Court of Appeals of Illinois, First District, First Division
In re MARRIAGE OF DEBORAH L. LYMAN, Petitioner-Appellant and Cross-Appellee, and ROBERT E. LYMAN, Respondent-Appellee and Cross-Appellant
[Copyrighted Material Omitted]
Appeal from the Circuit Court of Cook County. No. 07 D 7096. Honorable Mark Lopez, Judge Presiding.
In the dissolution of the parties' marriage, the trial court properly dismissed petitioner's amended and second amended petitions filed pursuant to section 2-1401 of the Code of Civil Procedure, and the appellate court reversed the trial court's grant of leave to petitioner to file her second amended section 2-1401 petition and the motion granting sanctions to respondent was vacated and the cause was remanded for a hearing to determine whether respondent should be awarded attorney fees under section 508(a) of the Marriage and Dissolution Act, since petitioner failed to show her proposed amendment would cure the defective pleading, the second amended petition to modify the judgment of dissolution was merely a " cut and paste" of the words used in her first pleading, the record did not support petitioner's claim that respondent concealed his assets, petitioner elected to forego further discovery by accepting a representation and warranty of full and complete disclosure at her own peril, and even though she had the opportunity to negotiate a clause into the settlement agreement requiring respondent to disclose his interest in his businesses, she failed to do so.
For PETITIONER-APPELLANT, Miller Shakman & Beem LLP, Chicago, IL (Karen L. Levine and Melissa B. Pryor, of counsel), and Miner Barnhill & Galland, P.C., Chicago, IL (George F. Galland, Jr., of counsel).
For RESPONDENT-APPELLEE, Lake Toback, Chicago, IL (Michael G. DiDomenico and Sean M. Hamann, of counsel).
PRESIDING JUSTICE DELORT delivered the judgment of the court, with opinion. Justices Cunningham and Connors concurred in the judgment and opinion.
DELORT, PRESIDING JUSTICE
[¶1] This divorce case illustrates the difficulty a spouse has in extricating herself from a marital settlement agreement whose terms were, in retrospect, not as generous as she would have liked. Petitioner Deborah Lyman and respondent Robert Lyman entered into a marital settlement agreement (MSA), which was incorporated into a divorce judgment. Deborah filed post-judgment petitions claiming fraud and breach of the MSA pursuant to section 2-1401 of the Illinois Code of Civil Procedure (Code) (735 ILCS 5/2-1401 (West 2010)). She argued that she was fraudulently induced to enter into the MSA because Robert informed her that his businesses were ceasing to operate and would lose their value. Robert moved to dismiss Deborah's amended section 2-1401 petition pursuant to sections 2-619(a)(4) and (a)(9) of the Code (735 ILCS 5/2-619(a)(4), (a)(9) (West 2010)). Robert also moved for sanctions against Deborah under Illinois Supreme Court Rule 137 (Ill. S.Ct. R. 137 (eff. Feb. 1, 1994)). The trial court granted Robert's motion to dismiss and motion for sanctions, from which Deborah appeals. For the following reasons, we affirm in part, reverse in part, vacate in part, and remand this matter with directions to the trial court to conduct a hearing to determine whether to award attorney fees to Robert under section 508(a) of the Illinois Marriage and Dissolution
of Marriage Act (Act) (750 ILCS 5/508(a) (West 2010)).
[¶3] Deborah and Robert were married on November 6, 1982 and have two adult children. On July 16, 2007, Deborah filed for dissolution of marriage in Cook County. Throughout the divorce proceedings, Robert maintained a 40% ownership interest in Mudd-Lyman Set and Service, LLC, ML Sourcing, Inc., Mudd-Lyman Sales and Service Corporation, and ML Reset, Inc. (collectively, the Mudd-Lyman entities). His partner, Donald Mudd, owned the remaining 60% interest in the Mudd-Lyman entities. According to Deborah, Robert's interest in the Mudd-Lyman entities represented a substantial portion of the marital estate.
[¶4] The parties litigated the divorce for more than two years, during which Deborah conducted discovery of third parties and hired multiple experts to value portions of the marital estate. Deborah focused her efforts on obtaining financial discovery related to the Mudd-Lyman entities. She moved numerous times to compel Robert to produce documents concerning the Mudd-Lyman entities.
