Two Illinois Appellate Court districts recently reviewed whether a
worker's entire settlement from a job-related injury constitutes income
for purposes of determining child support. In each case, evidence--or a
lack of evidence--that the settlement included factors outside of wages
influenced the court's decision.
In Villanueva v. O'Gara, 282 Ill.App.3d 147, 668 N.E.2d 589
(1996), the 2d District Appellate Court held that it was error to deem
the whole settlement income and remanded the case for a determination of
the non-wage components of the settlement. In Illinois Department of
Public Aid ex rel. Jennings v. White, 1997 Ill.App. LEXIS 11 (1997),
the 3d District ruled that the entire settlement should be considered
income.
Both decisions underscore the importance of not only understanding
the components of a settlement award but obtaining the appropriate
discovery to present this information properly to the court.
Villanueva
Around 1990, respondent Sean O'Gara injured his hand while at work.
He eventually received a lump-sum settlement of $385,000 for his
potential product liability claim. After attorney fees and costs were
deducted, O'Gara received net proceeds of $251,665.
Before settling, O'Gara was adjudged to be the father of Amanda
Villanueva, born to petitioner Dolia Villanueva on April 27, 1987, and
ordered to pay child support. After O'Gara received his personal-injury
settlement, Dolia Villanueva petitioned for an increase in support based
on the settlement award. Villanueva sought a one-time lump sum of 20
percent of the net settlement proceeds.
The trial court agreed that the net settlement proceeds constituted
income under section 505 of the Illinois Marriage and Dissolution of
Marriage Act and ordered O'Gara to deposit 20 percent of the amount, or
$50,331, into a trust. The trial court did not apportion the damages
between the different elements of damages recoverable in personal-injury
torts. On appeal, O'Gara argued that the trial court erroneously found
that the entire personal-injury settlement constituted income for
purposes of child support.
The 2d District Appellate Court began its analysis by attempting to
define "net income" for purposes of child support. Section 505(a) of the
Marriage Act simply defines "net income" as income from all sources,
minus a list of specified deductions. The court determined that
"income," as contemplated by section 505(a), is undefined. The court
then considered the legislative intent and noted that income generally
represents gain or profit. It is ordinarily understood to be a return on
investment of labor or capital.
By contrast, personal-injury awards serve to make an injured party
whole, in effect restoring one to the status quo before the injury was
suffered. The court noted that O'Gara was not any richer as a result of
the settlement but was made whole. The Appellate Court agreed with
O'Gara that the personal-injury award may have included the compensation
for the following:
- Disability and disfigurement resulting from the injury.
- Pain and suffering.
- The reasonable expense of necessary medical care, treatment and
services.
- The present and future value of lost earnings.
Holding that the first three factors are designed to
make a party whole, the court remanded the case for a determination of
what portion of the settlement was or should have been apportioned to
the fourth factor, replacing present and future lost earnings.
White
Respondent Rodney White received a settlement award after injuring
his back while working for the Burlington Northern Railroad in June
1992. Rodney filed suit under the Federal Employers Liability Act
against his employer, and in September 1995, his case settled for
$200,000. Before the settlement, White was adjudged to be the father of
Cody Jennings, who was born to petitioner Jacquelynn Jennings on Oct.
17, 1989. After White received his award, the Illinois Department of
Public Aid filed a petition to modify White's child support obligation
based on his increased income from the FELA settlement.
Before trial, a special assistant state's attorney filed two
requests to produce, seeking documents that would support a breakdown of
the FELA award. White never complied with the requests. Later at trial,
White testified that the entire FELA award was for pain and suffering.
When asked if any documentation supported his claim, White said he
thought so but that the papers were probably with his other attorney or
at home.
The trial judge apparently was reluctant to rely solely on White's
testimony because he failed to produce any supporting documents. As a
result, the judge continued the hearing to allow both parties to submit
documentation concerning the break down of the settlement.
White's attorney eventually submitted three documents: a letter
from his client's FELA attorney indicating that the settlement covered
only lost wages loss; a settlement statement showing case expenses and
disbursements; and Burlington Northern's release of all claims.
The trial court concluded that the entire award, less expenses,
constituted income for purposes of child support. The court pointed out
that no breakdown of the award was specified; however, one of the
deductions included a mandatory contribution to the Railroad Retirement
Board. This implied the award was for lost wages because the deduction
is normally a wage deduction. The trial court ordered White to pay a
lump sum percentage of the total award (less expenses) for division
between the Department of Public Aid and the mother.
White appealed, arguing that the trial court erred in concluding
that the FELA award constituted income for purposes of child support.
As in Villanueva, the White court noted that the act
does not define "income" for purposes of child support and reviewed the
legislative intent for assistance. Several cases construing the language
of section 505 broadly applied the term "income" to include various
items such as tax return refunds, severance pay and one-time income. The
court next compared the language of section 505 with the language in
section 503 as described in In re Marriage of DeRossett, 173
Ill.2d 416, 671 N.E.2d 654 (1996). The DeRossett court concluded
that a workers' compensation award, arising out of a claim accrued
during the marriage, is marital property because section 503 presumes
that all property acquired during the marriage is marital property.
Likewise the 3d District Appellate Court broadly defined "income" for
child support purposes as all income, unless specifically excluded by
statute.
The appeals court considered White's argument that the case should
be remanded pursuant to Villanueva to determine the apportionment
of his FELA award. However, without addressing the merits of the
Villanueva decision, the court held that remand was unnecessary because
the trial court already had given White numerous opportunities to
produce the evidence necessary to show that the award was for something
other than lost wages.
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