CHICAGO POLICE SERGEANTS’ ASSOCIATION, POLICEMEN‘S BENEVOLENT & PROTECTIVE ASSOCIATION, UNIT 156A, Plaintiff-Appellee, v. JOHN PALLOHUSKY, Defendant-Appellant (Policemen‘s Annuity and Benefit Fund, Third-Party Respondent).
No. 1-16-2822
Appellate Court of Illinois, First District, First Division
September 11, 2017
2017 IL App (1st) 162822
Appeal from the Circuit Court of Cook County, No. 15-L-7546; the Hon. Alexander P. White, Judge, presiding. Judgment Reversed.
Law Offices of John F. Stimson, Ltd., of Skokie (John F. Stimson, of counsel), for appellant.
Johnson Legal Group, LLC (Cindy M. Johnson, of counsel), and the Law Offices of Ira N. Helfgot (Ira N. Helfgot, of counsel), both of Chicago, for appellee.
OPINION
¶ 1 Defendant, John Pallohusky, appeals from a turnover order entered in supplementary collection proceedings. The circuit court concluded that monthly payments Mr. Pallohusky receives as a “widow‘s annuity” under his deceased wife‘s pension plan are not statutorily exempt from collection and must be paid to his judgment creditor. For the reasons that follow, we disagree and reverse the judgment of the circuit court.
¶ 2 BACKGROUND
¶ 3 The Policemen‘s Annuity and Benefit Fund (Fund) was created and is maintained under article 5 of the
¶ 4 John Pallohusky and his late wife, Mary O‘Toole, were both Chicago police officers. From 1991 until her death in 2010, Ms. O‘Toole made regular pension contributions. As Ms. O‘Toole‘s surviving spouse, Mr. Pallohusky receives a widow‘s annuity of $1829.10 per month, which, reduced by federal income taxes and the cost of his monthly health insurance premium, results in monthly payments to him of $782.13. By statute, this benefit is non-transferrable.
¶ 5 On July 30, 2013, the Chicago Police Sergeants’ Association, Policemen‘s Benevolent & Protective Association, Unit 156A (Association), obtained a judgment in its favor against Mr. Pallohusky in the amount of $690,215.17.1 Seeking to collect
¶ 6 On February 17, 2016, the circuit court granted the Association‘s motion. Agreeing that Clark and Branit applied, the court concluded that “Mr. Pallohusky‘s benefit payments from his deceased wife‘s pension d[id] not fall within the purview of § 12-1006 and [we]re therefore not exempt from collection” because, as with an inherited IRA, “certain significant attributes” of the benefits changed upon the original holder‘s death. Although Mr. Pallohusky could not withdraw the funds in a lump sum like the holder of an inherited IRA, the court noted that he also could not contribute additional funds to the account and was required to withdraw money from the account “no matter how many years away from retirement he m[ight] be.” The court explained that, in its view:
“The pension payments at issue here changed from being part of a retirement plan to a discretionary fund upon the death of [Ms.] O‘Toole. [Mr.] Pallohusky is not precluded from using these funds to supplement his current lifestyle, and they therefore do not constitute ‘retirement funds’ for the purpose of the Illinois exemption statute.”
¶ 7 On October 5, 2016, the circuit court denied Mr. Pallohusky‘s motion to vacate or reconsider that ruling. This appeal followed.
¶ 8 ANALYSIS
¶ 9 A. Appellate Jurisdiction
¶ 10 We first address the parties’ dispute over this court‘s jurisdiction. Mr. Pallohusky contends that the circuit court‘s orders of February 17, 2016, and October 5, 2016, are final and appealable “because there are no further proceedings in the Circuit Court that could result in [their] vacatur or reversal.” However, the Association insists that the orders are not final—and that this appeal must be dismissed—because the third-party citation to discover assets served on the Fund remains pending. According to the Association, the circuit court‘s turnover order will only become final when the citation “is concluded”
¶ 11 As a general matter, only final orders are reviewable on appeal. Niccum v. Botti, Marinaccio, DeSalvo & Tameling, Ltd., 182 Ill. 2d 6, 7 (1998). Final orders that dispose of fewer than all of the claims or parties in a case may be appealed pursuant to Illinois Supreme Court Rule 304(a) if they include an express finding that there is no just reason to delay enforcement or appeal.
