Appeal from Circuit Court of Knox County. No. 75D452. Honorable James B. Stewart, Judge Presiding.
Rehearing Denied December 9, 1997. Released for Publication December 9, 1997. As Corrected January 8, 1998.
The Honorable Justice Knecht delivered the opinion of the court. Garman and Green, JJ., concur.
The opinion of the court was delivered by: Knecht
The Honorable Justice KNECHT delivered the opinion of the court:
Jean E. Stevens, now known as Schrilla, the plaintiff, brought a garnishment action in the circuit court of Knox County against garnishees, Stevens Family Trust (Trust) and First Midwest Bank (Bank), seeking to enforce a judgment of $36,777.59 for child-support arrearages against her former husband, defendant Mervyn W. Stevens II. Defendant is the lifetime beneficiary of a trust established by his father, Mervyn Stevens (Stevens). Stevens established the trust as a revocable inter vivos trust that paid him income until his death, when defendant became the lifetime beneficiary and, at defendant's death, is to pay three quarters of the trust estate into a trust for the benefit of Stevens' grandson, Samuel James Stevens, and pay one quarter into a trust for the benefit of his granddaughter, Amy Lyn Stevens. Both the residuary beneficiaries are children of defendant. Defendant's third child, Heidi Lyn Stevens, was specifically excluded by the provisions of the trust agreement from receiving benefits under the Trust.
Defendant, during his lifetime, is to receive so much of the net income of the Trust as may be, in the trustee's exclusive discretion, necessary for his support and also so much of the principal as the trustee, in her exclusive discretion, deems necessary. Defendant became entitled to receive income or principal payments, at the discretion of the trustee, beginning August 7, 1994. As of the date of this appeal, defendant had received no payments from the Trust.
The bulk of the property in the Trust is farmland. The trust agreement signed by Stevens provided his purpose in creating the Trust was to satisfy his own well-being during his lifetime and to pass the farm real estate free of encumbrances to his grandson, Samuel, at defendant's death. The trust agreement also contained the following spendthrift provision:
"No part of the principal of the Trusts created hereby, or of the income therefrom, shall be subject to execution, attachment, garnishment or other legal process or claim of any creditor of any Beneficiary of such Trusts; and, all payments to any Beneficiary shall at all times be free of any interferences, influence, or control of Third Parties; no title to, nor interest in, either the principal or the income from any part of the Trust Property may be voluntarily or involuntarily alienated, assigned, transferred or encumbered by the Beneficiary while still in the hands of the Trustee."
On September 27, 1996, plaintiff filed a motion for summary judgment. The Trust filed a motion for summary judgment on October 11, 1996. A hearing was held on all pending motions on November 12, 1996.
On February 27, 1997, the trial court issued its order granting plaintiff's motion and entered a garnishment order against the Trust and the Bank requiring payment of the net income and principal of the Trust to satisfy the judgments for child support arrearages against defendant. Despite the fact Heidi, for whom the child support arrearages were sought, was specifically excluded as a Trust beneficiary, the trial court concluded the income from the Trust may be withheld and is subject to garnishment by plaintiff to enforce the judgment obtained against defendant.
The trial court found defendant was the sole income beneficiary of the Trust during his lifetime and is the only beneficiary, during his lifetime, to whom discretionary payments of principal may be made. Both are factors required to allow garnishment of spendthrift trusts under section 2-1403 of the Civil Practice Law in order to secure collection of unpaid child support obligations owed by a trust beneficiary. 735 ILCS 5/2-1403 (West 1996). Without those factors, the Trust, as a spendthrift trust, could not be the subject of a garnishment proceeding. 735 ILCS 5/2-1403 (West 1996).
The trial court then ordered the garnishees, the Bank and the Trust, to pay to plaintiff the net income of the Trust to satisfy the garnishment and, to the extent the child support arrearage plus interest is not satisfied out of the net income, the remainder shall be satisfied from the Trust principal.
The Trust has appealed. The issues presented for review are whether, as a matter of law, (1) the net income and principal held by the Trust can be garnished for the satisfaction of a judgment for child support arrearages owed by defendant, (2) the Trust's bank account at the Bank can be directly garnished for the satisfaction of that judgment against defendant, (3) it was error for plaintiff to fail to give notice of the garnishment proceedings to the residuary beneficiaries, and (4) the trial court erred by adding the interest on principal to the date of the entry of its order to the amount to be garnished; and (5) whether it was error to enter the garnishment judgment in the name of plaintiff rather than in the name of defendant for the use of plaintiff.
The Trust contends defendant is not the sole beneficiary of the Trust; he does not receive periodic payments of either income or principal; the indebtedness alleged to be due defendant by the Trust is not liquidated and due without contingency; the garnishment would exceed defendant's ability to access the funds in the Trust; and it would be inequitable to allow the garnishment because, to the extent the Trust was forced to use its assets to satisfy the ...