author: JUSTICE LORENZ

text:
      In re MARRIAGE OF ESLEE KESSLER, a/k/a Eslee Brody, Petitioner and Counterrespondent-Appellee and Cross-Appellant, and STANTON KESSLER, Respondent and Counterpetitioner-Appellant and Cross-Appellee.
    First District (5th Division)
    No. 81—2134
    Opinion filed October 22, 1982.

      Robert A. Helman and Douglas A. Poe, both of Chicago (Mayer, Brown & Platt, of counsel), for appellant.
    Neumark & Bonner, Ltd., of Chicago (J. Scott Bonner, of counsel), for appellee.
   JUSTICE LORENZ

delivered the opinion of the court:

This is an appeal by both parties from orders of the trial court in a post-divorce judgment proceeding.

On appeal, respondent, Stanton Kessler, contends that the trial court erred (1) by modifying the weekend joint custody residential schedule set forth in the initial judgment for divorce; (2) by characterizing the respondent’s monthly payments to petitioner, Eslee Brody, as child support and not maintenance, thereby altering the tax consequences embodied in the initial judgment; (3) by increasing the amount of child support payments; (4) by denying his supplemental petition seeking recovery of a portion of the monthly payments received by petitioner during the period she resided with her present husband, Dr. Bruce Brody, prior to their marriage; and (5) by assessing a portion of petitioner’s attorney fees and costs against him.

Petitioner cross-appeals, contending that the trial court erred by denying her petition for declaratory relief regarding the permissibility of joint custody of minor children under Illinois law and the rights of the parties as joint custodians.

We affirm in part, reverse in part and remand.

The following pertinent evidence was adduced at the hearing held on the post-decree proceedings.

Petitioner and respondent were married on July 20, 1969, and their marriage was dissolved on July 22, 1977. Two children were born of this marriage, Alexis, now age 8, and Louis, age 6. The initial judgment for divorce incorporated an extensive agreement that had been reached between the parties relating to such matters as the custody and residence of the children, the nature and extent of the periodic payments made to petitioner from respondent, the circumstances under which those payments would be increased or reduced, and the payments of attorney fees and costs by each party.

Insofar as it is relative to the issues raised in the present appeal, this agreement provided that the parties would maintain a primary residence in Chicago for SVa years from the date of judgment and that neither would move from Chicago unless a prior court order was obtained. Both parents were awarded joint custody of the two children, who were to reside each week with their father from 6 p.m. on Friday until 1 p.m. on Sunday, and from 6 p.m. on Tuesday until 8 a.m. on Wednesday, the remaining portion of each week being spent with their mother.

The agreement further provided that respondent would make monthly payments to petitioner, which payments were characterized as “periodic payments” that would be deductible to respondent and taxable to petitioner under section 71 of the United States Internal Revenue Code. (Internal Revenue Code of 1954, 26 U.S.C. sec. 71 (1976).) Respondent was also obligated to pay petitioner’s Federal and State income taxes with respect to these payments. The payments were not to be increased based upon any future increases in his income nor reduced by any amount that she might receive upon resumption of employment. Upon the occurrence of specific contingencies, including the remarriage of petitioner, the payments were to be reduced by 60%.

With respect to the payment of attorney fees and court costs, the agreement provided that “each party will pay his or her attorney fees and court costs incurred either in connection with this Agreement or in connection with any proceedings involving this Agreement.” Both the agreement and the divorce judgment expressly provided that the agreement would survive its incorporation in the divorce judgment.

Approximately two years subsequent to the parties’ divorce, petitioner married Dr. Bruce Brody on October 2, 1979. On October 16, 1979, the respondent filed a petition to modify the divorce judgment to have his residence designated as the principal place of residence of the children and to prohibit the removal of the children’s residence to Winnetka by petitioner and Dr. Brody.

The petition also alleged, inter alia, that on or about March 1979, petitioner had commenced cohabiting at her residence on a continuing, conjugal basis with Dr. Bruce Brody, and that they were contemplating removing the children to reside in the suburbs contrary to the provisions of the divorce. Petitioner filed a response to this petition on April 8, 1980.

On December 12, 1979, respondent filed a petition for a preliminary injunction seeking to prevent petitioner from removing the children from Chicago to Winnetka, Illinois, where the Brodys had purchased a house. Petitioner filed a response to the petition for preliminary injunction, and a motion for temporary relief to allow the move during the pendency of the proceedings. In addition, petitioner filed a petition for declaratory relief , and for modification of the divorce judgment. The petition sought, inter alia, that (1) joint custody be terminated; (2) that the Tuesday evening overnight visitation with respondent be eliminated, and (3) “that the frequency of the weekend visitation schedule be reduced in such manner as this Court deems to be in the best interests of and welfare of the parties’ minor children.”

The circuit court thereupon entered an order on December 20, 1979, denying respondent’s petition for preliminary injunction and granting petitioner leave to remove the residence of the children from Chicago to Winnetka.

On March 13, 1980, respondent filed a petition seeking a rule to show cause against petitioner for interference with his visitation rights and an order that petitioner share the transportation arrangements in connection with the visitation schedule. Petitioner responded to this petition on May 15,1980.

On October 20, 1980, the circuit court entered an order requiring the petitioner to transport the children on Friday evenings, and alternating Tuesday evenings and Sunday afternoons, with the remaining transportation being the responsibility of respondent.

Respondent filed a supplement to this petition to modify the divorce judgment on October 8, 1980. He alleged that, pursuant to the divorce judgment which provided for a reduction in monthly payments from $1,500 to $600 upon petitioner’s remarriage, he had overpaid her $5,435 by virtue of her cohabitation on a resident, continuing, conjugal basis with Dr. Brody for a five-month period in 1979 prior to their marriage.

Hearings limited to the issue of petitioner’s request that the joint custody arrangement be terminated, and the time that the children reside with respondent on Tuesdays and weekends be reduced were held in April 1981.

