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In Re Marriage of Russell Dann v. Lori Dann

July 20, 2012

IN RE MARRIAGE OF RUSSELL DANN,
PETITIONER AND COUNTERRESPONDENT-APPELLEE,
v.
LORI DANN, RESPONDENT AND COUNTERPETITIONER-APPELLANT.



Appeal from the Circuit Court of Lake County. No. 06-D-2348 Honorable Diane E. Winter, Judge, Presiding.

The opinion of the court was delivered by: Justice Birkett

JUSTICE BIRKETT delivered the judgment of the court, with opinion.

Presiding Justice Jorgensen and Justice Hudson concurred in the judgment and opinion.

OPINION

¶ 1 Respondent, Lori Dann, appeals from the order of the circuit court dissolving her marriage to petitioner, Russell Dann. First, she challenges the trial court's summary judgment ruling that certain assets were part of Russell's non-marital estate. Second, she challenges multiple aspects of the trial court's dissolution decree that followed an evidentiary hearing on the dissolution petitions. The rulings she challenges pertain to property division, reimbursement between the marital and non-marital estates, spousal maintenance, and contribution to attorney fees. We hold that the trial court erred in granting summary judgment, because issues of material fact exist as to the classification of the assets in question. Because the property classification issues on which summary judgment was erroneously granted affect the issue of property division, and by extension might impact the issues of maintenance and contribution to attorney fees, we decline to decide those issues. We do, however, reach certain reimbursement issues raised by Lori and affirm the trial court's disposition of them. For the following reasons, we affirm in part and reverse in part and remand this case for further proceedings.

¶ 2 I. PRELIMINARY COMMENTS

¶ 3 We note at the outset our concerns with the manner in which the record on appeal was assembled. The reports of proceedings contain multiple, misleadingly designated "excerpts" of proceedings that are in fact duplicates of full transcriptions that appear nearby in the reports. There is also a period between July 11, 2008, and January 23, 2009, for which there are no reports of proceedings even though the corresponding common-law record indicates that there were proceedings on the record during that period. The January 23 transcript is of a hearing on the summary judgment motion as it resumed after the noon break. Apparently, Russell had concluded his arguments in the morning, but there is no transcript of the morning session. Since we sit in review of the decision below, it is important for us to know what arguments were before the trial court for decision. Relatedly, though the briefs reference a hearing at which the trial court announced its decision to grant summary judgment, the record contains no transcript of that hearing. Although our review of a summary judgment ruling is de novo (Ries v. City of Chicago, 242 Ill. 2d 205, 216 (2011)), it is our preference to have before us whatever rationale the trial court offered in deciding the motion for summary judgment.

¶ 4 Moreover, two of the multiple boxes comprising the record on appeal contain several loose documents that bear no file stamps, exhibit markings, or other indications that they were made part of the trial record below. Also lying loose in the boxes is an exhibit list dated December 28, 2009, for an unidentified proceeding. Possibly, the other documents were the received exhibits, but we cannot verify as the documents have no exhibit stickers.

¶ 5 Two of these documents warrant specific mention. The first is a transcript of a January 9, 2009, deposition of John Barsella.*fn1 Russell asserts in his brief that "[t]he record prepared does not include John Barsella's January 6, 2009 deposition." We are not sure how to take this remark. Either Russell has overlooked the deposition in the box, or he has noticed it but nonetheless believes that it is not properly part of the record. Russell notes that he has included a copy of the January 6, 2009, deposition in the appendix to his response brief. Our review confirms that the document Russell has attached is identical to the document in the box. Nonetheless, we will not consider the document for the purpose for which Russell asks us to consider it, i.e., to judge the propriety of the summary judgment ruling. Our review extends only to those materials submitted to the trial court for consideration in deciding the initial summary judgment motion or the motion to reconsider. See McCullough v. Gallaher & Speck, 254 Ill. App. 3d 941, 947 (1993). Barsella's January 6, 2009, deposition was not attached to any of the parties' submissions at the summary judgment stage. Russell asserts that Barsella's January 6, 2009, deposition was received as an exhibit at the January 23, 2009, hearing on the summary judgment motion. At that hearing (for which, as noted, we have only a partial transcript), the parties did reference both a deposition of Russell and a deposition of Barsella, and Russell's counsel did remark that he would give the court "copies of the depositions." We cannot verify, however, that the document in the box is the same document, or a copy thereof, that the parties referenced at the January 23 hearing and that the court received. (Notably, there is another deposition of Barsella, dated November 11, 2008, attached to a response by Lori to one of Russell's summary judgment motions.) Illinois Supreme Court Rule 329 (eff. Jan. 1, 2006) allows the parties to supplement the record by stipulation, but the parties have tendered no stipulation concerning Barsella's January 6, 2009, deposition. We decline to consider the deposition for purposes of reviewing the summary judgment ruling.*fn2 As we explain below, however, the deposition would not have changed our opinion that summary judgment was granted in error.

