In re Marriage of Lugge

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Appellate Court Date: 2020.06.14
13:42:17 -05'00'
In re Marriage of Lugge, 2020 IL App (5th) 190046Appellate Court In re MARRIAGE OF CHRISTY LUGGE, Petitioner-Appellant, and
Caption JAMES LUGGE, Respondent-Appellee.
District & No. Fifth District
No. 5-19-0046
Rule 23 order filed December 23, 2019
Motion to
publish allowed January 15, 2020
Opinion filed January 15, 2020
Decision Under Appeal from the Circuit Court of St. Clair County, No. 13-D-912; the
Review Hon. Thomas B. Cannady, Judge, presiding.
Judgment Affirmed.
Counsel on Curtis L. Blood, of Collinsville, for appellant.
Appeal
Charles W. Courtney Jr. and Jayni D. Lintvedt, of Courtney Clark
Law, P.C., of Belleville, for appellee.
Panel JUSTICE OVERSTREET delivered the judgment of the court, with
opinion.
Presiding Justice Welch and Justice Moore concurred in the judgment
and opinion.
OPINION
¶1 During the dissolution of marriage proceedings below, the petitioner, Christy Lugge, and
the respondent, James Lugge, entered into a marital settlement agreement to divide marital
assets, and the circuit court heard evidence on the remaining issues, including child support
and maintenance. On appeal, Christy alleges that, in determining child support and
maintenance, the circuit court improperly considered income generated from cash awarded her
pursuant to the marital settlement agreement. Christy requests this court to reverse and remand
to recalculate income for purposes of child support and maintenance. We affirm the decision
of the circuit court.
¶2 I. BACKGROUND
¶3 The parties married on February 14, 1987, and four children were born of the marriage. On
November 22, 2013, Christy filed a petition for dissolution of marriage. On October 17, 2018,
the circuit court entered an order noting the parties’ partial agreement with regard to
distribution of the marital property. The circuit court attached to its order a property division
report, which revealed that the parties had agreed to a property settlement allocating
approximately $3 million to each party, accounting for a $471,500 equalization payment from
James to Christy.
¶4 Pursuant to the agreed property division, James received real estate with equity totaling
$915,000; cash and investments totaling $51,053; interest in Bel-O Sales and Service, Inc.
(Bel-O Sales), valued at $2,102,750; interest in Bel-O Pest Solutions, Inc. (Bel-O Pest), valued
at $175,000; a cell tower lease valued at $7000; cars and personal effects valued at $26,100;
life insurance valued at $54,009; retirement accounts valued at $381,515; and debts totaling
$233,865. Pursuant to the agreed property division, Christy received real estate with equity
totaling $1,041,130; cash and investments totaling $818,442; cars and personal effects valued
at $66,000; life insurance valued at $168,161; and retirement accounts valued at $442,072.
¶5 On October 18, 2018, at the hearing on the remaining issues, including child support and
maintenance, James testified that he and Christy had four children: Alexis, age 20, Jack, age
18, Joe, age 16, and Anna, age 13. James testified that his father started Bel-O Sales, a heating,
air-conditioning, and plumbing company, and that he had been employed by Bel-O Sales since
1980. James testified that he became a shareholder in 1995 and owned 90% of the shares.
James testified that when he acquired Bel-O Sales in 1995, it grew from $3 million in gross
sales to $8 or $9 million in gross sales. James testified that in 2008, however, commercial
construction halted and negatively affected the whole business.
¶6 James testified that he also owned 51% of the shares of Bel-O Pest, a pest control and
solutions company, which began in 2005. James testified that Bel-O Sales and Bel-O Pest were
subchapter S corporations and were, in effect, pass-through entities for which he and Christy
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paid taxes. Accordingly, James testified that Bel-O Sales maintained investment accounts and
that ordinary dividends passed through as income to him.
¶7 James testified that Bel-O Sales held $600,000 to $700,000 in cash reserve accounts for
bonding purposes, i.e., to acquire bonds for large commercial projects. James explained that to
acquire a large commercial project opportunity, a bond is required, and in order for Bel-O Sales
to be bonded, a bonding company reviewed financial statements for profit and ability to pay,
in case of failure to complete a project. James testified that generally an insurance audit team
reviewed the financial statements and determined a bonding rate based on the company’s
capability to repay a loan or bond. James testified that although there was no explicit bonding
threshold or mark for cash reserves, strong cash reserves resulted in a lower bonding rate.