Respondent was called as an adverse witness under section 60 of the Illinois Civil Practice Act (Ill. Rev. Stat. 1977, ch. 110, par. 60, now cited as section 2 — 1102 of the Code of Civil Procedure, Ill. Rev. Stat. 1981, ch. 110, par. 2 — 1102). He testified that petitioner drives the children to his residence, or that of a friend, Susan Getzendanner, between 6:30 and 7 p.m. on Tuesdays, where they have dinner, and he drives the children to school in Winnetka on Wednesday morning. He has a weekend visitation period extending from Friday at 6 p.m. until Sunday at 1 p.m. He stated that he engages in many activities with the children on weekends, and that he is flexible and accommodates them concerning school or leisure activities that conflict with his visitation by either driving them to the event, or permitting them to remain in Winnetka for the event.

Dr. Marv Meyer, a clinical psychologist, was called as a witness by petitioner. He testified that he had seen both parties in a professional capacity on six occasions in 1979, and had seen Alexis once in 1979 and Louis for an extended period in 1980. His evaluation of the children related to the circumstances that existed in 1979. Dr. Meyer testified that it was essential for respondent to maintain his normal involvement with the children and that the minimum amount" of time that he should see the children was twice a week. He recommended Tuesday visitation without sleeping over and alternate weekend visitation. He also testified that the joint custody arrangement “perpetuates the fight” between the parties.

Dr. Robert Bussell, a psychiatrist, was called as a witness by respondent. He performed an independent evaluation of the joint custody arrangements by agreement of the parties in 1980.

He testified that the relationship between respondent and the children was of “unusually good quality.” In his opinion, the children clearly perceived their primary home as being with petitioner, and the overnight visits did not cause them any difficulty in terms of their sense of home. He further testified that the overnight Tuesday visitation was having a “very positive effect” on the children.

Petitioner testified on her own behalf that at the time of the divorce she believed the joint custody residential schedule to be in the children’s best interests but that it had proven to be too inflexible in accommodating their current needs. She stated that the children’s current interests are shifting away from the family and they desire more contact with their school friends, and that Louis seems to be tired and listless on Wednesday afternoons after the Tuesday overnight visitation.

Petitioner further stated that she does not have any recreation time with the children on weekends and that she thought they would benefit from staying at her home at least one weekend a month to “play with their friends- and be with Bruce and myself in our family structure.”

Amy Wieder, Louis’ kindergarten teacher, was called as a witness by respondent. She testified that Louis had an exceptional amount of energy and exhibited no change in his attitude on Wednesday mornings.

Susan Getzendanner, a friend of respondent, testified that she often sees the children on Wednesday mornings when she stops at respondent’s apartment to give him her car to drive the children to Winnetka, and that they do not appear to be fatigued on Wednesday mornings.

On June 26, 1981, a hearing was held on those issues relating to the monthly payments made to petitioner by respondent, and to the issue of attorney fees.

Petitioner testified that the monthly expenses for the children are $1,937 and that the $600 per month which she receives from respondent is not sufficient to support the children.

In her affidavit detailing the children’s expenses, petitioner attributed, inter alia, 37% of the monthly mortgage payments and 50% of the monthly utility bills to the children “because they watch a lot of television.”

On cross-examination, she stated, however, that none of the money received by her from respondent was being used for mortgage payments, and that Brody paid all the household utility bills pursuant to agreement.

She further testified that she informed respondent at the beginning of March 1979 that Brody was going to be living with her and that they were going to be married as soon as possible. She stated that respondent did not object to the living arrangement and that when he picked up the children at her apartment twice a week, Brody was usually present.

Brody moved into her apartment at the end of.March 1979 with an intention to marry her, but subsequently their wedding was delayed. She stated that he moved most of his clothes into her apartment, she prepared his meals, and they engaged in sexual relations. She testified that she did not remember telling respondent that Brody had his own apartment.

Respondent, called as an adverse witness under section 60 (Ill. Rev. Stat. 1977, ch. 110, par. 60, now cited as section 2 — 1102 of the Code of Civil Procedure, Ill. Rev. Stat. 1981, ch. 110, par. 2 — 1102), testified that in 1977 his gross income was $88,904 and his 1980 income from his law practice was $117,558.

He reduced the payments made to petitioner from $1,500 per month to $600 per month in September 1979, after she admitted to him that she was living with Brody.

Respondent testified on his own behalf that in late March 1979, certain comments by the children led him to believe that Brody was sleeping at petitioner’s apartment. However, he was unable to ascertain whether Brody was living in petitioner’s apartment. Subsequently petitioner brought the children down to the door for a three- to four-week period instead of letting him up into her apartment.

In July 1979, he confronted Eslee with his suspicion that Brody had moved into her apartment in a conversation in the presence of Dr. Meyer, to which she replied, “That is right, but it is none of your business.” After consulting with his attorney, respondent reduced the payments in September 1979 to $600 per month.

He testified that he has income of approximately $50,000 after taxes and deductions, which is spent for living expenses for himself and the children and the payments to petitioner. The record reflects that his income has increased steadily since the original judgment in 1977. He buys food, some clothing for the children and pays certain medical expenses.

At the time of the hearings, he was negotiating to purchase an apartment adjoining his own apartment for between $70,000 and $80,000 so that the children can each have a bedroom.

He further stated that he deducts the $600 monthly payments to petitioner, plus the tax payments that he makes to her, in determining his Federal and State income taxes. Pursuant to the agreement he reimburses petitioner for her income tax payments.

On April 29, 1981, the circuit court declined to modify the joint custody arrangement but ruled that the children would reside with respondent on Tuesdays and alternate weekends.

On August 4, 1981, the court ruled that notwithstanding the designation of the periodic payments in the divorce judgment as “alimony,” the payments were for child support. While stating that the petitioner’s apportionment of some of her household expenses to the children was “somewhat inflated,” the court increased the child support payments to $1,200 per month.

The trial court further ordered respondent to pay $10,000 in petitioner’s attorney fees and $1,225.30 in costs as his contribution towards petitioner’s $17,000 attorney fees.