[¶5] On February 27, 2008, the parties entered into an agreed order providing that Robert would pay Deborah 50% of his net annual salary on a monthly basis beginning March 1, 2008. The order required Robert to provide proof of his monthly net salary at the time he made each payment. In addition, if Robert received a bonus or distribution other than his salary, the net after-tax amount was to be placed in escrow for distribution at a later date to be determined by written agreement or further order of the trial court.
[¶6] Also in 2008, Deborah retained an expert to value the Mudd-Lyman entities. The expert had full access to the Mudd-Lyman entities' corporate documents and scrutinized the companies' operations for over 30 days. The assessment completed by Deborah's expert showed that the value of the Mudd-Lyman entities was derived almost exclusively from a contract with Home Depot. The contract with Home Depot accounted for over 90% of the Mudd-Lyman entities' total annual revenue. On May 15, 2008, the expert valued the Mudd-Lyman entities to be worth approximately $38 million. Throughout the divorce proceedings, Robert informed Deborah that the Mudd-Lyman entities'
lucrative contract with Home Depot was only temporary and that its expiration would affect both the value of Mudd-Lyman and his future earning capacity.
[¶7] On November 17, 2008, Deborah moved for leave to subpoena Home Depot to obtain additional information regarding its contract with the Mudd-Lyman entities. She also moved to redepose Robert about the Home Depot contract. On January 7, 2009, the trial court granted Deborah leave to issue a subpoena to Home Depot.
[¶8] On January 12, 2009, Home Depot sent a letter to the Mudd-Lyman entities announcing that it would terminate the Home Depot contract effective July 10, 2009. Robert's counsel enclosed this correspondence in a letter to Deborah's counsel, dated January 13, 2009, which stated, " [o]bviously, the termination of the Home Depot contract materially affects the valuation of the various Mudd-Lyman entities in this case."
[¶9] Deborah nevertheless subpoenaed Home Depot and Donald Mudd, but in light of the expense that would accompany the additional discovery and new business valuations due to the loss of the Home Depot contract, both parties agreed to enter into settlement negotiations. The parties agreed to each submit asset affidavits as accurate statements reflecting their assets for purposes of determining a property settlement and entering into the MSA.
[¶10] On July 17, 2009, the Mudd-Lyman entities ceased operations. Robert and all other Mudd-Lyman employees received their final paychecks on that date. As settlement discussions continued, the trial court entered an order on August 6, 2009 requiring the parties to supplement their document production on all accounts " such that the same are current through July 2009, on or before August 17, 2009." Also at this time, Deborah stopped receiving the temporary support payments from Robert as required by the February 27, 2008 agreed order. When her counsel inquired as to why the payments ceased, Robert's counsel explained by letters dated August 12, 2009 and August 24, 2009 that Robert was no longer receiving a paycheck from the Mudd-Lyman entities. Robert agreed to bring Deborah a check for the final temporary support payment to their September 2, 2009 court date.
[¶11] On September 2, 2009, the parties entered into the MSA, which was incorporated into a judgment of dissolution of marriage, entered on the same date. The provisions from the MSA pertinent to this appeal include the following:
[¶12] Paragraph F in the preamble of the MSA states:
" The Husband has employed and had the benefit of counsel of [Names] as his attorneys. The Wife has employed and had the benefit of the counsel of [Names] as her attorneys. Each of the parties has had the benefit of advice, investigation and recommendations with reference to the subject matter of this Agreement. Although the Wife has not completed depositions of all relevant witnesses, both she and the Husband acknowledge that each has been informed as to the wealth, property, estate and income of the other party as set forth in: (x) the Affidavits By Certification Regarding Assets (the 'Asset Affidavits') provided for in paragraph 8.1 hereof; and (y) a supplemental document production, which the producing party hereby represents to be a complete and accurate update of all of his or her own financial information as well as of financial information regarding accounts held in the name of and/or for the benefit of [their children] William and Natalie (the 'Supplementation'). The Asset Affidavits and the Supplementation are each a
condition precedent to the effectiveness and validity of this Agreement. Each party has been informed of his and her respective rights and obligations in the premises, and each party is sufficiently conversant with the property and income possessed by the other and the value thereof in connection with the Asset Affidavits and the Supplementation so as to enter into this Agreement. Further, each party has specifically waived the exercise of: (i) any rights to take additional discovery to the extent not pursued; (ii) any rights to take further steps in connection with obtaining any updated or further appraisals or valuations of any property held by either of the parties; and (iii) any rights to pursue claims for dissipation or otherwise. Further, the parties have instructed their respective attorneys to take no further measures themselves or through others with respect to the foregoing."
