In re Marriage of Takata ( 2008 )

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
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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
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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
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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
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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
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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
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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.,
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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.
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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
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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).
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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
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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.
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