In re Marriage of Roepenack , 2012 IL App (3d) 110198 ( 2012 )

ILLINOIS OFFICIAL REPORTS
Appellate Court
In re Marriage of Roepenack, 2012 IL App (3d) 110198
Appellate Court In re MARRIAGE OF CHAT T. ROEPENACK, Petitioner-Appellant,
Caption and KATHLEEN L. ROEPENACK, Respondent-Appellee.
District & No. Third District
Docket No. 3-11-0198
Filed March 2, 2012
Held The trial court’s order granting respondent’s petition under section 2-
(Note: This syllabus 1401 of the Code of Civil Procedure alleging that the judgment dissolving
constitutes no part of the parties’ marriage was procured by fraud and was unconscionable was
the opinion of the court affirmed where respondent was not represented by counsel, petitioner
but has been prepared misstated his income during the settlement negotiations, he failed to
by the Reporter of disclose information concerning the parties’ business interests, petitioner
Decisions for the received the majority of the marital assets, he submitted an unauthorized
convenience of the deviation of child support, he failed to disclose assets, and it was unlikely
reader.)
the trial court would have approved the settlement agreement if the court
had been provided with complete information; therefore, the trial court
properly vacated the settlement agreement, save the portion granting the
parties joint custody of the children, and remanded the cause for further
proceedings.
Decision Under Appeal from the Circuit Court of Tazewell County, No. 09-D-310; the
Review Hon. Paul P. Gilfillan, Judge, presiding.
Judgment Affirmed and remanded.
Counsel on Derek Schroen (argued), of Benckendorf & Benckendorf, PC, of Peoria,
Appeal for appellant.
David M. Lynch (argued), of Lynch & Bloom, of Peoria, for appellee.
Panel PRESIDING JUSTICE SCHMIDT delivered the judgment, with opinion.
Justices Holdridge and Wright concurred in the judgment and opinion.
OPINION
¶1 On August 12, 2009, the trial court entered a judgment dissolving the marriage of
petitioner, Chad T. Roepenack, and respondent, Kathleen L. Roepenack, and incorporating
the parties’ marital settlement agreement. On May 12, 2010, Kathleen filed a petition under
section 2-1401 of the Code of Civil Procedure for relief from judgment (735 ILCS 5/2-1401
(West 2008)), alleging that portions of the judgment were unconscionable and procured by
fraud. The trial court granted Kathleen’s petition and vacated provisions of the parties’
marital settlement agreement (judgment). Chad appeals from the trial court’s order granting
Kathleen’s petition for relief from judgment, arguing that the trial court erred in: (1) finding
that the marriage settlement agreement was unconscionable; and (2) admitting a business
appraisal into evidence. We affirm.
¶2 FACTS
¶3 The parties married on February 10, 2000. Children were born August 15, 2001, and
April 19, 2005. On June 16, 2009, Chad filed a petition for dissolution of marriage alleging
that Kathleen was guilty of extreme and repeated mental cruelty. In the petition, Chad
requested custody of the minors subject to Kathleen’s visitation, child support, and a division
of the marital and nonmarital property. On July 2, 2009, Kathleen and Chad signed a marital
settlement agreement and a joint-parenting agreement, at which time Kathleen was
unrepresented by counsel and Chad was represented by counsel. Kathleen also signed an
entry of her appearance in the case and waived any further notice.
¶4 On August 12, 2009, Chad and his attorney attended a prove-up hearing for entry of a
judgment of dissolution of marriage. Kathleen was neither present at the hearing nor
represented by counsel. Chad testified that his 2008 income was $100,000. (This testimony
was ultimately proven false.) The trial court entered a judgment for dissolution of marriage,
incorporating the terms of the parties’ marital settlement agreement dated July 2, 2009.
¶5 Under the terms of marital settlement agreement, Chad was awarded all interest in the
businesses, CT Rope Co. (CT Rope) and Rope & Clark JJ Development Co. (Rope & Clark).
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Kathleen was awarded the marital home and was required to pay $13,000 into the minors’
college fund. Each party was awarded all interest in his/her own respective pension and
retirement programs, checking and savings accounts, and life insurance policies.