A written order incorporating the August 4, 1981, rulings also denied respondent’s petition for recovery of periodic payments and it is from these orders that respondent appeals. Petitioner cross-appeals from the orders which (1) sustain the validity of the joint custody arrangemént, and (2) deny modification of the Tuesday overnight visitation schedule.

Opinion

Initially, we address the petitioner’s argument on cross-appeal that since joint custody is not specifically authorized by the Illinois Marriage and Dissolution of Marriage Act (Ill. Rev. Stat. 1977, ch. 40, par. 101 et seq.) the trial court erred by denying her declaratory relief with respect to the permissibility of joint custody arrangements and the rights and obligations of the parties thereunder.

In light of recent legislation, we find that petitioner’s argument is now rendered moot. During the pendency of this appeal, an amendment creating section 603.1 of the Marriage and Dissolution of Marriage Act became effective upon its enactment on September 17, 1982. Pub. Act 82-1002.

Section 603.1 provides in pertinent part:

“(a) Upon the application of either or both parents or upon its own motion, the court may award joint custody. Joint custody may not be awarded unless it is determined that such custody is in the best interest of the child *** and both parties agree to the joint custody and terms of the joint custody ***.” Pub. Act. 82-1002.

Since section 603.1 expressly authorizes joint custody awards when in the best interest of the subject children and upon agreement of the parties, we reject petitioner’s argument that joint custody is not permissible in Illinois. Accordingly, we turn now to consider respondent’s first contention that the trial court erred by modifying the weekend joint custody residential schedule as set forth in the initial judgment for divorce.

Respondent specifically argues that the circuit court erred in applying a “best interest” test to restrict his visitation with the children, pursuant to the visitation provisions of the Act (Ill. Rev. Stat. 1979, eh. 40, par. 607), which disallows such a restriction absent a finding of serious endangerment to the child.

We find, however, that respondent first argues this position on appeal and it is, accordingly, waived.

In the instant case, the trial court held that modification of the weekly joint custody residential schedule was authorized pursuant to section 610 of the Act, which prior to this appeal provided in pertinent part:

“(b) The court shall not modify a prior custody judgment unless it finds, upon the basis of facts that have arisen since the prior judgment *** that a change has occurred in the circumstances of the child or his custodian and that the modification is necessary to serve the best interest of the child.”

Section 610(b)(1), (2) and (3) further provided for retention of the original custodian subject to a “serious endangerment” to the child test. (We note that the latter provision has been stricken pursuant to the amendments embodied in Public Act 82 — 1002.) Nonetheless, since both parties were retained as joint custodians, we find that the criteria of subsections (1), (2) and (3) of section 610 were not applicable to the case at bar, and the trial court properly applied the “best interests of the child” test in modifying the weekly residential schedule under the prior judgment.

It should be noted parenthetically that we recognize the confusion engendered at the trial court level by the hybrid nature of the joint custody arrangement in the present case, where respondent, a joint custodian, appears to be exercising a form of visitation rights.

Prior to the enactment of section 603.1, joint custody, or the modification thereof, was not specifically authorized or defined by statute. The legislature has now attempted to rectify this previously gray area by providing that joint custody modification after a two-year period following the initial custody judgment must be determined under the standards of section 610. As amended, section 610 provides for such modification where “a change has occurred in the circumstances of the child or either or both parties having custody, and that the modification is necessary to serve the best interest of the child.”

Having examined the application of the correct standard, we are of the opinion that the trial court did not abuse its discretion in determining that the weekend custody schedule is detrimental to the children’s best interests where its frequency prevents a balanced relationship, or recreation time, with their mother and new family unit. The children, ages 8 and 6, are now of school age, and the trial court properly found that at this stage of their development they need more frequent and consistent opportunities to interact with their peer group who are within the area of their primary home with petitioner.

In conjunction with this issue, we have also considered petitioner’s argument on cross-appeal that the trial court erred by retaining the existing Tuesday night custody schedule. We find that the trial court’s determination that both parties have demonstrated a genuine and honest concern for the best interests of their minor children, despite the friction generated between the parents as a result of the Tuesday night visitation, is amply supported by the record.

In addition, we are cognizant that stability of environment is an important factor in determining what is in the best interest of the child. See De Franco v. De Franco (1978), 67 Ill. App. 3d 760, 384 N.E.2d 997.

Since the trial court’s findings with respect to the Tuesday overnight schedule are not against the manifest weight of the evidence, we accordingly affirm this portion of the trial court order.

Respondent next contends that the trial court erred in its determination that the intrinsic nature of his support obligation represented child support and not alimony. We do not agree.

In support of this position respondent refers us to the terms of the agreement incorporated within the original divorce judgment. Article III of the agreement provides that respondent pay petitioner $1,500 a month “as alimony for both her support and that of Alexis and Louis, the minor children of the parties hereto,” and further sets forth that these payments decrease by 60% from $1,500 to $600 a month upon petitioner’s remarriage. There is no separate provision in the judgment providing for child support.

Article XI of the agreement provides: “In the event ESLEE remarries and there is a partial abatement of the installments of money in accordance with Article III *** then the remaining sums to be paid by STANTON to ESLEE *** shall continue to be treatable as periodic payments under Section 71 of the Internal Revenue Code of 1954 and deductible by STANTON under Section 215 ***.”

Despite the provisions of the agreement, however, section 510(b) of the Marriage and Dissolution of Marriage Act provides: “[T]he obligation to pay future maintenance is terminated upon *** the remarriage of the party receiving maintenance ***.” Ill. Rev. Stat. 1977, ch. 40, par. 510(b).

We have previously held that parties to a divorce may not, by their agreement, purport to continue maintenance payments beyond the occurrence of one of the mandatory “terminating” events specified by section 510(b). Bramson v. Bramson (1980), 83 Ill. App. 3d 657, 661, 404 N.E.2d 469, wherein the court stated, “Neither the parties pursuant to agreement nor the courts can avoid the statute’s directive. See Duvall v. Duvall (1972), 8 Ill. App. 3d 53, 289 N.E.2d 59 (by incorporating settlement agreement in the decree, the court does not divest itself of the power to modify).”