“[a] final judgment or order entered in a proceeding under section 2-1402 of the
¶ 12 Supplementary proceedings under section 2-1402 are used to enforce a judgment and are commenced when a judgment creditor serves a citation to discover assets on either a judgment debtor or a third party believed to possess assets belonging to the judgment debtor.
¶ 13 We have consistently recognized in section 2-1402 proceedings that an order is final and appealable ” ’ “when the citation petitioner is in a position to collect against the judgment debtor or a third party, or the citation petitioner has been ultimately foreclosed from doing so.” ’ ” PNC Bank, N.A. v. Hoffmann, 2015 IL App (2d) 141172, ¶ 24 (quoting Inland Commercial Property Management, Inc. v. HOB I Holding Corp., 2015 IL App (1st) 141051, ¶ 26, quoting D‘Agostino v. Lynch, 382 Ill. App. 3d 639, 642 (2008)).
¶ 14 Consistent with this rule, we have repeatedly exercised appellate jurisdiction to review circuit court orders requiring the payment or liquidation of assets to satisfy a judgment. See, e.g., In re Estate of Yucis, 382 Ill. App. 3d 1062, 1069-70 (2008) (orders directing third parties to liquidate a judgment debtor‘s property to satisfy a judgment were “automatically appealable” under Rule 304(b)(4)); Levaccare v. Levaccare, 376 Ill. App. 3d 503, 506, 510-11 (2007) (such orders “became final and appealable upon their entry“); Bianchi v. Savino Del Bene International Freight Forwarders, Inc., 329 Ill. App. 3d 908, 917 (2002) (“an order requiring
¶ 15 As the Association points out, we recently held in National Life, 2016 IL App (1st) 151446, ¶ 16, that an order in a section 2-1402 proceeding concluding that certain loan proceeds were not assets of the judgment debtor and therefore not subject to a citation lien was not a final and appealable order. Because the order in that case—unlike the turnover order in this case—did not put the petitioner “in a position to collect against the judgment debtor” (D‘Agostino, 382 Ill. App. 3d at 642), the petitioner needed to demonstrate that it instead “ha[d] been ultimately foreclosed from doing so” (id.), something it could not do while its citation was still pending and the supplemental proceeding against the third-party respondent was ongoing. National Life, 2016 IL App (1st) 151446, ¶ 15. Thus, we held in National Life that the appellant needed a finding under Rule 304(a) (eff. Feb. 26, 2010) that there was no just reason to delay enforcement or appeal. National Life, 2016 IL App (1st) 151446, ¶¶ 11, 16.
¶ 16 Here, the payments from Mr. Pallohusky‘s widow‘s annuity were the only assets the Association sought in its motion for turnover, and the circuit court granted that motion in its
entirety. The Association argues that it could, in theory, identify and seek to recover other assets of Mr. Pallohusky‘s from the Fund as a citation respondent. While this may be true—and may also have been true in the cases cited above—as D‘Agostino and the cases following it make clear, once the citation petitioner is put in a position to collect assets, the court order that put the petitioner in that position is final and appealable. The turnover order Mr. Pallohusky appeals from requires the payment of specific assets to a judgment creditor and puts the Association in a position to collect against a third party. This makes it a final order under D‘Agostino.
¶ 17 Because we are satisfied that the circuit court‘s turnover order is a final and appealable order under Rule 304(b)(4), we turn to the merits of the appeal.
