen outside the grace period, so that penalties should be assessed against

       Shives for the pay period of June 15, 2014. It appears that a similar scenario occurred in August,

       September, and October 2014, with no information in the record for November and December

       payments in 2014 or payment for January 15, 2015, other than Julie’s testimony that by mid-

                                                       25
       December 2014, Troy was not far behind in paying her. Accordingly, we vacate the judgment of

       the trial court imposing $66,700 in penalties against Shives and remand to the trial court for a

       hearing to determine the applicable 35(a) penalties to be assessed against Shives in accordance

       with this opinion.

¶ 61                                             CONCLUSION

¶ 62            The judgment of the circuit court of Tazewell County is affirmed as modified in part,

       vacated in part, and remanded with directions.

¶ 63            Affirmed as modified in part, vacated in part, and remanded with directions.

¶ 64            JUSTICE HOLDRIDGE, specially concurring.

¶ 65            I agree that the manifest weight of the evidence establishes that Shives was properly

       served with the Notice to Withhold (Notice) in accordance with section 35(a) of the Act (750

       ILCS 28/35(a) (West 2014)) on May, 28, 2014. I therefore join the majority’s modification of the

       trial court’s judgment to reflect that service date. I also agree with the majority’s judgment as to

       the calculation of penalties to be assessed against Shives. However, I do so for different reasons

       than the majority. I write separately to clarify the analysis that I believe should govern the latter

       issue.

¶ 66            As the majority acknowledges, Shives repeatedly violated the Notice by failing to

       withhold from Troy’s paycheck and to pay the amounts specified in the Notice for 15

       consecutive pay periods. However, because Troy paid some support payments directly to Julie

       during the relevant time period, and because Julie failed to notify Shives that Troy had made

       those payments (as required by section 45(f) of the Act (750 ILCS 28/45(f) (West 2014))), the

       majority suggests that Shives did not “knowingly” fail to withhold or pay the support payments

       that Troy ultimately made to Julie. Supra ¶¶ 59-60. The majority reaches this conclusion even

                                                         26
       though it acknowledges that there is no evidence that Shives knew of any of Troy’s payments to

       Julie. Supra ¶ 58. I disagree. In my view, the fact that Troy made certain payments directly to

       Julie unbeknownst to Shives does not negate the fact that Shives knowingly failed to withhold

       and pay the amounts specified in the Notice.

¶ 67          Nevertheless, I agree with the majority’s ultimate holding that Shives should not be

       penalized for failing to make support payments on Troy’s behalf during those time periods that

       Troy made support payments to Julie. Section 45(f) of the Act provides that the obligee (here,

       Julie) “shall provide notice to the payor and Clerk of the Circuit Court of any other support

       payment made.” (Emphasis added.) 750 ILCS 28/45(f) (West 2014)). The legislature’s use of the

       word “shall” in a statute “ordinarily connotes a mandatory obligation.” In re Marriage of Takata,

       304 Ill. App. 3d 85, 95 (1999). Moreover, section 35(a) of the Act provides, in pertinent part:

              “[i]t shall be the duty of any payor who has been served with an income

              withholding notice to deduct and pay over income as provided in this Section. The

              payor shall deduct the amount designated in the income withholding notice, as

              supplemented by any notice provided pursuant to subsection (f) of Section 45.

              (Emphasis added.) 750 ILCS 28/35(a) (West 2014)).

       Reading these two sections together, it is not clear whether an obligee’s failure to supplement a

       withholding notice by notifying the payor of any support payments made by other parties, as

       required by section 45(f), relieves the payor of its duty to make those same support payments

       under section 35(a). As the majority correctly notes, we must resolve any ambiguity on this issue

       in Shives’s favor. Supra ¶¶ 40, 56, 59; Schultz v. Performance Lighting, Inc., 2013 IL 115738,

       ¶ 12. Section 35(a) arguably suggests that a payor’s duty to deduct and withhold payments does

       not extend to support payments that were or should have been included in a section 45(f) notice

       (i.e., to amounts that an obligee had already received from some other source). Accordingly, I

                                                       27
       would find that Shives was not required to withhold and pay over any amounts that Troy paid to

       Julie.

¶ 68            This analysis is based entirely on the Act’s requirements. It does not require us to reach

       the counterintuitive conclusion that Julie’s failure to notify Shives of the payments from Troy

       somehow rendered Shives’s failure to withhold and pay the amounts specified by the Notice not

       “knowing.” Rather, it allows us to find, by the plain terms of section 35(a), that Shives had no

       statutory duty to withhold or pay amounts that Julie received from some other source, even if the

       Notice erroneously suggested otherwise.

¶ 69            The majority’s approach appears to be based on a desire to do equity rather than a direct

       application of the Act as written. Although the majority does not say so explicitly, its rather

       strained holding seems to be an attempt to prevent Julie from obtaining statutory penalties for

       Shives’s nonpayment of support installments that Julie had already received from Troy, which

       would represent an unfair windfall to Julie. However, such considerations have no relevance to a

       payor’s liability for penalties under section 35 of the Act. In re Marriage of Chen, 354 Ill. App.
3d 1004, 1018 (2004) (“the fact that the penalty assessment [under section 35] may result in a

       windfall to [the obligee] is irrelevant because the penalty is not related solely to the hardship she

       suffered”). We must base an assessment of statutory penalties on the Act’s requirements, not on

       equitable considerations.

¶ 70            One final point bears mentioning. As the majority notes, section 45(j) of the Act, which

       was enacted as part of the August 17, 2012, amendments, provides that “[i]f an obligee who is

       receiving income withholding payments under this Act does not receive a payment required

       under the income withholding notice, he or she must give written notice of the non-receipt to the

       payor.” 750 ILCS 28/45(j) (West 2014). Within 14 days of receiving such notice, the payor must

       either notify the obligee of the reason for non-payment or make the required payment with 9%

                                                         28
interest. Id. Section 45(j) states that “[a] payor who fails to comply with this subsection is subject

to the $100 per day penalty provides under” section 35(a) of the Act. Id. In this case, Julie did

not notify Shives in writing that she did not receive any of the payments required by the Notice.

As the majority notes, Shives did not raise this issue as a defense to Julie’s claim for penalties

under section 35(a). Even if it had raised the issue, however, it would not have changed the

result. Section 45(j)’s notice requirement unambiguously applies only to an obligee who “is

receiving income withholding payments under this Act [and] does not receive a payment

required under the income withholding notice.” (Emphasis added.) Id. In other words, section

45(j) requires an obligee to send notice of nonpayment to the payor only if the obligee had

previously been receiving payments from the payor but subsequently failed to receive one of the

scheduled payments. In this case, Julie never received any payments from Shives during the

relevant time period. (In fact, Shives never even withheld any payments from Troy’s paycheck.)

Thus, by its plain terms, section 45(j) does not apply here.

                                                 29