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In re Marriage of Henke

April 26, 2000

IN RE MARRIAGE OF MARVIN W. HENKE, JR., PETITIONER AND COUNTERRESPONDENT-APPELLANT,
AND
ADELE HENKE, RESPONDENT AND COUNTERPETITIONER-APPELLEE



Appeal from the Circuit Court De Kalb County. No. 97-D-79 Honorable Wiley W. Edmondson, Judge, Presiding.

The opinion of the court was delivered by: Justice Thomas

The petitioner, Marvin W. Henke, Jr. (Marvin Jr.), appeals portions of the trial court's judgment of dissolution of Marvin Jr.'s marriage to respondent, Adele Henke (Adele). Marvin challenges the trial court's classification of certain property as marital property and the trial court's distribution of property. Marvin also appeals the trial court's finding that he dissipated certain marital assets.

The parties presented an extensive amount of testimony and evidence at the trial of the dissolution of marriage. Because the parties are aware of the record in this case, only those facts relevant to the issues on appeal will be discussed. The parties were married on July 24, 1982. The judgment for dissolution of marriage was entered on December 29, 1998. Two children were born during the course of the marriage. Daughter Kristi was born on December 20, 1982, and daughter Haylee was born on January 25, 1986. Prior to the parties' marriage, Adele had worked for Ideal Industries in Sycamore, Illinois. Soon after the marriage, Adele quit her job to become a full-time homemaker. Adele went back to work for Ideal Industries in 1997 when the parties separated. At the time of trial, Adele was earning $320 a week from Ideal Industries and was also earning $334 a month from a part-time job with Salem Lutheran Church. Marvin Jr. is a self-employed farmer.

Following their marriage, Marvin Jr. and Adele lived in a single-family home on 160 acres of Henkeview Farms. Henkeview Farms, which is around 840 acres in total, is owned in trust by Marvin Jr.'s parents, Doris and Marvin Henke, Sr. (Marvin Sr.). The portion of Henkeview Farms where Adele and Marvin Jr. lived was referred to as the Home Farm. Marvin Sr. and Doris lived on a portion of Henkeview Farms known as Dad's Farm. Marvin Jr.'s sister Debbie lived on a section of Henkeview Farms referred to as Debbie's Farm, and his sister Jeannie's portion of the farm was referred to as the Back Farm. Marvin Jr. farmed all of Henkeview Farms and paid cash rent to his parents and siblings for their portions of the property. Following the parties' marriage, Marvin Jr. also bought a 160-acre farm from his neighbor, Kate Clark. This property was referred to as the Clark Farm. Marvin Jr. later sold five acres of the Clark Farm to his father for $50,000.

At the trial of the judgment for dissolution, Marvin Sr. testified that he gave nearly all his farm equipment to Marvin Jr., some of which Marvin Jr. traded in for newer models. Marvin Sr. said that Henkeview Farms passes to Marvin Jr. when Marvin Sr. passes away. Marvin Sr. used to pay the real estate tax bills for Henkeview Farms, but now the tax bill is split among all of his children. For example, Marvin Jr. pays the taxes for his 160 acres of Henkeview Farms in addition to paying the taxes for the Clark Farm.

Adele testified as an adverse witness during Marvin Jr.'s case in chief that she had been living apart from Marvin Jr. since March 3, 1997. Prior to that time, she had lived with Marvin Jr. in a single-family home on the Home Farm. Adele did not dispute that the parties' home was non-marital property. Adele said that during the marriage she used money from a checking account at the National Bank and Trust in Sycamore, Illinois (hereinafter the checking account), to pay for groceries and to pay all household and family bills and expenses. The checking account was in the name of Henkeview Farms and Marvin Jr. and had been in existence prior to the time that Adele married Marvin Jr. Adele did not have a signature card to sign checks on the checking account. If she needed money, Marvin Jr. would either sign the checks or he would have Adele sign them for him. From the time of the parties' marriage through the time of their separation, Adele did not have a checking account. The money that went into the checking account was the profit from Marvin Jr.'s farming operations. Although Henkeview Farms was listed on the checking account, Adele testified that Marvin Sr. had nothing to do with the checking account.

Adele testified that the deed to the Clark Farm was in the names of both Marvin Jr. and Adele. Adele said that money from the farming operations was used as a down payment on the Clark Farm and that a loan was taken out on the balance. The loan was for $195,000.

Adele then testified that she had been indicted for forgery with regard to checks from the checking account totaling $6,700. Adele said that she pleaded guilty to misdemeanor theft and was required to pay restitution to Marvin Jr.

Patrick Brennan testified that he is a loan officer and the vice president of National Bank and Trust Company of Sycamore. Brennan said that Marvin Jr. was the only person authorized to sign checks on the checking account. Brennan also said that he had examined the bank records to determine what funds Marvin Jr. had prior to the parties' marriage in 1982. Brennan found a certificate of deposit that had been made out in 1981 in the amount of $94,000. Brennan did not know what happened to the $94,000.

