SIXTH DIVISION December 12, 2008
Nos. 1-07-0135 & 1-07-2142, Cons.
In re MARRIAGE OF KAREN F. EBERHARDT, ) Appeal from the ) Circuit Court of Cook County Petitioner-Appellee, ) ) No. 02 D 10429 and ) ) Honorables STEPHEN E. EBERHARDT, ) Mark Joseph Lopez and ) Martin Moltz, Respondent-Appellant. ) Judges Presiding.
JUSTICE CAHILL delivered the opinion of the court:
Respondent Stephen E. Eberhardt appeals the trial court's denial of his postjudgment
motions following the dissolution of his marriage to petitioner Karen F. Eberhardt. He argues the
trial court erred in: (1) denying his motion to modify child support by "double counting" his
withdrawals from individual retirement accounts (IRAs) he received in the property settlement;
(2) denying his motion for sanctions; (3) ordering him to pay part of Karen's attorney fees; and (4)
denying his claimed exemptions to garnishment. We affirm in part, reverse in part and remand for
a hearing on attorney fees.
The judgment of dissolution was entered in December 2005. Karen and Stephen were
married in 1979 and had three daughters, ages 20, 19 and 13, at the time of the judgment. Karen
was given primary custody of 13-year-old Susan. Stephen was ordered to pay $982.58 per month 1-07-0135 & 1-07-2142, Cons.
in child support based on 20% of his personal net income as a self-employed attorney. In the
allocation of marital assets, Stephen received $154,349.28 from Karen as his share of the equity in
the family home. Stephen also received three IRAs.
Two months later, Stephen filed a pro se motion to modify child support. The
proceedings on this motion generated other contested rulings on sanctions, attorney fees and
garnishment. As a result, two appeals have been consolidated and four overlapping matters are at
issue. We will review each of these matters separately, beginning with Stephen's motion for
modification of child support.
As a preliminary matter, we deny Karen's motion to strike Stephen's brief and to dismiss
this appeal for noncompliance with Supreme Court Rule 341(h)(6) (210 Ill. 2d R. 341(h)(6)).
This rule requires an appellant's brief to contain "facts necessary to an understanding of the case,
stated accurately and fairly without argument or comment, and with appropriate reference to the
pages of the record." 210 Ill. 2d R. 341(h)(6). It is within our discretion to consider an appeal
despite minimal citation to the record in the appellant's statement of facts. Silny v. Lorens, 73 Ill.
App. 3d 638, 392 N.E.2d 267 (1979). Stephen's brief is sufficient for review.
Stephen filed a motion to modify child support on February 23, 2006. He reported a
substantial change in circumstances because he had $0 income in the first two months of 2006 and
he expected his annual personal income to be substantially less than in 2005. He attached a
financial disclosure statement, showing a balance of $71,249.63 in a "house & IRA proceeds
account." Karen, who was represented by her brother, attorney Robert H. Farley, Jr., responded.
Farley argued Stephen was not entitled to a modification because he had withdrawn the IRA
2 1-07-0135 & 1-07-2142, Cons.
funds he received in the property settlement and such proceeds must be counted as "income" for
calculating child support under In re Marriage of Lindman, 356 Ill. App. 3d 462, 824 N.E.2d
1219 (2005).
Farley also filed a petition for rule to show cause as to why Stephen should not be held in
contempt for violating the terms of the dissolution. The allegations were that Stephen: (1) failed
to pay child support and health insurance; (2) failed to pay Susan's high school tuition; (3) spent
thousands of dollars on White Sox tickets and had $71,000 in a bank account and a $100,000 line
of credit while failing to meet his support obligations; (4) failed to pay the college expenses of the
couple's two older daughters; (5) failed to pay for Susan's extracurricular activities and uncovered
medical expenses; and (6) failed to pay Susan's remaining grammar school expenses. Farley later
withdrew the last two claims.
