Marriage of Olson, In re

• Decision Date: 09 January 1992
• Docket Number: No. 2-91-0132,2-91-0132
• Citation: 223 Ill.App.3d 636,585 N.E.2d 1082
• Parties: , 166 Ill.Dec. 60 In Re MARRIAGE OF Eloise F. OLSON, Petitioner-Appellee, and Thomas R. Olson, Respondent-Appellant.
• Court: United States Appellate Court of Illinois

Page 1082

585 N.E.2d 1082

223 Ill.App.3d 636, 166 Ill.Dec. 60

In Re MARRIAGE OF Eloise F. OLSON, Petitioner-Appellee and Thomas R. Olson, Respondent-Appellant.

No. 2-91-0132.

Appellate Court of Illinois Second District.

Jan. 9, 1992.

Rehearing Denied Feb. 21, 1992.

Joel D. Arnold, Fortunato, Farrell & Davenport, Ltd., Westmont, for Thomas R. Olson and Quadro Enterprises, Inc.

John Panegasser, Jeanne E. Galvin, Caluwaert, Panegasser, Hancock & Schousen, Elmhurst, Ill., for Eloise F. Olson.

Justice NICKELS delivered the opinion of the court:

After trial, the circuit court of Du Page County granted the petition of Eloise Olson (Eloise) for an order of dissolution of marriage and, as part of that order, made findings and entered orders determining the value and dissipation of the parties' closely held corporation, Quadro Enterprises, Inc. (Quadro), allocating the marital property and establishing the amount of child support (Ill.Rev.Stat.1989, ch. 40, par. 401 et seq.). Thomas Olson (Thomas) appeals those orders and asserts nine issues: (1) whether the trial court not only erred in permitting Eloise's valuation expert to testify, but whether the court's acceptance of such valuation was against the manifest weight of the evidence; (2) whether the court's finding of dissipation of marital assets was against the manifest weight of the evidence; (3) whether the court erred in including certain assets in the marital estate; (4) whether the court's allocation of marital assets was an abuse of discretion; (5) whether the court erred in requiring Thomas to pledge his individual retirement account (IRA) as security for Thomas' payment of the cash portion of the marital estate due to Eloise; (6) whether the court's requirement that Thomas name or maintain Eloise as a trustee on life insurance policies for the benefit of the parties' two sons and as co-owner and cobeneficiary of policies on the lives of the parties' sons was error; (7) whether the amount of the award of child support was an abuse of discretion; (8) whether the court erred in entering an order apportioning the cost of future college education of the parties' two 17-year-old sons; and (9) whether the court's failure to allocate the marital debt, with the exception of eventual capital gain tax liability on the sale of the marital home, was error.

On April 1, 1988, Eloise petitioned for dissolution of the marriage on grounds of adultery and mental cruelty. Thomas agreed to stipulate to grounds of mental cruelty on the first day of the trial, which thereby removed any issue of adultery from the trial. However, Eloise had further specifically alleged that between 1986 and 1988 Thomas had dissipated Quadro, the parties' closely held corporation, in paying a draw, commissions, and various personal expenses to an independent contractor, Theresa Bronkema Slater (Theresa), who was Thomas' alleged paramour. The parties agreed to a valuation date of July 31, 1989, for all marital assets, including Quadro.

The parties were married on March 15, 1969. In 1974, twin boys, Garrett and Darren, were born. The boys participated extensively in tennis tournaments, the expenses relative to which Thomas volunteered to assume. At the time of trial, Eloise was 46 years old, and Thomas was 48 years old.

An injunction prevented either Thomas or Eloise from disposing of marital property pending distribution by the court. Therefore, both parties continued to reside in the marital residence in Hinsdale, which was offered for sale at the time of trial. By court order, Thomas and Eloise shared equally all household expenses after Eloise filed her petition on April 1, 1988.

Prior to forming Quadro in 1983, Thomas was employed as a vice-president of marketing and sales by a similar company, where he earned $98,783 in 1982. Thomas' tax returns for 1988 and 1989 reflected earnings of $80,141 and $75,331, respectively, and his annual salary at the time of trial was $66,000. Eloise was employed by Official Airline Guides with an annual income of almost $49,000.

Quadro is an advertising or promotional specialties wholesaler. It essentially provides promotional items to its customers, who in turn offer them to prospective customers to encourage business or to sales employees as incentives for obtaining business. Calculators, pens, and other similar items are typical products that Quadro merchandises. T.J. Distributing (T.J.) was a formally recognized division of Quadro, and Gifts that Grow, although unofficial, was also treated as a separate division.

