Searching over 5,500,000 cases.

Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.

In re Marriage of Liszka

Court of Appeals of Illinois, Third District

September 27, 2016

In re MARRIAGE OF KATHLEEN LISZKA, Petitioner-Appellee, and MICHAEL LISZKA, Respondent-Appellant.

         Appeal from the Circuit Court of the 12th Judicial Circuit, Will County, Illinois. Circuit No. 12-D-225 The Honorable Victoria M. Kennison, Judge, Presiding.

          JUSTICE LYTTON delivered the judgment of the court, with opinion. Justice Wright concurred in the judgment and opinion.



         ¶ 1 Petitioner Kathleen Liszka filed a dissolution of marriage action against respondent Michael Liszka. Prior to trial, the court barred Michael's expert from testifying as to the value of a corporation owned by the parties, ISP Painting Inc. (ISP), as a discovery sanction. In its judgment for dissolution, the court divided the marital estate equally between the parties, awarding ISP and the marital home to Kathleen and requiring her to pay Michael $673, 785. The court denied Michael's request for maintenance, imputed monthly income of $17, 500 to him for child support purposes, and imposed a trust for child support payments. After ruling on the parties' motions for reconsideration, the trial court reduced the amount Kathleen was to pay Michael to $84, 007.50.

         ¶ 2 Michael appeals, arguing that the trial court erred in (1) barring his expert from testifying as to the value of ISP, (2) denying his motion to continue the trial, (3) imputing income to him, (4) valuing ISP, (5) not dividing ISP's 2013 retained earnings, (6) assigning no value to another business owned by the parties, (7) failing to treat Kathleen's attorney fees as advances from the marital estate, (8) valuing the marital home, (9) refusing to reopen the proofs to allow the introduction of ISP's 2013 tax returns, (10) denying him rehabilitative maintenance, and (11) establishing a trust for his child support payments. We reverse those parts of the trial court's order that bar Michael's expert from testifying and that impute monthly income of $17, 500 to him and remand for further proceedings. We affirm the trial court's decision in all other respects.

         ¶ 3 FACTS

         ¶ 4 Michael and Kathleen Liszka were married in 1993 and had three children together during their marriage. In 2002, Michael and Kathleen started a corporation together, ISP Painting, Inc. Kathleen owned 51% of ISP, and Michael owned 49%. They both served in various roles at ISP throughout their marriage. In 2011, Michael was the chief financial officer (CFO), and Kathleen was president of ISP.

         ¶ 5 In 2011, Michael and Kathleen entered into a collaborative divorce process. As part of that process, they hired Christiana Zouzias, a certified public accountant, to value ISP. In 2012, the collaborative process broke down, and Kathleen filed a petition for dissolution of marriage. She sought sole custody of the parties' children, who were 14, 12, and 10 years old at the time. In June 2012, Kathleen placed Michael on administrative leave from ISP but continued to pay him an annual salary of approximately $210, 000. Both parties filed motions alleging dissipation of assets by the other party.

         ¶ 6 In April 2013, the trial court set the trial for custody and property matters to take place on October 21, 2013. In April 2013, Kathleen sent Michael financial documents related to ISP. On May 20, 2013, Michael filed a motion to compel production of unredacted documents, arguing that the documents Kathleen sent him contained redacted data that interfered with his ability to determine the value of ISP. The trial court entered an order requiring Kathleen to provide the documents in unredacted form subject to a protective order.

         ¶ 7 On August 12, 2013, Kathleen disclosed her trial witnesses, including Zouzias as her valuation expert. On August 14, 2013, Kathleen sent Michael some unredacted financial records. Soon thereafter, Michael disclosed Mary Lynn Hoffer as his ISP valuation expert but did not provide any of her conclusions or opinions and indicated that her report would "be available prior to trial." On that same date, Michael filed another motion to compel the production of unredacted documents, asserting that Kathleen failed to send him certain balance sheets, financial statements, and general ledgers for ISP. On August 29, 2013, Kathleen sent Michael unredacted copies of the financial statements and ledgers he requested. On September 26, 2013, Kathleen sent Michael the 2012-13 balance sheets for ISP.

