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In Re Marriage of Shinn

May 15, 2000

IN RE: THE MARRIAGE OF NANCY ELIZABETH SHINN, PETITIONER-APPELLANT AND CROSS-APPELLEE, AND JOHN ROBERT SHINN, RESPONDENT-APPELLEE AND CROSS-APPELLANT.


Appeal from Circuit Court of Champaign County No. 97D270 Honorable Harry E. Clem, Judge Presiding.

The opinion of the court was delivered by: Justice Knecht

In April 1999, after a lengthy hearing, the trial court issued a written judgment order in the dissolution of Nancy and Robert Shinn's marriage. The trial court made final determinations with respect to child support, property and debt apportionment, maintenance, and attorney fees, ordering petitioner ex-wife to pay $1,500 monthly maintenance to respondent ex-husband, subject to review after 24 months, and respondent's reasonable attorney fees.

In August 1999, the trial court held a hearing on the issue of reasonable attorney fees. At the conclusion, the trial judge denied respondent his reasonable attorney fees, finding respondent failed to present sufficient evidence to establish the amount of the fees. The trial court denied a motion to reopen the fee issue to allow respondent's counsel to reconstruct her fees.

Petitioner filed a timely notice of appeal with this court, arguing the trial court abused its discretion by ordering her to pay maintenance. Respondent cross-appealed, arguing the trial court abused its discretion in denying his reasonable attorney fees and by not allowing counsel to reconstruct her billing records. For reasons set forth below, we affirm in part and reverse in part and remand with directions.

I. BACKGROUND

John and Nancy Shinn married in May 1982. The parties had two children during their marriage, born in October 1985 and in May 1988.

Petitioner's family owns Mettam Safety Supply, Inc. (Mettam Safety), a safety equipment distributorship. In June 1982, petitioner's parents hired respondent as a salesman for Mettam Safety. Respondent later became a field sales manager for the company. In 1984, petitioner also took a position with Mettam Safety, starting as a telemarketing manager and later ascending into an upper management position. Eventually, petitioner became majority shareholder in Mettam Safety.

In the spring of 1997, petitioner filed for dissolution of marriage. The trial court granted the dissolution in September 1997 and reserved the determination of ancillary issues.

In May 1998, after a contested hearing, the trial court awarded petitioner primary residential custody of the two children during the school year, with respondent getting visitation one night a week and on alternating weekends. The trial court awarded respondent primary residential custody during the children's summer break from school, with the petitioner getting alternate weekends for visitation during that period. The court specified a schedule for holiday visitations.

During July and August 1998, the court held five days of hearings on the financial issues. The court ordered respondent to pay $572 per month in child support (i.e., $285.70 biweekly), with that responsibility abating during the summer months while the children were in respondent's custody. The court ordered petitioner to pay the cost of the children's lessons, activity fees, tuition, books, uniforms, lunches, and other special events related to their attendance at parochial school, even during the summer months when the children were with respondent. In addition, the trial court ordered petitioner to pay for the children's health insurance and other incidental medical costs, since they would be covered under her policy at Mettam Safety.

The parties had three major assets: (1) the marital home, valued between $233,000 and $255,000; (2) petitioner's 401(k) plan through Mettam Safety, valued at about $167,244; and (3) respondent's 401(k) plan through Mettam Safety, valued at about $202,025. The court awarded the marital home to petitioner, as well as the responsibility of paying the balance of the mortgage (estimated to be between $133,000 and $147,000). The court awarded each party his or her respective 401(k) plan.

In addition, the court awarded petitioner ownership of the parties' Tennessee walking horse and mixed breed pony, as well as 205.5 shares of Mettam Safety stock that had been gifted to her by her family. The court divided the remainder of the parties' bank accounts, life insurance policies, and personal property. However, to achieve an equitable distribution of the marital estate, the court ordered petitioner to pay respondent $25,000. Neither party challenges the trial court's order regarding custody and the division of assets.

Petitioner testified her 1997 salary from Mettam Safety was $58,143.82. Petitioner was the majority shareholder in Mettam Safety (which the parties stipulated was worth between $2 and $3 million) and was entitled to her share of distributions taken from the corporation's profits. In 1997, in addition to her annual salary, petitioner was entitled to $343,541 in distributions from Mettam Safety; petitioner's tax return reflected she actually received $180,000 in distributions. Petitioner stated she was required to pay taxes on her entire share of the distribution, whether or not she actually received the money in hand. According to petitioner, the $180,000 she actually received was not primarily spendable income but was used to pay her tax liability for that year, which totaled $118,536. In 1996, the parties jointly paid $130,534 in taxes.

Rex H. Kallembach, a certified public accountant, also testified concerning petitioner's income from Mettam Safety. He told the court Mettam Safety was a "subchapter S corporation" (see 26 U.S.C. ยง1366 (1994)), which is a type of "pass through" entity. All the net profits flowed through the corporation to the individuals entitled to receive distributions, so the distributions were taxed at the individual rate rather than the corporate rate. Kallembach concluded petitioner was entitled to substantially more money than the $180,000 she actually received. Taking petitioner's 1997 distributions from Mettam, Kallembach explained how, even though she only actually received $180,000 in cash, she was entitled to receive the balance of the $343,541 in ...


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