In re Liszka

• Decision Date: 27 September 2016
• Docket Number: No. 3–15–0238.,3–15–0238.
• Citation: 2016 IL App (3d) 150238,77 N.E.3d 1000
• Parties: In re MARRIAGE OF Kathleen LISZKA, Petitioner–Appellee, and Michael Liszka, Respondent–Appellant.
• Court: United States Appellate Court of Illinois

2016 IL App (3d) 150238

77 N.E.3d 1000

In re MARRIAGE OF Kathleen LISZKA, Petitioner–Appellee, and Michael Liszka, Respondent–Appellant.

No. 3–15–0238.

Appellate Court of Illinois, Third District.

Opinion filed Sept. 27, 2016.

Modified upon denial of rehearing Nov. 16, 2016.

Laura L. Malinowski and James A. Murphy (argued), of Mahoney, Silverman & Cross, LLC, of Joliet, for appellant.

Paul L. Feinstein (argued), of Chicago, for appellee.

OPINION

Justice LYTTON delivered the judgment of the court, with opinion.

¶ 1 Petitioner Kathleen Liszka filed a dissolution of marriage action against respondent Michael Liszka. Prior to trial, the court barred Michael's expert from testifying as to the value of a corporation owned by the parties, ISP Painting Inc. (ISP), as a discovery sanction. In its judgment for dissolution, the court divided the marital estate equally between the parties, awarding ISP and the marital home to Kathleen and requiring her to pay Michael $673,785. The court denied Michael's request for maintenance, imputed monthly income of $17,500 to him for child support purposes, and imposed a trust for child support payments. After ruling on the parties' motions for reconsideration, the trial court reduced the amount Kathleen was to pay Michael to $84,007.50.

¶ 2 Michael appeals, arguing that the trial court erred in (1) barring his expert from testifying as to the value of ISP, (2) denying his motion to continue the trial, (3) imputing income to him, (4) valuing ISP, (5) not dividing ISP's 2013 retained earnings, (6) assigning no value to another business owned by the parties, (7) failing to treat Kathleen's attorney fees as advances from the marital estate, (8) valuing the marital home, (9) refusing to reopen the proofs to allow the introduction of ISP's 2013 tax returns, (10) denying him rehabilitative maintenance, and (11) establishing a trust for his child support payments. We reverse those parts of the trial court's order that bar Michael's expert from testifying and that impute monthly income of $17,500 to him and remand for further proceedings. We affirm the trial court's decision in all other respects.

¶ 3 FACTS

¶ 4 Michael and Kathleen Liszka were married in 1993 and had three children together during their marriage. In 2002, Michael and Kathleen started a corporation together, ISP Painting, Inc. Kathleen owned 51% of ISP, and Michael owned 49%. They both served in various roles at ISP throughout their marriage. In 2011, Michael was the chief financial officer (CFO), and Kathleen was president of ISP.

¶ 5 In 2011, Michael and Kathleen entered into a collaborative divorce process. As part of that process, they hired Christiana Zouzias, a certified public accountant, to value ISP. In 2012, the collaborative process broke down, and Kathleen filed a petition for dissolution of marriage. She sought sole custody of the parties' children, who were 14, 12, and 10 years old at the time. In June 2012, Kathleen placed Michael on administrative leave from ISP but continued to pay him an annual salary of approximately $210,000. Both parties filed motions alleging dissipation of assets by the other party.

¶ 6 In April 2013, the trial court set the trial for custody and property matters to take place on October 21, 2013. In April 2013, Kathleen sent Michael financial documents related to ISP. On May 20, 2013, Michael filed a motion to compel production of unredacted documents, arguing that the documents Kathleen sent him contained redacted data that interfered with his ability to determine the value of ISP. The trial court entered an order requiring Kathleen to provide the documents in unredacted form subject to a protective order.

¶ 7 On August 12, 2013, Kathleen disclosed her trial witnesses, including Zouzias as her valuation expert. On August 14, 2013, Kathleen sent Michael some unredacted financial records. Soon thereafter, Michael disclosed Mary Lynn Hoffer as his ISP valuation expert but did not provide any of her conclusions or opinions and indicated that her report would "be available prior to trial." On that same date, Michael filed another motion to compel the production of unredacted documents, asserting that Kathleen failed to send him certain balance sheets, financial statements, and general ledgers for ISP. On August 29, 2013, Kathleen sent Michael unredacted copies of the financial statements and ledgers he requested. On September 26, 2013, Kathleen sent Michael the 2012–13 balance sheets for ISP.

¶ 8 On October 17, 2013, Michael provided Hoffer's report to Kathleen. Kathleen filed a motion to bar Hoffer's report and testimony because Michael did not provide her report or disclose her opinions by the discovery deadline. The trial court granted Kathleen's motion.