Paragraph G of the MSA's preamble states:
" Each party expressly states that he or she has freely and voluntarily entered into this Agreement of his or her own volition, free from any duress or coercion and with full knowledge of each and every provision contained in this Agreement and the consequences thereof. Each party expressly states that no representation has been made by the other party or the other party's attorney other than that which is contained in: (x) this Agreement, including the Asset Affidavits; and (y) the Supplementation. Each of the parties, after carefully considering the terms and provisions of this Agreement, states that he or she believes the same to be fair and reasonable under the present circumstances."
[¶13] Article I, section 1.1 of the MSA incorporates the preamble into article I by reference and states that the parties " agree that the Preamble is contractual and not a mere recital and is material to this Agreement." Under article II of the MSA, Robert agreed to pay maintenance to Deborah. Section 2.6 of article II required Robert to give Deborah each year from 2010 to 2015: (1) a sworn certification of his gross income from employment for the preceding calendar year; (2) copies of his federal and state tax returns with all schedules and attachments for the preceding calendar year; and (3) copies of all W-2s, K-1s, and 1099s. In addition, upon Deborah's request, Robert would also provide " true and correct copies of tax returns (with all schedules and attachments), annual financial statements and/or other financial or accounting records for the preceding calendar year of the Mudd Lyman entities."
[¶14] Article V of the MSA includes the division of " other property" to Deborah, including $1,500,000 in cash, a Morgan Stanley investment account valued at $500,000, and " [t]he exact sum of Four Hundred Seventy-Five Thousand Dollars ($475,000.00) in cash to be delivered by Husband, from accounts held solely in Husband's name, on or before January 15, 2010, by wire transfer to an account designated by the Wife and/or cashier's check(s), which payment may not be reduced by any set-off, offset or recoupment." Section 5.3 of article V states that, with respect to all of the property awarded to Deborah, " the Wife shall fully and forever indemnify and hold Husband harmless for any liability thereon."
[¶15] Article VII of the MSA, entitled " Other Property to Husband," lists the property to be retained by Robert " free and clear of any and all rights, claims or interest of the Wife *** less the $2,000,000 to be paid to Wife on the Effective Date and the $475,000 to be paid on or
before January 15, 2010." The parties agreed
[¶16] Article VIII of the MSA addresses the asset affidavits and supplementation completed by the parties. Under section 8.1 of article VIII, each of the parties " represents and warrants to the other party that he or she has made a full and fair disclosure to the other party of his or her material property and interests and the value thereof (net of liabilities other than tax liabilities) that are held solely in his or her name or held (in trust or otherwise) for his or her benefit, regardless of whether such property or interests are marital, non-marital, or expectancy." Section 8.1 specifically states that Robert " need not disclose the value of his interests in the Mudd Lyman Entities." This section also required Robert to declare in his asset affidavit " that neither he, nor his designee or assignee, nor any of the Mudd Lyman Entities has entered into an agreement or other arrangement to sell, encumber or transfer any of the Mudd Lyman Entities, a substantial portion of the assets of any of them, or any of Husband's interests in any of the foregoing, and that none of them are soliciting or negotiating the sale, encumbrance or transfer of any of the foregoing." Section 8.1 continues:
" [P]rior to the execution of this Agreement, and as a condition precedent to its effectiveness and validity, the parties have provided to each other the Supplementation, which provides the values for the property and interests set forth in the Asset Affidavits and updates each party's respective document production pursuant to an Order of Court entered August 6, 2009. Further, each party understands and acknowledges that the other party has specifically relied on and has entered into this Agreement based on the other party's Supplementation, Asset Affidavit and statements contained therein and herein. Further, by executing this Agreement, each party represents and avers that there has been no material change in his or her assets between when his or her Asset Affidavit was executed and his or her Supplementation was produced, on the one hand, and the date of execution and the Effective Date, on the other hand."