The trial court held a combined hearing on the petition for rule to show cause and on
Stephen's motion to modify child support on November 2, 2006. Stephen first objected to
exhibits attached to a memorandum Farley had submitted ex parte to the trial judge just days
before the hearing. The judge said he had not read Farley's memo or looked at the exhibits and
admonished both parties to "follow the rules."
Stephen, Karen and two of their three daughters testified at the hearing. Stephen admitted
withdrawing IRA funds of $8,065.24 on January 31, 2006, and $5,759.30 on February 17, 2006.
He admitted a financial disclosure statement he submitted on October 1, 2006, did not reflect
these withdrawals.
The trial court denied Stephen's motion to reduce child support, finding no substantial
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change in circumstances. The court also found Stephen in contempt, stating:
"I truly don't understand a record like this where, Mr. Eberhardt, you tell me you
get $154,000 in a buyout. You get IRA distributions, which clearly are income.
Had you explained a little bit better in terms of your clear and convincing burden
that you [paid] debts with these [distributions] and you submitted cancelled
checks, receipts for payments, to give me some reason to believe your
representations, then maybe you might have something there ***. *** [Y]ou just
represent these things to me; and you expect me just to accept [them] at face
value. That is not what a clear and convincing standard is. It is a higher burden;
and if you gave me some documentation to support it, I might be inclined to go
along with you. *** [It] doesn't sound to me like somebody who is trying to be
straightforward with this Court. It sounds like somebody who is trying to be
evasive and not give me the full picture.
*** [Y]ou are a private practitioner since [1992] to the time of judgment;
and then all of a sudden, after judgment; things go down hill; and you expect me
just to accept the fact that business is bad or things are tough out there[?] I
understand things *** go up and down. *** [B]ut to go straight into the tubes
after judgment, that doesn't sound very reasonable to expect this Court to believe
you. *** I don't. *** [I]t is a very poor record for me to grant you the relief that
you have been seeking[,] counsel."
Stephen filed a motion to reconsider, arguing that the trial court erred by double counting
4 1-07-0135 & 1-07-2142, Cons.
his IRA withdrawals and misapplied the law on double counting in In re Marriage of Lindman,
356 Ill. App. 3d 462. After a hearing, the trial court denied Stephen's motion for reconsideration:
"I do not believe there is anything inappropriate in considering IRA distributions as
being income. I think that your concern about not considering the double counting
issue is misguided because that was a small part of the reason for my findings. My
concern with your failure to meet your burden was what I perceived as a lack of
credibility on your part and your testimony, the lack of support of documentation
to support your testimony, the failure to include—even by your own
acknowledgment—the IRA on your [financial disclosure affidavit required under
the Cook County circuit court rules].
***
Further, I have a record where your monies seem to be spent on things
other than your court-ordered obligation. *** [I]f you pay your support[,]
everything else is your business; but you are coming to this court asking me to
reduce your court-ordered obligation ***. And it's your burden to show me that
change, one, it occurred, and two, it warrants a modification of your court-ordered
obligation, and you failed in that regard."
The hearing continued after this ruling with arguments on unresolved motions and petitions,
including requests for sanctions and attorney fees. These matters are addressed individually later
in this opinion. The court also purged its finding of contempt after Farley reported Stephen had
fulfilled his child support obligations.
5 1-07-0135 & 1-07-2142, Cons.
The modification of child support is governed by section 510 of the Illinois Marriage and
Dissolution of Marriage Act (Act) (750 ILCS 5/510 (West 2006)). A parent's child-support
obligation may be modified if he or she can show a substantial change in circumstances. 750
ILCS 5/510(a)(1) (West 2006). The party seeking relief has the burden of showing a change in
circumstances substantial enough to warrant a change in support. In re Marriage of Singleteary,
293 Ill. App. 3d 25, 34, 687 N.E.2d 1080 (1997). A change in income is one of the grounds for
modification. In re Marriage of Carpenter, 286 Ill. App. 3d 969, 974, 677 N.E.2d 463 (1997).