Initially, Quadro operated as an independent representative of the producers of promotional products, and its income was principally derived from commissions. However, in 1986, Quadro evolved and began purchasing products through its T.J. Distributing division. Quadro paid for such products and invoiced its customers, so that its income was principally derived from the excess of its sales over its cost of sales. Gifts that Grow differed from Quadro's other programs because Quadro sold gift certificates, which were later redeemed for nursery products.

Quadro maintained no inventories, but rather had its vendors ship all merchandise directly to its customers. Quadro operated on a cash basis with a fiscal year end of January 31. Wolf and Company, Quadro's accountants, then compiled its financial records from documents supplied by Thomas and prepared Quadro's tax returns.

Thomas was Quadro's president, sole shareholder, and, as of the valuation date, its sole employee. Quadro's business had been conducted from the marital home, but was relocated to an office complex during the pendency of this action at which time an office manager was hired. Eloise participated in the business and performed computer work for Quadro, for which she was paid sums that the parties agreed were nonmarital funds.

In addition to Thomas' sales efforts, Quadro merchandised products through independent contractors. In May 1986, Thomas hired Theresa Bronkema Slater as an independent contractor. Theresa was paid $1,000 per month as draw against commissions. On two occasions, once in 1987 and once in 1988, Theresa was paid an additional month's draw without explanation. In addition to her sales efforts, Thomas testified that Theresa performed administrative work two to three days a week at Quadro's office located in the parties' home, although she then resided in Rockford. In 1986, Theresa was provided with a 1984 Lincoln as a company car. All repairs, insurance, and gas were paid by Quadro. No other independent contractor was provided an auto. Thomas attended six to eight trade shows yearly, and Theresa accompanied Thomas on four to six of such trips. Both Theresa and Thomas, as well as occasionally another individual who was promoting one of Quadro's lines, occupied the sales booth during the shows, answering questions and distributing literature. Theresa shared Thomas' hotel suite on such trips. Other expenses paid either by Quadro or by Thomas and reimbursed to him by Quadro included the travel expenses of the trade shows, modeling photos of Theresa both with and without Quadro products, a modeling composite for Theresa, Theresa's moving expenses when she relocated from Rockford to Bolingbrook, furniture and draperies for Theresa's apartment in Bolingbrook, and expenses for the Sybaris, which is an adult motel in the Chicago suburbs.

Eloise retained Daniel Anderson as an expert to testify at trial and give an opinion of the value of Quadro, to which Thomas objected asserting that Anderson was not qualified. Anderson had practiced as a CPA since 1974 and additionally was certified as a financial planner since 1988. Anderson had previously conducted two or three other business evaluations and was in the process of completing yet another. Anderson, however, had not testified as an expert. Rather, on one occasion he had testified as to the methodology of the evaluation, and in another his testimony had been unnecessary because the case settled. However, he had rendered opinions as to the value of businesses, although not at trial. Anderson had no formal evaluation training. However, he reviewed and applied the formula for valuation of intangible assets set out in the publication recommended by the Illinois CPA Society, as well as consulting with its author, Arthur Crandall, who was a well-known expert in the area. Anderson had never written any treatises, nor lectured on the subject of evaluating businesses. Over Thomas' objection, the court found that as a CPA Anderson was a qualified expert and that his limited experience or formal evaluation training went only to the weight the court would give his testimony.

Anderson's opinion was based entirely on documents supplied by Wolf and Company, which was not only Quadro's accountants but also Thomas and Eloise's accountants during the marriage. Such documents had in turn been supplied to Wolf and Company by Thomas. Quadro operated on a cash basis, and Wolf and Company, based on the documentation supplied by Thomas, converted Quadro to an accrual basis and compiled Quadro's operating statements and tax returns each year at the end of Quadro's fiscal year on January 31. However, because the valuation date was July 31, 1989, no compilation had been done for the six-month period from February 1, 1989, to July 31, 1989. Therefore, Anderson performed the compilation from documents provided pursuant to discovery requests and court order by Thomas to Wolf and Company, and in turn to Anderson. The February 1, 1989, through January 31, 1990, compilation remained unfinished at the time of trial in May 1990 because Wolf and Company had been occupied with preparation for the trial and had obtained an extension in which to file Quadro's tax return. In addition to requesting generally all receipts, records, expenses, and documents, Anderson had specifically requested accounts payable relative to the Gifts that Grow...