¶ 9 On October 21, 2013, Michael filed a "motion to continue property/financial portion of trial due to discovery abuses by petitioner." At the hearing on the motion, Kathleen's attorney, Paul Starkman, testified that he provided redacted financial records to Michael in October 2012 and April 2013, including profit and loss statements and general ledgers. He testified that he redacted only the names of ISP's customers, which he considered confidential. On August 28, Starkman provided Michael with unredacted financial information, including general ledgers for 2011 and 2012, profit and loss statements, and some balance sheets. On September 26, 2013, Starkman provided Michael with the unredacted balance sheets for 2012 and 2013.

¶ 10 Phil McLawhorn, the accounting manager of ISP, testified that in August 2013, he provided financial documents to Michael, including a balance sheet and a profit and loss statement. On August 28, 2013, he provided Michael with general ledgers for 2011 and 2013. On September 26, 2013, McLawhorn provided Michael with the balance sheet for 2012, as well as the updated balance sheet for 2013. The trial court denied Michael's motion to continue.

¶ 11 Right before trial, the parties settled their custody dispute, leaving only property issues to be decided by the court. At trial, Michael testified that he is a healthy 44–year–old. He has a college degree with a major in financing. Before starting ISP, Michael started a local painting company, Illinois State Painters, in 1987. At ISP, Michael served as human resources manager, marketing director, finance director, president, chief executive officer (CEO), and CFO.

¶ 12 In addition to ISP, Michael and Kathleen owned several other businesses, including Coreman Technologies. Coreman Technologies operates an extranet system that is used by ISP and two other customers. The extranet system was developed and paid for by ISP. ISP created Coreman to market the extranet to other companies. Coreman has no employees. Coreman does not file taxes. Coreman's earnings are included in ISP's earnings for tax purposes. Coreman's earnings were $1320 in 2010, $21,718 in 2011, $4695 in 2012, and $3205 in 2013. Michael estimated that Coreman's value was $500,000 based on its "possible future." Kathleen testified that she did not know the value of Coreman. She testified that Coreman's only assets are its name and its ability to use and sell extranet software. Coreman does not have any copyrights, patents, or trademarks for its software. Louis Miller, ISP's Director of Financing, testified that Coreman does not have a bank account separate from ISP's. According to Miller, Coreman is not separate from ISP.

¶ 13 At trial, Zouzias testified that the value of ISP was $1,116,000 as of December 31, 2011. At Michael's request, Zouzias looked at ISP's 2012–13 financial information but did not perform a complete analysis for those years. The 2012–13 information confirmed Zouzias's belief that her 2011 valuation was correct. She did not have an opinion regarding the value of ISP as of 2012 or 2013 because she did not perform a complete business valuation for those years. Michael testified that ISP's value was $4,037,817 in 2012 and $5,047,902 in 2013 based on financial information from the first half of the year. He testified that he was offered $2,000,000 for ISP in 2005 or 2006 and that it has substantially grown in value since then.

¶ 14 Both parties provided evidence regarding the value of the marital home. Kathleen presented a copy of an appraisal, performed on August 5, 2011, stating that the home had a value of $565,000. Kathleen testified that she believed the fair market value of the home was $420,000. Michael presented an appraisal of the home performed on March 12, 2012, indicating that the value of the home was $615,000. Michael testified that he believed the value of the home at the time of trial was $691,000.

¶ 15 Michael alleged that Kathleen dissipated marital assets, in part, by paying excessive attorney fees. Peggy Tracy, a forensic accountant hired by Michael, testified that Kathleen spent $228,400 more in attorney fees than Michael. Kathleen disputed Tracy's testimony and testified that she spent only $78,982 more than Michael in attorney fees.

¶ 16 The trial ended on January 24, 2014, at which time the court gave an oral ruling that grounds existed for dissolution of the parties' marriage. The court reserved the issue of child support for six months.

¶ 17 In March 2014, Michael filed a "motion to reopen proofs as to ISP, Inc. valuation and allocation of retained earnings." Attached thereto was ISP's 2013 tax return. The trial court denied the motion.

¶ 18 On April 16, 2014, the trial court entered its written judgment for dissolution of marriage. The court found that the value of the marital home was $577,000 based on Kathleen's 2011 appraisal and improvements in the market. Kathleen was awarded the marital home and ordered to pay Michael for his share. The court accepted Zouzias's business valuation of ISP, finding that the date of her valuation "is still reasonably close enough toward the time of trial that it is an acceptable amount." The court awarded ISP to Kathleen and ordered her to pay...