"Net income" is defined in section 505(a)(3) of the Act as "the total of all income from all
sources." 750 ILCS 5/505(a)(3) (West 2006). "[T]he General Assembly has adopted an
expansive definition of what constitutes 'net income.' ” In re Marriage of Rogers, 213 Ill. 2d 129,
136, 820 N.E.2d 386 (2004). "[T]he relevant focus under section 505 [of the Act (750 ILCS
5/505 (West 2006))] is the parent's economic situation at the time the child support calculations
are made by the court." In re Marriage of Rogers, 213 Ill. 2d at 138.
Stephen argues that the question of whether the trial court erred in counting his IRA
withdrawals as income under the Act is a question of law, subject to de novo review, citing In re
Marriage of Crook, 211 Ill. 2d 437, 442, 813 N.E.2d 198 (2004) (when there are no factual or
credibility issues, questions of law are reviewed de novo). Statutory interpretation is also subject
to de novo review. In re Marriage of Rogers, 213 Ill. 2d at 136-37.
In Lindman, this court conducted de novo review of the legal question posed here and
concluded: "regardless of the property settlement, the disbursements [the] petitioner receives from
his retirement account are income at the time they are paid." In re Marriage of Lindman, 356 Ill.
6 1-07-0135 & 1-07-2142, Cons.
App. 3d at 469. But see In re Marriage of O'Daniel, 382 Ill. App. 3d 845, 850, 889 N.E.2d 254
(2008) (Lindman should not be read to mean that "any IRA disbursement would constitute
income" (emphasis added)).
The Lindman court relied on In re Marriage of Klomps, 286 Ill. App. 3d 710, 676 N.E.2d
686 (1997). There we said: "If we were to allow retirement income to be excluded from net
income when setting child support merely because those benefits, prior to their receipt, were used
to determine an equitable distribution of the parties' marital property, we would be adding
provisions to the Act that do not exist. We will not twist the clear meaning of the Act to invent
an otherwise nonexistent rule that would be contrary to the purpose of making 'reasonable
provision for spouses and minor children during and after litigation.' [Citation.]" In re Marriage
of Klomps, 286 Ill. App. 3d at 716-17.
Under Lindman and Klomps, Stephen's question of whether, as a matter of law, the IRAs
awarded to him in the property settlement can be regarded as income when liquidated must be
answered in the affirmative. To avoid this result, Stephen directs us to a section added by the
court in Lindman, discussing "a potential 'double counting' issue" that the petitioner there did not
raise. In re Marriage of Lindman, 356 Ill. App. 3d at 470. The court described a hypothetical
situation where improper double counting could occur if the earnings deposited in an IRA were
counted as income when they were earned and again five years later when withdrawn. In re
Marriage of Lindman, 356 Ill. App. 3d at 470. "To avoid double counting in this situation, the
court may have to determine what percentage of the IRA money was considered in the year one
net income calculation and discount the year five net income calculation accordingly." In re
7 1-07-0135 & 1-07-2142, Cons.
Marriage of Lindman, 356 Ill. App. 3d at 470. This is not the theory Stephen advances here.
Stephen's exact argument, that improper double counting occurs when IRAs awarded in a
property settlement are liquidated and viewed as income, was recently considered and rejected in
a Massachusetts appellate court opinion, Croak v. Bergeron, 67 Mass. App. Ct. 750, 753, 856
N.E.2d 900, 903 (2006). Although neither party has cited this case and foreign judgments have
no effect in Illinois, the case is instructive.
