Court Opinion

ID: 3140767
Source: CourtListenerOpinion
Date Created: 2015-10-22 17:52:14.52057+00
Date Added: 2024-06-11T12:06:36.662590
License: Public Domain

No. 3--07--0175
_________________________________________________________________
Filed June 13, 2008
                            IN THE

                 APPELLATE COURT OF ILLINOIS

                        THIRD DISTRICT

                          A.D., 2008

In re MARRIAGE OF CHRISTINE ANN ) Appeal from the Circuit Court
TAKATA,                         ) of the 10th Judicial Circuit,
                                ) Peoria County, Illinois,
     Petitioner-Appellant,      )
                                )
and
                               )
FRED HAFLEY,                   )
                                ) No. 03--D--631
     Respondent-Appellee        )
                               )
                               )
(Lynne Hafley,                  )
                               ) Honorable
     Third-Party                ) Stephen A. Kouri,
     Defendant-Appellee).      ) Judge, Presiding.
________________________________________________________________

     JUSTICE O’BRIEN delivered the opinion of the court:
________________________________________________________________

    The petitioner, Christine Ann Takata, filed a motion for

turnover against Lynne Hafley, the third-party defendant and wife

of the respondent, Fred Hafley.     The petitioner sought the

respondent's past-due child support from his asserted $31,067.83

interest in an individual retirement account (IRA) under the

third-party defendant's name.     The trial court denied the motion.

The petitioner appeals, arguing that the IRA was subject to

turnover under section 2--1402(c)(3) of the Code of Civil

Procedure (Code) (735 ILCS 5/2--1402(c)(3) (West 2006)) because:

(1) respondent's asserted interest in the IRA is not exempt from

a judgment creditor or a child support enforcement action; (2)
the IRA is the marital property of respondent and third-party

defendant; and (3) the trial court improperly placed the burden

of determining the extent of the respondent's interest in the IRA

on the petitioner.     We reverse and remand.

                                FACTS

    The petitioner and the respondent's marriage was dissolved

on January 9, 1990.     The trial court awarded custody of the

parties' two children to the petitioner and ordered the

respondent to pay child support and provide health insurance for

the children.

    Since that time, the respondent has regularly failed to pay

his child support obligations.     The petitioner has instituted

numerous proceedings to compel the respondent to pay child

support.     Nonetheless, the respondent fails to report his income

to the trial court and only appears to pay his child support

arrearage when he is found in contempt and ordered incarcerated.

    Relevant to this appeal are the following facts.     On April

7, 2006, the petitioner initiated citation proceedings against

the respondent and third-party defendant, seeking to discover the

respondent's and third-party defendant's assets and income to

satisfy $18,626.62 in judgments against the respondent.

    On May 9, 2006, the trial court held a hearing on a rule to

show cause.     The third-party defendant testified about her and

the respondent's joint income tax return from 2002.     Under the

income portion for pensions and annuities on the return, $64,274

is listed.     The third-party defendant did not know what that

                                  2
amount represented.    She also testified about a $15,854 IRA

distribution listed on the return.    She stated that the

distribution was from her 401(k) account and that it was used to

repay credit card debt and attorney fees.    The hearing was

continued until July 18, 2006.

    On July 18, 2006, the respondent's arrearage totaled

$23,963.70.   The respondent testified about an interrogatory that

he answered on December 22, 2005.    The interrogatory asked the

respondent whether he owned any stocks, bonds, securities, or

other investments in the preceding three years.    If so, he was

asked to describe the investment and list any other owners of the

investment.   The respondent answered the interrogatory: Lynne

Hafley, Fidelity Investments, Fidelity Rollover IRA, $31,067.83.

At the hearing, the respondent stated that he answered the

question incorrectly because the money belonged to the third-

party defendant and he did not have such an account.    The

petitioner made an oral motion for turnover of the IRA account.

    On August 9, 2006, the trial court found the respondent in

indirect civil contempt for failure to pay his child support.

The trial court ordered the respondent incarcerated and set bond

at $10,000.   The trial court reserved ruling on petitioner's oral

motion for turnover.

    On August 24, 2006, the petitioner filed a motion for

turnover against the third-party defendant, seeking the

respondent's past-due child support from his asserted $31,000

interest in an IRA under the third-party defendant's name.      As of

                                 3
the date of filing, the respondent owed $25,453.48 in past-due

child support.

    On September 21, 2006, the trial court released the

respondent from custody.    The trial court ordered the respondent

to pay 30% of his income to the petitioner and to provide the

trial court with a detailed accounting of his income and

expenses.    On November 7, 2006, the trial court ordered the

respondent to pay 50% of his income to the petitioner and to

provide her with copies of his pay stubs.