¶6 Chad was given sole possession and responsibility for the lease payments on the parties’
Toyota Tundra. Kathleen was to receive the title to the parties’ Land Rover prior to the entry
of judgment of dissolution. Kathleen would be responsible for the $933 monthly payment
on the Land Rover but would be entitled to $475 of additional maintenance while she was
making payments. The Land Rover would be transferred to Chad on July 1, 2010, with Chad
responsible for the remaining debt, or Kathleen could transfer the Land Rover to Chad at
anytime prior thereto.
¶7 Chad was required to pay for three semesters of college for Kathleen as a loan, which
Kathleen was to repay into the minors’ college fund within seven years. The minors’ $10,000
college fund was to be administered by Chad and would be used toward Chad’s contribution
to the minors’ college expenses. Chad was required to pay $531.59 in child support every
two weeks. Kathleen would receive $2,833 per month in maintenance, which would be
reduced to $1,417.50 per month after the second year, and terminate after the third year.
After the initial six months, Kathleen’s maintenance would also be reduced by 75% of her
net income. The parties’ joint custody of their two minor children was subject to the terms
of the joint-parenting agreement.
¶8 On May 12, 2010, pursuant to section 2-1401 of the Illinois Code of Civil Procedure,
Kathleen filed a petition to reopen or vacate the marital settlement agreement, alleging
fraudulent concealment and misrepresentation on Chad’s part. Specifically, the petition
alleged that Chad knowingly misrepresented his 2008 gross income as $100,000 on a child
support calculation sheet that he had provided to Kathleen. Kathleen also alleged that Chad
failed to disclose the value of the businesses and did not inform her that there was a valuation
that could be assigned to the ownership of the businesses that exceeded $1 million. Kathleen
alleged that as a result of the marital settlement agreement, Chad received assets in excess
of $1 million while she received less than $50,000 worth of assets.
¶9 Evidence at the hearing on Kathleen’s petition indicated that the parties’ corporations,
consisting of Jimmy John’s franchises, were formed during the marriage. In 2000, when the
parties married, Chad was the general manager of a Jimmy John’s franchise and then an area
manager of multiple franchises. In 2003, the parties purchased a franchise in Pekin, Illinois,
for $158,000 from their marital assets. In May 2004, the parties purchased another franchise
in Lincoln, Illinois, for $125,000 from their marital assets. The Pekin and Lincoln franchises
were incorporated into CT Rope.
¶ 10 In June 2006, Chad brought in a partner, who paid $180,000 for a 35% share of CT Rope.
Chad and his partner also formed a 50/50 partnership as Rope & Clark and purchased a
franchise in Morton, Illinois, for $290,000. They later purchased another franchise under
Rope & Clark in East Peoria, Illinois, for $340,000. Chad testified that at the time of the
parties’ dissolution in 2009, CT Rope was $108,000 in debt and Rope & Clark was $340,000
in debt.
¶ 11 Until September of 2006, Kathleen did the accounting for the businesses. In 2007,
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Kathleen became employed as a cheerleading coach for a junior high school, earning $3,000
per year, and was no longer involved in the businesses.
¶ 12 Although Kathleen was no longer involved in the operation of the businesses, on June
25, 2008, she cosigned for a business loan in the amount of $108,668 at Chad’s request. On
February 26, 2009, she cosigned for another business loan in the amount of $310,000 in
anticipation of Chad purchasing the East Peoria franchise.
¶ 13 In April of 2009, the parties discussed getting divorced. In discussing child support, Chad
e-mailed a document, prepared by his attorney, to Kathleen indicating that his gross income
for 2008 was $100,000 and his net income was $70,516.75. The documents showed that
Kathleen was entitled to 28% of Chad’s net income as child support for two children in the
amount of $19,775 per year “[l]ess 30% deviation due to amount of time with kids.”
According to the child support calculation sheet, the resulting child support that Chad owed
Kathleen was $13,821.28 per year or $531.59 every two weeks.