In Croak, as here, the father argued "it was improper 'double-counting' to treat funds
prematurely withdrawn from his IRAs as income for child support purposes as those funds had
already been divided as part of the marital estate upon divorce." Croak, 67 Mass. App. Ct. at
753, 856 N.E.2d at 903. The court disagreed: "[T]he [trial] judge found that [the father] had a
pattern of nondisclosure and evasion with respect to his finances." Croak, 67 Mass. App. Ct. at
755, 856 N.E.2d at 905. "[W]e perceive nothing in [the father's] argument that the judge engaged
in improper 'double counting' (or 'double dipping') by treating his IRA funds 'as both assets in the
property division and later, as income when [the father] liquidated them,' that would cause us to
disturb the judgment." Croak, 67 Mass. App. Ct. at 758, 856 N.E.2d at 907. " 'Commentators
use the phrase "double dipping" to describe the seeming injustice that occurs when property is
awarded to one spouse in an equitable distribution of marital assets and is then also considered as
a source of income for purposes of imposing support obligations.' " Croak, 67 Mass. App. Ct. at
758-59, 856 N.E.2d at 907, quoting Champion v. Champion, 54 Mass. App. Ct. 215, 219, 764
N.E.2d 898, 902 (2002). The court found that nothing in the state's supreme court rulings
"prohibits double dipping as matter of law." Croak, 67 Mass. App. Ct. at 759, 856 N.E.2d at
8 1-07-0135 & 1-07-2142, Cons.
907. "Rather, *** the judge must look to the equities of the situation to make her determination."
Croak, 67 Mass. App. Ct. at 759, 856 N.E.2d at 907. "Even were we to assume that the concept
of double counting has application in the present case, and were to assume further that the judge
engaged in some double counting, we would conclude that, in the circumstances presented here
***, a failure to consider the IRAs [as income] would have resulted in an inequity." Croak, 67
Mass. App. Ct. at 759, 856 N.E.2d at 907.
The outcomes in Croak, Lindman and Klomps ultimately turned on the facts of the case.
We review the trial court's factual findings in ruling on a motion to modify child support under the
abuse of discretion standard. People ex rel. Hines v. Hines, 236 Ill. App. 3d 739, 744, 602
N.E.2d 902 (1992). An abuse of discretion occurs when no reasonable person would take the
trial court's view. Dawdy v. Union Pacific R.R. Co., 207 Ill. 2d 167, 177, 797 N.E.2d 687
(2003). We will allow the trial court's factual conclusions to stand unless they are against the
manifest weight of the evidence. In re Marriage of Heldebrandt, 301 Ill. App. 3d 265, 267, 703
N.E.2d 939 (1998). "A judgment is against the manifest weight of the evidence only when an
opposite conclusion is apparent or when findings appear to be unreasonable, arbitrary, or not
based on evidence.” Bazydlo v. Volant, 164 Ill. 2d 207, 215, 647 N.E.2d 273 (1995).
Here, as in Croak, the court found Stephen to be evasive and less than straightforward
about his finances. It found a pattern of nondisclosure. The court did not believe Stephen's story
of a sudden downturn in business. The court addressed the double counting issue, calling it a
misguided argument on Stephen's part because the IRA income was less of an influence on the
court's decision than the perception that Stephen's testimony was not credible. The court also
9 1-07-0135 & 1-07-2142, Cons.
noted that Stephen apparently spent money for his own benefit rather than meeting his court-
ordered support obligations to his children. We conclude the trial court did not abuse its
discretion in denying Stephen's motion for modification of child support, nor were its findings
against the manifest weight of the evidence.
We turn to the issue of sanctions. During the pendency of Stephen's motion for
modification of child support, the parties disputed several procedural issues, including some
related to discovery. It is from these disputes that Stephen's motions for sanctions arose.
In April 2006, Farley submitted interrogatories and requests for documents. Stephen
moved to strike the interrogatories and impose sanctions, alleging Farley violated Supreme Court
Rule 213(b) (210 Ill. 2d R. 213(b)) (the attorney directing interrogatories must restrict them to
pertinent subject matter and avoid unnecessary detail and expense to the answering party). At a
status hearing, Stephen suggested that the parties have a conference with the court to resolve
their discovery disagreements. Farley declined, stating he planned to file within 10 days a
response to Stephen's motion to strike as well as a motion on Karen's behalf to compel Stephen's
compliance with discovery. Stephen asked for 21 days to respond to Farley's filings, but the court
allowed only 10 days. The trial court went on to deny Stephen's motion for sanctions but it did
not compel his compliance with discovery. Instead, the court ordered Stephen to produce only
financial documents for the period of January 1, 2006, to June 30, 2006.
