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Hofmann v. Hofmann

OPINION FILED FEBRUARY 18, 1983.

SANDRA DARLENE HOFMANN, APPELLANT,

v.

ROGER WILLIAM HOFMANN ET AL., APPELLEES.



Appeal from the Appellate Court for the Third District; heard in that court on appeal from the Circuit Court of Mercer County, the Hon. David DeDoncker, Judge, presiding.

JUSTICE SIMON DELIVERED THE OPINION OF THE COURT:

What disposition should be made of property in connection with a dissolution of the marriage of Sandra and Roger Hofmann, and in particular the disposition of a 319-acre farm known as the "Sackville farm," of which Sandra claims she was deprived by collusion between her husband and his parents, and a 77 1/2-acre farm known as the "McManus farm" are the questions involved in this appeal. Sandra and Roger maintained their marital residence on the Sackville farm, and Roger, a full-time farmer, farmed both farms.

Sandra and Roger were married on March 17, 1972. The Sackville farm was owned by Roger's parents at that time, and Roger leased it and farmed it on a 50% share-crop basis. Prior to the marriage, in 1969, Roger entered into a contract for deed for the purchase of the McManus farm. The total price of this farm was $50,375. Roger received $10,000 from his parents, which he used as a down payment on the farm, and after the marriage Roger and Sandra continued to make payments on it until the petition for dissolution was filed on November 4, 1977, at which time $13,575 remained owing on that farm. In his financial statements, Roger placed a value on the McManus farm of $155,000 on December 5, 1977, and of $232,000 on March 28, 1979.

The Sackville farm was purchased by Roger's parents in 1971 and leased to Roger in that year. The lease arrangement continued until April 15, 1976, when Roger entered into a contract with his parents for the installment purchase of the farm. The contract required a down payment of $20,000, which Roger borrowed from a local bank, and annual installment payments of between $10,000 and $25,000, at 6% interest, were due on March 20 of each year. Title was to pass to Roger only upon payment of the full price of $239,250. The contract contained a clause permitting the parents to declare a full forfeiture if any of the conditions of the contract were breached.

On March 20, 1977, Roger paid $13,000 of the yearly payment due on the Sackville farm and gave his parents a promissory note for an additional $5,000 which they claimed was due in that month, but which they agreed to allow him to pay in cash in December 1977. During the year, however, Roger was confronted with several debts in addition to the payment that was due on the Sackville farm. He paid off a debt of $11,720.33 on October 11, 1977, for a farm bin which he had purchased for the Sackville farm, and on October 26, 1977, he made a $13,752.55 payment on a combine which he later testified he would not have needed had it not been for the size of the Sackville farm. In November and December 1977, Roger made two more payments of approximately $3,000 each relating to the various properties he was farming. On the appointed date in late December, however, he did not have the $5,000 he needed for payment to his parents on the Sackville farm, and he claimed he could not meet that obligation even after his parents gave him an extension of 30 days in which to do so. On January 21, 1978, they served a notice of intention to declare a forfeiture of the contract for deed and a notice of intention to file a forcible detainer suit as to the property. Roger did not contest the forfeiture, despite the fact that he had an equity of approximately $420,000 in the farm at the time due to appreciation, and no forcible detainer suit was filed. The Sackville property was declared forfeited on February 23, 1978, along with all down payments and improvements made on it. Roger continued to live on the farm as a sharecropper, however, and later leased the farm for a yearly cash rent of $25,000, as he continues to do.

Sandra and Roger had experienced marital difficulties since 1972, the year of their marriage, and separated in 1973, reuniting later in that year. They had one child, and Sandra worked as a dentist's aide and a beautician and helped Roger on the farm to help support the family. Differences continued between them, however, and when the contract for sale of the Sackville farm was negotiated between Roger and his parents in 1976 a lawyer explained to Sandra, who was present, that her name was intentionally omitted from the contract as a buyer and that the purpose of this was to preclude her from getting an interest in the farm in the event of divorce.

Sandra filed for divorce on November 4, 1977, a month and a half before the $5,000 payment on the Sackville farm was due and three and a half months before the farm was forfeited. She claimed certain items as marital property, including the Sackville and McManus farms, and sought an award of attorney fees. Roger's parents, as title owners of the Sackville farm, were added as parties defendant in June 1978. The circuit court of Mercer County denied attorney fees but ruled that certain corn, farm machinery and land in Arizona were marital property, 30% of which was to belong to Sandra. It ruled that the McManus farm was not marital property but belonged to Roger. With regard to the Sackville farm, it ruled:

"No matter how Roger and his parents describe the transaction, this Court has only one conclusion: The parents' attempted foreclosure and Roger's acquiescence in failing to make the $5000 payment while paying other obligations was simply an attempt to wipe out an equity and prevent Sandra from sharing marital property.