¶ 14 Chad testified that during the marriage settlement discussions, the parties had specifically
discussed that Chad’s 2008 income was approximately $190,000. According to Chad, the
parties agreed that child support would be based on a salary of $100,000 per year because
that was the amount of income the parties were living on, while the remainder of their
income was invested back into the businesses. Chad testified that the parties agreed that child
support would be increased after Kathleen’s maintenance terminated and that additional
restaurants could be purchased to help Kathleen and the minors in the future. Chad testified
that the trial court had not specifically approved of the child support deviation and was not
informed of Chad’s actual income of $211,000.
¶ 15 During their marriage, the parties filed a business tax return by March 15 each year and
their personal tax return by April 15 each year. In 2009, Chad filed the parties’ 2008 joint tax
return on September 17, 2009, which was 38 days following the entry of the dissolution of
marriage order. It was not until that day that Kathleen saw and signed the parties’ 2008 tax
return. Chad testified that the 2008 tax return was filed late because his partner was redoing
their accounting. The parties’ 2008 tax return, which was filed more than 30 days after the
dissolution judgment, indicated that Chad’s income was $211,000, based on Chad’s personal
salary of $71,000 and the corporations’ income of $140,000. Kathleen’s salary was $2,104.
¶ 16 During their marriage, the parties had a joint account out of which Kathleen paid their
personal expenses. Chad had a business savings account, in which quarterly distributions
from the businesses were deposited. Out of the business savings account, the parties paid for
their vehicles, mortgage, debt, and vacations. Kathleen had no authority on the business
savings account. Kathleen had a personal account that Chad deposited $400 per month into
for Kathleen to “do whatever she want[ed] with.”
¶ 17 All the paperwork for the businesses was kept in the sunroom of the parties’ marital
home until Chad moved out in May of 2009. Chad testified that Kathleen knew where the
documents were located and they were never locked. Chad testified that he and Kathleen
discussed his annual salary, and she had always known the amount of his real income. Chad
testified that he discussed the progress of the businesses on a daily basis with Kathleen and
that he “constantly told her how [they] were doing.”
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¶ 18 Kathleen testified that she received half the equity in the home and some personal
property in the home in consideration for transferring her interest in the four franchises to
Chad. Kathleen testified that at the time of the parties’ dissolution, there was $30,000 in
equity in the marital home of which she agreed to pay $13,000 to the minors’ education trust.
Kathleen testified that she gave the Land Rover back to Chad so she could purchase a vehicle
with lower payments. Kathleen received no other benefits from the divorce.
¶ 19 In February 2009, in connection with the parties’ loan request for the East Peoria
franchise, Chad had received an appraisal valuing the Pekin, Morton, and Lincoln franchises
at $1,150,000. Chad testified that he had a “quick discussion” about the appraisal with
Kathleen as a “kind of pat on the back” in relation to how far the businesses had come.
Kathleen testified that she knew an appraisal was going to be completed, but was never
aware that one had actually been completed and she was not aware of the value of the
businesses. Kathleen testified that during the settlement negotiations, Chad had indicated that
the businesses carried a lot of debt and had practically no value. Kathleen testified that she
did not know an appraisal of the businesses had been conducted until November 30, 2010,
when she found out that an appraisal indicated that three of the four businesses were worth
a total of $1.3 million.
¶ 20 Kathleen sought to admit the appraisal into evidence, and Chad objected on the basis of
the document containing hearsay. The trial court admitted the appraisal into evidence with
limitations. The trial court indicated that the appraisal would be admitted for “the secondary
tertiary reasons dealing with state of mind and the overall ultimate issue *** [of] whether or
not fraud or deception was involved.”
¶ 21 Kathleen testified that she was not involved with the accounting for the business after
2006 and did not know the value of the businesses at the time of the divorce negotiations.
Kathleen testified that Chad told her a portion of his income went back into the businesses,
which was a legal deduction that was not applicable toward paying child support. He gave
Kathleen a document created by his attorney indicating the amount of child support he was
legally required to pay based upon a $100,000 income. Kathleen testified that she agreed to
take less child support because she thought the agreed-upon amount was configured pursuant
to law. Kathleen testified that she never agreed to allow Chad to keep money for his own
purposes that should have been paid in child support.