On December 12, 2006, Stephen filed another motion for sanctions. Stephen alleged
Karen and Farley: (1) filed improper interrogatories as proven by the fact that the trial court did
not order Stephen to answer them, instead asking for six months of financial documents; (2)
10 1-07-0135 & 1-07-2142, Cons.
falsely alleged that Stephen had failed to pay certain expenses incurred by Susan for which he was
not responsible under the dissolution to harass him, increase litigation costs and deceive the court;
(3) refused to cooperate with Stephen's attempts to expedite the litigation and harassed him by
requiring him to give a deposition; and (4) misrepresented to the court the law on double
counting. The court denied the motion and Stephen appeals.
We review a ruling on a motion for sanctions under the abuse of discretion standard. In re
Marriage of Baumgartner, 384 Ill. App. 3d 39, 64, 890 N.E.2d 1256 (2008). The trial court is in
the best position to decide how procedural rules should be applied and so its decisions are entitled
to deference. In re Marriage of Baumgartner, 384 Ill. App. 3d at 64. We consider whether the
decision was "informed, based on valid reasons, and followed logically from the circumstances of
the case." Burrows v. Pick, 306 Ill. App. 3d 1048, 1051, 715 N.E.2d 792 (1999).
Stephen first argues that Farley violated Supreme Court Rule 213(b) (210 Ill. 2d R.
213(b)) by submitting interrogatories intended to harass him and lengthen the litigation. He
argues that the trial court gave a "clear indication" that it found Farley's interrogatories improper
when it failed to order Stephen to answer them and directed him to provide only financial
information from January to June 2006. Rule 213(b) requires the attorney serving interrogatories
to avoid unnecessary burdens or expenses on the answering party. 210 Ill. 2d R. 213(b). Rule
213(c) quantifies the requirement: "a party shall not serve more than 30 interrogatories." 210 Ill.
2d R. 213(c). Here, the record shows that Farley's first set of interrogatories contained 13
questions and a second set contained 4 questions. This is well within the 30-interrogatory limit
stated in the rule. The trial court did not abuse its discretion in denying Stephen's request for
11 1-07-0135 & 1-07-2142, Cons.
sanctions under Rule 213(b) (210 Ill. 2d R. 213(b)).
Stephen next argues that Farley should have been sanctioned for signing pleadings that
contained false statements about the provisions in the dissolution order on reimbursements for
Susan's extracurricular activities. He claims the dissolution order specifically limited
reimbursements to athletic activities, music lessons and dramatics classes, yet Farley requested
reimbursement for dances, pizza parties and Mardi Gras activities. The record shows this request
was withdrawn by Farley. Despite this withdrawal, Stephen maintains Farley violated Rule
8.4(a)(4) of the Rules of Professional Conduct (134 Ill. 2d R. 8.4(a)(4)) (an attorney shall not
"engage in conduct involving dishonesty, fraud, deceit or misrepresentation") and Supreme Court
Rule 137 (155 Ill. 2d R. 137) (the signature of the attorney in a lawsuit certifies that the pleadings
are "well grounded in fact" and "not interposed for any improper purpose, such as to harass or to
cause unnecessary delay or needless increase in the cost of litigation").
It appears from the record that Farley realized a mistake had been made when he withdrew
the paragraphs at issue. While it is true that sanctions are proper where a mistake could have
been corrected but was not and the other party incurs costs as a result ( People v. Stefanski, 377
Ill. App. 3d 548, 552-53, 879 N.E.2d 1019 (2007)), the mistake here was corrected in a timely
fashion and there is no evidence that Stephen incurred costs.
Stephen next argues that sanctions should have been imposed under Rules 3.2 and
3.3(a)(11) of the Rules of Professional Conduct (134 Ill. 2d Rs. 3.2, 3.3(a)(11)) because Karen
and Farley refused Stephen's request to meet with the trial judge to resolve their discovery
differences. Stephen claims their refusal was a means of forcing him to respond to a "rule to show
12 1-07-0135 & 1-07-2142, Cons.
cause" and appear for an unnecessary deposition. Rule 3.2 provides: "A lawyer shall make
reasonable efforts to expedite litigation consistent with the interests of the client." 134 Ill. 2d R.
