In re: Marriage of McNeil

Nos. 2--05--0098 & 2--05--0405 cons.
______________________________________________________________________________

IN THE

APPELLATE COURT OF ILLINOIS

SECOND DISTRICT
______________________________________________________________________________

In re MARRIAGE OF ) Appeal from the Circuit Court
CATHY HOUSTON McNEIL, ) of Du Page County.
)
Petitioner-Appellee, )
)
and ) No. 03--D--263
)
KENNETH KARL McNEIL, ) Honorable
) James J. Konetski,
Respondent-Appellant. ) Judge, Presiding.
_____________________________________________________________________________

In re MARRIAGE OF ) Appeal from the Circuit Court
CATHY HOUSTON McNEIL, ) of Du Page County.
)
Petitioner-Appellee, )
)
and ) No. 03--D--263
)
KENNETH KARL McNEIL, ) Honorable
) Blanche Hill Fawell,
Respondent-Appellant. ) Judge, Presiding.
_____________________________________________________________________________

JUSTICE CALLUM delivered the opinion of the court:

Respondent, Kenneth Karl McNeil, appeals from the circuit court's orders: (1) denying his

motion to reject the terms of a divorce settlement agreement; (2) entering the divorce settlement

agreement; (3) finding him guilty of willful contempt for failing to pay child support; and (4)

denying his motion for rehearing on the contempt order. For the following reasons, we reverse and

remand this cause for further proceedings.
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I. BACKGROUND

A. Settlement Agreement

Respondent and petitioner, Cathy Houston McNeil, now known as Cathy McNeil Stein, were

married on October 12, 1986. The parties have two children. Petitioner filed a petition for

dissolution of marriage on December 10, 1992. The parties executed a marital settlement agreement

(agreement) on May 30, 1993, and, on June 29, 1993, a judgment for dissolution of marriage was

entered, incorporating the terms of the agreement.

On December 23, 2002, petitioner filed a petition for rule to show cause, alleging that

respondent failed to comply with the agreement's terms requiring him to pay child support; health,

dental, and life insurance; and uninsured medical expenses, and that respondent owed over $60,000

in support and insurance payments. Petitioner alleged that respondent, a graduate of the Wharton

School of Business and Harvard Law School, voluntarily resigned from a salaried legal position and

willfully refused to obtain employment necessary to make child support and other payments.

In response, respondent admitted that he failed to fully comply with the agreement and that

he was in arrears on his payments, but he denied that the arrearage approached $60,000. Moreover,

he admitted that he voluntarily resigned from a salaried position, but he explained that he left his

employment to begin a divorce mediation practice. Shortly after starting his new business,

respondent was injured and immobilized and, ultimately, was unable to successfully start his

practice. Respondent,"a practitioner in the field of domestic relations," focused his efforts on

representing parties in domestic relations cases and attempted bartending to supplement his income.

Respondent further alleged that he was subject to a federal tax lien and that he was able to pay

petitioner only $500 from July 2001 to December 2002. Respondent later amended his response,

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asserting that he had obtained employment and was a member of Nadler, Pritikin & Mirabelli, LLC,

a domestic relations law firm.

On August 15, 2003, petitioner filed a petition to amend the dissolution judgment, seeking

modification of various terms of the agreement, including respondent's custody and insurance

obligations. On August 5, 2004, prior to the hearing on the return of the rule to show cause, the

parties reached a settlement resolving all pending issues. At the proveup hearing, respondent was

represented by Enrico Mirabelli, a partner at his law firm. Petitioner, also an attorney, appeared pro

se. The settlement terms were read into the record. The settlement provided, in pertinent parts, that:

(1) the rule to show cause would be discharged and there would be a finding that respondent's failure

to pay support was not willful and contumacious, but was due to financial and health circumstances

beyond his control; (2) respondent's monthly child support obligations would increase to $1,100; (3)

joint custody of the children would remain intact, although certain decisionmaking responsibilities

would be reallocated between the parties; (4) respondent's obligation for all past-due child support,

and interest due on the child support, totaled $42,700; (5) respondent would immediately tender

$12,700 as an initial payment on the arrearage; and (6) the remaining $30,000 would be paid at a

rate of $6,000 per year, on or before December 31 of the year. No interest would accrue on the

annual amount, and petitioner would not file any further actions to collect the unpaid balance. If,

however, respondent failed to make a payment in a timely fashion, 9% interest would be added to

the unpaid balance and the payment plan would be accelerated such that a judgment could be entered

against him for the entire unpaid balance and all accrued interest.