It is an established rule in this State that it is not the label placed upon payments made under the terms of a divorce judgment which is determinative of their nature. (Richeimer v. Richeimer (1972), 9 Ill. App. 3d 376, 292 N.E.2d 190.) An agreement to avoid tax consequences by giving the husband the ability to deduct for income tax purposes payments which were actually intended for child support should not be enforced to permit the husband to thus avoid part of his responsibility to support his minor children during the period when they are in the custody of the wife. (Sudler v. Sudler (1976), 35 Ill. App. 3d 917, 342 N.E.2d 772, cert. denied (1976), 429 U.S. 921, 50 L. Ed. 2d 288, 97 S. Ct. 318.) An equitable adjudication of the rights of the litigants must necessarily be predicated upon the substance rather than the form of their agreement. Weber v. Weber (1979), 77 Ill. App. 3d 383, 396 N.E.2d 43.

Accordingly, we find that the trial court did not err in characterizing the respondent’s monthly payments to petitioner as child support and not alimony.

Respondent also urges that the trial court erred by increasing the amount of child support payments from $300 to $600 per month, aggregating a total of $1,200 per month.

In Illinois, maintenance and child support are continuing obligations subject to change as the conditions and circumstances of the parties warrant. (In re Sharp (1978), 65 Ill. App. 3d 945, 382 N.E.2d 1279.) The trial court has the power to modify child support provisions of a divorce judgment if a modification has been shown to be necessitated by changes in the conditions and circumstances of the parties occurring subsequent to entry of the divorce judgment. Winter v. Winter (1978), 69 Ill. App. 3d 359, 387 N.E.2d 695.

When determining whether there is sufficient cause to modify, courts consider both the circumstances of the parents and the circumstances of the children. (Swanson v. Swanson (1977), 51 Ill. App. 3d 999, 367 N.E.2d 512.) New or changed conditions are necessary to warrant a change in support payments (In re Sharp (1978), 65 Ill. App. 3d 945, 382 N.E.2d 1279), and increased needs of children may be presumed from the fact that children have grown older and the cost of living has risen. (Swanson v. Swanson (1977), 51 Ill. App. 3d 999, 367 N.E.2d 512.) Moreover, considerable discretion is placed in the trial court and an order of modification will not be disturbed on review, absent an abuse of discretion. Edwards v. Edwards (1970), 125 Ill. App. 2d 91, 259 N.E.2d 820.

In the present case, the court predicated its determination upon evidence that respondent is a practicing attorney and a partner in a law firm; that he earned income which has substantially increased since the entry of the original judgment in 1977; that the cost of living had increased greatly; that the minor children are now of school age and are no longer preschoolers; that although the evidence showed that petitioner’s expense list was “somewhat inflated,” the children’s needs and activities had in fact greatly increased since the time of judgment.

In addition, our independent review of the record discloses that neither party disputes that petitioner, who is currently not employed, has personal assets which consist of her equity in the family residence and $2,400 in annual dividend income from stock investments. While we have duly noted, as respondent urges us, the increase in petitioner’s second husband’s income from his medical practice, we do not consider this to be a persuasive or a controlling factor.

The financial status of a divorced parent’s current spouse should not be considered in determining the ability of that spouse to fulfill his or her duty to support. Robin v. Robin (1977), 45 Ill. App. 3d 365, 359 N.E.2d 809.

Accordingly, we do not believe the trial court erred in awarding an increase in support payments in light of the evidence.

Respondent also argues that the trial court improperly denied his supplemental petitions seeking recovery of a portion of the monthly payments received by petitioner during the period she resided with Dr. Brody prior to their marriage.

Section 510 of the Marriage and Dissolution of Marriage Act (Ill. Rev. Stat. 1979, ch. 40, par. 510) provides in pertinent part that “the provisions of any judgment respecting maintenance or support may be modified only as to installments accruing subsequent to the filing of the motion for modification ***.”

Respondent argues, however, that his obligation to pay terminated automatically upon petitioner’s cohabitation with Dr. Brody pursuant to section 510(b) (Ill. Rev. Stat. 1979, ch. 40, par. 510(b)), which provides that the obligation to pay future maintenance is terminated if the party receiving maintenance cohabits with another person on a resident, continuing, conjugal basis. We disagree with respondent’s contention.

It is well settled that a party may not unilaterally reduce allowances on the basis of a claimed change in circumstances. Modification is considered a judicial function which is to be administered by the court in its discretion. (Brandt v. Brandt (1981), 99 Ill. App. 3d 1089, 425 N.E.2d 1251.) Since a court has no power to modify past due installments of maintenance (Green v. Green (1974), 21 Ill. App. 3d 396, 315 N.E.2d 324), a petition for modification- or termination would only apply to payments owed subsequent to the date of the filing of the petition. Kowalski v. Kowalski (1981), 96 Ill. App. 3d 830, 422 N.E.2d 83.

Consequently, we find that the trial court properly denied respondent the retroactive recovery of a portion of the monthly payments.

Finally, we consider respondent’s argument that a major portion of petitioner’s attorney fees and costs were improperly assessed against him.

Respondent refers us to article XII of the agreement which states:

“It is understood and agreed that each party will pay his or her attorney’s fees and court costs incurred either in connection with this Agreement or in connection with any proceedings involving this Agreement.”
The judgment further provides:
“Notwithstanding such adoption of said Agreement herein [the divorce judgment], said Agreement, by its specific terms, shall not be merged into this Judgment but shall continue to have independent legal significance without the ambit of this Judgment and shall be subject to enforcement by either party as in the case of any other contract or Agreement, as well as enforced by this Court by way of summary proceedings.”

Respondent argues that the parties’ agreement concerning the payments of attorney fees is crystal clear on its face. We agree.

