Appeal from the Appellate Court for the Second District; heard
in that court on appeal from the Circuit Court of Du Page County,
the Hon. S. Keith Lewis, Judge, presiding.
CHIEF JUSTICE RYAN DELIVERED THE OPINION OF THE COURT:
This case concerns the disposition of property and the custody of a minor child in connection with a dissolution of marriage. The parties, Geraldine Olson and Kenneth Olson, were married on July 14, 1970. Geraldine Olson petitioned for dissolution of the marriage on January 17, 1979. The marriage was dissolved by a judgment entered in the circuit court of Du Page County on April 1, 1980. The court entered a supplemental judgment on February 4, 1981, which, among other dispositions, assigned the marital residence to the petitioner, Geraldine Olson, as her non-marital property, awarded her custody of the minor child, Kristin, and allowed her to remove the minor child from the jurisdiction. Respondent, Kenneth Olson, appealed from this supplemental judgment and a related temporary restraining order which required the wife to escrow only $10,000 of the funds received from the sale of the marital residence. The appellate court affirmed the judgment of the trial court by a Rule 23 order (73 Ill.2d R. 23). (102 Ill. App.3d 1202.) We granted Kenneth Olson's petition for leave to appeal.
One issue in this appeal involves the classification and disposition of the marital residence, 537 Park Row, Glen Ellyn, Illinois, and the proceeds from its sale. The parties resided at this address throughout their marriage.
In 1967 Geraldine purchased the home for $39,000. She bought it before her marriage to Kenneth, and contributed $3,000 to $4,000 from the sale of her former residence to the down payment. Her parents, Donald and Edith Zugenbuehler, contributed $12,000. She and her parents also obtained a $24,000 mortgage to finance the balance. The property was placed in a land trust. Geraldine had a one-third interest in the trust while her parents had a two-thirds interest.
Once the parties married, Kenneth lived in the house with his wife, her two sons from a former marriage, and a daughter, Kristin, from their marriage. While they were married, the couple extensively remodeled and decorated their home. Kenneth, who operated a construction company, did a substantial amount of this work. His subcontractors also donated their time to performing remodeling services. Geraldine's sons also contributed their labor.
During the marriage, Geraldine owned and operated an antique business. She also received social security, Veterans' Administration death benefits, Maywood fire department annuity benefits, and child-support payments. She paid for part of the remodeling work with a death benefit of $10,000 which she received when her first husband died. She established a segregated account with her own funds to pay for this work. Her husband did not financially contribute to it.
Geraldine contributed $302 per month to pay the house mortgage. During the early years of the marriage, Kenneth deposited his paycheck into a joint checking account from which family expenses, including mortgage payments, were paid. After the couple established separate checking accounts, however, he paid his wife approximately $300 to $375 per week from his salary for family living expenses, which he said included the mortgage payments.
To finance Kenneth's participation in a joint venture involving his construction company, the couple used the home as collateral for a $23,000 loan. The bank released the collateral after Kenneth repaid the loan.
In 1978 the couple also used the home as collateral for a $50,000 loan which was used to finance the purchase of two lots on which Old Colonial Homes, a company which the couple owned, planned to build a single-family home. The bank made the $50,000 check jointly payable. It is undisputed, however, that Kenneth received the entire $50,000. He endorsed the check with his signature, and a significant percentage of the money was disbursed to Olson Construction Company, which he solely owned.
In January 1979, Geraldine asked her husband to renegotiate the note, reduce the $50,000 balance, or repay the principal sum. She also told him that the bank intended to foreclose the mortgage on the 537 Park Row property, which would deprive her children of their family home. Kenneth said, however, he would not help his wife to prevent foreclosure. He left the marital home about January 15, 1979. As noted above, Geraldine filed a petition for dissolution of the marriage on January 17, 1979. On July 6, 1979, she filed a petition in the dissolution proceeding asking the court to order Kenneth to make the past-due payments on the loan on the property in question. On September 11, 1979, Kenneth, in turn, filed a petition alleging that the home was marital property and that Geraldine had sold it and prayed that she be enjoined from transferring the proceeds of the sale. On September 13, 1979, the court ordered that $10,000 of the proceeds of the sale of the 537 Park Row property be escrowed, subject to further order of the court. It appears that the $10,000 was never placed in escrow. The petition filed by Kenneth on September 11, 1979, and the order entered September 13, 1979, both recite that the home had been sold. However, a memorandum filed by Geraldine's attorney prior to the entry of the final supplemental decree on February 4, 1981, recites that the home was sold October 2, 1979. In any event, it was sold well before the entry of the judgment of dissolution on April 1, 1980.
Since the bank would not allow Geraldine to reexecute the note, it was necessary to sell the home to avoid the costs of foreclosure. The selling price was $114,000. From these proceeds the first mortgage of $34,145.80 was paid to the bank, leaving a balance of $79,854.20. From this the balance due on the $50,000 note, which had been used to finance Kenneth's participation in a construction project, was paid. After this payment, $33,110.37 remained. The bank also deducted interest due on Geraldine's and her mother's notes, and the remaining balance of $31,861.40 was applied to her mother's, Mrs. Zugenbuehler's, note. Mr. Zugenbuehler had died. It appears that the two-thirds interest in the land trust owned by him and his wife was held in joint tenancy and that, following his death, Mrs. Zugenbuehler had a two-thirds beneficial interest in the land trust. Thus, all of the proceeds of the sale of the 537 Park Row property had been disposed of immediately after its sale. At the time of the entry of the judgment of dissolution Geraldine had no title or interest in the property located at 537 Park Row or in the proceeds from the sale of that property. We will discuss later the effect of these facts upon the question of whether the marital home at 537 Park Row was marital property. We will first address the arguments of the parties on that question and the trial court's treatment of it.
Section 503 of the Illinois Marriage and Dissolution of Marriage Act (Ill. Rev. Stat. 1979, ch. 40, par. 503) directs the court to divide into marital and non-marital portions the couple's property and to assign each spouse his or her non-marital share. Any property purchased after the marriage but prior to the dissolution is presumptively marital property. Sections 503(a)(5) and (6) of the Act (Ill. Rev. Stat. 1979, ch. 40, pars. 503(a)(5), (6)) provide that non-marital property includes property which a spouse acquires before the marriage and any increase in value of such property. In this case, Geraldine purchased the Park Row residence in 1967, which was several years before she married. Since this property falls within the statutory exception, it must be classified as non-marital.
Kenneth argues, however, that his contribution to the improvement of the house and the payments on the mortgage from marital funds during the marriage transmuted the Park Row residence to marital property. In support of this theory, he relies on three cases, In re Marriage of Rogers (1981), 85 Ill.2d 217; In re ...