¶ 6 Another of these loose documents in the boxes is captioned as "Lori's Response to Russell Dann's Amendment to Amended Motion for Summary Judgment and Lori's Motion to Continue December 15, 2008, Hearing." This document, which bears no exhibit sticker or file stamp, appears to be identical in all respects to a document with the same caption appearing in a bound volume of the common-law record, except for one difference: while both versions reference an attached group exhibit "N," consisting of "gift letters" from Armand Dann, Russell's father, to Russell and Lori, the version in the boxes attaches nine letters while the version in the bound volume attaches only one letter. We will not consider those additional eight letters, because we cannot verify that the version that the trial court considered in rendering its decision was in fact the unbound version in the boxes. See McCullough, 254 Ill. App. 3d at 947.*fn3

¶ 7 The boxes contain multiple other documents that bear no exhibit stickers or file stamps. For instance, there are several printouts from online research services. Another document appears to consist of an attorney's notes in preparation for arguing the summary judgment issues. When documents of uncertain origin appear in the appellate record, we are rightfully concerned.

¶ 8 The briefing, too, has shortcomings that we must mention. The statement of facts in the appellant's brief "shall contain the facts necessary to an understanding of the case" (Ill. S. Ct. R. 341(h)(6) (eff. July 1, 2008)). Lori, however, devotes most of her statement of facts to an exhaustive, nearly line-by-line recitation of the filings in the summary judgment proceedings. Lori's aim in supplying such a detailed history is, evidently, to demonstrate that Russell was evasive in presenting his theory for summary judgment, but she also should have included a condensed statement of facts to assist us in resolving the substantive issues on appeal that are independent of Russell's alleged procedural mischief. Many of the facts necessary for our decision do not appear until the argument section.

¶ 9 As for Russell, we are surprised by his apparent attempt to incorporate his summary judgment filings into his appellate brief. Russell states that, rather than "laboriously detail all the transactions" that occurred after Russell liquidated the assets whose classification is at issue in this appeal, he "respectfully stands on the allegations and supporting documents in his Amended Motion for Summary Judgment as well as deposition testimony regarding the transactions occurring after receipt of the proceeds." If this material is germane, Russell ought to have included it in his appellate brief, even if in summary form (and if that were not feasible, he could have moved us to relax the length restrictions on his brief). A party on appeal may not adopt by mere reference the arguments of his trial pleading.*fn4 See Wilson v. Department of Professional Regulation, 344 Ill. App. 3d 897, 907 n.4 (2003); Stenger v. Germanos, 265 Ill. App. 3d 942, 952-53 (1994); Gruse v. Belline, 138 Ill. App. 3d 689, 698 (1985).

¶ 10 We now proceed to the substance of the appeal.

¶ 11 The parties were married on December 22, 1995. Two children issued from the marriage: Frank, born August 25, 1997, and Joseph, born January 26, 1999. On November 16, 2006, Russell filed his petition for dissolution of marriage. On January 25, 2007, Lori filed her counterpetition for dissolution.

¶ 12 II. SUMMARY JUDGMENT

¶ 13 A. Background

¶ 14 On February 28, 2008, Russell filed a motion for summary judgment, triggering a flood of filings that did not subside until March 23, 2009, when Lori moved for reconsideration of the trial court's March 13, 2009, summary judgment ruling. Russell amended the motion on June 23, 2008, and again on August 13, 2008. In a somewhat unusual procedure, the trial court commenced trial on July 10, 2008, while Russell's summary judgment motions were still pending. Three witnesses had testified before the trial court entered summary judgment on March 13, 2009. Moreover, the trial concluded before the trial court denied, on May 5, 2009, Lori's motion to reconsider.