         ¶ 8 On October 17, 2013, Michael provided Hoffer's report to Kathleen. Kathleen filed a motion to bar Hoffer's report and testimony because Michael did not provide her report or disclose her opinions by the discovery deadline. The trial court granted Kathleen's motion.

         ¶ 9 On October 21, 2013, Michael filed a "motion to continue property/financial portion of trial due to discovery abuses by petitioner." At the hearing on the motion, Kathleen's attorney, Paul Starkman, testified that he provided redacted financial records to Michael in October 2012 and April 2013, including profit and loss statements and general ledgers. He testified that he redacted only the names of ISP's customers, which he considered confidential. On August 28, Starkman provided Michael with unredacted financial information, including general ledgers for 2011 and 2012, profit and loss statements, and some balance sheets. On September 26, 2013, Starkman provided Michael with the unredacted balance sheets for 2012 and 2013.

         ¶ 10 Phil McLawhorn, the accounting manager of ISP, testified that in August 2013, he provided financial documents to Michael, including a balance sheet and a profit and loss statement. On August 28, 2013, he provided Michael with general ledgers for 2011 and 2013. On September 26, 2013, McLawhorn provided Michael with the balance sheet for 2012, as well as the updated balance sheet for 2013. The trial court denied Michael's motion to continue.

         ¶ 11 Right before trial, the parties settled their custody dispute, leaving only property issues to be decided by the court. At trial, Michael testified that he is a healthy 44-year-old. He has a college degree with a major in financing. Before starting ISP, Michael started a local painting company, Illinois State Painters, in 1987. At ISP, Michael served as human resources manager, marketing director, finance director, president, chief executive officer (CEO), and CFO.

         ¶ 12 In addition to ISP, Michael and Kathleen owned several other businesses, including Coreman Technologies. Coreman Technologies operates an extranet system that is used by ISP and two other customers. The extranet system was developed and paid for by ISP. ISP created Coreman to market the extranet to other companies. Coreman has no employees. Coreman does not file taxes. Coreman's earnings are included in ISP's earnings for tax purposes. Coreman's earnings were $1320 in 2010, $21, 718 in 2011, $4695 in 2012, and $3205 in 2013. Michael estimated that Coreman's value was $500, 000 based on its "possible future." Kathleen testified that she did not know the value of Coreman. She testified that Coreman's only assets are its name and its ability to use and sell extranet software. Coreman does not have any copyrights, patents, or trademarks for its software. Louis Miller, ISP's Director of Financing, testified that Coreman does not have a bank account separate from ISP's. According to Miller, Coreman is not separate from ISP.

         ¶ 13 At trial, Zouzias testified that the value of ISP was $1, 116, 000 as of December 31, 2011. At Michael's request, Zouzias looked at ISP's 2012-13 financial information but did not perform a complete analysis for those years. The 2012-13 information confirmed Zouzias's belief that her 2011 valuation was correct. She did not have an opinion regarding the value of ISP as of 2012 or 2013 because she did not perform a complete business valuation for those years. Michael testified that ISP's value was $4, 037, 817 in 2012 and $5, 047, 902 in 2013 based on financial information from the first half of the year. He testified that he was offered $2, 000, 000 for ISP in 2005 or 2006 and that it has substantially grown in value since then.

         ¶ 14 Both parties provided evidence regarding the value of the marital home. Kathleen presented a copy of an appraisal, performed on August 5, 2011, stating that the home had a value of $565, 000. Kathleen testified that she believed the fair market value of the home was $420, 000. Michael presented an appraisal of the home performed on March 12, 2012, indicating that the value of the home was $615, 000. Michael testified that he believed the value of the home at the time of trial was $691, 000.

         ¶ 15 Michael alleged that Kathleen dissipated marital assets, in part, by paying excessive attorney fees. Peggy Tracy, a forensic accountant hired by Michael, testified that Kathleen spent $228, 400 more in attorney fees than Michael. Kathleen disputed Tracy's testimony and testified that she spent only $78, 982 more than Michael in attorney fees.

         ¶ 16 The trial ended on January 24, 2014, at which time the court gave an oral ruling that grounds existed for dissolution of the parties' marriage. The court reserved the issue of child support for six months.