Earl Mecklenburg testified that he is an insurance agent and that Marvin Sr. and Marvin Jr. are his clients. Mecklenburg identified a farm personal property inventory form dated December 29, 1981, that he had completed. Mecklenburg said that the inventory form listed and valued farm machinery owned by Marvin Sr. and Marvin Jr.

Marvin Jr. then testified that he had been farming with his father since he was 13 or 14 years old. Marvin Jr. said that between 1981 and the time of trial the farm equipment listed in Mecklenburg's 1981 inventory form had been replaced. When Marvin Jr. replaced a piece of equipment, he traded in the old equipment and paid the difference to buy the new equipment. Marvin Jr. paid the cash difference from the checking account. Marvin Jr. could not specifically state when he traded in each piece of equipment listed on the 1981 inventory. Marvin Jr. said he still had some of the equipment listed in the 1981 inventory, including four Parker wagons, a chisel plow, and a tractor.

Marvin Jr. testified that he bought the Clark farm from Kate Clark in 1989 for $320,000 pursuant to an installment contract. Marvin Jr. said that he put down $50,000 to purchase the Clark Farm and that the money came from the $94,000 certificate of deposit that he had prior to his marriage. Marvin Jr. thought he had put another $50,000 down on the Clark Farm after he sold five acres of the Clark Farm to his father. The payments on the Clark Farm came out of the checking account. When there was $195,000 remaining on the installment contract, Marvin Jr. took out a mortgage to pay off the balance. Marvin Jr. said that he took out the mortgage because interest rates had dropped and were lower than the rate that he had been paying to Kate Clark. When Marvin Jr. took out the mortgage, Adele was listed on the note and mortgage and on the deed for the property. Marvin Jr. said that he had not wanted Adele's name on those documents.

With regard to the checking account, Marvin Jr. said that Adele was never supposed to sign checks on the checking account. The checking account has been in existence for 22 to 23 years. Marvin Jr. claimed that the funds in the checking account belonged to his father and himself. Marvin Jr. also said that during the marriage he did not know that Adele had a credit card in her name. Adele had the credit card statements sent to her father's house. When Marvin Jr. filed for dissolution of marriage, he learned that Adele had close to $16,000 in credit card bills. Marvin Jr. said that the checks that were the subject of the forgery charges against Adele had been used to pay Adele's credit card charges. Marvin Jr. testified that Adele had signed his name to those checks.

Marvin Jr. said that he spent a lot of the money that he earned as a farmer and put the remainder of the money into the checking account. The checking account was used to pay family expenses and to pay farm expenses. At the beginning of the parties' marriage, Marvin Jr. was farming around 680 acres of his father's farm and was farming the Clark Farm. During the course of the parties' marriage, Marvin Jr. paid cash rent to his father on the acreage that belonged to his father.

Marvin Jr. said that during the marriage he built grain bins and a Morton building on the Home Farm. Marvin Jr. and Adele took out a mortgage for the Morton building, and the payments on that mortgage were paid out of the checking account. Marvin Jr. also bought a 1987 Corvette and a 1993 anniversary edition Corvette during his marriage. Marvin Jr. explained that he bought a 1982 Corvette two weeks before he got married. That Corvette was totaled in an accident in the spring of 1983, and Marvin Jr. used the money he received from that accident to purchase a new 1982 collector Corvette. Marvin Jr. sold the 1982 collector Corvette and bought the 1987 Corvette. Marvin Jr.'s name is the only name on the titles to the Corvettes.

Adele then testified in her case in chief that grain bins were put up on the Home Farm in 1987 at a cost of around $80,000. The grain bins were paid for with proceeds from the farming operations. Adele said that during her marriage she and Marvin Jr. filed joint income tax returns and paid any taxes owed out of the checking account. Marvin Jr. always paid for seed, fertilizer, and all other expenses related to farming out of the checking account. The parties paid around $100,000 for the Morton building, and a junior mortgage was taken out on the Clark Farm for $60,000 owed on the Morton building. Payments on the junior mortgage were paid out of the checking account. Real estate taxes on the Home Farm and on the Clark Farm also were paid out of the checking account.

Adele said that she had a 1994 Ford conversion van. She and Marvin Jr. also had purchased a 1996 Ford pickup truck during their marriage. Both the van and the pickup truck were purchased with funds from the checking account. Adele further testified that during the marriage Marvin Jr. had a life insurance policy with Country Companies. Policy premiums were paid from the checking account. Marvin Jr. also had a retirement account with the National Bank and Trust of Sycamore. Money was contributed to that account during the marriage from the checking account.

