In re Marriage of Hegge

No. 2--95--1474

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IN THE

APPELLATE COURT OF ILLINOIS

SECOND DISTRICT
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In re MARRIAGE OF ) Appeal from the Circuit Court
MARILYN KATHLEEN HEGGE, ) of Winnebago County.
)
Petitioner-Appellee, )
) No. 94--D--327
and )
)
ALFRED DEAN HEGGE, ) Honorable
) K. Craig Peterson,
Respondent-Appellant. ) Judge, Presiding.
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JUSTICE BOWMAN delivered the opinion of the court:
Following dissolution of marriage proceedings, the trial court
awarded petitioner, Marilyn Hegge, the marital home. The trial
court ruled that the marital home could be classified as nonmarital
property because Marilyn acquired it in exchange for nonmarital
property. On appeal, respondent, Alfred Hegge, challenges this
ruling. We reverse and remand.
The following facts are taken from both the parties' agreed
statement of facts and the record. Marilyn and Alfred were married
in 1985 and resided on Merrill Avenue in Loves Park, Illinois
(Merrill property). Marilyn had acquired the Merrill property as
part of a prior dissolution of marriage. At the time of the
Hegges' marriage, Alfred moved into the Merrill property. Marilyn
owned the Merrill property subject to a mortgage which the Hegges
paid out of their joint checking account.
On July 31, 1986, the Hegges sold the Merrill property and
purchased a home on Petunia Drive in Machesney Park, Illinois
(Petunia property). Marilyn received $35,855.93 for the Merrill
property and applied that entire amount to the $62,000 purchase
price of the Petunia property. Alfred did not contribute any of
his personal assets to the Petunia property purchase. The Hegges
then obtained a $27,000 mortgage loan for the balance of the
purchase price of the Petunia property. While both Alfred and
Marilyn signed the mortgage note, title to the Petunia property was
placed only in Marilyn's name. The mortgage payments on the
Petunia property were again paid out of their joint checking
account.
At some point after the Hegges began living at the Petunia
property, Marilyn quit her job. While the mortgage payments on the
Petunia property were still made from the joint account, Alfred's
income became the sole source of funds for that account. On June
17, 1993, Marilyn and Alfred refinanced the original terms of the
mortgage on the Petunia property. The application was approved
using Alfred's employment as the sole source of income for the
couple. The stipulated value of the Petunia property is $83,500.
On March 17, 1994, Marilyn filed a petition for dissolution of
marriage. Following a bench trial, the court found that, under
section 503 of the Illinois Marriage and Dissolution of Marriage
Act (Act) (750 ILCS 5/503 (West 1994)), Marilyn acquired the
Petunia property in exchange for the Merrill property, a nonmarital
asset. Thus, the trial court classified the Petunia property as
nonmarital property and awarded it to Marilyn.
Alfred contends on appeal that the trial court erred in
finding that the Petunia property was Marilyn's nonmarital
property. Specifically, Alfred argues that (1) the Petunia
property is presumed to be marital property because it was acquired
during the marriage; and (2) the presumption can only be overcome
by clear and convincing evidence, which Marilyn did not establish.
Marilyn argues that she overcame the presumption and that the trial
court did not err in awarding her the Petunia property as
nonmarital property.
In order to distribute property upon dissolution of marriage,
a trial court must first classify that property as either marital
or nonmarital. In re Marriage of Jelinek, 244 Ill. App. 3d 496,
503 (1993). The trial court's determination that an asset is
nonmarital property will not be disturbed on appeal unless that
determination is against the manifest weight of the evidence
(Jelinek, 244 Ill. App. 3d at 503) because that determination rests
largely on the trial court's evaluation of the credibility of the
witnesses (In re Marriage of Werries, 247 Ill. App. 3d 639, 641
(1993)).
The distribution of property from a dissolution of marriage is
governed by sections 503(a) and (b) of the Act. 750 ILCS 5/503(a),
(b) (West 1994). The Act states in pertinent part:
"(a) For purposes of this Act, 'marital property' means
all property acquired by either spouse subsequent to the
marriage, except the following, which is known as 'non-marital
property':
***
(2) property acquired in exchange for property
acquired before the marriage or in exchange for property
acquired by gift, legacy or descent;
* * *
(b) For purposes of distribution of property pursuant to
this Section, all property acquired by either spouse after the
marriage and before a judgment of dissolution of marriage or
declaration of invalidity of marriage, including non-marital
property transferred into some form of co-ownership between
the spouses, is presumed to be marital property, regardless of
whether title is held individually or by the spouses in some
form of co-ownership such as joint tenancy, tenancy in common,
tenancy by the entirety, or community property. The
presumption of marital property is overcome by a showing that
the property was acquired by a method listed in subsection (a)
of this Section." (Emphasis added.) 750 ILCS 5/503(a)(2),
(b) (West 1994).