         ¶ 17 In March 2014, Michael filed a "motion to reopen proofs as to ISP, Inc. valuation and allocation of retained earnings." Attached thereto was ISP's 2013 tax return. The trial court denied the motion.

         ¶ 18 On April 16, 2014, the trial court entered its written judgment for dissolution of marriage. The court found that the value of the marital home was $577, 000 based on Kathleen's 2011 appraisal and improvements in the market. Kathleen was awarded the marital home and ordered to pay Michael for his share. The court accepted Zouzias's business valuation of ISP, finding that the date of her valuation "is still reasonably close enough toward the time of trial that it is an acceptable amount." The court awarded ISP to Kathleen and ordered her to pay Michael $558, 000 for his interest. The court rejected Michael's valuation of ISP, finding it "was fraught with errors." The court awarded Coreman Technologies to Kathleen and ordered her to pay Michael $250, 000 for his interest in it.

         ¶ 19 The court denied both parties' claims of dissipation. The court found that Kathleen's attorney fees were more than Michael's "but, because of the situation that we have here and how this started as a collaborative effort and with no requirement that there be an equalization as to attorneys' fees, the Court is not going to equalize the attorneys' fees."

         ¶ 20 The court denied Michael's request for maintenance after reviewing the applicable statutory factors. The court explained: "Both parties are walking away now with significant assets, some in property and some in cash. Both parties have significant earning capacity and they are both working people."

         ¶ 21 The court divided the marital estate equally between the parties, awarding Michael two Hawaii timeshares, personal property, bank accounts, retirement accounts, and two vehicles. In order to accomplish the 50/50 split, Kathleen was required to pay Michael $673, 785.

         ¶ 22 On the same day the court entered its judgment, Kathleen terminated Michael from ISP. Michael then filed a petition for equitable maintenance, and Kathleen responded with a motion for a directed finding that Michael was not entitled to maintenance. At a hearing on his petition, Michael testified that he had expenses totaling $17, 500 per month, including over $10, 000 in living expenses and $7000 in attorney fees. He had been withdrawing money from his 401(k) accounts to support himself since his termination from ISP. The trial court granted Kathleen's motion and denied Michael's petition for maintenance.

         ¶ 23 In June 2014, Kathleen filed a petition to set child support. Michael responded to the petition by denying that he is "well able and capable of contributing to the support of the minor children." Kathleen also filed a petition for imposition of a trust, pursuant to section 503(g) of the Illinois Marriage and Dissolution of Marriage Act (Act) (750 ILCS 5/503(g) (West 2012)), for the benefit of the children. The trial court held a hearing on the petitions. At the hearing, Michael testified that since he was terminated from ISP in April 2014, he has been "trying to start [his] own company." His new company was incorporated in October 2014, and, according to his business plan, he will be paying himself an annual salary of $40, 000, plus bonuses. He asked the trial court to set child support based on that salary.

         ¶ 24 In December 2014, the trial court issued its oral ruling on Kathleen's petitions, finding that Michael is "voluntarily unemployed" and "unwilling to pay the necessary support for his children." The trial court imputed income to Michael in the amount of "$17, 500 per month which is the amount that he was living off of and using." The trial court also granted Kathleen's request for imposition of a section 503(g) trust.

         ¶ 25 In February 2015, the trial court entered a written order requiring Michael to pay $3765 in child support per month based on his imputed monthly income of $17, 500. The order granted Kathleen's request for a 503(g) trust, finding that Michael "has not acted in good faith, that he has in fact been trying to avoid meeting his obligations to fully support the children as necessary." The court ordered that $200, 000 of the amount Kathleen owed Michael be placed in the trust.

         ¶ 26 Both parties filed motions to reconsider the judgment for dissolution. The court denied Michael's motion but partially granted Kathleen's motion, reassigning three bank accounts to ISP instead of the parties and ruling that Coreman had no value because it is part of ISP and its value, if any, was included in ISP's value. The court also determined that it "double counted" certain assets and accounts. After the court's modifications, the total value of the marital estate decreased by $1, 179, 553, and the amount Kathleen was required to pay Michael decreased from $673, 785 to $84, 007.50.