It is well settled that in interpreting any contract, the intent of the parties is to be gathered by giving to the contract a fair and reasonable interpretation, from the language of the entire contract, considered in light of the circumstances under which it was made. (Stevens v. Fanning (1965), 59 Ill. App. 2d 285, 207 N.E.2d 136.) This intention will be given full force and effect unless it is repugnant to another rule of law or is against public policy. Cimino v. Cimino (1968), 93 Ill. App. 2d 412, 236 N.E.2d 299.

In Cimino, the divorce judgment between the parties provided that each of the parties should bear his or her own fees arising out of the divorce proceedings. Finding the language of the agreement to be “precise, plain, clear, unequivocal and devoid of any ambiguity” (93 Ill. App. 2d 412, 416), the Cimino court concluded that, since there was no ambiguity in the agreement, no question of construction arose. The court then held that, under the circumstances of the case, it was neither reasonable, proper, nor just to tax the husband with the wife’s attorney fees.

Here, as in Cimino, the terms of the agreement with respect to attorney fees are clear and unequivocal, and it was freely and knowingly entered into by both parties and approved by the court. Furthermore, petitioner has not demonstrated a financial inability to pay her portion of the fees as originally agreed. Under these circumstances, we find that a binding interparty contract resulted which is not repugnant to another rule of law nor is it against public policy.

Accordingly, we hold that the trial court improperly assessed a portion of petitioner’s attorney fees against respondent.

For the preceding reasons, the order of the circuit court of Cook County is affirmed as to (1) the modification of the weekend joint custody residential schedule; (2) the characterization of respondent’s monthly payments to petitioner as child support; (3) the increase of the amount of child support payments; and (4) the denial of respondent’s supplemental petition seeking retroactive recovery of a portion of the monthly payments, and is reversed as to the assessment of a portion of petitioner’s attorney fees against respondent, and remanded for further proceedings consistent with the views expressed herein.

Affirmed in part; reversed in part and remanded.

SULLIVAN, P.J., and MEJDA, J., concur.

      The former term “alimony” is now replaced by the term “maintenance.” Ill. Ann. Stat., ch. 40, par. 504, Historical and Practice Notes, at 523 (Smith-Hurd 1979).


source: Caselaw Access Project

author: PRESIDING JUSTICE SULLIVAN

license: Public Domain

text:
    INDIANA HARBOR BELT RAILROAD COMPANY, Plaintiff-Appellant, v. THE BUDD COMPANY, Defendant-Appellee.
    First District (5th Division)
    No. 81—2257
    Opinion filed October 29, 1982.
    Anna M. Kelly, of Chicago, for appellant.
    Vedder, Price, Kaufman & Kammholz, of Chicago (Victor L. Lewis, Allan E. Lapidue, and Richard A. Kaminsky, of counsel), for appellee.
   PRESIDING JUSTICE SULLIVAN

delivered the opinion of the court:

Plaintiff appeals a judgment against it in an action to collect additional demurrage charges based upon a recomputation of the charges previously made.

Initially, it should be noted that because the facts have been set forth in a prior appeal in this matter, they will be repeatéd only insofar as they are pertinent here. In this regard, it appears that since 1950, plaintiff has supplied empty railroad cars needed by defendant for the loading and transportation of its products. Cars assigned for defendant’s exclusive use were stored at plaintiff’s freight yard six miles from defendant’s industrial plant, and plaintiff — upon receiving an order for cars — would deliver them to one of defendant’s five interchange tracks located adjacent to its plant where they would remain until defendant’s switching crews took them from the interchange tracks and brought them inside its plant for loading. After the cars were loaded, defendant’s crews returned them to one of the interchange tracks and released them to plaintiff for delivery to defendant’s customers.

Prior to October 1973, the parties had always treated the cars as subject to demurrage from the time defendant placed them in its plant for loading until they were released to plaintiff for delivery, but plaintiff concluded that it had improperly interpreted the tariffs governing demurrage, and it notified defendant that as of October 1973, demur-rage would be assessed from the date empty cars were placed on the interchange tracks until they were released under load to plaintiff. Thereaftér, all demurrage bills were assessed consistent with the new method of calculation and have been paid by defendant. Plaintiff, however, also issued corrected bills to defendant, pursuant to section 16(3) of the Interstate Commerce Act (49 U.S.C. sec. 16(3) (1976)) (current version at 49 U.S.C.A. secs. 11705, 11706 (1982)), for the period from March 1, 1971, to September 30, 1973, based upon a recomputation under the new method. Defendant, having already paid the charges that were assessed during that period, refused to pay the additional amount.

Plaintiff then brought this action, seeking $425,685 from defendant for the additional demurrage charges for the stated period. Defendant counterclaimed for $40,000 — the amount of the increase in charges it had paid to plaintiff from October 1973 through the date of the filing of the amended complaint — and it later moved for and was granted summary judgment, which this court reversed and remanded in the prior appeal. The ensuing trial resulted in a finding for defendant on plaintiff’s claim for the additional demurrage charges and for plaintiff on defendant’s counterclaim. This appeal is brought by plaintiff from the denial of its claim.

Opinion

The sole question presented here is the propriety of the trial court’s finding that plaintiff may not recover additional demurrage charges from defendant for the period from March 1, 1971, through September 30, 1973.

Initially, we note that the demurrage tariffs pertinent here include Freight Tariff No. 4 — 1, I.C.C. No. H — 36, effective June 1, 1968, and Freight Tariff No. 4-J, I.C.C. No. H-59, effective April 1, 1973, which replaced and is phrased identically to Tariff No. 4 — 1, and in Section 1, Rule 3, Item 910 thereof, there are two relevant sections which are set forth as follows:

“SECTION D. — *** on cars to be delivered on other-than-public-delivery tracks, time will be computed from the first 7:00 A.M. after actual *** placement on such tracks.
Time computed from actual placement on cars placed at exactly 7:00 A.M. will begin at the same 7:00 A.M.; actual placement to be determined by the precise time the engine cuts loose. * * *
NOTE. — ‘Actual Placement’ is made when a car is placed in an accessible position for loading or unloading or at a point previously designated by the consignor or consignee. ***
SECTION E. — *** on cars to be delivered on interchange tracks of industrial plants performing the switching service for themselves or other parties, time will be computed from the first 7:00 A.M. after actual *** placement on such interchange tracks until return to the same or another interchange track. Time computed from actual placement on cars placed at exactly 7:00 A.M. -will begin at the same 7:00 A.M.; actual placement to be determined by the precise time the engine cuts loose.”