¶ 18 B. Whether the Widow‘s Annuity Is Exempt From Collection
¶ 19 Mr. Pallohusky contends that the monthly widow‘s annuity he receives from the Fund is exempt from collection under both section 5-218 of the Pension Code (
¶ 20 The issue presented is one of statutory construction, which we review
¶ 21 It is quite clear that Mr. Pallohusky‘s widow‘s annuity is exempt from collection under section 5-218 of the Pension Code. That section broadly exempts any benefit granted under article 5 of the Pension Code from collection, stating:
“§ 5-218. Annuities, etc.—Exempt. All pensions, annuities, refunds or disability benefits granted under this Article, and every portion thereof, are exempt from attachment or garnishment process and shall not be seized, taken, subjected to, detained or levied upon by virtue of any judgment, or any process or proceeding whatsoever issued out of or by any court for the payment and satisfaction in whole or in part of any debt, damage, claim, demand, or judgment against a pensioner, annuitant, refund applicant or other beneficiary hereunder.” (Emphases added.)
40 ILCS 5/5-218 (West 2014) .
And the widow‘s annuity Mr. Pallohusky receives is plainly a benefit granted under article 5 of the Pension Code.
¶ 22 The language of section 12-1006 is equally clear—a debtor‘s interest in an annuity under a public employee pension plan “is exempt from judgment.”
“(a) A debtor‘s interest in or right, whether vested or not, to the assets held in or to receive pensions, annuities, benefits, distributions, refunds of contributions, or other
payments under a retirement plan is exempt from judgment, attachment, execution, distress for rent, and seizure for the satisfaction of debts if the plan (i) is intended in good faith to qualify as a retirement plan under applicable provisions of the Internal Revenue Code of 1986, as now or hereafter amended, or (ii) is a public employee pension plan created under the Illinois Pension Code, as now or hereafter amended.
(b) ‘Retirement plan’ includes the following:
* * *
(4) a public employee pension plan created under the Illinois Pension Code, as now or hereafter amended.” Id.
¶ 23 Notwithstanding this clear statutory language, the Association insists, and the circuit court found, that we are bound by the United States Supreme Court‘s analysis in Clark—adopted by this court in Branit—to conclude that Mr. Pallohusky‘s widow‘s annuity is not exempt from collection because it lacks the characteristics of a “retirement benefit.” The Association‘s and the circuit court‘s reliance on these cases is misplaced.
¶ 24 Neither Branit nor Clark dealt with the kind of retirement benefit that is at issue here—a pension benefit that, by virtue of its creation under the Pension Code, is expressly exempted from collection both under section 5-218 of the Pension Code and under section 12-1006 of the Code of Civil Procedure. Instead, the courts in those cases considered whether nonspousal inherited IRAs, which did not clearly fall within any exemption, should be considered
¶ 25 In Clark, the Supreme Court considered whether an individual filing for bankruptcy may exempt from her bankruptcy estate an IRA she inherited from her mother. The debtor in Clark relied on section 522(b)(3)(C) of the Bankruptcy Code, which exempts ” ‘retirement funds to the extent that those funds are in a fund or account that is exempt from taxation under [various provisions] of the Internal Revenue Code.’ ”
¶ 26 In Branit, this court adopted the reasoning in Clark to hold that a nonspousal inherited IRA, which the debtor had inherited from his mother, was not exempt from collection under section 12-1006 of the Code of Civil Procedure. Branit, 2015 IL App (1st) 141297, ¶ 26. Through use of the disjunctive “or,” subsection (a) of that section establishes two independent exemptions: the first for an interest in a “retirement plan” if it “is intended in good faith to qualify as a retirement plan under applicable provisions of the Internal Revenue Code” (
¶ 27 According to the Branit court, it was not enough for an IRA to be included in subsection (b)‘s definition of a “retirement plan“; it must also satisfy subsection (a)(i)‘s requirement of being “intended in good faith to qualify as a retirement plan under the Internal Revenue Code.” Branit, 2015 IL App (1st) 141297, ¶ 19. In the Branit court‘s view, this created an “ambiguity” requiring the use of “external aids for proper construction of the statute.” Id. For this it turned to the Clark Court‘s analysis of the objective characteristics of such plans, ultimately concluding that a nonspousal inherited IRA has “literally nothing” to do with retirement and should therefore not be considered exempt. (Emphasis omitted.) Id. ¶ 26.