    On November 20, 2006, the trial court held a hearing on the

petitioner's motion for turnover.    The respondent owed $25,568.22

on that date.    The petitioner stated that she was proceeding

under section 2--1402(c)(3) of the Code (735 ILCS 5/2--1402(c)(3)

(West 2006)).    Petitioner asserted that her burden was to show

that the respondent would be entitled to a share of the IRA in a

hypothetical cause of action, such as a dissolution proceeding,

in order for the trial court to grant her motion.

    With regard to the IRA, the petitioner and the trial court

had the following interaction:

            "THE COURT: I just want to know what--did you ever

    subpoena her records on the IRA or retirement account so

    that we can see what went in when?

            MS. TAKATA: There wasn't enough information given to

    me.     I was given a dollar amount and a name of a company,

    which I don't know where that company's located.     I did ask

    for copies of all documentation showing the location of all

                                 4
    the assets held by Fred and Lynne Hafley.      I was not given

    that information.     Mr. Harrod, who represented Mr. Hafley in

    the past, he's the one that filed the interrogatory

    responses for Mr. Hafley asserting Mr. Hafley's interest in

    a $31,000 rolled over IRA held at some unknown location."

    The petitioner and third-party defendant then proceeded to

discuss matters unrelated to the IRA account.     Finally, the trial

court stated:

         "THE COURT: But Ms. Takata, I'm--you keep confusing me.

    I thought we were talking about the retirement account.       I

    know you want to say that Mr. Hafley is a thief and hides

    money, and maybe he is, but what does all that have to do

    with Ms. Hafley's retirement account.

         ***

         THE COURT: I understand your argument and I'm going to

    look up the case law on it.      I understand that argument

    that, you know, Mr. Hafley, if he were to file a divorce

    action, could get to some of that and, therefore, you should

    be able to get to it.     I understand that argument.   I don't

    need to rehash [it] over and over.      I've thrown the guy in

    jail at least three times, I think, because of, you know,

    what he does or doesn't do with money that you think he has.

    Okay.    But I'm not going to redo that part of this case

    today.     I'm looking at this retirement account.   And even if

    Mr. Hafley is hiding all kinds of money and everything else,

    I understand your legal argument about the retirement

                                 5
    account.     I don't think there's any factual dispute about

    it.

          ***   But I'm not seeing that there's any big factual

    dispute about the IRA.     It's a legal issue."

    On December 7, 2006, the trial court denied the petitioner's

motion for turnover.    The trial court stated:

          "The interest Plaintiff seeks to recover is a 401(k)

    retirement account held in the name of Third Party

    Defendant.     Plaintiff claims Defendant has an interest in

    that account by reason of his general disclosure in an

    interrogatory and by reason of his alleged potential marital

    interest in the assets in the purely speculative event of a

    divorce between Defendant and Third Party Defendant.

    Because there would theoretically be an ability on the part

    of Defendant to claim an interest to some degree in said

    401(k) account, Plaintiff argues that she should be entitled

    to reach that interest at this time pursuant to 735 ILCS

    5/2-1402.

          The evidence submitted did not establish the extent of

    the interest of Defendant, if any, such that the Court could

    award Plaintiff a specific amount.     To the contrary, the

    facts presented suggest that Defendant would have little or

    no interest in any event under almost any realistic

    scenario.

          More significantly, the interest of Defendant, if any,

    in and to Third Party Defendant's 401(k) account is an

                                 6
    inchoate interest at best that is dependent on a variety of

    hypothetical and speculative factors (including the

    occurrence of a divorce and the weighing and balancing of

    numerous factors set forth in Section 503 of the Illinois

    Marriage and Dissolution of Marriage Act, along with other

    assets and liabilities).     Under the circumstances submitted,

    there is simply no more than a vague, contingent, highly

    speculative interest in the asset in question.     See Gonzalez

    v. Profile Sanding Equipment, 333 Ill. App. 3d 680, 694

    (First District 2002)."

    On January 5, 2007, the petitioner filed a motion for

reconsideration.   On February 15, 2007, the trial court held a

hearing on the motion.   The record does not contain any

transcripts from that hearing.    On February 16, 2007, the trial

court denied the motion, stating:

         "Upon consideration of [Plaintiff's] Motion to

    Reconsider, the Court finds and orders as follows:

         ***

         2. The reasons stated in the Court's order of 12/7/06

    apply to subsection (c)(3) of section 2-1402 of the Ill.