¶ 22 At the time Kathleen agreed to the settlement, she thought Chad’s salary was between
$100,000 to $150,000. Kathleen testified that she did not know how much money Chad made
from year to year and she had always been confused by the difference between Chad’s
income and the businesses’ income. Kathleen testified that she signed the parties’ joint tax
returns and various loan documents without reviewing those documents because she always
trusted Chad as her husband. Based on Chad’s representations, Kathleen believed that any
equity in the businesses was insignificant.
¶ 23 Kathleen testified that she received a copy of the 2008 tax return after the dissolution of
their marriage was final. The return indicated that Chad’s salary for 2008 was $211,000. At
that time, Kathleen began questioning Chad about the amount of child support he was
paying. Chad acknowledged that there was a difference in the amount of income used to
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calculate the child support and his reported income for 2008. He indicated that the child
support would be fixed at the time of the review of Kathleen’s maintenance in two years.
¶ 24 On cross-examination, Kathleen testified that she paid the parties’ personal bills from a
joint checking account that she accessed online. She could see the business savings account
online if she “clicked on it,” but she never did. During the settlement negotiations, Kathleen
had an initial consultation with an attorney, who told her that she should look into the
proposed child support figure and should obtain a valuation of the businesses. She did not
hire an attorney during the divorce proceedings because she felt she could not afford one.
¶ 25 Kathleen testified that during the settlement negotiations, she did not know Chad’s true
income, the value of the businesses, the exact value of the personal property she had been
awarded, the existence of any retirement account, or the $30,000 in the business savings
account. Kathleen testified that she discovered the existence of the retirement account after
the dissolution.
¶ 26 On February 22, 2011, the trial court found that Kathleen had proven, by clear and
convincing evidence, that the parties’ marital settlement agreement was unconscionable and
resulted from fraud in that Kathleen had proved Chad’s intent to deceive her. The trial court
granted Kathleen’s petition for relief from judgment and vacated the marriage settlement
agreement (except for the portion awarding the parties joint custody of the minors). Chad
appealed.
¶ 27 ANALYSIS
¶ 28 I. Unconscionability of the Marital Settlement Agreement
¶ 29 On appeal, Chad argues that the trial court erred in granting Kathleen’s section 2-1401
petition to vacate the marital settlement agreement as unconscionable and the result of fraud.
We disagree.
¶ 30 In order to receive relief under section 2-1401, a petitioner must affirmatively allege
specific facts to support the following elements: (1) the existence of a meritorious defense
or claim; (2) due diligence presenting this defense or claim to the circuit court in the original
action; and (3) due diligence in filing the petition. Paul v. Gerald Adelman & Associates,
Ltd., 223 Ill. 2d 85 (2006). Although a section 2-1401 petition is ordinarily used to bring
facts to the attention of the trial court, which if known at the time of judgment would have
precluded its entry, it may also be used to challenge a purportedly defective judgment for
legal reasons. Id. Relief under section 2-1401 may be available to set aside a settlement
agreement that is unconscionable or was entered into because of duress, coercion or fraud.
In re Marriage of Johnson, 339 Ill. App. 3d 237 (2003).
¶ 31 Unconscionable means that one party did not have a meaningful choice and the contract
terms are unreasonably favorable to the other party. In re Marriage of Gorman, 284 Ill. App.
3d 171 (1996). The fact that an agreement merely favors one party over the other does not
render the agreement unconscionable. Id. To rise to the level of being unconscionable, the
settlement must be improvident, totally one-sided or oppressive. Id. To determine whether
an agreement is unconscionable, a court must consider two factors: (1) the conditions under
which the agreement was made; and (2) the economic circumstances of the parties that result
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from the agreement. In re Marriage of Bielawski, 328 Ill. App. 3d 243 (2002).
¶ 32 Section 503(d) of the Illinois Marriage and Dissolution of Marriage Act requires that the
division of marital property upon the dissolution of marriage be in “just proportions” in light
of the relevant circumstances of the parties. 750 ILCS 5/503(d) (West 2008). Although “just
proportions” does not necessarily mean mathematically equal, the distribution must be
equitable under the circumstances. Bielawski, 328 Ill. App. 3d 243.