Upon examination at the proveup hearing, respondent testified that, although there was no

petition filed to increase child support, he agreed to increase the support to a set amount of $1,100

per month. Respondent further agreed that he would pay $146.70 monthly for health insurance and

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$18.73 monthly for dental insurance. Respondent acknowledged that he understood each term of the

settlement and further testified as follows:

"Q. Mr. McNeil, have you entered into this agreement freely and voluntarily?

A. Yes.

Q. Have I not advised that I have certain defenses that I wanted to present to the

judge which may have saved you substantial money?

A. Yes.

Q. Notwithstanding that, you said [you] want to agree to a $40,000 arrearage?

A. That's right."

Petitioner and respondent both testified that they understood that a written order reflecting the

settlement terms would be drafted and submitted to the court for entry and that, if the order were

drafted to accurately reflect the terms as put on the record at the hearing, the court could enter the

order with or without their signatures. Respondent's counsel presented petitioner with a $12,700

check, drawn on an Enrico Mirabelli Professional Corporation account, as the initial payment on the

arrearage.

On December 16, 2004, petitioner moved to memorialize the settlement terms as presented to

the court on August 5, 2004. The motion included a draft agreed order. On December 28, 2004, the

parties appeared before the court for entry of the agreed order modifying the dissolution judgment.

That same day, respondent moved to "reject or modify the terms of the agreed order," arguing that the

settlement's support and custody modifications and the payment schedule on the arrearage were

unconscionable and not in the children's best interests. 1 In part, respondent asserted that the increase

1
That same day, and before the hearing, petitioner filed a response to respondent's motion. In

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in his child support obligations was unconscionable because there had been no showing that he could

financially sustain the increase and, in fact, he could not meet the revised obligations. The following

discussion ensued:

"THE COURT: *** [Y]ou both agree then that the revised proposed order is in

conformity with the transcript [from August 5] and then if I sign that, that's the end of that,

right? We're done, I think? You don't have any objection to the entry? You don't claim it

doesn't conform in some way, or there is some other problem?

MR. McNEIL: No, sir. I don't claim that it doesn't conform. I only claim that it's [sic]

provisions financial, and with respect to modification of custody and in certain other smaller

matters is unconscionable. As soon as this order is entered--well, since August 5th when we

were before the court--

THE COURT: Right.

MR. McNEIL: Judge, I've tried to comply with the financial terms of the order and I

have been unable to do so. I will be in non-compliance as soon as it is entered.

THE COURT: Okay. I mean, but you recognize at least on that day--and I think that's

the last time I've seen you guys. I can't remember seeing you since.

her response, petitioner modified the draft agreed order to delete certain procedural provisions to

which respondent had objected. Petitioner's response did not, however, substantively respond to

respondent's unconscionability arguments.

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MS. McNEIL-STEIN: Yes.

THE COURT: On any motions or anything. You both said that that was the

agreement--

MR. McNEIL: Yes, sir.

THE COURT: --You had an attorney here, Mr. Mirabelli--

MR. McNEIL: Yes, sir.

THE COURT: So, at least as of that day--okay. So, I'm going to sign the order and

then at least at that point then if you want to seek to modify it, you can start to take some

action because otherwise we are kind of--I'm not really sure where we are here otherwise,

okay?

MR. McNEIL: Okay. Just for the record--

THE COURT: Yes. I know. You've made it clear.

MR. McNEIL: I would like to be heard on unconscionability--

THE COURT: Well--

MR. McNEIL: --before the entry of the order.

THE COURT: You agreed to the order on August 5th, right?

MR. McNEIL: Yes, sir.

THE COURT: You guys asked for time to reduce it to writing. It's now the end of

December. And so I'm going to sign this order and make it nunc pro tunc to August 5th and

then anything after that, you can do whatever you think you need to do, but I'm going around

in a circle the wrong direction here, okay?"

The court made no other comments regarding respondent's motion, and no memorandum opinion

denying the motion was entered. The court entered the settlement order, modifying the dissolution

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judgment, and dated the order nunc pro tunc to reflect an August 5, 2004, date of entry. Respondent

did not file a subsequent motion to modify the judgment. Instead, on January 27, 2005, respondent

filed a notice of appeal.