The law conclusively presumes that shippers are aware of lawful tariff rates (Kansas City Southern Ry. Co. v. Carl (1913), 227 U.S. 639, 57 L. Ed. 683, 33 S. Ct. 391; Illinois Central Gulf R.R. Co. v. Tabor Grain Co. (N.D. Ill. 1980), 488 F. Supp. 110), and where error or misrepresentation of a proper rate is made by a carrier, a shipper may riot invoke the doctrine of waiver or estoppel against the right of a carrier to enforce legally applicable rates (Illinois Central Gulf R.R. Co. v. Tabor Grain Co.; Illinois Central Gulf R.R. Co. v. Golden Trian gle Wholesale Gas Co. (N.D. Miss. 1976), 423 F. Supp. 679, aff’d (5th Cir. 1978), 586 F.2d 588; Illinois Central Gulf R.R. Co. v. Sankey Brothers, Inc. (1979), 78 Ill. 2d 56, 398 N.E.2d 3; see generally 13 Am. Jur. 2d Carriers sec. 109 (1964)). To hold otherwise would undermine the general purposes of tariffs to promote uniformity and to avoid rate discrimination among shippers. (Illinois Central Gulf R.R. Co. v. Tabor Grain Co.) However, where an ambiguous tariff is drafted by the carrier and its construction is in doubt, the tariff should be construed in favor of the shipper since the carrier is presumed to have used language necessary to protect its interest. Further, railroads which drafted tariffs and acquiesced in the shipper’s interpretation over a long period of time are deemed to have given the tariff the same interpretation as the shipper. Illinois Central Gulf R.R. Co. v. Tabor Grain Co.; Norfolk & Western Ry. Co. v. Continental Grain Co. (E.D. Mo. 1979), 473 F. Supp. 1093, aff’d (8th Cir. 1980), 620 F.2d 307; Kansas City Southern Ry. Co. v. Kansas City Power & Light Co. (W.D. Mo. 1976), 430 F. Supp. 722, aff’d (8th Cir. 1977), 551 F.2d 1134; Calcium Carbonate Co. v. United States (S.D. Ill. 1966), 256 F. Supp. 99.

In Calcium Carbonate Co., two railroads submitted revised tariff rates to plaintiffs, who were in the business of selling and shipping ground limestone, contending that the rates collected and charged during the preceding three years were inapplicable and that a higher scale was controlling. The controversy involved a dispute over the meaning of language in the applicable tariff and, in finding for plaintiffs, the court reasoned:

“We think it highly significant that the intervening railroads for a period of more than three years accepted without question the certification made by plaintiffs and other shippers of ground limestone as being in substantial compliance with Section 4. ***. As the railroads were the progenitors of the tariff and acquiesced in plaintiffs’ interpretation for such a long period, we think the inference inescapable that they interpreted it in the same manner. To think otherwise would necessarily attribute to the carriers a degree of indifference, negligence or plain stupidity, for which the record furnishes no justification.” 256 F. Supp. 99,103.

Similarly, in Tabor Grain Co., where the court distinguished between misapplication of a tariff and the interpretation of ambiguous language, the court held:

“The court finds that defendants are not invoking — nor could they invoke — the doctrine of waiver or estoppel. The ICG now may believe that the tariff was misapplied from 1976 to 1978. However, the evidence clearly reveals that during that period both the shippers and the carrier interpreted the language in the same way; or at the very least that the carriers willingly acquiesced in, and in fact supported, the shipper’s interpretation. Given these findings, plaintiff cannot successfully argue that the tariff was merely misapplied. The procedures followed and the rates applied were the result of a joint agreement by the shippers and the carriers regarding the proper application of Tariffs 604 and 804.” 488 F. Supp. 110,121.

In the instant case, plaintiff has no quarrel with the decisional law holding that ambiguities in tariff provisions will be construed in favor of the shipper, but it maintains that demurrage charges were improperly assessed during the period in question and that no tariff ambiguity exists with respect to sections D and E, which it contends are unrelated and must be read separately. Plaintiff further maintains that demurrage should have been computed during this period under section E, because that section specifically refers to the situation, as here, where cars were “delivered on interchange tracks of industrial plants performing the switching services for themselves” and that, pursuant to this language, demurrage charges began to run from the time cars were placed on defendant’s interchange tracks.

It is defendant’s position that the definition of actual placement appearing in the “Note” between sections D and E, in Rule 3 is controlling of the provisions of both sections, and under that definition, when cars were delivered to the interchange tracks of industrial plants performing switching services themselves, demurrage computations were not to begin until the cars were “placed in an accessible position for loading or unloading or at a point previously designated” by the parties. Defendant reasons that in the instant case, while there is evidence that plaintiff delivered cars to and removed cars from the interchange tracks of defendant, there never was a point designated by the parties for the placement of cars and, in light thereof, defendant concludes that demurrage was properly calculated because actual placement of the cars occurred only when they were “placed in an accessible position for loading.”

Thus, the significant question presented is whether the tariff is ambiguous with respect to whether the “Note” definition of actual placement is applicable to section E, and from our examination of the records and briefs filed in this and the prior appeal, it is our view that ambiguity does exist in this regard. This ambiguity is also indicated in the contention of plaintiff that the “Note” definition of actual placement does not apply to section E because that section has its own ex-elusive definition of the term in its language that “actual placement [is] to be determined by the precise time the engine cuts loose.” We note, however, that this exact language is also in section D, and it thus appears to us that it is not a definition but rather was used in both sections solely to ascertain “the first 7:00 A.M.” after actual placement on those tracks, which would be determined from the time the engines cut loose from the cars. Thus, if we accepted this contention of plaintiff, that the “Note” definition did not apply to section E, we would also have to find that it did not apply to section D.

