Family Law - Illinois State Bar Association

December 2014 Vol. 58, No. 6
Illinois State Bar Association
Family Law
The newsletter of the Illinois State Bar Association’s Section on Family Law
Chair’s column
Inside
By Kelli Gordon
T
he Illinois State Bar Association’s midyear
meeting marks the halfway point of my
term as chair of the Family Law Section
Council. So far this year, the maintenance guidelines have become law (effective January 1,
2015); House Bill 1452 has been worked on zealously by our council; and there has been a lot of
work on a bill that will change how we calculate
child support. There are a lot of changes to family law that have happened and will be happen-
Chair’s column . . . . . . . . . . . . 1
ing over the next several years.
One thing that has not changed is our awesome CLE programs! With the NOLA seminar already full, Pam Kuzniar has now switched gears
to the financial trial. Mark your calendars for
October 8 and 9, 2015, in beautiful downtown
Grafton, Illinois. The financial trial, much like the
custody trial of 2013, will be an actual trial put
Continued on page 2
In re Marriage of Iqbal and Khan: A reminder
not to overplay your hand in drafting
postnuptial agreements
In re Marriage of Iqbal
and Khan: A reminder
not to overplay your
hand in drafting
postnuptial
agreements . . . . . . . . . . . . . . . 1
Transmutation: Muddled
assets shouldn’t lead to
muddled evidence
presentation . . . . . . . . . . . . . . 5
Upcoming CLE
programs . . . . . . . . . . . . . . . . . 7
By Patrick B. Hurley
I
n the recent case of In re Marriage of Iqbal
and Khan, 2014 IL App (2d) 131306, the Second District Appellate Court was called upon
to determine the validity of what can only be
described as a bizarre postnuptial agreement
(“PNA”) which the husband, Mohammad Khan,
had sought to enforce in the trial court. By way
of complete disclosure, this author must confess that he represented the wife, Uzma Iqbal, at
trial and for some time prior thereto, including
attending the declaratory judgment hearing at
which the trial judge ruled the PNA invalid and
unenforceable. This issue proved to be the primary impetus behind Khan’s appeal.
The PNA contained a variety of terms, some
rather pedestrian and others, well, not so much.
Certain of the PNA’s terms related to the parties’
daily life, such as how they would communicate
with each other and family, household arrangements, and the like. It sought to confirm that the
parties would base their life and marriage on the
Holy Quran and Sunnah. It also set forth the manner in which Iqbal would become vested, over a
four-year period, in co-ownership of the house
purchased by Khan prior to the parties’ marriage.
Not so odd, you say? Ah, but wait, there’s more.
The PNA appointed a third party “Religious
and Marital Counselor and Arbiter of their Marital Affairs,” a man named Fisal Hammouda. (As an
aside, the author must confess that his cross-examination of Mr. Hammouda at trial was one of
the most surreal and entertaining experiences of
his legal career.) The ill-fated PNA went so far as
to provide that Hammouda’s authorization and
approval was required for any major decisions,
including but not limited to financial matters,
matters relating to the parties’ three children,
work and travel, and any contemplated divorce
Continued on page 3
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Family Law |
December 2014, Vol. 58, No. 6
Chair’s column
Family Law
Continued from page 1
on by attorneys who oddly will play attorneys, as well as witnesses. I have signed up
to be an actual attorney again, with Bill Scott
as my co-counsel. As I told Bill, it is real easy
to commit to the work when it is a year away.
For those of you who did not have the
opportunity to see the custody trial of 2013,
Judge Blockman from Champaign was our
trial judge. The attendees sat behind the trial
attorneys as if they were sitting in an actual
courtroom. Judge Blockman made his rulings on all objections as if it were an actual
trial. After direct and cross-examinations of
each witness, Pam stopped the trial and had
other seasoned judges comment on the attorneys’ performance, as well as Judge Blockman’s rulings. Judge Blockman felt as if he
had immediate Appellate Court rulings.
I want to be completely clear, THERE
WAS NO REHEARSAL. This is not scripted. Bill
and I (and I am sure Lane Harvey and Rory
Weiler, our opposing counsel) met several
times; had numerous phone calls back and
forth strategizing our case; and spent hours
upon hours preparing for this trial. Pam had
written an 80-page scenario complete with
backgrounds of the parties and interviews of
the witnesses. Our client, the husband (John
Racklin) became so embedded in his role
that while Judge Blockman was rendering
his decision he started to get nervous sweats!