¶ 15 Even before we describe the issues that Russell raised below in his summary judgment motions, we address a contention by Lori regarding the manner in which Russell presented his summary judgment claims below. As Lori notes, Russell's portrayal of the intricate factual background of this case substantially evolved during the course of the three motions he filed. Lori complains about the "metamorphoses" of Russell's "allegations and documents" and "the continual changing of the purported facts in [Russell's] summary judgment] pleadings." She asserts that "[c]omplicated factual scenarios which keep changing and are proffered by a party who in the end was shown to have, at best, a faulty memory, as well as an admitted willingness to lie when it was to his financial benefit, are not properly amenable to summary judgment." To extent that Lori is insinuating that Russell's withdrawal or addition of legal or factual assertions in his successive summary judgment motions is in itself a ground for relief, we cannot agree. First, as Russell points out, and as Lori does not contest, Lori has not preserved for appeal any claim that Russell should not have been allowed to file his successive motions. Second, the issue on review of a summary judgment ruling is whether there is an issue of material fact (see 735 ILCS 5/2-1005(c) (West 2010)), which depends on the nature of the claims brought and their underlying facts. Russell's litigation tactics were, simply, not the subject of the summary judgment motions.

¶ 16 Lori cites Myers v. Levy, 348 Ill. App. 3d 906 (2004), for the proposition (as she frames it) that "even prior consistent statements made outside of court proceedings will create a material issue of fact and defeat a motion for summary judgment." The statements in Myers, consisting of the defendant's praise of the plaintiff's job performance, were found by the appellate court to be relevant to whether the defendant acted knowingly and recklessly when, a short time after his praise of the plaintiff, he lobbied the plaintiff's superiors to have him fired. Id. at 917. Again, the issue for purposes of summary judgment is not the rectitude of Russell's litigation choices. As we explain below, we do find an issue of material fact, but not because Russell presented somewhat of a moving target in arguing for summary judgment.

¶ 17 Returning to the procedural history, we note that Russell's latest summary judgment motion, filed August 13, 2008, incorporated some of the assertions in his amended motion filed June 23, 2008, but none of the assertions in his original motion filed February 28, 2008. (Hereinafter, we refer to Russell's latest two motions collectively as his "amended motion.") The following is a brief statement of the relief that Russell sought in the amended motion. First, Russell asked that the trial court declare as non-marital property the interests in Dann Brothers, Inc. (DBI), and the Dann Rotstein Insurance Partnership (DRIP) held by a trust of which Russell was beneficiary (Russell's trust). Russell was employed by DBI from 1979 to 2005. Russell also claimed as non-marital his individual interest in Benefit Planning Associates LLC (BPA LLC). In January 2005, Russell's trust sold its interests in DBI and DRIP, and Russell sold his individual interest in BPA LLC. With some of the proceeds, Russell purchased life insurance policies from DRIP. The remainder of the proceeds he deposited into two accounts. The first was a trust account titled the "Russell R. Dann Irrevocable Stock Trust Account," which had a balance of zero when the proceeds were deposited. The second was a joint account held by the parties. Using the new funds in the trust account, Russell made several investments and opened several investment accounts held in the name of his trust. In his amended motion, Russell specified several assets that he claimed were non-marital because they were purchased with the proceeds of the sale of the (allegedly) non-marital interests in DBI, DRIP, and BPA LLC.

¶ 18 Russell's amended motion contained mostly a recitation of facts and did not appear to develop a legal theory as to why the interests in DBI, DRIP, and BPA LLC were non-marital. We can reconstruct his position, however, from the (incomplete) transcript we have of the oral arguments on the motions and from Lori's written responses, which set forth her understanding of Russell's positions. Russell, it seems, argued that, of the 2,050 shares of DBI owned by his trust, 1,500 were acquired before the parties' marriage and 550 were acquired during the marriage but with the use of non-marital funds, namely, distributions from DBI and a $300,000 gift from Armand to Russell. Russell also appeared to argue that his interest in DRIP was non-marital because it, too, was purchased with distributions from DBI. Finally, Russell argued that, though BPA LLC was formed during the marriage, his interest in the firm was non-marital because the firm was the successor in interest to a company in which Russell had acquired an interest before the parties' marriage.