Furthermore, we note that section D pertains to cars delivered “on other-than-public-delivery tracks,” with demurrage charges to be computed from “the first 7:00 A.M. after actual *** placement” on those tracks. Section E concerns cars delivered “on interchange tracks of industrial plants performing the switching services for themselves” with time to be computed from “the first 7:00 A.M. after actual *** placement” on those tracks. An ambiguity additionally exists in the description of the tracks in that, while each section provides for a different method of demurrage computation, both sections would appear to control the present case. Section D refers to “other-than-public-delivery tracks,” and Section 1, Item 20(c) of Tariff 4 — 1 states that “[flor the purpose of these rules, a privately owned *** track ***, will constitute an ‘other-than-public-delivery’ track.” It would appear also that each of the interchange tracks here is a private track, which is defined in Section 1, Rule 1, Item 900, of Tariff 4 — 1 as “a track outside of this railroad’s right of way, yard and terminals and of which this railroad does not own either nails, ties, roadbed or right of way.”

We conclude that the ambiguity found within sections D and E must be construed in defendant’s favor. This is particularly true since it clearly appears that the manner in which the demurrage rules were applied was the result of joint agreement between the parties, and both plaintiff and defendant accepted and acquiesced in the interpretation of the ambiguously drafted tariff for a period of 23 years. Defendant was thus entitled to rely on the interpretation given the tariffs by plaintiff for the relevant period prior to October 1, 1973. Accordingly, we hold that the trial court properly found defendant was not liable to plaintiff for the additional demurrage charges sought in its action, and we affirm the judgment appealed from.

Affirmed.

LORENZ and WILSON, JJ., concur.

      Monetary charges assessed by a carrier against a shipper for detention of a car held by the shipper for loading or unloading after a period of “free time” allowed by the demurrage tariffs.

        Indiana Harbor Belt R.R. Co. v. Budd Co. (1980), 87 Ill. App. 3d 91, 408 N.E.2d 944.

      defendant subsequently reduced its claim to $399,280 in an amendment to its second amended complaint.

      Defendant has not appealed the adverse ruling on its counterclaim.


author: JUSTICE McGILLICUDDY

text:
    CARL F. CHAPMAN et al., Plaintiffs-Appellants, v. THE DEPARTMENT OF REVENUE, Defendant-Appellee.
    First District (3rd Division)
    No. 80—2912
    Opinion filed August 4, 1982.
    Rehearing denied December 2, 1982.
    Vernon T. Squires and Randall S. Rapp, both of Chicago, for appellants.
    Tyrone C. Fahner, Attorney General, of Springfield (Joseph D. Keenan III, Special Assistant Attorney General, of counsel), for appellee.
   JUSTICE McGILLICUDDY

delivered the opinion of the court:

This action, brought by the trustees of the Chicago Dock and Canal Trust (the Trust), sought administrative review of the decision of the Illinois Department of Revenue (the Department) denying the Trust’s claim for a refund of certain State income taxes paid by the Trust. The trustees appeal from an order of the circuit court of Cook County which affirmed the Department’s denial.

The issues presented for review are: (1) whether the Illinois income tax constituted an unconstitutional retroactive tax; (2) whether the tax discriminated against the class of corporate taxpayers; and (3) whether the Trust should be treated as a corporation for Illinois income tax purposes.

The Chicago Dock and Canal Trust was organized on January 22, 1962, as an Illinois business trust to succeed to the business and assets of the Chicago Dock and Canal Company (the Company), an Illinois special charter corporation. The conversion to the trust was a qualified reorganization for Federal income tax purposes. The trust succeeded to the Company’s Federal income tax bases in assets acquired from the Company, and the Trust’s holding period for those assets included the Company’s holding period.

On October 31, 1972, the Trust sold certain property that had been held by the Company since the 1800’s. The sale price of that property was $4,500,000; and in accordance with section 1053 of the Internal Revenue Code of 1954 (I.R.C. sec. 1053), the Federal tax basis for that property was $424,000, its fair market value as of March 1, 1913. For Federal income tax purposes, the Trust reported a long-term capital gain of $3,560,093.53. The Trust also included this gain on its Illinois income tax return for its fiscal year ending April 30, 1973, and, at the 4% tax rate, paid $142,403.74 in taxes to the State.

On August 13, 1976, the Trust filed a claim for refund for overpayment of its Illinois income taxes with the Department of Revenue. In computing the refund amount, the Trust applied the provisions of section 203(e)(2)(B) of the Illinois Income Tax Act (the Income Tax Act) (Ill. Rev. Stat. 1973, ch. 120, par. 2 — 203(e)(2)(B)) and reduced its capital gain from the real estate sale by the amount the property appreciated prior to August 1, 1969, the date the Act became effective. The pre-August 1, 1969, appreciation amount, known as the valuation limitation amount, was defined by statute as: “that amount which bears the same ratio to the total gain reported in respect of the property for federal income tax purposes for the taxable year, as the number of full calendar months in that part of the taxpayer’s holding period for the property ending July 31, 1969 bears to the number of full calendar months in the taxpayer’s entire-holding period for the property.” (Ill. Rev. Stat. 1973, ch. 120, par. 2-‘-203(e)(2)(B).) In the instant case, the number of months in the entire holding period (March 1, 1913, to October 31, 1972) was 716; and the number of months in the Trust’s holding period prior to the date of the Act (March 1, 1913, to August 1, 1969) was 677. Thus, the Trust applied the ratio of 677/ 716 to the Federal gain of $3,560,093.53 and determined the valuation limitation amount to be $3,366,177.82. The Trust thereupon reduced its taxable gain by the valuation limitation amount to arrive at a net gain of $193,915.71. Applying a 4% tax rate, the Trust determined that it should have paid income taxes in the amount of $7,756.63 rather than $142,403.74. Therefore, the Trust requested a refund of Illinois income taxes in the amount of $134,647.11.

