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In re Marriage of Peters

December 13, 2001

IN RE MARRIAGE OF TIMOTHY J. PETERS, PETITIONER-APPELLEE AND EILEEN S. PETERS, RESPONDENT-APPELLANT


Appeal from the Circuit Court of McHenry County. No. 99-DV-294 Honorable Joseph P. Condon, Judge, Presiding.

The opinion of the court was delivered by: Justice Callum

Released for publication January 21, 2002.

IN RE MARRIAGE OF TIMOTHY J. PETERS, PETITIONER-APPELLEE AND EILEEN S. PETERS, RESPONDENT-APPELLANT

Appeal from the Circuit Court of McHenry County. No. 99-DV-294 Honorable Joseph P. Condon, Judge, Presiding.

The opinion of the court was delivered by: Justice Callum

Petitioner, Timothy J. Peters, and respondent, Eileen S. Peters, entered into a marital settlement agreement that reserved one issue for the trial court. The parties could not agree on whether any part of petitioner's potential stock bonus should be considered marital property. The court entered a judgment of dissolution of marriage that adopted the parties' settlement agreement and later ruled that no part of the stock bonus would be considered marital property. Respondent appeals, and we reverse and remand.

The parties married in 1994. On August 21, 1995, petitioner executed an independent sales representative agreement with Cardinal Container Corporation. The agreement included a provision that, if petitioner represented the company for 10 consecutive years and averaged a certain amount in annual collected gross profits, the company would transfer a percentage of its stock to him. If petitioner averaged $125,000 in annual gross collected profit, the company would award him 10% of its stock. The maximum amount petitioner could obtain would be 49%, if he averaged $400,000 per year in annual collected gross profit. Petitioner had been with the company for five years when the parties dissolved their marriage.

According to a stipulated exhibit, petitioner's collected gross profits for the years of the marriage were $19,848 in 1995, $86,685 in 1996, $223,270 in 1997, $294,531 in 1998, and $418,369 in 1999. Petitioner worked on commission, and the company paid him a monthly draw against his commissions. If his draw exceeded his commissions, he would have a deficit account. From 1995 through 1998, petitioner drew more than his commissions. In 1999, however, his commissions exceeded his draw by $27,072. His total deficit for 1995 through 1999 was $112,717. The parties stipulated that, at the time of the hearing, the employer's liabilities exceeded its assets.

The court determined that the stock bonus was not marital property subject to division because the bonus would be future compensation for future efforts, regardless of petitioner's efforts during the marriage. The court stated that petitioner's efforts during the marriage had earned him no part of the bonus and that it was speculative whether petitioner would receive the bonus and whether the stock would have any value. Finally, the court noted that respondent would receive maintenance and that maintenance and support "are the context for the consideration of future compensation, contingent or otherwise."

Respondent contends that the court erred in failing to classify the stock bonus as marital property. Generally, we will not disturb a court's determination that an asset is non-marital unless that determination is against the manifest weight of the evidence. In re Marriage of Hegge, 285 Ill. App. 3d 138, 140 (1996). However, that standard of review is based on the presumption that determining whether an asset is marital involves weighing the witnesses' credibility. In re Marriage of Werries, 247 Ill. App. 3d 639, 641 (1993). Here, the facts are not in dispute, and the witnesses' credibility is not an issue. Instead, the parties ask us to determine the legal effect of undisputed facts. Accordingly, our review is de novo. In re Marriage of Hughes, 322 Ill. App. 3d 815, 819 (2001).

Property is presumed to be marital when it is acquired by either spouse after the marriage and before a judgment of dissolution of marriage. 750 ILCS 5/503(b)(1) (West 2000). A showing that the property was acquired by a method listed in subsection 503(a) of the Illinois Marriage and Dissolution of Marriage Act (the Act) (750 ILCS 5/503(a)(1) (West 2000)) can overcome the presumption. 750 ILCS 5/503(b)(1) (West 2000). We resolve any doubts in favor of a finding that the property is marital. Hegge, 285 Ill. App. 3d at 141.

Whether a contingent stock bonus is marital property is a question of first impression in Illinois. As respondent points out, however, other states have generally held that bonuses are martial property to the extent they were earned during the marriage. See, e.g., Wilson v. Wilson, 294 Ark. 194, 741 S.W.2d 640 (1987) (cash bonus primarily earned during marriage but received after divorce was marital property); Burns v. Burns, 687 So. 2d 933 (Fla. App. 1997) (cash bonus earned during marriage was marital property); Simpson v. Simpson, 650 N.E.2d 333 (Ind. App. 1995) (cash bonus earned during marriage was marital property); Byington v. Byington, 224 Mich. App. 103, 568 N.W.2d 141 (1997) (compensation package including bonus, incentives, and "phantom stock" plan, earned after dissolution action was filed but before divorce was final, was marital property); Hartog v. Hartog, 85 N.Y.2d 36, 647 N.E.2d 749, 623 N.Y.S. 2d 534 (1995) (cash bonus earned during marriage but paid after commencement of dissolution proceedings was marital property); Lineberger v. Lineberger, 303 S.C. 248, 399 S.E.2d 786 (App. 1990) (cash bonus earned during marriage but paid after divorce action was filed was marital property); Joynes v. Payne, 36 Va. App. 401, 551 S.E.2d 10 (2001) (portion of cash bonus was marital property when it was earned during the marriage).

Respondent concedes, however, that in most of the above cases the bonus was received by the time of the divorce. The case most similar to this one is Lewis v. Lewis, 785 P.2d 550 (Alaska 1990). There, the husband signed an agreement with his employer that he would receive 100,000 shares of the company's stock when the company had 18 profitable months. By the time of the dissolution proceedings, the husband had not received the stock. The trial court classified the contingent stock as non-marital property because it represented future earnings. The Alaska Supreme Court reversed, holding that the stock should be treated similarly to a non-vested pension:

"Steve's contingent stock interest is similar to a non-vested pension in that both are contractual rights. It was earned at least in part during the marriage. The applicable legal principle is that property earned during a marriage is marital property regardless of when it is transferred. [Citation.] If any stock is awarded to Steve pursuant to the employee agreement, ...


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