In a sporting event this would be called a `fix.' To allow games to be played with marital property would be unconscionable."

The court accordingly awarded Sandra a 30% share of the Sackville farm as a lien against the title.

On appeal, the appellate court, with one judge dissenting, reversed the circuit court order as to the Sackville farm, holding that since neither spouse had an interest in it at the time of dissolution it could not be treated as marital property. (99 Ill. App.3d 526.) The court did not reach other issues, even though they were briefed. On this appeal Sandra seeks to reinstate the circuit court's order concerning the Sackville farm, to overturn that court's determination that the McManus farm was non-marital property and its denial of attorney fees, and to increase the amount of the award of marital property from 30% to 50%. Roger, on cross-appeal, disputes the trial court's computation of his equity in the crops which were determined to be marital property, an issue which the appellate court did not address, and also seeks to have Sandra's award of 30% of the marital property declared excessive. We will treat each of the issues in turn.

THE SACKVILLE FARM

The appellate court, in ruling that the Sackville farm was not marital property at the time of dissolution, based its holding on the theory that property held by a spouse becomes "marital property" only upon entry of an order of dissolution and can be alienated free from any claim by the other spouse until that time. It assumed that the farm would have been marital property had it remained in Roger's possession and therefore did not rule on that issue. Roger and his parents maintained before the circuit and appellate courts>, as they continue to do as appellees here, that the farm was essentially a gift to Roger under the installment sale contract and thus comes under an exception to the statute creating marital property rights. They also argue that Sandra expressly agreed to the provision of the sale contract precluding her from acquiring an interest in the farm, and thus attempt to invoke another exception to the marital-property statute for property excluded from its reach pursuant to a valid agreement between spouses.

The statute governing marital property in Illinois is section 503 of the Illinois Marriage and Dissolution of Marriage Act (Ill. Rev. Stat. 1977, ch. 40, par. 503), which provides in relevant part:

"(a) For purposes of this Act, `marital property' means all property acquired by either spouse subsequent to the marriage, except the following, which is known as `non-marital property':

(1) property acquired by gift, * * *; [or]

(4) property excluded by valid agreement of the parties."

The statute creates a rebuttable presumption that all property acquired after marriage is marital property. See Kujawinski v. Kujawinski (1978), 71 Ill.2d 563, 571, citing Ill. Rev. Stat. 1977, ch. 40, par. 503(b).

Roger and his parents base their assertion that the contract for sale of the Sackville farm was a gift on the fact that the property was valued at considerably more than the contract sale price in 1977 and on statements made by Roger and his father in court to the effect that, although the father was aware that Roger was a poor businessman, he had earlier sold a farm to a daughter for a bargain price and wished to treat Roger similarly. The circuit court noted that although the parents may have sold the farm to Roger reluctantly, they sold it for a higher price than they had paid for it five years earlier and ruled that the property was not even partially a gift, citing testimony by Roger's mother that she considered the sale price to be a "fair" one. We note the additional possibility, not disproved by the record, that the price was considered "fair" as an arm's length transaction only because Roger, with his history of insolvency, could not realistically be expected to pay a higher price. The burden of proof rests on those seeking to establish that the transaction was intended as a gift. (In re Marriage of Severns (1981), 93 Ill. App.3d 122.) The trial court's determination was supported by credible evidence, and we are not free to disturb it in light of the statutory presumption.

Roger and his parents point out that the sale contract excluded Sandra from acquiring an interest in the Sackville farm, that Sandra was present during the negotiations and did not object to her exclusion when this was explained to her by the attorney, and that Sandra testified that when Roger informed her that he was going to lose the farm to his parents she replied, "What you and your father do is your business." They argue on the basis of this evidence that there was a "valid agreement" between Roger and Sandra that she should not share in the property, and that this requires us to apply exception (4) to the marital property section (Ill. Rev. Stat. 1977, ch. 40, par. 503(a)(4)) and hold that the Sackville farm was non-marital property. We do not agree. Sandra's testimony reveals that Roger had not arranged for her to come to the lawyer's office to listen to the negotiation of the contract but that Sandra had suggested that she accompany him, apparently on the spur of the moment, and that Roger had warned her to "shape up" just before they went. She did not bring a lawyer of her own. In the attorney's office she sat in the back of the room and did not participate in the negotiations; she heard only part of the conversation between Roger, his father and the attorney, and was informed at one point by the attorney that she was not to share in the farm in case a divorce should occur. Under these circumstances, her failure to object and her subsequent actions might be attributed to a conclusion that the lawyer was telling her that she had no legal right to share in the property or to a desire not to anger Roger or his parents, rather than to a knowing and voluntary relinquishment of rights she knew she had. She signed no formal contract, nor did she say anything in the attorney's office to indicate a voluntary surrender of known rights. This case is ...


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