¶ 33 To sustain a claim of fraud, the following elements must be proven: (1) false statement
of material fact known or believed to be false by the party making it; (2) intent to induce
another party to act; (3) action by the other party in reliance on the truth of the statement; and
(4) damage to the other party relying on such statement. In re Marriage of Morris, 147 Ill.
App. 3d 380 (1986).
¶ 34 In People v. Vincent, 226 Ill. 2d 1 (2007), our supreme court discussed the applicable
standard of review in some proceedings involving section 2-1401 petitions, but did not
directly address the standard of review in cases involving either the grant or denial of relief
on a section 2-1401 petition after an evidentiary hearing. In dicta, the supreme court
indicated that the abuse of discretion standard of review “does not match up with”
disposition of a section 2-1401 petition following an evidentiary hearing. Vincent, 226 Ill.
2d at 17 n.5.
¶ 35 In this case, Kathleen’s section 2-1401 petition for relief was granted after the trial court
conducted an evidentiary hearing. Accordingly, we will review the trial court’s judgment
under the manifest weight of the evidence standard of review. S.I. Securities v. Powless, 403
Ill. App. 3d 426 (2010). A decision is against the manifest weight of the evidence when the
opposite conclusion is clearly evident. Id.
¶ 36 Here, the record shows that during the settlement negotiations, Chad was represented by
counsel and Kathleen was unrepresented. Kathleen testified that she did not believe that she
could afford an attorney, and the record supports that belief as reasonable in that she only
earned $3,000 per year. The parties’ settlement discussions were over the course of only two
months.
¶ 37 During the settlement negotiations, Chad gave Kathleen a child support calculation sheet
that misstated his actual income, which he had claimed was a valid figure of his net income
under applicable law. Chad conceded that his disclosure of earning $100,000 in 2008 was
not accurate. The inaccuracy of Chad’s disclosed income not only affected the child support
calculation but also Kathleen’s perceived value of the businesses. During the parties’
negotiations, Chad had the benefit of having both an intimate familiarity with the franchises
and an appraisal of those businesses. Not only did Chad fail to disclose the existence of the
appraisal and appraised value of the businesses to Kathleen, but he led her to believe that the
businesses were worth little to nothing. Additionally, Kathleen was unaware of the existence
of a retirement account or that Chad would be receiving $30,000 that was in a savings
account.
¶ 38 Although the record is not clear as to the exact value of the businesses at the time of the
dissolution, it is clear that Chad testified that $913,000 had initially been invested into the
businesses and the businesses had approximately $448,000 worth of debt. The total debt was
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$108,000 for CT Rope and $340,000 of debt for Rope & Clark. Notably, Chad and Kathleen
owned a 65% share in CT Rope, the corporation with less debt at the time of the dissolution.
In addition, Chad testified that in 2006 his partner paid $180,000 for a 35% share of CT
Rope, which suggests that CT Rope had a total value of $514,286 at that time. These figures
support Kathleen’s ideation that the businesses have substantial value, contrary to Chad’s
representations to her during the settlement negotiations.
¶ 39 The trial court’s finding that the marital settlement agreement was unconscionable and
procured by fraud was supported by the fact that Chad: (1) received the majority of the
marital assets; (2) submitted an unauthorized deviation of child support to both Kathleen and
the court; and (3) failed to disclose marital and personal assets. It is likely that the marriage
settlement agreement would not have been approved had the trial court been furnished with
complete information. Therefore, Kathleen presented a meritorious claim.
¶ 40 Chad argues that Kathleen did not use sufficient diligence in discovering the value of the
business and other assets and presenting this claim to the circuit court in the original action.
We believe the record supports the trial court’s finding that Kathleen acted with adequate
diligence. Kathleen had little money to hire an attorney. Additionally, she may have sought
out the value of the businesses if Chad had not misled her into believing there was little to
no value in the businesses. Nonetheless, the requirement that a section 2-1401 petition
demonstrate diligence is not inflexible. Johnson, 339 Ill. App. 3d 237. When justice and
fairness require, a judgment may be vacated even though the requirement of due diligence
had not been satisfied. In re Marriage of Hoppe, 220 Ill. App. 3d 271 (1991). Where there
is fraud or unfair conduct, the due diligence requirement will not be strictly enforced.