         ¶ 27 ANALYSIS

         ¶ 28 I. ISP's Valuation

         ¶ 29 A. Barring Michael's Expert and Refusing to Continue Trial

         ¶ 30 Supreme Court Rule 213(f)(3) requires a party to disclose, for each controlled expert witness, "(i) the subject matter on which the witness will testify; (ii) the conclusions and opinions of the witness and the bases therefor; (iii) the qualifications of the witness; and (iv) any reports prepared by the witness about the case." Ill. S.Ct. R. 213(f)(3) (eff. Jan. 1, 2007). Information required by Rule 213 must normally be disclosed no later than 60 days before trial. Gee v. Treece, 365 Ill.App.3d 1029, 1036 (2006).

         ¶ 31 Supreme Court Rule 219(c) authorizes the trial court to prescribe sanctions, including barring witnesses from testifying, when a party fails to comply with discovery deadlines. Ill. S.Ct. R. 219(c)(iv) (eff. July 1, 2002); Nedzvekas v. Fung, 374 Ill.App.3d 618, 620 (2007). The imposition of sanctions is within the discretion of the trial court and will not be disturbed absent a clear abuse of discretion. Fung, 374 Ill.App.3d at 620-21.

         ¶ 32 In determining whether the trial court abused its discretion in fashioning a sanction, the reviewing court should consider (1) the surprise to the adverse party, (2) the prejudicial effect of the witness's testimony, (3) the nature of the testimony, (4) the diligence of the adverse party, (5) the timeliness of the objection, and (6) the good faith of the party seeking to offer the testimony. Id. at 621. No single factor is determinative, and each case must be considered based on its unique facts. Id.

         ¶ 33 Disqualification of an expert is not the only sanction available when a party violates Illinois Supreme Court Rule 213. Marshall v. Osborn, 213 Ill.App.3d 134, 141 (1991). In fact, barring a witness's testimony is a drastic sanction and should be exercised with caution. McGovern v. Kaneshiro, 337 Ill.App.3d 24, 37 (2003). In some circumstances, allowing the offended party the opportunity to depose the expert may be an appropriate response to a party's failure to timely disclose. Marshall, 213 Ill.App.3d at 141.

         ¶ 34 Where a party has acted in good faith and has not engaged in abusive discovery practices, it is an abuse of discretion for the trial court to bar expert testimony that is not timely disclosed. See Vallejo v. Mercado, 220 Ill.App.3d 1, 10 (1991). The proper remedy is to continue the trial date and revise the discovery schedule. Id.

         ¶ 35 Here, the record shows that Michael disclosed Hoffer as a controlled expert witness more than 60 days before trial but failed to disclose her opinions and report until just 4 days before trial. However, this late disclosure was not caused by Michael's bad faith or abusive discovery practices. Rather, the late disclosure was the result of Kathleen's failure to provide Michael and his expert with necessary financial information.

         ¶ 36 In early 2013, Michael sought ISP's financial documents from Kathleen. While Kathleen provided some documents to Michael in April 2013, many of them were redacted, requiring Michael to file a motion to compel Kathleen to provide unredacted documents. Kathleen provided unredacted documents to Michael in August 2013 but failed to send him 2012 balance sheets, financial statements for part of the year, or general ledgers for any years, causing Michael to file another motion to compel. On August 29, 2013, Kathleen sent Michael the financial statements and ledgers he requested. However, it was not until September 26, 2013, less than 30 days before trial, that Kathleen finally provided Michael with IPS's 2012 and 2013 balance sheets. Three weeks later, Michael provided Hoffer's report to Kathleen.

         ¶ 37 Under these circumstances, the trial court abused its discretion in barring Hoffer's testimony. The record establishes that Michael, and by extension Hoffer, did not receive all of the relevant financial information necessary to reach a conclusion regarding ISP's value until September 26, 2013, less than a month before trial and more than a month after the August 22, 2013 discovery deadline. Because it was Kathleen's lack of diligence that caused Hoffer's report to be untimely, Michael should not have been penalized. The proper remedy would have been for the trial court to ...

Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.