3.2. Rule 3.3(a)(11) provides that a lawyer shall not "refuse to accede to reasonable requests of
opposing counsel that do not prejudice the rights of the client." 134 Ill. 2d R. 3.3(a)(11). A Rule
3.2 violation must be proven by clear and convincing evidence (In re Smith, 168 Ill. 2d 269, 282-
83, 659 N.E.2d 896 (1995)), as must a Rule 3.3 violation (In re Ingersoll, 186 Ill. 2d 163, 177,
710 N.E.2d 390 (1999)).
Here, Farley declined to participate in an impromptu conference on discovery proposed
by Stephen but agreed to file pleadings on the issues within 10 days. Stephen then asked for
twice as much time, 21 days, to respond to the pleadings Farley would file. Instead, the trial court
imposed on Stephen the same 10-day deadline given to Farley. Farley's preference for addressing
the discovery issues in written pleadings rather than a hastily-assembled conference is not clear
and convincing evidence that Farley violated Rules 3.2 and 3.3. In fact, it appears from the record
that both sides contributed to delays in discovery and other procedural matters. The trial court
did not err in refusing to sanction Farley for delays.
Stephen next argues his motion for sanctions should have been granted because Farley
violated Rule 3.3(a)(3) of the Rules of Professional Conduct (134 Ill. 2d R. 3.3(a)(3)) by filing an
unsolicited memorandum and misrepresenting the case law on double counting on the eve of the
hearing on Stephen's motion for modification. Rule 3.3(a)(3) requires a lawyer to "disclose to the
tribunal legal authority in the controlling jurisdiction known to the lawyer to be directly adverse to
the position of the client and not disclosed by opposing counsel." 132 Ill. 2d R. 3.3(a)(3).
13 1-07-0135 & 1-07-2142, Cons.
The record shows that the trial judge had not read the memorandum or exhibits at issue,
but even if he had, this argument is waived. At the hearing on the motion to modify child support,
Stephen objected to the exhibits attached to the memorandum, but he did not challenge the
content of the memorandum or its representation of case law. Nor did Stephen raise these issues
when the trial court held a hearing on his petition for sanctions after its ruling on Stephen's motion
to reconsider the denial of his petition for modification on December 19, 2006. The doctrine of
waiver applies to arguments raised for the first time on appeal. Daniels v. Industrial Comm'n, 201
Ill. 2d 160, 182, 775 N.E.2d 936 (2002).
We turn to the issue of attorney fees. Farley filed a petition on Karen's behalf for attorney
fees under section 508(b) of the Act (750 ILCS 5/508(b) (West 2006)). Both parties presented
oral arguments on December 19, 2006, after the court's rulings on Stephen's motions to
reconsider the denial of his petition for modification and for sanctions. Stephen asked for a
separate evidentiary hearing where Farley would be required to testify about his fees and services.
The trial court denied the request and ordered Stephen to pay $3,000 of Karen's attorney fees.
The judge said he had considered the parties' arguments and the factors used by courts in
assessing a petition for attorney fees. See, for example, Richardson v. Haddon, 375 Ill. App. 3d
312, 314-15, 873 N.E.2d 570 (2007) (the factors include "the nature of the case, the case's
novelty and difficulty level, the skill and standing of the attorney, the degree of responsibility
required, the usual and customary charges for similar work, and the connection between the
litigation and the fees charged"). The judge said he also had reviewed Farley's hourly billing
sheets and costs. Stephen argues on appeal that the court erred in refusing to hold a separate
14 1-07-0135 & 1-07-2142, Cons.
hearing.