Ridgway v. Ridgway, 146 Ill. App. 3d 463 (1986); In re Marriage of Palacios, 275 Ill. App.
3d 561 (1995). We find it significant that Chad testified to the accuracy of the admittedly
inaccurate statement of income before the trial court in the original action. We have not only
a fraud on Kathleen, but a fraud on the court as well. We find it appropriate here to lower the
due diligence bar. Accordingly, the trial court’s grant of Kathleen’s section 2-1401 petition
for relief after the evidentiary hearing in this case was not against the manifest weight of the
evidence.
¶ 41 Chad additionally urges this court to find that the trial court erred in denying his request
to sever and vacate only the provisions of the marital settlement agreement related to child
support. Chad acknowledged that he had misrepresented his income for the purpose of child
support and the trial court did not make a specific finding to deviate from the statutory
guideline that he pay 28% of his net income in child support for two children. Chad does not
dispute that the child support provisions of the marital settlement agreement should be
vacated. However, he argues that the unenforceability of the child support provision does not
render the remaining provisions unenforceable.
¶ 42 As discussed above, the trial court’s findings that remaining provisions were also
procured by fraud and were unconscionable are supported by the record. Chad’s false
representations and testimony regarding his 2008 income were also relevant to the value of
the businesses from which the income was derived. Therefore, the trial court did not err in
vacating the parties’ marital settlement agreement in its entirety but for the portion granting
the parties joint custody of the minors.
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¶ 43 II. Admission of the Business Appraisal Into Evidence
¶ 44 Chad argues that the trial court committed reversible error in admitting the business
appraisal into evidence because it was hearsay. Evidentiary rulings will not be overturned
absent a clear abuse of discretion. Simmons v. Garces, 198 Ill. 2d 541 (2002). In order to
warrant a reversal, an evidentiary ruling must have been substantially prejudicial and affected
the outcome of the case. Id. “Hearsay” is a statement, other than a statement made by the
declarant while testifying at the trial or hearing, offered into evidence to prove the truth of
the matter asserted. Ill. R. Evid. 801(c) (eff. Jan. 1, 2011). In other words, an out-of-court
statement offered into evidence for some purpose other than to prove the truth of the matter
asserted is not hearsay. People v. Kliner, 185 Ill. 2d 81 (1998). An out-of-court statement
offered to prove its effect on a listener’s mind or to show why he subsequently acted as he
did is not hearsay and is admissible. People v. Sorrels, 389 Ill. App. 3d 547 (2009).
¶ 45 Here, the trial court allowed the appraisal into evidence for the limited purpose of
determining whether fraud or deception was involved in this case on Chad’s part. The
appraisal was not admitted to prove the businesses’ actual value. Instead, it was used to show
Chad’s state of mind as to fraud or deception. For that purpose, the appraisal was not
hearsay. See Sudzus v. Department of Employment Security, 393 Ill. App. 3d 814 (2009)
(providing that the statement that damages to heating and air-conditioning units was $8,000
was not hearsay, where the statement was not offered to prove the actual amount of damages
but was offered to show that the board had been alerted that there was damage to the units).
Accordingly, the trial court did not abuse its discretion in allowing the appraisal into
evidence to determine whether Chad knew of the existence of the appraisal and whether he
disclosed or concealed its existence to Kathleen in support of Kathleen’s theory of Chad’s
intent to deceive.
¶ 46 Further, even if the trial court had erred in allowing the appraisal into evidence, the error
was harmless. As indicated above, there was evidence other than the appraisal that Chad had
fraudulently concealed or misrepresented the value of the businesses. In this regard, we note
that Chad’s underrepresentation of his $211,000 annual income from the businesses by over
50% served to lower the perceived value of the businesses. The evidence that Chad procured
the dissolution decree by a fraud upon both Kathleen and the court renders harmless any error
with respect to the appraisal.
¶ 47 CONCLUSION
¶ 48 For the foregoing reasons, the judgment of the circuit court of Tazewell County is
affirmed, and this cause is remanded for further proceedings.
¶ 49 Affirmed and remanded.
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