2017 IL App (1st) 162822
Ill. App. Ct.2017Background
- John Pallohusky is the surviving spouse of Chicago police officer Mary O’Toole and receives a widow’s annuity from the Policemen’s Annuity and Benefit Fund (monthly gross $1,829.10; net to him $782.13). The annuity is nontransferable and payable only monthly until his death.
- The Chicago Police Sergeants’ Association (Association) obtained a judgment against Pallohusky for $690,215.17 and served a third-party citation on the Fund to collect assets.
- The Fund disclosed the widow’s annuity payments and $153,762.90 of Pallohusky’s own pension contributions; the Fund claimed both were exempt under 40 ILCS 5/5-218.
- The Association moved for turnover under 735 ILCS 5/12-1006, arguing the survivor annuity resembles an inherited IRA (citing Clark v. Rameker and In re Marriage of Branit) and thus is not an exempt “retirement fund.” The Association did not seek the turnover of Pallohusky’s own pension contributions.
- The circuit court granted the Association’s motion, applying Clark and Branit and reasoning that the annuity’s attributes changed at the original holder’s death so it was not a retirement fund exempt from collection.
- Pallohusky appealed; the appellate court addressed jurisdiction and then reversed, holding the widow’s annuity is statutorily exempt from collection under both 40 ILCS 5/5-218 and 735 ILCS 5/12-1006.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the widow’s annuity is exempt from collection | The annuity, like a nonspousal inherited IRA, changed character after the original holder’s death and thus is not an exempt "retirement fund;" turnover should be ordered. | The widow’s annuity is a benefit granted under Article 5 of the Illinois Pension Code and is expressly exempt from collection under 40 ILCS 5/5-218 and 735 ILCS 5/12-1006. | The annuity is exempt. The appellate court reversed the turnover order because Article 5 benefits are unambiguously exempt under both statutes. |
| Whether Clark v. Rameker governs this pension-based annuity | Clark and Branit control; their analysis of inherited IRAs should apply to render the annuity nonexempt. | Clark concerned inherited IRAs and does not control a public-employee pension annuity that is explicitly exempt by statute. | Clark and Branit are distinguishable; they addressed IRAs, not pension benefits that are separately and unambiguously exempt. |
| Whether the turnover order was a final, appealable order | (Association) The underlying citation proceeding remained pending, so the order is not final and appeal should be dismissed. | (Pallohusky) The turnover order put the Association in a position to collect and thus is final and appealable. | The court found the turnover order final and appealable under Rule 304(b)(4) because it required payment of specific assets and enabled collection. |
| Whether Pallohusky could move to vacate despite not participating in initial briefing | (Association) He was not a proper party to move because he didn’t contest the turnover motion below. | He is a proper party; any party may move to vacate or reconsider within 30 days under 735 ILCS 5/2-1203 and 5/2-1301. | The court held Pallohusky was a proper party and could move to vacate; lack of prior briefing did not bar reconsideration. |
Key Cases Cited
- Clark v. Rameker, 134 S. Ct. 2242 (2014) (Supreme Court holding inherited IRAs lack key retirement characteristics and are not "retirement funds" for exemption purposes)
- In re Estate of Yucis, 382 Ill. App. 3d 1062 (2008) (orders directing third parties to liquidate assets to satisfy judgment are appealable in citation proceedings)
- Levaccare v. Levaccare, 376 Ill. App. 3d 503 (2007) (orders requiring payment of judgment from specific assets are final and appealable)
- D’Agostino v. Lynch, 382 Ill. App. 3d 639 (2008) (citation-petitioner can appeal when put in position to collect or ultimately foreclosed)
- Bianchi v. Savino Del Bene Int’l Freight Forwarders, Inc., 329 Ill. App. 3d 908 (2002) (order requiring third-party turnover of funds is appealable)
- Toner v. Retirement Board of the Policemen’s Annuity & Benefit Fund, 259 Ill. App. 3d 67 (1994) (statutory construction principles and reliance on plain statutory language governing pension rights)
- People ex rel. Nelson Brothers Storage & Furniture Co. v. Fisher, 373 Ill. 228 (1940) (courts cannot restrict or enlarge unambiguous statutory language)