All in all it was a great experience and, believe it or not … fun! While I am sure I won’t
be thinking how fun it is on October 7, 2015,
as Bill and I burn the midnight oil preparing
for trial, it will be another great educational
opportunity not only for the attendees, but
for us, the actors. ■
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December 2014, Vol. 58, No. 6 |
Family Law
In re Marriage of Iqbal and Khan: A reminder not to overplay your hand in drafting postnuptial agreements
Continued from page 1
or separation. It required the parties to consult with Hammouda regarding any significant problems and major issues, further
requiring the parties to be bound by Hammouda’s decisions with regard thereto. And
as if these terms were not peculiar enough,
the PNA provided that in the event Iqbal
should seek an “unreasonable divorce,” i.e.,
one without Hammouda’s express written
approval, she would forfeit all rights to her
vested share of the marital residence.
But wait, there is still more. The PNA provided that in the event a party (clearly targeted at Iqbal) should seek the dreaded “unreasonable divorce,” that party would forfeit all
rights to custody of the three minor children.
In poker parlance, this is known as overplaying one’s hand. Truth be told, it seems from
the court’s decision that the PNA would have
been considered invalid even in the absence
of the custody forfeiture language, in light of
the fact that the term “unreasonable divorce”
was undefined and was therefore impermissibly vague and ambiguous. It is clear, however, that the custody forfeiture language
sealed the PNA’s fate.
The court was not only concerned with
the PNA’s terms; the circumstances also
proved rather irregular. The PNA was drafted
by an attorney who later represented Khan
for a period of time in the dissolution proceedings. This lawyer was also Hammouda’s
nephew. At trial, Hammouda testified that he
recalled Iqbal having been represented by
counsel during the negotiations of the PNA,
but could recall no details.
The heavy-handed language of the PNA
went far beyond simply vesting Hammouda
with unfettered and completely subjective
authority to determine whether a divorce
sought by either party was “reasonable.” As
discussed above, the PNA provided that an
“unreasonable divorce” would divest the petitioner of all child custody rights, regardless
of the best interests of the children. Furthermore, the PNA purported to prohibit either
party from calling the authorities or police
for any incident – with the exception of life or
death emergencies or for the benefit of the
other party – without Hammouda’s written
approval. Violation of that provision would
result in forfeiture of the violating party’s
rights under the PNA (including not only
custody rights, but also Iqbal’s vested rights
in and to the marital residence, which was by
far the most valuable marital asset). In short,
the PNA placed complete authority in the
hands of Hammouda to decide all marital
disputes, pursuant to Islamic law, and with
no obligation that Hammouda consider or
adhere to principles of existing Illinois law or
the best interests of the three minor children.
Per the PNA’s terms, Hammouda’s judgments
were intended to be binding and final, without recourse to judicial review. Moreover,
even if the parties mutually wished to modify the terms of the PNA, they could not have
done so without Hammouda’s approval.
Contrary to Khan’s position in the trial
court, on appeal he (wisely) conceded that
the PNA’s terms relating to child custody
were unenforceable as contrary to public
policy. He then argued that the PNA’s provisions were severable, as he sought to enforce
only the provisions relating to property distribution. Iqbal, ¶ 38. But despite the existence
of severability language in the PNA, this argument proved unpersuasive to the Appellate Court. The court examined this severability issue in light of Kinkel v. Cingular Wireless,
LLC, 223 Ill. 2d 1 (2006), in which the Illinois
Supreme Court approved a standard for applying severability clauses that derives from
section 184 of the Restatement (Second) of
Contracts. “Under this standard, ‘a court may
sever the unenforceable portion of an agreement and enforce the remainder’ if the party
seeking enforcement did not engage in serious misconduct and the enforceable portion
is not essential to the agreement as a whole.”
Iqbal, ¶ 39, citing Kinkel, 223 Ill.2d 47.
