Verhines v. Hickey (In re Verhines)
| Decision Date | 20 November 2018 |
| Docket Number | No. 2-17-1034,2-17-1034 |
| Citation | 2018 IL App (2d) 171034,129 N.E.3d 181,432 Ill.Dec. 293 |
| Parties | IN RE MARRIAGE OF Cherie A. VERHINES, Petitioner-Appellant, AND Michael J. HICKEY, Respondent-Appellee. |
| Court | United States Appellate Court of Illinois |
Annette M. Fernholz, of Chicago, for appellant.
George Mueller, of Ottawa, for appellee.
¶ 1 Respondent, Michael J. Hickey, petitioned for a reduction of child support under section 510 of the Illinois Marriage and Dissolution of Marriage Act (Act) ( 750 ILCS 5/510 (West 2016) ). Michael pleaded that an involuntary termination led to an early retirement and that, at age 64, he no longer earned the $180,000 net income upon which the support amount had been based. The court granted the petition, reducing the monthly support amount from $3043 to $1700. It determined Michael's net income under section 505 of the Act (id. § 505) to be $78,000 per year, with a guideline support amount of $1300 per month, and it issued an upward deviation of $400 due to Michael's wealth.
¶ 2 Petitioner, Cherie A. Verhines, appeals. She argues that, as a threshold matter, Michael's net income is far higher than $78,000. According to Cherie, the court forgot to include $83,000 in deferred compensation and erred in refusing to categorize any portion of a $400,000 withdrawal from a retirement account as section 505 income. Michael admits to having used $129,000 of this withdrawal to sustain his lifestyle. Plugging the correct numbers into the section 510 modification analysis, Cherie asserts that the court erred in reducing support. Further, Cherie continues, Michael's retirement did not lead to a substantial change in his economic fortune such that he should be relieved of his support obligation.
¶ 3 Generally, we agree with Cherie. Michael's net income is at least $128,000 per year, for a guideline support amount of $2133 per month. Regardless, income is not the only factor in a substantial-change analysis, and here there has not been a substantial change in Michael's overall financial position. Although retirement is generally equated with reduced means, a parent with a retirement as well-funded as Michael's ($2.585 million in brokerage accounts; three homes, including a $775,000 vacation residence; and a demonstrated travel budget of $60,000 per year) has not had a reversal of economic fortune such that he is entitled to be relieved of a $900-per-month shortfall between the new guideline amount and the original award. Rather, this case is unique in the sense that an obligor parent with significant means chose to have a child later in life. Thus, he necessarily retired at the tail end of the child's dependency. Though initially unwanted, the lack of employment and withdrawal of assets here represent not a hardship but, rather, a life stage. Michael, relieved of the responsibility of saving for retirement, is now situated to draw on his retirement accounts to finance his life in a planned-for manner. Part of his life is his minor child. Michael uses his retirement accounts to maintain a luxurious vacation residence and travel the world, so he can also use his retirement accounts to satisfy his comparatively modest support obligation over his son's remaining years of dependency. Also, we note that the trial court misapplied the law when it considered only those costs exclusive to the child in determining the child's needs, it misstated the evidence when it assessed Cherie's financial resources, and it engaged in faulty logic when it assessed the impact that satisfying Michael's support obligation would have on his financial security in retirement. Accordingly, we reverse.
¶ 5 Michael, born in 1953, and Cherie, born in 1967, married in 2004. Their only child together, a son, M.H., was born later that year. Michael had another son from an earlier marriage, who was then approximately 14 years old. The parties separated in September 2005, and they were divorced in March 2007.
¶ 6 The March 2007 judgment of dissolution incorporated the parties' marital settlement agreement and parenting agreement. Both parties waived maintenance. Cherie was to have residential custody of M.H. Michael, who had grossed approximately $550,000 in 2006 as an executive for a packaging company, was to pay child support according to the following downward sliding scale:
Amount Earned Gross Percentage of Net Amount Due
$0-$250,000 20% $2596/month guaranteed
$250,000-$350,000 15% $10,800/year if applicable
$350,000-$450,000 10% $6900/year if applicable
$450,000-$500,000 5% $2700/year if applicable
$500,000-$600,000 5% $5400/year if applicable
Support from the last $100,000 bracket, representing $500,000 to $600,000 gross, would be deposited in a college fund.1 No support would be given for amounts earned over $600,000. Support would terminate at age 19 or upon graduation from high school, whichever occurred first. Support would also terminate if M.H. lived away from Cherie full time, such as in a boarding school, or if he married or joined the military.
