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In re Marriage of Zamudio

Supreme Court of Illinois

November 21, 2019

In re MARRIAGE OF LOUISE ZAMUDIO, Appellee, and FRANK OCHOA JR., Appellant.

          JUSTICE KILBRIDE delivered the judgment of the court, with opinion. Chief Justice Burke and Justices Thomas, Garman, Karmeier, Theis, and Neville concurred in the judgment and opinion.

          OPINION

          KILBRIDE JUSTICE

         ¶ 1 The sole issue raised in this appeal is whether permissive pension service credit based on time served in the military is marital or nonmarital property under the facts of this marriage dissolution action. The parties purchased permissive service credit in the Illinois State Retirement System during their marriage based on time the respondent served in the active duty military prior to the marriage. See 40 ILCS 5/14-104(j) (West 2016) (allowing purchase of pension service credit for up to four years of active duty military service); 40 ILCS 5/1-119(5.5), (7.5) (West 2016) (defining "permissive service" to include, in relevant part, "service credit purchased by the member" and "regular service" as "service credit earned by the member" that "does not include service credit purchased by the member"). The appellate court held that the pension credit is marital property because it was purchased during the marriage with marital funds. 2019 IL App (3d) 160537. For the following reasons, we affirm the appellate court's judgment and remand to the trial court for further proceedings.

         ¶ 2 I. BACKGROUND

         ¶ 3 Petitioner Louise Zamudio, formerly known as Louise Ochoa, and respondent Frank Ochoa Jr. were married in January 2000. In May 2014, Louise filed a petition for dissolution of the marriage in the Whiteside County circuit court. The parties resolved most of the issues in the dissolution proceeding but could not agree on the division of Frank's Illinois State Retirement System pension. The parties disputed whether permissive service credit based on Frank's prior active duty military service was marital or nonmarital property.

         ¶ 4 The record shows that Frank served in the United States Air Force from 1974 to 1980. In August 1989, he began working for the Illinois State Police. In September 2006, the parties paid $4813.20 to the State Retirement System to purchase 24 months of permissive military service credit. In August 2011, they again paid $4813.20 to the State Retirement System to purchase the remaining 24 months of permissive military service credit. Frank retired from the Illinois State Police in August 2011, with 320 months of service credit, consisting of 263.5 months of regular service, 48 months of permissive service credit based on his active duty military service, 6 months of unused sick time, and 2.5 months of unused vacation time.

         ¶ 5 Frank began receiving monthly annuity payments from the State Retirement System in August 2011. As of September 2015, his monthly annuity payment was $9088.86. The permissive service credit purchased by the parties increased the monthly annuity payment by $1363.33. Accordingly, the monthly annuity payment would have been $7725.53 without the additional service credit. The parties agreed that Louise should receive 50% of the marital portion of the pension but disagreed on whether the marital portion included the amount attributable to the permissive service credit. Thus, as of September 2015, the amount in dispute was $681.67 per month, or 50% of the $1363.33 increase in the monthly annuity payment resulting from the permissive service credit.

         ¶ 6 The trial court initially ruled that the permissive service credit was marital because it was earned or acquired during the marriage. In response to Frank's motion to reconsider, however, the trial court reversed its ruling and held that the permissive service credit was properly classified as nonmarital because "what was purchased to enhance the pension *** was military time earned prior to the marriage." The trial court ordered Frank to reimburse Louise in the amount of $4813.20, for her share of the marital funds used to purchase the permissive service credit.

         ¶ 7 In reversing the trial court's judgment, the appellate court observed that In re Marriage of Ramsey, 339 Ill.App.3d 752 (2003), suggests that courts must determine whether a pension enhancement is "derivative of the right to receive a pension in the first place or if the enhancement is nonderivative in the sense that the enhanced portion is directly and solely attributable to nonmarital contributions and not subject to division." (Emphases in original.) 2019 IL App (3d) 160537, ¶ 18. The appellate court rejected Frank's argument that his eligibility for the permissive service credit stemmed entirely from his active duty military service completed 20 years prior to the marriage. 2019 IL App (3d) 160537, ¶ 19.

         ¶ 8 The appellate court instead held that Frank's entitlement to an enhanced pension benefit by purchasing the service credit derived from his entitlement to the pension in the first place. 2019 IL App (3d) 160537, ¶ 19. The appellate court further concluded that Frank did not acquire the permissive service credit at the time of his military service. Frank's military service had no relationship to his pension until he purchased the service credit during the marriage with marital funds. 2019 IL App (3d) 160537, ¶ 20. Accordingly, the appellate court held the permissive service credit was marital property and remanded to the trial court for an equitable apportionment of the pension. 2019 IL App (3d) 160537, ¶¶ 22-24.

         ¶ 9 Justice Schmidt dissented, asserting that "Frank enhanced a nonmarital asset with marital assets, and therefore, he must repay, and I believe has repaid, Louise for her share of those funds. The trial court got it exactly right. Frank's 48 months of military credit are no more marital property than are the 11 years of credit he earned for his Illinois State Police service prior to the marriage." 2019 IL App (3d) 160537, ¶ 28 (Schmidt, J., dissenting). The dissent maintained that enhancement of Frank's 48 months of military service with marital funds does not transmute his military service into marital property. 2019 IL App (3d) 160537, ¶ 32. Justice Schmidt, therefore, would have affirmed the trial court's judgment holding the permissive service credit is nonmarital property. 2019 IL App (3d) 160537, ¶¶ 32-33.

         ¶ 10 We allowed Frank's petition for leave to appeal (Ill. S.Ct. R. 315 (eff. July 1, 2018)).

         ¶ 11 II. ANALYSIS

         ¶ 12 The only issue in dispute before this court is whether the permissive service credit purchased by the parties is marital or nonmarital property. Frank contends the permissive service credit is nonmarital because it is derived primarily from his active duty military service completed 20 years prior to the marriage. Frank maintains his military service is the primary and necessary element required to claim the permissive service credit and the credit cannot be considered acquired or earned during the marriage given that he served in the military many years before the marriage. Frank concludes ...


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