"[W]here the allowance of attorney's fees is contested and a hearing is requested, the trial
court should conduct a hearing on the question." Scott v. Scott, 72 Ill. App. 3d 117, 127, 389
N.E.2d 1271 (1979). It appears from the transcripts that the trial court regarded proceedings held
on December 19, 2006, as a hearing on attorney fees. But because Stephen requested a separate
hearing, he is entitled to receive one. We reverse the trial court's award of attorney fees and
remand for a hearing on this issue.
Because Stephen's claims of exemptions to garnishment may remain at issue after the
hearing, we will address them here. After the trial court awarded Karen $3,000 in attorney fees,
Farley served a nonwage garnishment summons on First Midwest Bank (First Midwest), where
Stephen had several accounts. The date of service was January 2, 2007. The next day, First
Midwest advised Stephen that it was holding $200 from one account and $2,800 from another
account to satisfy the nonwage garnishment.
Stephen filed a notice to claim exemptions from garnishment. He claimed $2,800 was
exempt from garnishment under section 12-704 of the Code of Civil Procedure (Code) (735 ILCS
5/12-704 (West 2006)) (benefits and refunds payable by retirement funds are exempt from
garnishment) or section 12-1006 of the Code (735 ILCS 5/12-1006) (a debtor's interest in a
retirement plan is exempted from seizure for satisfaction of debts). In the alternative, he argued
that the entire $3,000 was exempt under section 12-1001(b) of the Code (735 ILCS 5/12-1001(b)
(West 2006)) (personal property owned by the debtor, including the debtor's equity interest "in
any other property" is exempt from judgment).
15 1-07-0135 & 1-07-2142, Cons.
After a hearing, the trial court denied the exemptions, citing Auto Owners Insurance v.
Berkshire, 225 Ill. App. 3d 695, 588 N.E.2d 1230 (1992) (a lump-sum distribution from a pension
plan is not exempt from garnishment unless the recipient rolled over the funds into another
qualified plan). It is undisputed that Stephen did not do so. Stephen filed a motion to reconsider,
arguing that the court's order was unclear and that $9,000 in his business bank accounts could not
be used to satisfy the garnishment because the funds were deposited after the date of service,
January 2, 2007.
The trial court denied Stephen's motion to reconsider in a written memorandum opinion
and order, concluding that First Midwest properly held $3,000 at the time of the garnishment
summons and the lien that attached at that time remained in effect.
Stephen argues on appeal that he was entitled to exemptions under: (1) section 12-704 of
the Code (735 ILCS 5/12-704 (West 2006)), exempting retirement benefits and refunds from
garnishment; and (2) section 12-1001(b) of the Code (735 ILCS 5/12-1001(b) (West 2006)),
exempting personal property including the debtor's equity interest up to $4,000. When, as here, a
garnishment issue is contested and there was a trial on the issue, a reviewing court must determine
whether the judgment was against the manifest weight of the evidence. Buckner v. Causey, 311
Ill. App. 3d 139, 142-43, 724 N.E.2d 95 (1999).
Section 12-704 of the Code provides: "Benefits and refunds payable by pension or
retirement funds *** are exempt and are not subject to garnishment." 735 ILCS 5/12-704 (West
2006). When retirement funds are deposited in a checking account, they are exempt from
garnishment only if they remain traceable as retirement benefits. Berkshire, 225 Ill. App. 3d at
16 1-07-0135 & 1-07-2142, Cons.
701. Here, the evidence showed the distributions from Stephen's IRA accounts had been
commingled with the proceeds from Karen's buy-out of his interest in the family home and that
Stephen was unable to trace and differentiate the retirement funds. The trial court's denial of an
exemption to garnishment under section 12-704 of the Code (735 ILCS 5/12-704 (West 2006))
was not against the manifest weight of the evidence.
Stephen argues that Berkshire is inapplicable because the court there specifically stated
that nonwage garnishment, the issue here, was not at issue there: "The nonwage garnishment
action has its own exemption for pension plans and does not apply here." Berkshire, 225 Ill. App.
3d at 697-98. The context of this statement was this court's observation that the trial court
misspoke: "We must also note that while the trial court referred to a nonwage garnishment, the
procedure employed by plaintiff was a [different] procedure." Berkshire, 225 Ill. App. 3d at 697.