[¶17] In Article XIV, section 14.2, the MSA states that each party " covenants and agrees for himself or herself *** that in the event any suit shall be commenced in violation of this release, this release, once pleaded, shall be and constitute a complete defense and bar to any such claim or suit so instituted by either party hereto," but " nothing herein contained shall operate or be construed as a waiver or release by either party of any obligation of the other party to comply with the express provisions of this Agreement, or the rights of either party under this Agreement." Section 14.7 sets forth that the MSA was jointly drafted and that each of the parties " acknowledges that he or she has had the benefit of the advice of counsel of his or her own choice in negotiating, drafting and executing this Agreement, and the language in all parts of this Agreement is the product of efforts of both counsel." Therefore, neither the entire MSA nor any provision in it " shall be *** construed against any party." Further, section 14.7 states, " [e]ach party acknowledges that, together with his or her attorneys, he or she made such investigation of the facts pertaining to this settlement and this Agreement, and of all the matters pertaining hereto, as he or she deems reasonably necessary."
[¶18] Robert certified " [u]nder penalties provided by law pursuant to Section 1-109 of the Illinois Code of Civil Procedure (735 ILCS 5/1-109)"
that the statements contained in the asset affidavit " are true and correct, except as to matters therein stated to be on information and belief." His asset affidavit listed " the material assets and liabilities" held in his name, on his behalf, or under his control, " exclusive of any assets held jointly" by Deborah and himself, which included 40% ownership of the Mudd-Lyman entities. Robert acknowledged that he: (1) was not selling the Mudd-Lyman entities; (2) had no claim against Donald Mudd; and (3) had not entered into any agreement with Mudd with respect to " selling, encumbering, transferring, recovering, returning, repaying or reimbursing (or forbearing to do any of the foregoing) any monetary sums, property or other assets of any kind." Robert also certified that as of July 17, 2009 through the September 2, 2009 effective date of the MSA, he had not received any paycheck or any other form of income from the Mudd-Lyman entities. Article VIII, section 8.1 of the MSA did not require Robert to list the amount of money in any account of the Mudd-Lyman entities. Most significantly, neither Deborah nor her counsel requested the current account balances of these companies when she executed the MSA.
[¶19] The trial court also conducted a hearing on September 2, 2009 to prove up the MSA. Deborah testified that she entered into the MSA with Robert. She confirmed that the MSA constituted the entire agreement with him regarding their dissolution of marriage. Deborah agreed that Robert's asset affidavit made a full and fair disclosure of all the property held solely in his name. She understood that Robert was not required to provide the value of the Mudd-Lyman entities, as evidenced by the affirmative response she provided to her counsel when asked, " [a]nd with the exception of real property that each of you own and certain interests that Robert owns in what we have referred to throughout this case as the Mudd Lyman (phonetic) Entities, this supplementation provides the values for these assets that are on the asset affidavits, is that correct?" Deborah testified that before entering into the MSA, her counsel explained to her all of her rights and the range of what she could expect to receive if she continued the divorce litigation. She stated that she voluntarily entered into the MSA and she believed the MSA was fair. Deborah agreed that she had been advised of all of her rights, including to litigate this case to trial without entering into the agreement and that she believed it was in her best interest to enter into the agreement.
[¶20] Deborah also stated that she conducted discovery and hired experts to assist in valuing certain properties. Deborah stated that she was satisfied that she had sufficient information to enter into the MSA. She acknowledged that she would be receiving, among other things, $475,000 in cash from Robert on or about January 15, 2010. Deborah testified that she was aware Robert would receive 100% of his interest in the Mudd-Lyman entities.
[¶21] Robert also testified regarding the MSA. After Robert's counsel questioned him, counsel for Deborah stated, " I have no questions."
[¶22] After the parties testified, the trial court stated that this matter " comes before the Court as a stipulated matter." The court made numerous factual findings as to jurisdiction, residency, the parties' two children, and the grounds for divorce. The court stated that it had the opportunity to review the MSA and found that " the terms are fair, reasonable, and not unconscionable, and that the parties have entered into the agreement freely and voluntarily." The court ordered a judgment of dissolution of marriage, incorporating the MSA into the judgment.
[¶23] As a result of the Home Depot contract termination, Robert received his 2009 year-end distribution in September instead of in December. The accountants for the Mudd-Lyman entities recommended the earlier distribution because Mudd Lyman Set and Service ...