¶ 19 In her response to the amended motion, Lori argued that there were issues of material fact as to whether Russell's trust's interests in DBI and DRIP, and his individual interest in BPA LLC, were entirely non-marital. As to DBI, Lori argued that Russell failed to establish that the transfers from DBI with which Russell's trust purchased the 550 shares were non-marital property. Lori also argued that the $300,000 transfer from Armand was actually a joint gift to both Russell and her. The final source of funds Lori identified as having been contributed to the purchase of the 550 shares was a $13,736.92 withdrawal that Russell made from the parties' joint account. Lori concluded that there were triable issues of fact as to whether the funds used to purchase the 550 shares were non-marital and, hence, whether the shares themselves were non-marital.

¶ 20 Lori likewise argued that Russell failed to establish that the transfers from DBI with which Russell's trust purchased its interest in DRIP were non-marital. She concluded that triable issues of fact remained as to whether the interest in DRIP was non-marital.

¶ 21 Lori further argued that summary judgment was inappropriate on whether Russell's interest in BPA LLC, a firm that was established during the marriage, was non-marital.

¶ 22 Lastly, Lori contended that, if the trust's interests in DBI and DRIP, and Russell's individual interest in BPA LCC, were marital, then the proceeds from the sale of those interests, as well as any assets or investments purchased with those funds, would be marital. Lori further argued that Russell understated the amounts he received for his interests in the three entities.

¶ 23 We set forth the relevant factual background for the summary judgment issues. We base this recitation on the following sources: (1) Russell's amended motion; (2) Lori's response; (3) the manifold documentary evidence attached to the filings; (4) two depositions of Russell from June 30 and December 3, 2008; (5) two undated affidavits of Russell; (6) the deposition of Barsella from November 11, 2008; (7) two undated affidavits of Barsella; and (8) an undated affidavit of Armand. For clarity, we subdivide the statement of facts.

¶ 24 1. The Trust's Interest in DBI

¶ 25 DBI was established on June 1, 1960, by Armand and his brothers, Charles and Donald Dann. Russell averred that DBI is now "defunct." DBI was an insurance and risk management company. The record demonstrates that DBI was privately held, but there is no information as to its internal governance or its status for tax purposes (i.e., whether it was a subchapter C corporation or a subchapter S corporation). (Russell's arguments on appeal make some assumptions about the discretion of DBI shareholders to take distributions from the company, but the record is silent on the issue.) Russell was employed by DBI from 1979 until his retirement in 2005. When DBI was established, 9,000 shares were issued, with Armand and his two brothers each receiving 3,000 shares. On July 9, 1990, approximately five years prior to the parties' marriage, Russell's parents, Armand and Elaine, established trusts for the benefit of Russell and his brother, Scott. Each trust was funded with 1,500 shares of DBI. Russell's trust was named the "Russell K. Dann Stock Trust." Scott was appointed trustee of Russell's trust, and Russell trustee of Scott's trust. Russell testified at his June 30, 2008, deposition that his trust had no bank account until January 2005.

¶ 26 In October 1995, Donald retired from DBI and decided to sell his shares. On October 6, 1995, Russell's trust and Donald entered into a "Stock Redemption and Purchase Agreement" (stock purchase agreement) by which Russell's trust agreed to purchase 550 shares of Donald's DBI stock for $386,576.75 plus interest. The agreement did not specify a price per share. The agreement called for the issuance of a promissory note consistent with the trust's payment obligation. The note was to be secured by a pledge of the purchased shares as well as a portion of the trust's current shares in DBI. Scott signed the stock purchase agreement as trustee of Russell's trust. Closing on the sale was set for January 1, 1996.