Thus, the Act creates a rebuttable presumption that all
property acquired after marriage and before dissolution is marital
property regardless of the manner in which title is held.
DeRossett v. DeRossett, No. 80168, slip op. at 3 (Ill. September
23, 1996); In re Marriage of Hagshenas, 234 Ill. App. 3d 178, 186
(1992); 750 ILCS 5/503(b) (West 1994). The presumption can only be
overcome with a showing, by clear and convincing evidence, that the
property falls within one of the statutory exceptions listed in
subsection (a). In re Marriage of Madoch, 212 Ill. App. 3d 1007,
1014 (1991); 750 ILCS 5/503(a) (West 1994). The party claiming
that the property is nonmarital has the burden of proof. Madoch,
212 Ill. App. 3d at 1014. Any doubts as to the nature of the
property are resolved in favor of finding that the property is
marital. In re Marriage of Eddy, 210 Ill. App. 3d 450, 456-57
(1991); see In re Marriage of Parr, 103 Ill. App. 3d 199, 205
(1981) (Act has "express preference for the classification of
property as marital property").
In this case, Marilyn concedes that the Petunia property was
acquired during the marriage. Therefore, she has the burden of
proving that the Petunia property should be classified as
nonmarital property. See Madoch, 212 Ill. App. 3d at 1014; 750
ILCS 5/503(b) (West 1994). She argues that the Petunia property
falls within the statutory exception listed in section 503(a)(2) of
the Act (750 ILCS 5/503(a)(2) (West 1994)) because she acquired it
in exchange for the Merrill property, which was undisputedly
nonmarital property. Marilyn argues that she overcame, by clear
and convincing evidence, the presumption that the Petunia property
was marital property because (1) she contributed all of the
proceeds from the sale of the Merrill property to the purchase of
the Petunia property; (2) Alfred did not pay anything toward the
purchase of the Petunia property at the time of closing; and (3)
the Petunia property was titled in her name only.
Alfred argues in response that, while Marilyn did provide
approximately $36,000 for the purchase of the Petunia property from
the sale of the Merrill property, the remaining $27,000 of the
purchase price of the Petunia property was financed from a mortgage
they jointly obtained and which they repaid from their joint
checking account. Moreover, after Marilyn quit her job, the Hegges
paid the mortgage using marital assets derived solely from Alfred's
employment. Thus, Alfred concludes, because the Petunia property
was purchased during the marriage and because nonmarital assets
were commingled with marital assets to purchase it, Marilyn did not
overcome the presumption that the Petunia property is marital
property.
The only issue for us to consider is whether Marilyn overcame
the presumption that the Petunia property was marital property.
After a careful review of the record and relevant case law, we
conclude that Marilyn has not demonstrated by clear and convincing
evidence that the Petunia property should be considered nonmarital
property. In In re Marriage of Leon, 80 Ill. App. 3d 383 (1980),
the parties purchased a home during their marriage. Part of the
down payment was funded by the husband's inheritance. The parties
then obtained a mortgage that they repaid from a joint account.
The wife conceded that she did not contribute her personal funds to
the purchase of the marital home. The husband claimed that the
marital home should have been classified as nonmarital property
because it was purchased, in part, with funds he received from an
inheritance. 80 Ill. App. 3d at 385. In other words, the husband
argued that the marital home should be classified as a nonmarital
asset because he had exchanged nonmarital funds for it. On appeal,
this court disagreed with the husband and determined that the home
was marital property. We stated:
"While the down payment of the *** home came from a
nonmarital source, the mortgage payments were made with
marital funds which were co-mingled in a joint account.
Further, the money which was used to pay the mortgage ***
came from the husband's earnings *** which were deposited in
a joint account." Leon, 80 Ill. App. 3d at 385.
The court concluded that, based on the foregoing facts, the husband
was not able to overcome the presumption that the Leons' home was
marital property. Leon, 80 Ill. App. 3d at 385; see In re Marriage
of Perlmutter, 225 Ill. App. 3d 362, 374-75 (1992) (assets acquired
after marriage are marital property).