The court determined that the power
vested in Hammouda, per the PNA, to control which party would have custody of the
children was of great importance to the parties (custody was contested vigorously at
trial and was an issue on appeal). The court
then concluded that the removal of such
terms from the PNA “would change the nature of the parties’ overall bargain substantially, to the point that we cannot conclude
that without them the parties would have
entered into the PNA. Moreover, the issue
of custody was intertwined in the PNA with
financial issues.” Iqbal, ¶ 39. Therefore, having determined that the PNA’s custody terms
were an essential aspect of it – and that those
terms were intertwined with the financial
3
terms – the court refused to apply the severability clause and enforce the PNA’s remaining provisions.
The court went on to point out that, even
if it could sever the PNA’s child custody and
financial provisions, it would still find the
PNA invalid and unenforceable. This is primarily due to the fact that “the term ‘unreasonable divorce,’ the linchpin upon which
the entire agreement turns, is vague, ambiguous, and uncertain.” Iqbal, ¶ 40. The PNA
provided no guidance as to circumstances
that would cause a divorce to be “unreasonable” and Hammouda’s trial testimony “was
likewise vague and ambiguous.” Id. Additionally, the court noted that the PNA was also
“substantively unconscionable,” as its terms
were “significantly one-sided or oppressive.”
Iqbal, ¶ 41, citing In re Marriage of Tabassum,
377 Ill.App.3d 761, 777 (2nd Dist. 2007). The
PNA sought to impose upon Iqbal the forfeiture of the single largest marital asset, the
marital residence, if she were to seek an “unreasonable divorce,” with no similar penalty
to be imposed on Khan. Furthermore, “the
vagueness of the term ‘unreasonable divorce’ further contributes to the substantive
unconscionability of the financial terms of
the PNA, as it raises the possibility that [Iqbal]
could lose her property rights if Hammouda
withheld approval of her desire to file for a
divorce, even if his actions were whimsical or
capricious.” Iqbal, ¶ 41.
It bears mention that, in specially concurring, Justice Burke disagreed with the majority’s analysis of the severability clause and
its unenforceability resulting from the intertwining of child custody and financial issues.
However, despite that disagreement, Justice
Burke agreed with the majority’s determination that the PNA was unenforceable in its
entirety due to vagueness, ambiguity, and
unconscionability.
In the final analysis, the PNA was done
in by its overreach. Clearly designed as a
mechanism to control Iqbal’s behavior and
deter her from ever considering seeking the
dissolution of the parties’ marriage, it collapsed under its own weight. And it serves
as a reminder to family law practitioners
not to seek—in the words of William Shakespeare—too much of a good thing. ■
Family Law |
December 2014, Vol. 58, No. 6
4
December 2014, Vol. 58, No. 6 |
Family Law
Transmutation: Muddled assets shouldn’t lead to muddled
evidence presentation
By Chuck Roberts and William S. Thayer, Roberts P.C., Wheaton
I
n September 2014, the First District dealt
with the issue of transmutation in In re
Marriage of Foster.1 Transmutation is an often murky concept on its own, and becomes
even more so when compounded with an
inappropriate analysis by the court and insufficient evidence presented by family law
practitioners which falls short. The First District’s opinion in Foster provides a workmanlike outline of the issues involved in trying
transmutation cases together with a guide
to the evidence needed to successfully prosecute the claim.
The Foster court was tasked with deciding whether funds in a Scottrade account
had been transmuted when inheritance income was commingled with marital funds
in a Chase account and then subsequently
transferred into a Scottrade account.2 While
the Foster court found that funds contained
in the Scottrade Account had not been transmuted,3 the Court’s discussion of the issue
illustrated the pitfalls in dealing with transmutation.
One of the threshold issues in any divorce
is determining what makes up the marital
estate. Of course, there is the presumption
that property acquired during the marriage
is marital.4 But transmutation comes into
play when one party argues that an asset
that was originally non-marital has become
marital through an act of the other party.
Section 503(c)(1) of the Illinois Marriage and
Dissolution of Act provides, “when marital
and non-marital property are commingled
by contributing one estate of property into
another resulting in a loss of identity of the
contributed property, the classification of
the contributed property is transmuted to
the estate receiving the contribution.”5 Thus,
what was non-marital becomes marital.