B. Contempt Finding

On March 4, 2005, petitioner filed a second petition for rule to show cause, alleging that

respondent failed to comply with the agreement, as modified by the August 5, 2004, settlement, and

that he failed to pay child support in December 2004 and January and February 2005. At the hearing

on the petition, respondent admitted that he was not in compliance with the agreement and agreed that

the petition be returnable instanter. Then, at the hearing on the return of the rule, respondent testified

that there were two primary reasons for his failure to pay support in compliance with the order. First,

respondent explained that the $12,700 payment to petitioner at the August 5, 2004, hearing was a loan

from one of his law partners. Respondent agreed to repay the loan by working without compensation;

thus, his financial obligations to petitioner were increased while his revenue decreased by $12,700.

Respondent testified that, in order to keep his job, he felt he needed to repay the loan to his law firm

before paying support. Second, respondent testified that, when he entered the agreement, he was

working on a case that occupied an estimated 80% of his time and from which he expected

compensation. However, his client's money was held under an injunction that had not yet been lifted.

Respondent also explained that members of his firm share expenses, but not revenue. Thus,

respondent felt that in order to hold onto his job, he needed to cover his share of firm expenses

before paying child support. Nevertheless, as a result of his working on an uncompensated basis and

his client's funds becoming unavailable, he was unable to pay his share of the firm's expenses in

January and February 2005. Accordingly, his employment was to terminate effective March 15,

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2005. Finally, respondent testified that he was also in arrears on child support owed to his second ex-

wife and that he was forced to give up his apartment.

The trial court stated:

"I do find you in contempt. I find that your failure to pay the child support is wilful. I find

this financial situation you're in is one of your own making entirely; that you've chosen to

practice law in this fashion. That you have chosen to become employed in a firm where this

is how it's set up as opposed to taking some type of salary employment. So I do find you in

contempt."

The trial court stayed the mittimus to provide respondent 14 days to acquire and pay the owed

support.

On March 21, 2005, respondent's motion for rehearing was denied. At the hearing,

respondent was unable to pay the entire $4,850 he owed petitioner, and the mittimus was served. On

April 20, 2005, respondent filed a second notice of appeal.

II. ANALYSIS

Respondent argues that, despite his motion and request to be heard on the unconscionability

and best interests issues, the trial court considered only one issue at the hearing to enter the order:

whether the proposed order conformed with the settlement terms as read into the record on August 5,

2004. Respondent contends that the court erred by denying him an opportunity to be heard on the

issues of unconscionability and the best interests of the children before entering the order

incorporating the parties' settlement into the dissolution judgment. We agree and find that the trial

court abused its discretion in denying respondent's motion without considering the unconscionability

and best interests issues. See, e.g., In re Marriage of Riedy, 130 Ill. App. 3d 311, 313 (1985)

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(modification of a divorce decree rests in the sound discretion of the trial court, and a court of review

will not disturb its findings unless the evidence clearly so requires).

Section 502(b) of the Illinois Marriage and Dissolution of Marriage Act (Act) (750 ILCS

5/502(b) (West 2004)) provides:

"The terms of the agreement, except those providing for the support, custody and

visitation of children, are binding upon the court unless it finds, after considering the

economic circumstances of the parties and any other relevant evidence produced by the

parties, on their own motion or on request of the court, that the agreement is

unconscionable." (Emphasis added.)

The statute anticipates that a court will consider the unconscionability of a settlement

agreement upon a motion by one of the parties. Here, the trial court denied respondent's motion and

entered the settlement order without addressing the merits of respondent's unconscionability and best

interests arguments. While we are sympathetic to the time pressures and frustrations faced by trial

courts, particularly in the realm of domestic relations, we find that the failure to address the merits of

respondent's arguments was erroneous.

"A party alleging unconscionability of a settlement agreement must be permitted to present

evidence relevant to that agreement ***." In re Marriage of Smith, 164 Ill. App. 3d 1011, 1020

(1987). In Smith, at a proveup hearing on an oral settlement agreement, the respondent testified that

she understood and agreed to the settlement agreement's terms. Shortly thereafter, she disavowed

the agreement and urged the court not to enter the agreement, arguing that its maintenance and

monetary awards were unconscionable. The trial court entered the settlement order, noting the

respondent's objection and stating that it found the agreement not unconscionable. The respondent

subsequently moved to vacate the order entering the supplemental judgment, again alleging

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unconscionability and asserting that the financial results of the settlement left her destitute and her

ex-husband financially advantaged. The motion to vacate was denied after an evidentiary hearing.