    Code of Civil Procedure."

    The petitioner appeals.

                              ANALYSIS

    Initially, we note that the respondent and third-party

defendant failed to file appellee briefs.    When an appellee fails

to file a brief, reviewing courts will decide the merits of the

                                 7
appeal if the record is simple and the errors can be easily

decided without the aid of an appellee's brief.    First Capitol

Mortgage Corp. v. Talandis Construction Corp., 63 Ill. 2d 128,

345 N.E.2d 493 (1976).    In other cases, if the appellant's brief

shows prima facie reversible error and the contentions in the

brief find support in the record, the trial court's judgment may

be reversed.    First Capitol Mortgage Corp., 63 Ill. 2d 128, 345

N.E.2d 493.    We reverse the trial court's judgment because the

petitioner has made a prima facie case of reversible error.

     On appeal, the petitioner argues that the trial court erred

when it denied her motion for turnover of the respondent's

asserted $31,000 interest in an IRA under the third-party

defendant's name.    Specifically, she argues that the IRA was

subject to turnover under section 2--1402(c)(3) of the Code (735

ILCS 5/2--1402(c)(3) (West 2006)) because: (1) the respondent's

asserted interest in the IRA is not exempt from a judgment

creditor or a child support enforcement action; (2) the IRA is

the marital property of respondent and third-party defendant; and

(3) the trial court improperly placed the burden of determining

the extent of the respondent's interest in the IRA on the

petitioner.    Our review is de novo because this appeal presents

legal questions as to the trial court's authority to enter an

order for turnover under section 2--1402 of the Code and because

the facts are not in dispute.    See Dowling v. Chicago Options

Associates, Inc., 365 Ill. App. 3d 89, 847 N.E.2d 821 (2006)

(stating that the standard of review is de novo when determining

                                 8
whether a trial court had the authority to enter a turnover order

under section 2--1402 of the Code).

    Section 2--1402(c) specifies the actions a trial court may

take when "assets or income of the judgment debtor not exempt

from the satisfaction of a judgment" are discovered in a citation

proceeding.     735 ILCS 5/2--1402(c) (West 2006).   Under subsection

(c)(3), the trial court may:

         "[c]ompel any person cited, other than the judgment

    debtor, to deliver up any assets so discovered, to be

    applied in satisfaction of the judgment, in whole or in

    part, when those assets are held under such circumstances

    that in an action by the judgment debtor he or she could

    recover them in specie or obtain a judgment for the proceeds

    or value thereof as for conversion or embezzlement."      735

    ILCS 5/2--1402(c)(3) (West 2006).

    Although the trial court did not address this issue in its

decision and the appellees have not filed a brief so arguing, we

will address whether the IRA is exempt from judgment to provide a

complete analysis of the petitioner's motion for turnover under

section 2--1402 of the Code (735 ILCS 5/2--1402 (West 2006)).

The IRA account is not exempt from application to the judgment

for two reasons.     First, the respondent and third-party defendant

did not seek an exemption hearing as provided under section 2--

1402(l) (735 ILCS 5/2--1402(l) (West 2006)).     A judgment creditor

does not have the burden of showing that an exemption is

inapplicable.     See Dowling v. Chicago Options Associates, Inc.,

                                  9
365 Ill. App. 3d 341, 847 N.E.2d 741 (2006) (stating that a

judgment debtor must affirmatively assert an exemption).

Therefore, the respondent and third-party defendant cannot claim

that the IRA is exempt from judgment.

    Second, even if the respondent and third-party defendant

could assert an exemption, such an exemption would be overcome by

a statutory exception to income exemptions for the collection of

child support.     Under section 12--1006 of the Code, a debtor's

interest in or right to the assets in a retirement plan, such as

an IRA, is exempt from judgment.      735 ILCS 5/12--1006(a), (b)(3)

(West 2006).     However, section 15(d) of the Income Withholding

for Support Act (750 ILCS 28/15(d) (West 2006)) provides an

exception to this income exemption from judgment for the

collection of child support.     Section 15(d) states that income

includes any payment from annuity, pension, and retirement

benefits and that "[a]ny other State or local laws which limit or

exempt income or the amount or percentage of income that can be

withheld shall not apply."     750 ILCS 28/15(d) (West 2006); see

also Jakubik v. Jakubik, 208 Ill. App. 3d 119, 566 N.E.2d 808

(1991) (stating that the exemption of an IRA from judgment is

subject to the statutory exceptions for child support and

maintenance obligations because public policy favors the payments

of these obligations from exempt property to promote the support

of the family).     Thus, for this additional reason, the respondent

and third-party defendant cannot claim that the IRA is exempt

from judgment.

