In re Lyman

27 N.E.3d 126

In re MARRIAGE OF Deborah L. LYMAN, Petitioner–Appellant and Cross–Appellee and Robert E. Lyman, Respondent–Appellee and Cross–Appellant.

No. 1–13–2832.

Appellate Court of Illinois, First District, First Division.

Feb. 2, 2015.

Miller Shakman & Beem LLP (Karen L. Levine and Melissa B. Pryor, of counsel), and Miner Barnhill & Galland, P.C. (George F. Galland, Jr., of counsel), Chicago, for appellant.

Lake Toback, Chicago (Michael G. DiDomenico and Sean M. Hamann, of counsel), for appellee.

OPINION

Presiding Justice DELORT delivered the judgment of the court, with opinion.

¶ 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)).

¶ 2 BACKGROUND¹

¶ 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.² 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; 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....