¶ 28 However, as other courts have recognized, Clark‘s application is limited. See In re Swarup, 521 B.R. 382, 387 nn.28, 31 (Bankr. M.D. Fla. 2014) (acknowledging the holding in Clark, but finding pre-Clark authority to be “more persuasive” on the issue of whether a contingent interest in an ex-spouse‘s 401(k) plan was exempt from the claims of creditors in bankruptcy proceedings); In re Williams, 556 B.R. 456, 463 (Bankr. C.D. Cal. 2016) (noting that, while Clark “provided some guidance,” for the proper construction of exemptions under California law, it “d[id] not address the situation at hand[,] where the account [wa]s a pension, not an IRA“). Here, there is simply no reason to apply the analysis in Clark and Branit because pension benefits are afforded their own exemption under subsection (a)(ii) of section 12-1006 of the Code of Civil Procedure, whether or not they also satisfy the requirements of subsection (a)(i). Because benefits under such plans are unambiguously and unconditionally exempt under both section 5-218 of the Pension Code and section 12-1006 of the Code of Civil Procedure, there is no reason for us to determine the objective nature of such plans based on their characteristics, as the Clark and Branit courts did with nonspousal inherited IRAs.
¶ 29 At oral argument in this case, the Association could identify no ambiguity in the relevant statutory exemptions. Instead, it relied heavily on our decision in Reynolds v. Retirement Board of the Firemen‘s Annuity & Benefit Fund, 2013 IL App (1st) 120052, for the proposition that—regardless of the precise statutory language—the true intent of the legislature when it established the widow‘s annuity was to support the surviving spouse of a police officer only during the surviving spouse‘s retirement. This reliance on Reynolds is misplaced. In that case, the administrator of the estate of a surviving spouse sought a retroactive increase in the amount of the monthly annuity after her death. Id. ¶ 2. We held that, although the decedent may have sought such an increase during her own lifetime, the legislature unequivocally provided that the benefit could not be transferred or inherited. Id. ¶ 24. Although we noted in Reynolds that this result was consistent with the important public policy concern of ensuring that adequate funds are available to meet the needs of public servants and their families “during their retirement years” (id. ¶ 32), the result in that case was driven by the plain and unambiguous language of the Pension Code. As we noted in Reynolds, a court may certainly “consider the reason for the law, the problem sought to be remedied, the purpose to be achieved, and the consequences of construing the statute one way or another,” but “[t]he most reliable indicator
of legislative intent is the language of the statute, given its plain and ordinary meaning.” Id. ¶ 25.
¶ 30 Pursuant to the plain language of section 5-218 of the Pension Code and section 12-1006 of the Code of Civil Procedure, Mr. Pallohusky‘s widow‘s annuity, like any other benefit granted by a public employee pension plan, is expressly exempt from collection. We have no power to “restrict or enlarge the meaning of [these] unambiguous statute[s]” (People ex rel. Nelson Brothers Storage & Furniture Co. v. Fisher, 373 Ill. 228, 234 (1940)), and “will not resort to outside sources to construe [their] meaning” (Toner, 259 Ill. App. 3d at 70).
¶ 31 C. Proper Party to Bring a Motion to Vacate or Reconsider a Judgment
¶ 32 The Association also asserts, as an alternative basis on which we may affirm the circuit court‘s judgment, that Mr. Pallohusky‘s motion to vacate or to reconsider the circuit court‘s turnover order
¶ 33 CONCLUSION
¶ 34 For the above reasons, we hold that a widow‘s annuity provided to the surviving spouse of a deceased police officer pursuant to article 5 of the Pension Code is exempt from collection and reverse the circuit court‘s turnover order dated February 17, 2016.
¶ 35 Reversed.