                                 10
    Because the IRA is not exempt from judgment, we must now

determine if the trial court erred when it denied the

petitioner's motion for turnover of the IRA under section 2--

1402(c)(3).     The trial court, relying on Gonzalez v. Profile

Sanding Equipment, Inc., 333 Ill. App. 3d 680, 776 N.E.2d 667

(2002), denied the motion because it found that the respondent

had a "vague, contingent, highly speculative interest" in the IRA

and because the petitioner failed to prove the extent of the

respondent's interest in the IRA so that it could award the

petitioner a specific amount.     The petitioner argues that

Gonzalez does not apply to this case and that the IRA is the

respondent and third-party defendant's marital property, subject

to turnover to the extent of the respondent's interest.        We

agree.

    Gonzalez concerned a petitioner's motion for turnover of the

respondent's potential cause of action under section 2-1402(c)(1)

of the Code.     Gonzalez, 333 Ill. App. 3d 680, 776 N.E.2d 667.

Here, the petitioner made her motion for turnover under section

2-1402(c)(3) of the Code.     Also, the petitioner sought an asset

in which the respondent has an actual, not potential or illusory,

interest.     Thus, the trial court erred in relying on Gonzalez to

deny the petitioner's motion for turnover.

    The respondent has an actual interest in the IRA in the

third-party defendant's name as it is the respondent and third-

party defendant's marital property.     Marital property is presumed

to be "all property acquired by either spouse subsequent to the

                                 11
marriage," regardless of whether the title to the property is

held individually or in some form of co-ownership.     750 ILCS

5/503(a) (West 2006).   This presumption may be overcome if it can

be shown that the property qualifies as nonmarital property.      See

750 ILCS 5/503(a) (West 2006) (listing the exceptions to the

presumption of marital property).

    In this case, the evidence shows that the IRA was held in

the name of the third-party defendant.     The third-party defendant

did not present evidence or argue that the IRA was nonmarital

property because it was acquired before her marriage to the

respondent or for any other reason.   In fact, the third-party

defendant did not appear to have much knowledge about this IRA

account.   Accordingly, we find that the IRA is marital property

of the respondent and third-party defendant.     Moreover, because

the IRA is marital property and the respondent has a legal

interest in it, we find that the IRA is subject to turnover to

the extent of the respondent's interest.     See Mid-American

Elevator Co. v. Norcon, Inc., 287 Ill. App. 3d 582, 587, 679

N.E.2d 387, 390 (1996) (stating that a trial court may order

turnover of assets held by a third-party "as long as the judgment

debtor would have the right to recover such assets from the third

party”); see also Lorillard Tobacco Co. v. Canstar, Inc., No. 03-

-C--4769 (N.D. Ill. May 16, 2006) (finding that a judgment

creditor could reach judgment debtor's marital property,

consisting of a television and a computer, to the extent of the

respondent's interest in it).

                                12
    Finally, we address whether the trial court erred in placing

the burden of determining the extent of the respondent's interest

in the IRA on the petitioner.    "Before a judgment creditor may

proceed against a third party who is not the judgment debtor, the

record must contain some evidence that the third party possesses

assets of the judgment debtor.     Only then does the citation court

have the jurisdiction to order that party to produce those assets

to satisfy the judgment."   Schak v. Blom, 334 Ill. App. 3d 129,

133, 777 N.E.2d 635, 639 (2002).

    In the present case, the petitioner met her burden as she

presented evidence that the third-party defendant possessed an

IRA in which the respondent had an interest.     She presented the

respondent's response to an interrogatory in which he admitted

that an IRA in the amount of $31,067.83 existed in the third-

party defendant's name and that he had an interest in it.     The

respondent and the third-party defendant did not deny the

existence of this IRA at the hearing on the motion for turnover.

Thus, having shown that the third-party defendant possessed an

IRA in which the respondent had an interest, the petitioner did

not need to determine the extent of that interest.     See Lorillard

Tobacco Co., No. 03--C--4769 (N.D. Ill. May 16, 2006) (ordering

that the value of the judgment debtor's interest in marital

property, consisting of a television and a computer, must be

turned over, but not stating that the judgment creditor needed to

prove the extent of the interest).

                            CONCLUSION

                                 13
    For the foregoing reasons, we reverse the judgment of the

circuit court of Peoria County and remand the cause for further

proceedings consistent with this opinion.

    Reversed and remanded.

    McDADE, P.J., and SCHMIDT, J., concur.

                              14