Court of Appeals of Illinois, First District, First Division
CHICAGO POLICE SERGEANTS' ASSOCIATION, POLICEMEN'S BENEVOLENT & PROTECTIVE ASSOCIATION, UNIT 156A, Plaintiff-Appellee,
JOHN PALLOHUSKY, Defendant-Appellant (Policemen's Annuity and Benefit Fund, Third-Party Respondent).
from the Circuit Court of Cook County. No. 15 L 7546
Honorable Alexander P. White, Judge Presiding.
JUSTICE MIKVA delivered the judgment of the court, with
opinion. Justice Connors and Justice Harris concurred in the
judgment and opinion.
1 Defendant John Pallohusky appeals from a turnover order
entered in supplementary collection proceedings. The circuit
court concluded that monthly payments Mr. Pallohusky receives
as a "widow's annuity" under his deceased
wife's pension plan are not statutorily exempt from
collection and must be paid to his judgment creditor. For the
reasons that follow, we disagree and reverse the judgment of
the circuit court.
3 The Policemen's Annuity and Benefit Fund (Fund) was
created and is maintained under Article 5 of the Illinois
Pension Code (Pension Code) "for the benefit of ***
policemen, their widows and children." 40 ILCS 5/5-101
(West 2014). Article 5 establishes a "[w]idow's
[a]nnuity" for the surviving spouses of police officers
who retire or die while in service. 40 ILCS 5/5-134 (West
2014). To fund the annuity, officers are required to
contribute a percentage of their salary each pay period, to
which the city adds a percentage contribution, plus interest.
40 ILCS 5/5-170, 5-175.1 (West 2014).
4 John Pallohusky and his late wife, Mary O'Toole, were
both Chicago police officers. From 1991 until her death in
2010, Ms. O'Toole made regular pension contributions. As
Ms. O'Toole's surviving spouse, Mr. Pallohusky
receives a widow's annuity of $1829.10 per month, which,
reduced by federal income taxes and the cost of his monthly
health insurance premium, results in monthly payments to him
of $782.13. By statute, this benefit is non-transferrable. 40
ILCS 5/5-218 (West 2014). It can only be paid monthly, can
never be withdrawn in a lump sum, and expires on Mr.
Pallohusky's death. 40 ILCS 5/5-121 (West 2014).
5 On July 30, 2013, the Chicago Police Sergeants'
Association, Policemen's Benevolent & Protective
Association, Unit 156A (Association), obtained a judgment in
its favor against Mr. Pallohusky in the amount of $690,
215.17. Seeking to collect on the judgment, the
Association served a third-party citation to discover assets
or income belonging to Mr. Pallohusky on the Fund in late
2015. In response, the Fund's lawyer disclosed both the
monthly widow's annuity payments received by Mr.
Pallohusky and an additional $153, 762.90 of Mr.
Pallohusky's own pension contributions that were held by
the Fund. The Fund asserted that both categories of funds
were exempt from collection pursuant to section 5-218 of the
Pension Code (40 ILCS 5/5-218 (West 2014)). The Association
then filed a motion for turnover, arguing that, under section
12-1006 of the Code of Civil Procedure (735 ILCS 5/12-1006
(West 2014)), the benefits Mr. Pallohusky received from the
Fund as Ms. O'Toole's surviving spouse were not
exempt from collection because they were not "retirement
funds paid under a retirement plan." In support of its
motion, the Association urged the court to apply the
reasoning in Clark v. Rameker, 573 U.S.__, 134 S.Ct.
2242 (2014), and In re Marriage of Branit, 2015 IL
App (1st) 141297, cases holding that the characteristics of
inherited individual retirement accounts (IRAs) make them
nonexempt assets. In its motion, the Association did not seek
turnover of Mr. Pallohusky's individual pension
6 On February 17, 2016, the circuit court granted the
Association's motion. Agreeing that Clark and
Branit applied, the court concluded that "Mr.
Pallohusky's benefit payments from his deceased
wife's pension d[id] not fall within the purview of
§ 12-1006 and [we]re therefore not exempt from
collection" because, as with an inherited IRA,
"certain significant attributes" of the benefits
changed upon the original holder's death. Although Mr.
Pallohusky could not withdraw the funds in a lump sum like
the holder of an inherited IRA, the court noted that he also
could not contribute additional funds to the account and was
required to withdraw money from the account "no matter
how many years away from retirement he m[ight] be." The
court explained that, in its view:
"The pension payments at issue here changed from being
part of a retirement plan to a discretionary fund upon the
death of [Ms.] O'Toole. [Mr.] Pallohusky is not precluded
from using these funds to supplement his current lifestyle,
and they therefore do not constitute 'retirement
funds' for the purpose of the Illinois exemption
7 On October 5, 2016, the circuit court denied Mr.
Pallohusky's motion to vacate or reconsider that ruling.
This appeal followed.
9 A. Appellate Jurisdiction
10 We first address the parties' dispute over this
court's jurisdiction. Mr. Pallohusky contends that the
circuit court's orders of February 17, 2016, and October
5, 2016, are final and appealable "because there are no
further proceedings in the Circuit Court that could result in
[their] vacatur or reversal." However, the Association
insists that the orders are not final-and that this appeal
must be dismissed-because the third-party citation to
discover assets served on the Fund remains pending. According
to the Association, the circuit court's turnover order
will only become final when the citation "is
concluded"-i.e., is formally dismissed by order
of court. On February 1, 2017, we denied the
Association's motion to dismiss the appeal on this basis.
While we agree with the Association that we are free to
reexamine the issue of our jurisdiction (see National
Life Real Estate Holdings, LLC v. International Bank of
Chicago, 2016 IL App (1st) 151446, ¶¶ 9-10
(noting that this ...