Under the statute, transmutation requires
a two part analysis: first, marital and nonmarital assets must be commingled; and,
second, the commingling must result in a
loss of identity between the marital and nonmarital property.6 Commingling, of course,
requires very little analysis. Either property
was mixed or it wasn’t. Therefore, in almost
every case, the bulk of the analysis will fall
under the second factor. But once property
has been mixed, “the principle of transmutation is based on the presumption that the
owner of the non-marital property intended
to make a gift of the property to the marital
estate.”7
That presumption, however, is rebuttable.8 Once funds have been traced from
a non-marital account to a marital one, the
court must determine whether a loss of identity has been shown by clear and convincing evidence.9 Many attorneys will simply
attempt to trace funds from a non-marital
account into a marital one, and claim that
transmutation has occurred. In doing so,
they hang their hat on the argument that
“tracing of funds is a procedure which allows
the court to find that property which would
otherwise fall within the definition of marital
property is actually non-marital property.”10
However, ending the analysis there is shortsighted as recent decisions have shown.
In grappling with this issue, the courts
have developed the “Conduit Rule.”11 The
Conduit Rule states that where the marital
account merely served as a conduit through
which the non-marital funds flowed, then
no loss of identity occurred, and, as such,
transmutation has not occurred.12 Thus, the
Conduit Rule serves as the crux of the analysis because courts recognize that every act of
commingling should not effectively constitute transmutation.13 Indeed, it is not sufficient to merely trace funds, but other factors
must be established as well.
To illustrate this point, let’s say that Husband inherited $500,000 from his uncle and
placed those funds in a non-marital account
with Bank A. However, during the course
of the parties’ marriage, Husband moves
$200,000, through a series of smaller transfers, from the account with Bank A to a joint,
marital account with Bank B. Husband then
uses funds from Bank B to purchase a cabin.
In attempting to argue that the cabin is marital property, Wife’s attorney traces the funds
from Bank A’s account into Bank B’s account.
Wife’s attorney then argues that funds were
commingled in Bank B’s account, their identity was lost when the cabin was purchased,
and therefore, transmutation occurred and
the cabin is marital property. Such argument,
5
on the surface, may seem adequate, but it
ignores the Conduit Rule by merely tracing
the funds. Therefore, the court will have to
look at a variety of other factors to determine
whether Bank B’s account was merely a conduit.
One of the factors that courts have
looked at when applying the Conduit Rule is
the length of time that the non-marital and
marital funds were mixed.14 In In re Marriage
of Henke, the Second District held mixing
of marital and non-marital funds within the
same account for 16 years resulted in a loss
of identity.15 The court held that the length
of time that the funds had been commingled
weighed against a finding that the funds
were merely flowing through the marital account.16
Courts have also looked at the amount of
money involved between the two accounts.
For example, the Henke Court held that “presumably, the amount of marital funds contributed over the 16 years greatly exceeded
the amount of non-marital funds initially
present in the account.” Id. Thus, in a situation
where a large sum of marital money is commingled with a smaller sum of non-marital
money, the court will lean toward finding
that the sum accumulated by the time of the
divorce is marital. Similarly, in In re Marriage
of Davis,17 the First District took the non-marital contribution amount into account when
finding that transmutation had occurred
within the context of a money market account that had been funded through inherited money. The Court held that although it
was established that the husband “intended
to segregate the proceeds from his inheritance from the marital estate, there was no
evidence as to what portion of the initial $1.8
million remained in the account.”18
Additionally, courts have looked to
whether there was donative intent to the
marital estate. In In re Marriage of Patrick,19
the husband owned various farm equipment
prior the marriage.20 During the course of
the marriage, the husband traded in the farm
equipment for new equipment and used
marital money from a joint account to cover
the difference between the trade-in value of
the old equipment and the purchase price
Family Law |
December 2014, Vol. 58, No. 6
of the new equipment.21 In holding that the
purchase of the new equipment resulted in
a loss of identity constituting transmutation,
the court found that the husband could have
presented evidence “that he did not intend
to make a gift to the marital estate when he
traded in his old equipment as part of the
purchase of the new equipment,” but he
chose not to.22 While it is hard to imagine
that this argument would have carried the
day, it illustrates the need to present evidence beyond mere tracing of funds.23
Finally, when all else fails, courts will look
at a general inability to trace the source of
the funds. Both the Davis24 and Wojcik25
Courts found that the inability to trace payments with specificity was a relevant factor.