James testified that when the company failed to show a profit, the cash reserves were
mandatory to even acquire a bond. James testified that the cost of a bond depended on the cost
of the project and that Bel-O Sales paid “so many dollars per thousand.” James testified that
the $600,000 to $700,000 in cash reserves was also necessary given that the company’s payroll
amounted to about $85,000 per week.
¶8 James testified that he had in the past withdrawn funds and paid bonuses when the business
hit profits over budget for that quarter. James testified, however, that Bel-O Sales had not met
targets for any quarter since 2013 and that, since 2012, he had not accessed funds to pay
bonuses or dividends to himself or any other shareholder. James testified that each October,
his business consultant prepared a written budget for the following year by reviewing with
department managers the obtainable sales goals and budget targets. James testified that he had
not adjusted that budget to increase targets to limit his payment of child support and
maintenance.
¶9 On November 7, 2018, the circuit court entered a judgment of dissolution of marriage. In
its order, the circuit court noted and memorialized the parties’ agreement regarding the
disposition of the majority of marital property and noted that the parties had reserved to the
court’s determination the issues of maintenance, child support, medical expenses, health and
life insurance, postmajority college support, and dissipation.
¶ 10 On December 14, 2018, the circuit court entered a supplemental judgment of dissolution
of marriage. The circuit court determined that James’s annual income totaled $167,842.25,
which included $131,700 W-2 income, $2400 director fees, $5951.25 cell tower rental, and
$27,791 dividends from investments held by Bel-O Sales. This dividend amount represented
the average of James’s 2016 and 2017 qualified and unqualified dividend income as
represented on his schedule K-1 forms, which reported his share as partner of income,
deductions, and credits of the business.
¶ 11 The circuit court found that Christy was awarded a total of $1,136,535 in cash from the
parties’ existing investment accounts, as well as a lump sum cash settlement of $471,500. The
court noted that Christy had argued that her cash property settlement should not be considered
as income. However, citing In re Marriage of Rogers, 213 Ill. 2d 129, 136-37 (2004)
(definition of income is broad, includes gains and benefits that enhance wealth, and is linked
to investments), the circuit court applied 6.5% to $950,000 of the cash assets awarded to
Christy, to determine interest income of $61,750 annually. Applying the guidelines of section
504 of the Illinois Marriage and Dissolution of Marriage Act (750 ILCS 5/504(a) (West 2018)),
the court awarded Christy monthly maintenance of $2507.25. The circuit court awarded child
support of $1605 per month.
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¶ 12 On January 18, 2019, the circuit court entered an order disposing of the issues remaining
subsequent to the December 14, 2018, order. On January 30, 2019, Christy filed a notice of
appeal.
¶ 13 II. ANALYSIS
¶ 14 On appeal, Christy argues that the circuit court erred as a matter of law in considering
interest income on her share of the marital property for purposes of maintenance and child
support. Christy states that she “does not claim that the finding as to [James]’s income was an
abuse of discretion[ ] or that the finding as to her income was an abuse of discretion.” Christy
argues that the method the circuit court used to calculate each party’s income was inequitable.
¶ 15 The circuit court’s determination in awarding maintenance and child support is presumed
to be correct. In re Marriage of Nord, 402 Ill. App. 3d 288, 292 (2010). The circuit court’s
findings as to net income and its awards for maintenance and child support lie within its sound
discretion and will not be disturbed on appeal absent an abuse of discretion. In re Marriage of
Schneider, 214 Ill. 2d 152, 173 (2005) (maintenance); In re Marriage of Moorthy, 2015 IL App
(1st) 132077, ¶ 41 (child support); In re Marriage of Pratt, 2014 IL App (1st) 130465, ¶ 22
(child support). The trial court abuses its discretion if “no reasonable person would take the
trial court’s view.” In re Marriage of Eberhardt, 387 Ill. App. 3d 226, 233 (2008).