¶ 7 In April 2009, Cherie petitioned to modify child support. She alleged numerous changed circumstances: (1) Michael's elder child had become emancipated, and Michael no longer paid child support for that child; (2) Michael's salary and bonuses increased; (3) M.H.'s expenses increased; and (4) Michael's visitation had been erratic, increasing daycare and other child-related costs and causing Cherie to miss opportunities, such as having to cancel a class in which she was enrolled.
¶ 8 Michael responded that Cherie Subsequent discovery showed that at that time Cherie's salary was approximately $145,000 per year.
¶ 9 In June 2010, the trial court denied the petition. It did not increase support based on Michael's reduced obligations, increased bonuses, and increased travel. It modified child support slightly, however, due to a new base salary. It created the following downward sliding scale:
Amount Earned Gross Percentage of Net Amount Due
$0-$271,843 20% $3043/month guaranteed
$271,843-$371,843 15% $10,800/year if applicable
$371,843-$471,843 10% $6900/year if applicable
$471,843-$521,843 5% $2700/year if applicable
$521,843-$621,843 5% $5400/year, if applicable
In other words, the court bumped up the gross base salary from which the guaranteed child support was calculated, from $250,000 to $271,843. This resulted in an increase of the guaranteed monthly payment from $2596 to $3043. As will become important on appeal, this $3043 per month represented 20% of Michael's guaranteed net income at the time, which must have been $182,000 per year ($3043 x 12 months is $36,516 per year, which is 20% of $182,000). The court continued with a downward sliding scale for the next $350,000 in bonuses, just as it had before.
¶ 11 In December 2015, Michael petitioned to reduce child support, based on his December 2014 termination and $1.4 million in severance payments ending that month. He would, however, continue to receive $83,000 per year in deferred compensation through the end of 2017. He attached a signed financial statement. He acknowledged that Cherie had recently lost her job. And, he pleaded that their son had increased needs, which included a diagnosis of attention deficit hyperactivity disorder (ADHD) and sensory deprivation disorder. However, this special-needs issue was resolved in a separate settlement concerning reallocation of decision-making authority and parenting time. (The new parenting agreement shows that Cherie continues to be the residential custodian.) Various events, such as Cherie's continued unemployment and the aforementioned negotiations over decision-making authority, delayed the hearing on the December 2015 petition to modify support.
¶ 12 Thus, in mid-2016, Michael filed an amended petition to reduce support. In conjunction with this petition, he attached an updated signed financial statement, dated April 2017. The April 2017 statement detailed Michael's income, assets, and expenses. It was admitted into evidence at the April 2017 hearing.
¶ 14 In his 2017 statement, Michael represented that his 2016 income had been $129,000. This did not include a virtually tax-free $400,000 withdrawal from a retirement account, which we will detail below. Michael further represented that his gross income for the first quarter of 2017 had been $91,517, on pace for over $360,000 per year. Also, and somewhat inconsistently, Michael stated that his gross income was $8677 per month. This included a $2641 pension benefit, $5416 in investment income, $600 in rental income from an Oswego rental property, and $20 in other dividends. He took $5205 in required deductions. This included state and federal income tax, but, given his age and/or employment status, not FICA, Medicare tax, or retirement contributions. It also included the $3043 support payment at issue. He did not list the $83,000 in deferred compensation that he had been awarded as part of his severance package.
¶ 15 Michael's assets included three homes. He owned one home in Naperville, where he resided much of the year. The Naperville home was valued at $375,000, and it had a remaining mortgage of $104,000. He owned a vacation home in Bozeman, Montana, which he visited often. The Bozeman home was valued at $775,000, and it had a remaining mortgage of $368,000. Finally, he owned the rental property in Oswego, which he paid for in 2016 with $161,000 cash. There was no remaining mortgage....
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