In In re Marriage of Parr, 103 Ill. App. 3d 199 (1981), this
court again faced a similar situation. In Parr, the husband
borrowed money during his marriage to finance the purchase of
property called the Southlawn residence. He "became the holder of
the beneficial interest in Southlawn." Parr, 103 Ill. App. 3d at
201. Shortly after he and his wife moved into the Southlawn
residence, he sold their previous home, the Ingleside property,
which was one of his nonmarital assets. The husband then used the
funds from that sale to repay part of the loan he obtained for the
Southlawn purchase. The husband argued that the Southlawn
residence was nonmarital property because it was acquired in
exchange for the Ingleside property. Parr, 103 Ill. App. 3d at
207. This court found that the husband failed to overcome the
presumption that the Southlawn residence, because it was purchased
after the marriage, was marital property. We stated that "[e]ven
if part of the purchase money could be traced to the Ingleside
home, [the husband] has failed to trace the rest of the purchase
price to a nonmarital source. When marital assets are commingled
with nonmarital assets to purchase a marital home, the home is
presumed to be marital property." Parr, 103 Ill. App. 3d at 207.
Similarly in this case, the Hegges acquired the Petunia
property, in part, with funds from undisputed nonmarital property
--the proceeds from the sale of the Merrill property. However,
both Marilyn and Alfred were listed as mortgagors on the Petunia
property. Thus, both were liable for the $27,000 mortgage.
Moreover, the mortgage payments, as in Leon, were paid out of a
joint checking account, and, after Marilyn quit her job, the
payments were made solely from funds Alfred earned from his
employment. See Leon, 80 Ill. App. 3d at 385. As in Parr, Marilyn
has failed to trace the entire purchase price of the Petunia
property to a nonmarital source. See Parr, 103 Ill. App. 3d at
207.
Further, Marilyn's testimony does not change our conclusion.
Marilyn testified that the Petunia property "would be my home" if
circumstances with Alfred were to change. According to Marilyn,
Alfred said he would "never take the home away" from her.
Marilyn's testimony, however, does not represent clear and
convincing evidence that the Petunia property should be considered
nonmarital property. As previously stated, according to the
statute's plain language, it is irrelevant that title to the
Petunia property was placed in Marilyn's name only. See
Hagshenas, 234 Ill. App. 3d at 186; 750 ILCS 5/503(b) (West 1994).
Even assuming Alfred told Marilyn that he would never take the
Petunia property from her, she did not segregate the Petunia
property from the rest of the Hegges' marital assets. See Parr,
103 Ill. App. 3d at 206. Rather, when she contributed nonmarital
assets, the proceeds from the Merrill property sale, to the marital
estate for the purchase of the Petunia property, her funds were
transmuted from nonmarital to marital. See In re Marriage of
Booth, 255 Ill. App. 3d 707, 711 (1993) (once nonmarital and
marital assets are commingled, the identity of the contributed
property is transmuted to the identity of the recipient property);
750 ILCS 5/503(c)(1) (West 1994). Therefore, Marilyn cannot now
claim that the Petunia property was acquired in exchange for
nonmarital property. See Parr, 103 Ill. App. 3d at 206. Thus, the
evidence presented, combined with the legislative preference toward
classifying property as marital, supports the conclusion that the
Petunia property was marital property. Accordingly, the trial
court erred in finding to the contrary. On remand, it must
consider the Petunia property to be a marital asset when redividing
the Hegges' property.
We note that Marilyn's reliance on In re Marriage of Eddy, 210
Ill. App. 3d 450 (1991), is misplaced. In Eddy, the husband used
nonmarital funds to secure loans that eventually were used to
purchase three McDonald's franchises after the marriage. Even
though those franchises were purchased after the marriage, the
court held that the husband had presented clear and convincing
evidence that they were acquired in exchange for nonmarital
property because the purchase of the franchises could be clearly
and entirely traced to nonmarital funds which served to secure the
necessary loans. Eddy, 210 Ill. App. 3d at 457-58. In this case,
however, the mortgage on the Petunia property, unlike the loans for
the franchises, was not secured entirely by nonmarital property.
Thus, the presumption remains that the Petunia property was marital
property.
For the foregoing reasons, the judgment of the circuit court
of Winnebago County is reversed, and the cause is remanded for
proceedings consistent with this order.
Reversed and remanded.
GEIGER and RATHJE, JJ., concur.