Since neither party could properly trace the
money through the account in question,
transmutation had not occurred.26 Clearly,
it helps if there are corresponding amounts
being deposited and withdrawn from an account, but this will rarely be the case. In most
cases, it will be important to look at the time
frame and the total amounts going into and
out of the accounts.
As such, to revisit the above example involving the cabin, it will not be enough to go
only as far as showing the commingling of
funds into Bank B and the ultimate purchase
of the cabin, but the attorneys will also have
to examine how much was withdrawn from
the account to pay for the cabin, the length
of time that the funds were commingled, the
amount of money in the account with Bank
B compared to the amounts transferred from
the account with Bank A, and whether there
was any donative intent to the marital estate.
Otherwise, the court is left with insufficient
facts to determine the nature of the commingled funds and whether loss of identity
truly occurred.
As the Foster decision most recently illustrated, transmutation cases deal with blurred
lines and muddled areas. If the analysis and
evidence presented to the court is not clear,
then it can cost clients significantly. However,
with a basic understanding of what factors
courts are looking for and how the statutory
presumptions operate within the context of
the two prong analysis, attorneys can create
a clear and concise game plan. Such a course
of action is necessary to be successful in trying a transmutation case and avoiding the
common pitfalls. ■
__________
1. 2014 Il App (1st) 123078
2. Id at. ¶16-19 and ¶32-35
3. Id at. ¶79
4. 750 ILCS 5/503(a). See also In re Marriage of
Heroy 385 Ill. App. 3d 640, 670 (2008)
5. 750 ILCS 5/503(c)(1)
6. Id.
7. In re Marriage of Olsen, 96 Ill. 2d 432, 439
(1983)
8. See In re Marriage of Didier, 318 Ill.App. 3d
253, 261-62 (2000)
9. In re Marriage of Steel, 2011 IL App (2d)
080974, ¶ 86
10.In re Marriage of Jelinek, 244 Ill. App. 3d 496
(1993)
11. See In re Marriage of Heroy, 385 Ill. App. 3d
640, 674-75 (2008), In re Marriage of Wojcik, 362 Ill.
App. 3d 144, 154-55 (2005), and In re Marriage of
Steel, 2011 IL App (2d) 080974, ¶83-85; and In re
Marriage of Foster, 2014 Il App (1st) 123078, ¶79
12. Id.
13. In re Marriage of Olsen, 96 Ill 2d. 432, 440
(1983)
14. In re Marriage of Henke, 313 Ill.App. 3d 159,
168 (2000)
15. Id.
16. Id.
17. 215 Ill. App. 3d 763 (1991)
18. Id at. 771
19. 233 Ill. App. 3d 561 (1992)
20. Id at. 563-564
21. Id.
22. Id at. 575-76
23. To see how this principle operates within
the context of exercising stock options, see In re
Marriage of Blackburn, 2013 IL App (2d) 110719-U
24. 215 Ill. App. 3d 763, 770-771 (1991)
25. 362 Ill. App. 3d 144, 155 (2005)
26. See footnotes 24 and 25.
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Webcast—Race & Sports- Racially Charged
Sports Controversies and Legal Concerns.
Presented by the ISBA Committee on Racial
and Ethnic Minorities. 1-2.
Thursday, 2/19/15- Chicago, ISBA Regional Office—Hot Topic- The New Illinois
Supreme Court Program for the Certification
of Interpreters, as well as the Effective Use
of Interpreters in & Out of Court. Presented
by the ISBA International & Immigration
Law Section; co-sponsored by the ISBA Civil
Practice and Procedure Section and the ISBA
Bench and Bar Section. 12-2.
Thursday, 2/19/15- Live Webcast—Hot
Topic- The New Illinois Supreme Court Program for the Certification of Interpreters,
as well as the Effective Use of Interpreters
in & Out of Court. Presented by the ISBA International & Immigration Law Section; cosponsored by the ISBA Civil Practice and Procedure Section and the ISBA Bench and Bar
Section. 12-2.
Thursday, 2/26/15- Naperville, NIU
Conference Center—ISBA Solo & Small Firm
Practice Institute. Presented by the Illinois
State Bar Association. 8:30-5:30.