The appellate court found that the trial court erred at the evidentiary hearing in excluding as

irrelevant evidence that not all assets were disclosed prior to the prove up. Smith, 164 Ill. App. 3d at

1020-22. The court determined that the evidence might have affected the trial court's

unconscionability finding. The court reversed the orders entering the supplemental judgment and

denying the motion to vacate, and it remanded for a new hearing concerning the parties' relative

economic circumstances resulting from the oral settlement agreement. Smith, 164 Ill. App. 3d at

1020-23.

In In re Marriage of Burch, 205 Ill. App. 3d 1082 (1990), the petitioner moved to vacate an

oral prove up prior to the entry of a dissolution judgment, on the grounds that the property settlement

agreement was unconscionable. At a hearing on the motion to vacate, the petitioner asked the court

to allow further discovery based on newly discovered information relating to fraud and

unconscionability of the agreement. The trial court denied the motion, stating that it had reviewed the

agreement and found that it was not unconscionable. The appellate court held that the trial court

abused its discretion in denying the motion without an evidentiary hearing. Burch, 205 Ill. App. 3d at

1096. In doing so, the court noted that "[d]ocumentary information in support [of the petitioner's

claim] was submitted to the trial court for its perusal, which in and of itself was sufficient to require

the court to hold an evidentiary hearing to establish the truth of the allegation." Burch, 205 Ill. App.

3d at 1089. The court found that the trial court erred in refusing to consider certain evidence in

support of the petitioner's allegations pertaining to unconscionability. Burch, 205 Ill. App. 3d at

1092. Finally, the court noted that it made no difference that the petitioner's motion to vacate was

made prior to the entry of judgment. "Although the case at bar involves a motion to vacate an oral

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prove up and a hearing on the motion, rather than a post-judgment petition and hearing, pursuant to

section 2--1401 of the Code of Civil Procedure [735 ILCS 5/2--1401 (West 2004)], the same legal

and public policy principles logically apply." Burch, 205 Ill. App. 3d at 1095-96.

We acknowledge that this case does not involve fraud or the failure to disclose assets.

Nevertheless, even in Burch and Smith, where the trial courts were reversed, the trial courts either

held hearings on the motions to vacate or expressly found that the agreements were not

unconscionable. Here, we have neither one. Respondent attached exhibits to his unconscionability

motion, including a comprehensive financial statement pursuant to the court's local rules, and alleged

that the financial terms of the agreement were so oppressive that he was unable to comply. No

hearing was held to permit respondent to present evidence regarding the truth of his assertion, nor did

the court discuss the agreement's financial ramifications with respondent during the December 28,

2004, hearing. The trial court's sole stated reason for denying the motion to reject the order was that

respondent had agreed to the terms at the prove up. However, an argument that an agreement is

unconscionable necessarily presumes the existence of an agreement. Thus, the trial court's statement

that respondent agreed to the settlement's terms was nonresponsive to respondent's contention that the

settlement was nevertheless unconscionable. Moreover, we cannot presume that, by entering the

order, the court implicitly found that the agreement was not unconscionable or that it was in the

children's best interests. There is no need or basis for such a presumption, because the trial court

gave an explicit reason for denying the motion--the order conformed to the terms as read into the

record at the proveup hearing--that had nothing to do with the unconscionability of the agreement.

Petitioner contends that the trial court did not err in "finding that the settlement agreement at

issue was not unconscionable." However, she does not indicate where in the record such a finding

was made, except to say that the trial court addressed respondent's unconscionability argument by

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pointing out that respondent agreed to the settlement terms at the prove up and was represented by

counsel. As discussed above, we do not agree that the trial court's confirmation that respondent

agreed to the terms at the prove up constitutes consideration of whether the terms themselves were

unconscionable. In any event, the inquiry into unconscionability requires a two-prong analysis, and

the trial court must consider: (1) the conditions under which the agreement was made; and (2) the

parties' economic circumstances resulting from the agreement. See Smith, 164 Ill. App. 3d at 1017.

Here, even if the trial court arguably addressed the circumstances under which respondent made the

agreement, it did not address the parties' economic circumstances resulting from the agreement.