¶ 16 Pursuant to section 504(a) of the Illinois Marriage and Dissolution of Marriage Act, the
circuit court, in deciding whether to grant a maintenance award, considers, inter alia, the
income and property of each party, including marital property apportioned, and nonmarital
property assigned to the party seeking maintenance. 750 ILCS 5/504(a) (West 2018). Likewise,
pursuant to section 505(a)(1)(F), the Illinois Department of Healthcare and Family Services’
rules establishing child support guidelines have the purpose of, inter alia, allocating the
amount of child support to be paid by each parent based upon a parent’s net income and the
child’s physical care arrangements. 750 ILCS 5/505(a)(1)(F) (West 2018); see also In re
Marriage of Rogers, 213 Ill. 2d at 136-37 (income includes money received from investments);
In re Marriage of Mayfield, 2013 IL 114655, ¶ 16 (income includes gains and benefits that
enhance a noncustodial parent’s wealth and facilitate parent’s ability to support children, which
are normally linked to employment, investments, royalties, and gifts).
¶ 17 Here, the circuit court found Christy’s income to be $61,750 annually based upon
application of a reduced 6.5% rate of return to a portion, $950,000, of the cash assets awarded
to her. Although the evidence revealed that the historical interest rate on the Edward Jones
Living Trust Account was 9.93%, the circuit court applied a reduced rate of return of 6.5% to
$950,000 in cash assets to allow Christy to pay off the $44,000 debt encumbering her recently
purchased vehicle, in addition to other debts. The circuit court found James’s income to be
$167,842.25 annually, which included $131,700 in W-2 income, $2400 in director fees,
$5951.25 in cell tower rental income, and $27,791 in dividends from investments held by Bel-
O Sales.
¶ 18 Christy argues that the $600,000 to $700,000 in cash retained by Bel-O Sales is “earning
money” from which the circuit court should have imputed income to James, considering that
it imputed interest income to her. We find no abuse of discretion, however, in the circuit court’s
implicit determination, pursuant to the facts in evidence, that “it is sometimes necessary for a
corporation to retain profits in order to secure its continued existence and appropriate
capitalization to meet ongoing business necessities.” See In re Marriage of Moorthy, 2015 IL
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App (1st) 132077, ¶ 64 (courts should engage in a case-by-case, fact-specific analysis to
determine whether retained earnings of a corporation should be imputed to the majority
shareholder for purposes of calculating child support). Moreover, as noted in the circuit court’s
supplemental judgment, the circuit court considered interest income received by both parties.
Specifically, the circuit court considered as income for James $27,791 in qualified and
unqualified dividends from investments held by Bel-O Sales. Thus, Christy’s suggestion that
the circuit court failed to consider James’s interest income is erroneous.
¶ 19 Further, despite Christy’s contention on appeal that considering interest income from
marital property awarded her is improper “double counting” of her assets, the circuit court may
properly consider investments when determining income for child support and maintenance
purposes. See 750 ILCS 5/504(a), 505(a)(1)(F) (West 2018); In re Marriage of Rogers, 213
Ill. 2d at 136-37; In re Marriage of Mayfield, 2013 IL 114655, ¶ 16; In re Marriage of Heroy,
385 Ill. App. 3d 640, 656 (2008). The cases cited by Christy to argue against “double counting”
marital property are inapposite. See In re Marriage of Talty, 166 Ill. 2d 232, 236-37 (1995)
(remand was required for trial court to determine whether consideration of goodwill in valuing
husband’s business resulting in impermissible double counting of its value, first when
considered as part of the business value and again later in the division of marital assets, thereby
overstating property assigned to husband); In re Marriage of Zells, 143 Ill. 2d 251, 256 (1991)
(goodwill is appropriately considered as an aspect of income potential then reflected in
maintenance and support awards, and any additional consideration of goodwill value is
duplicative and improper).
¶ 20 As noted by James, the circuit court acted within its discretion in including interest income
for Christy’s cash assets, charging her two-thirds of the historical rate of return and including
only a portion of the cash assets she received and in including as income the actual returns
James received on his Bel-O Sales investments for 2016 and 2017. Accordingly, we reject
Christy’s contentions on appeal. See In re Marriage of Moorthy, 2015 IL App (1st) 132077,
¶ 65 (noting that father had done nothing to manipulate his income to minimize his child
support obligations, reviewing court held that trial court did not abuse its discretion in
determining that the father’s proportionate share of the retained earnings from his majority-
owned subchapter S corporation should not be imputed to him to calculate child support
obligations). We find no abuse of discretion in the circuit court’s calculations of Christy’s and
James’s income or in the circuit court’s awards of child support and maintenance.
¶ 21 III. CONCLUSION
¶ 22 For the reasons stated, we affirm the judgment of the circuit court of St. Clair County.
¶ 23 Affirmed.
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