¶ 27 On January 1, 1996, at least three additional documents were signed. First, Donald signed an "Assignment Separate From Certificate" transferring 550 shares of DBI, with a "$1.00 par value per share," to Russell's trust. Second, Scott, as trustee of Russell's trust, signed a promissory note for $386,576.75 plus interest of 8.75% annually computed from January 1, 1996. Consistent with an amortization schedule formulated under the guidance of Barsella, an accountant who was giving tax advice to DBI, DRIP, and BPA LLC, the trust was to pay the principal and interest in 10 annual installments of $59,575.20 commencing January 1, 1997, and ending January 1, 2006.*fn5 Third, Donald and Scott (again as trustee) signed a "Pledge Agreement" by which Scott pledged as security 1,000 shares of DBI held by Russell's trust.

¶ 28 The actual payment on the note injected considerable complexity into the situation. The payments came from three principal sources. First, the annual payments for 1997, 1998, and 1999 came from DBI. As will be seen, the nature of these payments was crucial to the asset classification issues presented for summary judgment. The only evidence, however, as to the character and mechanics of the three payments came from the recollections of Russell and Barsella. In one of his affidavits, Barsella remarked as follows about the payments from DBI:

"In accordance with the terms of the [promissory note and amortization schedule], [DBI], for the benefit of Russell's Trust, paid Donald $59,575.21 on January 1st in the years 1997, 1998, and 1999."

Russell provided an identical description in one of his affidavits:

"In accordance with the terms of the [promissory note and amortization schedule], [DBI], for the benefit of my Trust, paid Donald Dann $59,575.21 on January 1st in the years 1997, 1998, and 1999."

¶ 29 At his December 3, 2008, deposition, Russell testified in relevant part:

"Q. *** I see that much of it is set forth in your affidavit. But in your own words, if you could tell me from A to Z how your trust came to acquire those 550 shares [from Donald]?

A. I think originally, the way the trust was originally set up, it was for my interest in [DBI] and that when Donald retired, the trust-you know, we redeemed his shares that went into the trust.

Q. Well, can you tell me about the mechanics of that?

A. It can be-

Q. How is it-how is it paid for, how was the purchase funded, [et cetera].

A. How was it paid for? It was paid for from distributions from [DBI] to-to the trust to acquire the shares.

Q. [Were] there any promissory notes executed in connection with the acquisition of the 550 shares? ***

A. I believe that we were paying this.

Q. When you say 'we,' who are you referring to?

A. Or I should say the company was.

Q. The 'company' being [DBI]?

A. Yes, was paying, you know, this plus interest. I'm-I'm guessing.

Q. Well-

A. I'm not guessing but-

Q. What was the name of your uncle?

A. Donald.

Q. Donald was the seller of 550 shares?

A. Right. And we were paying-I forget what interest rate. [DBI] was paying eight and three-quarters percent.

Q. So there was a promissory note executed to Donald?

A. Yes. Yes.

Q. And who signed that-that promissory note? ***

A. It looks like my brother signed it, Scott Dann, as trustee.

Q. In his capacity as trustee of the trust?

A. Right. Yes.

Q. And there was a schedule set, and there were annual payments made for some time-

A. Yes."

Russell then was asked again who made the payments to Donald, and in response he quoted the portion of his affidavit reproduced above. Though Russell knew "for a fact" that DBI made the three payments, he was unaware of any documentation reflecting the payments. Asked if the payments were made by check or wire transfer, Russell answered that he did not recall "how the physical check was made out." We note that no documentary evidence of the payments by DBI was adduced at the summary judgment stage (or, for that matter, at trial). On appeal, the parties agree that DBI made the payments, but dispute whether they and the 550 shares of DBI stock they purchased should be classified as marital or non-marital.

