APPEAL FROM THE CIRCUIT COURT OF COOK COUNTY, ILLINOIS. NO. 91 D 04278. THE HONORABLE KAREN SHIELDS, JUDGE PRESIDING.
Released for Publication December 24, 1997.
Presiding Justice Cousins delivered the opinion of the court. Leavitt and Cahill, JJ., concur.
The opinion of the court was delivered by: Cousins
PRESIDING JUSTICE COUSINS delivered the opinion of the court:
On April 7, 1992, the trial court entered a judgment for dissolution of marriage between the petitioner, Stephen Singleteary, and respondent, Chester Singleteary. The judgment incorporated a marital settlement agreement that included provisions for child Support for their child, Stephen II (Stephen II). The agreement provided that respondent have physical custody of Stephen and petitioner agreed to pay $864 per month or 20% of his net income, whichever amount was greater. In February 1995, petitioner filed an amended petition for modification of child support due to a substantial change in circumstances. The amended petition stated that there had been a substantial increase in petitioner's income and the application of the percentage order of the judgment would result in a child support payment that exceeded the needs of the child and would create a windfall to respondent. His prayer for relief asked the trial court to modify the child support order and to enter a child support order in a stated sum in a reasonable amount for the support of Stephen II. The trial court found that the 20% support order would result in an amount in excess of the needs of Stephen II and ordered petitioner to pay $2,000 in child support per month. On appeal, respondent contends that: (1) the trial court erred in modifying child support, since the parties had agreed to a valid and enforceable settlement agreement; (2) petitioner failed to show a requisite change of circumstances to warrant a modification of the settlement agreement; and (3) she demonstrated sufficient support needs to warrant a $3,000-per-month award.
Petitioner and respondent were married on July 22, 1982. Their only child, Stephen B. Singleteary II, was born on February 22, 1985, and was six years old at the time petitioner filed a petition for dissolution of marriage. At the time of their divorce, respondent was employed as a banker by the First National Bank of Chicago, earning an annual gross salary of $55,000. Petitioner was a self-employed businessman with an annual income of $90,000.
A judgment for dissolution of marriage was entered on April 7, 1992, which required petitioner to pay to respondent for the support of seven-year-old Stephen II the sum of $432 twice a month or 20% of his net income, whichever amount was greater. Child support payments were to be determined by the following formula: total income (line 23 of the 1991 United States tax form No. 1040) minus line 18 (rents, partnership, estates, trusts, etc.) of schedule E, minus federal and state income taxes, social security (FICA) payments and any other medical insurance premiums paid for the benefit of the child, minus other distributions (year-end or otherwise), times 20% divided by 24. The child support obligation also required that petitioner pay 20% of any other distributions whenever received.
At the hearing on the motion for modification, petitioner testified that, in August 1994, he became president of Diversity Food Processing in Petersburg, Virginia. Diversity Food Processing is a joint venture between Burger King Corporation, Hudson Foods and SBS Processing. Diversity Food Processing is a start-up food processing company that supplies hamburger patties to Burger King. Petitioner owns 62% of the company.
Petitioner filed a petition to modify child support in November 1994. Thereafter, he filed an amended petition for modification of child support in which he alleged that there had been a substantial increase in his annual income and that the application of the percentage order of the judgment for dissolution of marriage would result in a child support payment that exceeded the needs of the child and that would create a windfall to respondent. His prayer for relief asked the trial court to modify the child support order and to enter a child support order in a stated sum in a reasonable amount for the support of Stephen II.
At the time of the parties' divorce, petitioner was employed as president of Rayburt Systems, Inc. (Rayburt), which was a subchapter S corporation that owned and operated Burger King restaurants in Chicago. He was a 50% shareholder of Rayburt. He also owned 50% of the shares of Rayburt Systems of Indiana (Rayburt Indiana), which was a subchapter 5 corporation that owned and operated Burger King restaurants in Indianapolis, Indiana. His partner in both companies was a man named Oliver Darton, who owned 50% of the shares of both Rayburt and Rayburt Indiana and was president of Rayburt Indiana. Petitioner drew a salary from Rayburt but not from Rayburt Indiana. His salary in 1992 and 1993 was $90,000.