Testifying on behalf of Adele, John Almburg stated that since 1965 he had been a real estate broker and appraiser. Almburg said that the Home Farm consisted of approximately 120 acres. The Home Farm was worth $600,000, or $5,000 per acre. The Clark Farm was worth $3,250 an acre, or $503,750. Almburg testified that the grain bins on the Home Farm increased the value of the property between $25,000 and $50,000, and the Morton building improved the value of the property by $40,000.

At the close of the evidence, the trial court entered its judgment for dissolution of marriage. The trial court held that the farm equipment in Marvin Jr.'s possession that had been owned by him prior to marriage was non-marital property but that the remaining farm equipment, worth $270,250, was marital property. The trial court found that the Home Farm, which had a value of $600,000, was non-marital property, but the court ordered reimbursement to the marital estate for the $80,000 of marital funds spent to build the grain bins and for the $40,000 that the Morton building added to the value of the Home Farm. The Clark Farm was held to be marital property and was awarded to Adele. The trial court further held that Marvin Jr.'s life insurance policy and all the vehicles were marital property. In addition, the trial court classified the checking account, which contained $3,886, as marital property.

As noted, Marvin Jr. disputes the trial court's classification of certain property as marital property. First, Marvin Jr. contends that the trial court's finding that the checking account was marital property was against the manifest weight of the evidence. Marvin Jr. notes that Adele had testified that the account existed prior to the time of marriage, that the account was in the name of Marvin Jr. and Henkeview Farms, that Adele was not authorized to sign checks on the account, and that the money that went into the account was from the farming operations of Henkeview Farms, which belonged to Marvin Sr. Marvin Jr. also claims that Adele's guilty plea to the forgery charges constitutes a judicial admission that the checking account was non-marital property.

Adele concedes that the checking account initially was non-marital property because it existed prior to the marriage. However, Adele argues that the checking account was transmuted into marital property because income earned during the parties' marriage was deposited into the account and funds from the account were used to pay family expenses throughout the parties' 16-year marriage. Adele also claims that her guilty plea was not a judicial admission because the evidence before the trial court did not include a transcript from the criminal proceedings concerning what Adele had admitted to in the criminal proceedings.

In order to distribute property upon the dissolution of marriage, the trial court first must classify the property as either marital or non-marital property. In re Marriage of Blunda, 299 Ill. App. 3d 855, 861 (1998). A trial court's property classification will not be disturbed unless it is contrary to the manifest weight of the evidence. Blunda, 299 Ill. App. 3d at 861. The determination of whether property is to be classified as marital or non-marital is governed by section 503 of the Illinois Marriage and Dissolution of Marriage Act (the Act) (750 ILCS 5/503 (West 1998)). Section 503(a)(6) of the Act provides that "non-marital property" is property acquired by either spouse before the marriage. 750 ILCS 5/503(a)(6) (West 1998). With regard to the commingling of marital and non-marital property, section 503(c)(1) of the Act provides:

"(1) When marital and non-marital property are commingled by contributing one estate of property into another resulting in a loss of identity of the contributed property, the classification of the contributed property is transmuted to the estate receiving the contribution ***." 750 ILCS 5/503(c)(1) (West 1998).

Notwithstanding any transmutation, however, section 503(c)(2) of the Act provides that the contributing estate shall be reimbursed from the estate receiving the contribution, unless the contribution cannot be retraced by clear and convincing evidence or was a gift. 750 ILCS 5/503(c)(2) (West 1999).

The parties here do not dispute that the checking account at issue was in existence prior to the parties' marriage and thus initially was non-marital property. The funds deposited into the checking account following the parties' marriage were marital property, as remuneration in whatever form to a spouse during a marriage is considered marital property. In re Marriage of Phillips, 229 Ill. App. 3d 809, 818 (1992). Therefore, under a strict application of section 503(c)(1) of the Act, marital funds were contributed to Marvin Jr.'s non-marital checking account, resulting in a loss of identity of the marital funds so that the classification of the marital funds was transmuted to the non-marital estate, subject to reimbursement. Because the parties were married for 16 years, however, it likely would be extremely difficult, if not impossible, to retrace the contributions to the checking account for all those years. If Adele could not trace the contributions, all the funds in the checking account for the past 16 years would be considered non-marital property.

We do not believe that such a strict application of section 503(c)(1) of the Act is proper under these facts. The testimony at trial established that the checking account was used to pay for all household and family expenses, as well as for all farming expenses, during the course of the parties' marriage. The parties never opened a joint checking account, and Adele did not have a checking account of her own prior to the parties' separation. The money that went into the checking account was the profit from Marvin Jr.'s farming operations. Despite Marvin Jr.'s attempt to insinuate that Marvin Sr. had some connection with the checking account, there was no evidence in the record to ...


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