March
Monday, 3/2-Friday, 3/6/15 - Chicago,
ISBA Regional Office—40 Hour Mediation/
Arbitration Training. Master Series Presented
by the Illinois State Bar Association. 8:30-5:45
daily.
Friday, 3/13/15- Springfield, Hilton
Springfield—Spring 2015 DUI & Traffic Law
Updates. Presented by the ISBA Traffic Law
Section. 8:55-4.
Friday, 3/13/15- Chicago, ISBA Regional Office—Trial Practice Series: Hearing On
Motion for Preliminary Injunction. Presented
by the ISBA Labor & Employment Section; cosponsored by the ISBA Civil Practice Section.
8:55-4.
7
Friday, 3/13/15- Live Webcast—Trial
Practice Series: Hearing On Motion for Preliminary Injunction. Presented by the ISBA
Labor & Employment Section; co-sponsored
by the ISBA Civil Practice Section. 8:55-4.
Wednesday, 3/18/15- Chicago, ISBA
Regional Office—Creatively Resolving Disputes for Special Education Hearings under
the Individuals with Disabilities Education
Act. Presented by the ISBA ADR Section; cosponsored by the ISBA Education Law Section, ISBA Family Law Section and the ISBA
Child Law Section. 8:30am-12:30pm.
Wednesday, 3/18/15- Live Webcast—
Creatively Resolving Disputes for Special Education Hearings under the Individuals with
Disabilities Education Act. Presented by the
ISBA ADR Section; co-sponsored by the ISBA
Education Law Section, ISBA Family Law Section and the ISBA Child Law Section. 8:30am12:30pm.
Thursday, 3/9/15- Live Studio Webcast—How To: Summary Judgement and
Appeals in Human Rights Cases. Presented
by the ISBA Human Rights Section. 9-11:30.
Thursday, 3/19/15-Friday, 3/20/15New Orleans, Hyatt French Quarter—Family Law in New Orleans. Presented by the
ISBA Family Law Section. 1-6:15; 9-5.
Wedensday, 3/25/15- Live studio webcast—Avoiding Pitfalls While Navigating
Through the Custom Penalty Process. Presented by the ISBA International & Immigration Section. 12-1:30.
Thursday, 3/26- Friday 3/27/15- Chicago, ISBA Regional Office—2015 Environmental Law Conference. Presented by the
ISBA Environmental Law Section. 8:30-4:45
with reception until 6; 8:30-noon.
April
Thursday, 4/9/15- Chicago, ISBA Regional Office—Using Freelance Attorneys
and Other Outsourcing Choices to Grow Your
Practice and Profits. Presented by the ISBA
General Practice, Solo & Small Firm Council.
8:30-12:15. ■
Family Law
Non-Profit Org.
U.S. POSTAGE
PAID
Springfield, Ill.
Permit No. 820
Illinois Bar Center
Springfield, Illinois 62701-1779
December 2014
Vol. 58 No. 6
A must-have for attorneys new
to real estate transactions!
Bundled with a
FREE Fastbook
PDF!
BASIC RESIDENTIAL REAL ESTATE: FROM
CONTRACT TO CLOSING
Featuring the new Multi-Board Residential Real Estate
Contract 6.0!
As the first title in the ISBA’s new Practice Ready
Series, this book was specifically written to be a musthave resource for new attorneys and any others new to
residential real estate transactions. It walks you through
each stage of a common transaction, from the moment a
client contacts your office to the essential steps you must
take after the transaction closes. It includes a 130-page
appendix with sample copies of the common documents
you will encounter in a residential real estate transaction
– client letters, the Multi-Board Residential Real Estate
Contract 6.0, contingency letters, financing documents,
title company documents, closing documents, and many
others. Order your copy today and don’t risk seeing these
documents for the first time at your first closing!
Order at www.isba.org/store/books/basicresidentialrealestate
or by calling Janet at 800-252-8908 or by emailing Janet at [email protected]
BASIC RESIDENTAL REAL ESTATE: FROM CONTRACT TO CLOSING
$35 Members/$50 Non-Members
(includes tax and shipping)
Illinois has a history of
some pretty good lawyers.
We’re out to keep it that way.