¶ 30 According to Russell and Barsella, Russell's trust owed Donald $313,736.92 as of June 1999.*fn6 Armand was involved in the next portion that was paid on the loan. Russell and Armand stated in their affidavits that attorneys for DBI gave specific instructions for how to pay the balance owed Donald. The record contains a letter to Scott from the law firm of Horwood Marcus & Berk. (Russell and Armand did not confirm that these were the attorneys for DBI whom they mentioned.) The letter suggests the following "action steps to pay off Donald": (1) "Armand should issue a check in the amount of $313,736.92 to Russell"; and (2) "Russell should endorse his check to the Russell R. Dann Stock Trust and then Scott, as trustee of the Russell R. Dann Stock Trust, should endorse the check to Donald." Armand averred that, pursuant to the instructions from DBI's attorneys, he issued a check to Russell for $300,000. (It is not apparent why Armand issued a check for only $300,000.) The record contains a copy of a check, dated June 4, 1999, from Armand and Elaine to Russell for $300,000. Though there is no documentation of these further steps, Russell, Armand, and Barsella all stated that Russell endorsed the check to his trust, and then Scott, as trustee, endorsed the check to Donald. The record also contains a "Term Note" dated June 4, 1999, and signed by Russell himself. (Barsella stated in his deposition that "it should have been the trust" that signed the note.) By the note, Russell promised to pay Donald $300,000 plus interest at 5.66% annually.

¶ 31 At his December 3, 2008, deposition, Russell testified that, when Armand issued the check, he told Russell that it was a gift, not a loan. Russell stated in his affidavit that Armand "always intended to gift $300,000 to me" and that the transfer was "deemed [a] 'loan[]' for gift and estate tax purposes." Similarly, Armand averred that he "always intended to gift $300,000 to *** Russell" and that the transfer was "couched as [a] 'loan[]' pursuant to my accountants' advice for gift and estate tax purposes." Barsella also averred that the transfer was characterized as a loan simply for tax purposes. Barsella elaborated at his deposition, testifying that, "because of *** gift and estate tax rules, Armand lent the money to Russell *** and then forgave it over time according to annual exclusion limits and unified credit limits over the years." Barsella testified that Armand filed gift tax returns in association with incremental forgiveness of the "loan." Russell, Barsella, and Armand all claimed that neither Russell nor his trust ever paid Armand any money toward the $300,000 "loan."

¶ 32 As we noted, attached to Lori's response as it appears in the bound volumes of the record is a single letter from Armand and Elaine to Russell memorializing a gift. As noted, we will not consider the additional gift letters attached to the copy of Lori's response that we found loose in one of the boxes comprising the record. The single letter we do consider is dated January 4, 2000, and its salutation is "Russell." The body of the letter reads:

"Please accept this letter as Mom's and my annual gift to you and your wife, Lori, in the amount of $40,000. $11,266 will be paid in cash; the balance of $28,734 will be used to reduce your outstanding loan."

The letter is signed by Armand and Elaine. As can be seen, the letter gives no suggestion as to the nature of the "loan" to which it refers.

¶ 33 Also attached to Lori's response are gift tax returns filed by Armand for the years 1999 through 2005. The returns acknowledge gifts to several individuals including Russell and Lori. The gifts are listed by date and amount, but the returns do not indicate which, if any, of the gifts are related to the $300,000 transfer from Armand to Russell. Armand's testimony at trial was the only evidence linking the gift letters and gift tax returns to the $300,000.

¶ 34 It is undisputed that, with the purchase of the 550 additional shares, Russell's trust held a 25% interest in DBI. The remaining four shareholders in DBI were Marvin Rotstein and three trusts for the benefit of, respectively, Scott, Debra Dann, and Julie Dann.

¶ 35 2. The Trust's Interest in DRIP

¶ 36 On February 13, 1998-during the parties' marriage-DRIP was formed. The partnership agreement for DRIP specifies nine partners. The first four partners are designated "principals": Russell, Scott, Julie, and Marvin. The second five are designated "shareholders" (who are also identified as shareholders of DBI): the four trusts for the benefit of Russell, Scott, Julie, and Debra, respectively, and Rotstein. DRIP's purpose, as stated in the agreement, is "the ownership and administration of life insurance policies and proceeds and disability policies and proceeds in order to facilitate transition of the ownership of [DBI stock] upon the death or [p]ermanent disability of a [p]rincipal." The agreement calls for initial capital contributions by all partners in the amounts indicated in the attached "Exhibit A." Exhibit A grants Russell and his fellow "principals" each a 1.09% interest for a capital contribution of $2,500. The "shareholders" are granted more substantial interests in exchange for more substantial capital contributions. For instance, Russell's trust is given a 23.91% interest in exchange for a capital contribution of $54,753.99. The agreement empowers the partnership to purchase, maintain, and hold a life or disability policy insuring any principal.