Petitioner likens this case to In re Marriage of Chapman, 162 Ill. App. 3d 308 (1987), where

an evidentiary hearing on a motion to vacate was denied as unnecessary because the trial court was

thoroughly familiar with the allegations of the motion and extensively involved in the settlement

negotiations, the motion was verified, and the court made a finding that the property settlement was

not unconscionable when it orally entered the dissolution agreement. Petitioner asserts that the trial

court here "recalled" and "was aware" of certain aspects of this case, including respondent's

arguments, so a hearing was unnecessary. Petitioner does not provide any record citation to support

her contentions. Moreover, we find that this case is distinguishable from Chapman. Here, although

the motion was verified, the trial court had no integral role in the settlement negotiations and,

critically, made no explicit finding that the agreement was not unconscionable.

Petitioner also asserts that the trial court recommended that respondent file a petition to

modify the judgment, because it "was not buying [respondent's] argument that the settlement

agreement was unconscionable." We have no way of knowing from the record whether the trial judge

was "not buying" respondent's unconscionability argument, and we therefore cannot conclude that the

reference to filing a petition to modify was in some way a reflection of the trial court's assessment of

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the merits of respondent's arguments. And, while a motion to modify the judgment is an appropriate

method for addressing compliance issues (see, e.g., In re Marriage of Steichen, 163 Ill. App. 3d 1074,

1080-81 (1987)), there is no reason why respondent had to wait until after the judgment was entered

to move to reject the settlement terms. Burch, 205 Ill. App. 3d at 1095-96.

Finally, petitioner claims that the settlement terms pertained entirely to the minor children.

Petitioner therefore suggests that the unconscionability issue is not properly before the court, because

the Act provides that "[t]he terms of the agreement, except those providing for the support, custody

and visitation of children, are binding upon the court unless it finds *** that the agreement is

unconscionable." (Emphasis added.). 750 ILCS 5/502(b) (West 2004). Petitioner misinterprets the

statute. The cited language does not mean that the court cannot find unconscionable an agreement

with terms pertaining solely to children. Rather, the Act anticipates consideration as to whether the

agreement as a whole is unconscionable and provides that, even if the agreement is not

unconscionable, the court may still reject or modify the terms involving children. See, e.g., Smith,

164 Ill. App. 3d at 1017. In any event, this argument does not help petitioner, because the trial court

arguably possessed a heightened obligation to address respondent's argument that the modifications

were not in the children's best interests. See, e.g., In re Marriage of Ingram, 259 Ill. App. 3d 685, 689

(1994) ("modification of a child support obligation is a judicial function, and the court is obligated in

a dissolution proceeding to protect the interests of the children involved"); Weber v. Weber, 77 Ill.

App. 3d 383, 388 (1979) (when a separation agreement involves the welfare and support of children,

the court has a duty to ascertain all of the pertinent facts and circumstances and to determine whether

the award is fair and equitable).

In sum, we conclude that the trial court abused its discretion in denying respondent's motion

without considering the merits of his unconscionability and best interests arguments. We reverse the

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trial court's August 5, 2004, order entering the settlement agreement and remand this cause to the trial

court for the purpose of addressing whether the agreement is unconscionable and in the children's best

interests. Should the trial court find that the agreement is unconscionable or not in the children's best

interests, the court should vacate the August 5, 2004, oral prove up and conduct further proceedings

pursuant to section 502 of the Act. If, on the other hand, the trial court concludes that the agreement

is not unconscionable and that the modifications are in the children's best interests, the settlement

agreement may be approved by the court and reentered into the dissolution judgment.

In light of our conclusion that the settlement agreement was improperly, or at least

prematurely, entered, we reverse the order holding respondent in contempt for failing to comply with

the order. See, e.g., In re Marriage of Watling, 183 Ill. App. 3d 18, 22 (1989) (contempt order

vacated when trial court erred in entering the violated child support order); see also Reda v. Advocate

Health Care, 199 Ill. 2d 47, 63 (2002) (reversing contempt finding based on violation of invalid

discovery order); In re Marriage of Bonneau, 294 Ill. App. 3d 720, 723 (1998) ("where the trial

court's discovery order is invalid, a contempt judgment for failure to comply with the discovery order

must be reversed").

III. CONCLUSION

For the foregoing reasons, the judgment of the circuit court of Du Page County is

reversed and the cause is remanded with directions.

Reversed and remanded with directions.

BOWMAN and BYRNE, JJ., concur.

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