Contextual details aside, it is true that Berkshire construed section 12-1006 of the Code (735
ILCS 5/12-1006 (West 2006)) (exempting retirement plans from seizure for the satisfaction of
debts), while this case involves section 12-704 of the Code (735 ILCS 5/12-704 (West 2006))
(exempting benefits and refunds payable by pension or retirement funds from garnishment). At
the outset of its analysis, the Berkshire court generalized its holding beyond section 12-1006
when it noted: "In the last decade, the legislature has greatly increased the protection afforded [to
retirement funds] by the exemption statutes." (Emphasis added). Berkshire, 225 Ill. App. 3d at
697. We believe the Berkshire holding, that untraceable retirement funds are not exempt from
garnishment, applies equally to section 12-704. The trial court did not err in its reliance on
Berkshire.
17 1-07-0135 & 1-07-2142, Cons.
Stephen next argues that the trial court should have exempted the full $3,000 garnished as
personal property under section 12-1001(b) of the Code (735 ILCS 5/12-1001(b) (West 2006)).
This section exempts from garnishment personal property, including "[t]he debtor's equity
interest, not to exceed $4,000 in value, in any other property." 735 ILCS 5/12-1001(b) (West
2006). Stephen maintains that funds deposited in his business accounts after the date of service of
the garnishment summons should not have been counted by the court in enforcing the $3,000
judgment under Zucker v. United States Computer Corp., 85 Ill. App. 3d 759, 766, 408 N.E.2d
41 (1980) (indebtedness is to be measured as of the date of service of the garnishment summons
and so if a bank has not had reasonable time to learn of a deposit on the date of the summons,
there can be no indebtedness for garnishment purposes).
Stephen's arguments are at odds with the facts of the case. On January 2, 2007, First
Midwest received the garnishment summons, causing it to hold $3,000 in two of Stephen's
personal accounts. Under section 12-707 of the Code (735 ILCS 5/12-707(a)), a judgment or the
balance due on a judgment becomes a lien on the property held by the garnishee at the time of the
service of the garnishment summons and remains a lien on the property pending a garnishment
proceeding. "It is readily apparent that this lien attaches at the time the garnishee is served with
process." Maplehurst Farms, Inc. v. Greater Rockford Energy & Technology Co., 167 Ill. App.
3d 767, 769, 521 N.E.2d 1270 (1988).
Here, a lien attached to Stephen's First Midwest personal accounts when the garnishment
summons was served on January 2, 2007. Stephen's business accounts, including deposits after
the date of service, were not subject to the lien. Stephen's claim of an exemption to garnishments
18 1-07-0135 & 1-07-2142, Cons.
under section 12-1001 is unsupported under the facts of this case.
The trial court determined that Stephen's reliance on Zucker was misplaced and we agree.
In Zucker, the facts differed in that the bank there held no funds of the judgment debtor on the
date the garnishment summons was served. Zucker, 85 Ill. App. 3d at 761. Here, it is undisputed
that First Midwest Bank held $3,000 from Stephen's personal accounts when the garnishment
summons was served and that a lien attached at that time. The trial court did not err in denying
Stephen's motion to reconsider the denial of his claimed exemptions to garnishment.
In summary, we conclude: (1) there is no legal bar to counting Stephen's IRA withdrawals
as income despite their inclusion in the property settlement; (2) the trial court did not abuse its
discretion in denying Stephen's petition for modification of child support; (3) the trial court did
not abuse its discretion in denying Stephen's motion for monetary sanctions against Farley; (4) the
trial court should not have denied Stephen's request for a separate hearing on attorney fees and
we remand for such a hearing; and (5) Stephen's claims of exemptions to garnishment are without
merit.
The judgment of the circuit court is affirmed in part, reversed in part and remanded for a
hearing on attorney fees.
Affirmed in part and reversed in part; cause remanded.
O'MALLEY, P.J., and McBRIDE, J., concur.