The agreement also imposes a continuing obligation on partners to make capital contributions "as required to make timely premium payments on any life insurance policies and disability insurance policies owned by the [p]artnership or any of the [p]rincipals." Finally, the agreement grants a partner who withdraws from the partnership the right to purchase "any or all of the cash value policies insuring the life of the *** partner."

¶ 37 Russell testified at his December 3, 2008, deposition that, though the partnership agreement for DRIP contemplated that he would receive a 1.09% personal interest in DRIP, he had no recollection of ever receiving, or paying to receive, a personal interest in DRIP. Russell made the same assertion in his affidavit.

¶ 38 Barsella asserted in his affidavit that neither Russell, Scott, Julie, nor Debra owned any individual interest in DRIP. (Rotstein did, however, own an individual interest.) Rather, as Barsella averred, "[a]ll of Russell's, Scott's, Julie's, and Debra's [t]rust interest and [Rotstein's] individual interest in DRIP were funded through the transfer of life insurance policies owned by [DBI] and cash contributions made by [DBI]." Barsella indicated that these insurance policies, which insured the lives of Russell, Scott, Julie, and Debra, had as beneficiaries either the trusts or DBI. Barsella referred to a document (which is in the record) that lists all insurance policies held by DRIP.

¶ 39 Barsella explained the initial capitalization of DRIP:

"Along with the transfer of the life insurance policies relative to the initial capitalization of Russell's [t]rust's interest in DRIP (which had a total cash surrender value of $59,129 as of August 1, 1998), [DBI] made a distribution to Russell's [t]rust in the amount of $12,456, which was then transferred to DRIP*fn7 to pay the premiums for these life insurance policies, for a total capitalization of $71,585 in 1998."

Elsewhere in his affidavit, Barsella described the $12,456 distribution as "a cash contribution by [DBI] to pay the life insurance premiums." Barsella said that the initial capitalization of $71,585 was reflected on Russell's trust's 1998 Schedule K-1 from DRIP. The 1998 Schedule K-1 is in the record and shows that the trust contributed $71,585 in capital that year and had a "capital account" of $64,562 at the end of the year. The K-1 indicates that the trust held an initial 25% in capital ownership, which increased to 26.82% by the end of the year.

¶ 40 In his affidavit, Barsella also referenced transfers that DBI made subsequent to the initial capitalization. He noted that there were "subsequent contributions to DRIP on behalf of Russell's [t]rust" and that these were all "made through distributions to Russell's [trust] from [DBI]." In his own affidavit, Russell gave a virtually identical account of the capitalization of DRIP.

¶ 41 Barsella did not reference them, but the record contains documents showing the capital balances of the DRIP partners for the years 1998, 1999, 2000, 2001, and 2004. Russell is not represented on these balances as holding an individual interest in DRIP; the only partners listed are Rotstein and the trusts for the benefit of Russell, Julie, Scott, and Debra. In his appellate brief, Russell represents that these balances "show[] *** cash contributions from DBI to pay for the life insurance policies." The balance sheets themselves refer to "cash contribution[s]" from DBI on behalf of the partners of DRIP. The contributions made by DBI on behalf of Russell's trust consisted of $12,456 in 1998; $23,035 in 1999; $23,364 in 2000; $30,114 in 2001; and $34,644 in 2004. The total capital attributed to Russell's trust (including the $59,129 cash value of insurance policies transferred to DRIP when it was established) increased from $71,585 in 1998 to $181,397 in 2005. (The total capital did not increase dollar-for-dollar with the cash contributed by DBI, because a certain amount was deducted each year as "DRIP Income Allocation." Thus, while the total capital that DBI contributed in 1998 on behalf of Russell's trust was $71,585, the year-end balance showed a lesser total of $64,452.) A partner's individual capital percentage fluctuated from year to year; Russell's trust's year-end percentage was 26.82 in 1998 and 25.62 in 2004.

ΒΆ 42 At his November 11, 2008, deposition, Barsella reiterated that none of the partners made their own capital contributions to DRIP. In the case of Russell's trust, "all of the capital contributions *** came from funds that the trust received as distributions from [DBI]." At his June 30, 2008, deposition, Russell ...


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