Petitioner Purchased his interest in Diversity Food Processing by selling his Rayburt and Rayburt Indiana interests. To purchase his interest in Diversity Food Processing, petitioner was required by his new partners to divest himself of his interest in his Burger King franchises and to borrow $1 million to invest in the joint venture. He repaid the $1 million upon the sale of his interest in the Burger King restaurants. The Burger King restaurants owned by Rayburt Indiana and one individually owned restaurant in Chicago were sold in 1994. The gross sale proceeds were $1.9 million. These sales resulted in a capital gain to petitioner in the amount of $714,654. The three Burger King restaurants owned by Rayburt were sold in June 1995, but the corporation had not yet been dissolved. The combined gross sale proceeds of the Rayburt and Rayburt Indiana restaurants were approximately $3 million. Petitioner did not know the amount of the corporate liabilities at the time of sale and, therefore, could not testify as to the amount of the net sales proceeds. The sale proceeds of the Rayburt assets were deposited in the corporation's account at South Shore Bank. Petitioner expects to receive little or none of the net sale proceeds of Rayburt and estimates the taxes due in September 1995, resulting from the sale, to be between $300,000 and $350,000.
Petitioner has an employment agreement with Diversity Food Processing that provides that his salary is $300,000 per year. The salary amount was set by petitioner, Burger King and Hudson Foods. The contract also provides for two potential bonuses, one of an unstated amount and one in the amount of $100,000, which is designated a "non-discretionary" bonus. Although the bonus is termed nondiscretionary, it will be paid only if certain objectives are met by the business. Petitioner's employment agreement states that in any fiscal year that the company achieves specific performance targets determined by the board and based on the company's annual budget and the two-year plan, the company shall pay to petitioner for such fiscal year, in addition to his salary, a bonus in the amount of $100,000. If the company does not reach a specific performance target, he will not get his bonus. The board makes the determination as to whether the objectives are being met and whether he will receive the bonus. The board of directors consists of petitioner, two representatives from Burger King, two representatives from Hudson Foods, plus five other members. Petitioner does not control the board in regard to issues of his compensation.
The company started production in the latter part of June 1995 and did not have revenue until July 1995. Based on the company's projections, various cash flow analysis and profit-and-loss statements, petitioner projects that the company will lose anywhere between $500,00 to over $1 million and that, given that loss, he did not believe that he would be receiving either bonus for 1995 from Diversity Food Processing.
Petitioner receives his salary from Diversity Food Processing on a bimonthly basis. The gross salary for the bimonthly period is $12,500. He has a 401(k) deduction from each paycheck of $385; a FICA deduction of $181.25; federal withholding of $3,905.54; and state withholding of $362.20. His total deductions are $4,833.99. Therefore, his net pay is $7,666.01 per pay period.
When petitioner resided in Chicago, Stephen II spent two days a week with his father. During 1995, Stephen II spent his spring break, the month of August, and a week in June with his father in Virginia.
In addition to child support payments, petitioner pays for his son's camp, lessons, and club dues. He purchases educational bonds and takes his son on annual vacations. Petitioner also maintains medical insurance for Stephen II and pays the mortgage on the condominium in which respondent and Stephen II reside. The monthly mortgage payment is $794. The condominium has various amenities, such as a 24-hour doorman, security, indoor parking, cleaners, dentist, bank, grocery store, swimming pool, tennis and racquetball courts, and a clubhouse. The parties and Stephen II resided in the condominium as a family prior to the divorce.
Since moving to Virginia, petitioner has purchased a $430,000 home. He paid between $90,000 and $100,000 as a down payment on the home and the mortgage is $340,000. Petitioner leases a Porsche and purchased a 1992 Mercedes automobile with a car allowance provided under his employment contract with Diversity Food Processing.
Respondent testified that she has an undergraduate degree from Indiana University and an MBA from the Kellogg School of Business at Northwestern University. She is also a certified public accountant. Respondent is vice president in the private banking department at LaSalle National Bank. In 1994, her salary was $70,000 and she earned a total income of $74,513. In 1995, respondent's base salary increased to $72,500 and she received a $3,000 bonus in February 1995. Her total earned income in 1995 was $75,500.
Respondent has a savings account at First Chicago Bank into which petitioner deposits his child support. She deposits $1,000 per month into a savings account at LaSalle National Bank. Respondent has a 401(k) plan at First Chicago in which she defers 6% of her gross salary each month. Her 401(k) savings account has a total of $60,000. Respondent also ...