Although the claim for refund was filed on August 13, 1976, the Department of Revenue did not issue its notice of decision advising the Trust that the claim was denied until April 30, 1980. A corrected notice was issued on May 8, 1980. The Trust sought administrative review. The circuit court of Cook County affirmed the Department’s decision, and this appeal followed.

The Illinois Income Tax Act, as originally enacted, did not provide a valuation limitation deduction. However, a valuation limitation was inferred when in Thorpe v. Mahin (1969), 43 Ill. 2d 36, 250 N.E.2d 633, the Illinois Supreme Court determined that the legislature intended to tax only that portion of capital gains accruing after the Income Tax Act became effective. In 1971, the legislature amended the Income Tax Act and created the valuation limitation deduction for individuals, trusts and estates. (See Ill. Rev. Stat. 1973, ch. 120, pars. 2 — 203(a)(2)(F), 2 — 203(c)(2)(F).) The valuation limitation was not made applicable to corporations. See Ill. Rev. Stat. 1973, ch. 120, par. 2— 203(b).

The Trust argues that without the valuation limitation deduction, the Illinois income tax, as applied to corporations, is an unconstitutional retroactive tax because it taxes corporate income realized from the sale of property that appreciated in value prior to the effective date of the Income Tax Act. The Trust contends that Thorpe held that the tax was a retroactive tax without the valuation limitation. The Trust argues that the legislature, by denying the valuation limitation deduction to corporations, ignored the judicial dictates in Thorpe and thus violated the separation of powers doctrine (Ill. Const. 1970, art. II, sec. 1). The Trust further contends that the trial court in the instant case acted improperly by ignoring Thorpe and ruling that the income tax was not an unconstitutional retroactive tax.

We reject the Trust’s arguments since Thorpe did not determine whether the income tax, as it was originally enacted, was an unconstitutional retroactive tax. While recognizing that retroactive revenue laws may be unconstitutional if they are harsh and oppressive, the court eliminated the retroactive aspect of the Illinois income tax when it determined that the legislature intended to tax only that portion of capital gain accruing after the effective date of the Act. Furthermore, in Mitchell v. Mahin (1972), 51 Ill. 2d 452, 283 N.E.2d 465, cert. denied (1972), 409 U.S. 982, 34 L. Ed. 2d 245, 93 S. Ct. 317, the supreme court specifically stated that Thorpe was decided without reaching the question of whether retroactive application rendered the tax unconstitutional. 51 Ill. 2d 452, 456, 283 N.E.2d 465, 467.

The constitutionality of the Income Tax Act was, however, decided by this court in Warren Realty Co. v. Department of Revenue (1978), 62 Ill. App. 3d 450, 379 N.E.2d 100. In that case, the court adopted the realization of income theory that had been recognized in Justice Davis’ dissenting opinion in Mitchell v. Mahin (1972), 51 Ill. 2d 452, 458, 283 N.E.2d 465, 468. Warren Realty held that the Illinois income tax was not retroactive despite the fact that a portion of the gain taxed was attributable to increases in value occurring prior to the effective date of the Income Tax Act since the gain or profit was not realized until after such date.

In the case at bar, the Trust argues that Warren Realty should be rejected because this court unnecessarily discussed the retroactive taxation issue and because, absent alleged dilatory tactics by the Department of Revenue, the case at bar would have preceded Warren Realty at the appellate court level and would thus not have been controlled by Warren Realty.

We are not persuaded by the Trust’s arguments regarding the precedential value that should be accorded to Warren Realty. Furthermore, we note that the majority view in this country, as stated in City National Bank v. Iowa State Tax Com. (1960), 251 Iowa 603, 102 N.W.2d 381, is that a taxing act is not retroactive when it taxes gain or profit realized by the sale of property subsequent to the effective date of the income tax law, regardless of when the property sold increased in value.

The Trust attempts to distinguish City National Bank by the fact that the tax therein was applied to the gain on the sale of property that had appreciated over a 20-year period rather than a 56-year period as in the case at bar. However, the tax in that case could have applied to gains realized from appreciations occurring over a greater period had the facts so indicated. The Trust also contends that City National Bank actually supports its position because the court in that case began its opinion by citing the general rule that retroactive revenue laws could not be upheld if they went beyond a certain point in time. However, as stated above, the court in City National Bank determined that the tax in issue was not a retroactive tax because it applied to income from gain or profit realized after the effective date of the taxing statute. Thus, in accordance with Warren Realty and the majority view in this country as expressed in City National Bank, we find that the Illinois income tax is a tax on income realized after August 1, 1969, and that, therefore, the tax is not retroactive or unconstitutional.

The next issue raised by the Trust is whether the Income Tax Act unconstitutionally discriminates between the class of corporate taxpayers and the class of individuals, trusts and estates because the Act allows the valuation limitation deduction to the latter class but denies it to the former class.

Generally, the legislature has broad powers to make reasonable classifications in the field of taxation. Such classifications, however, must be based on real and substantial differences between persons taxed and those not taxed and they must bear some reasonable relation to the object of the legislation or to public policy. (Hemmer v. Department of Revenue (1968), 41 Ill. 2d 273, 242 N.E.2d 196.) One who assails the statute has the burden of showing how the legislature has violated the Constitution. (Thorpe v. Mahin.) The plaintiff in the case at bar contends that the Illinois Income Tax Act does not meet the foregoing standards because its distinction between taxpayers regarding the valuation limitation produces distorted results as between similarly situated taxpayers and because that distinction has no counterpart in Federal tax law or the tax laws of other States.

As stated in Thorpe v. Mahin, “there are sufficient differences between the privilege of earning or receiving income as a corporate entity and the privilege of earning or receiving income as an individual, trust or estate to justify their being taxed at a different rate.” (43 Ill. 2d 36, 47, 250 N.E.2d 633, 639.) That court noted that corporations are likely to have lower net incomes for Illinois tax purposes than similarly situated individuals because individuals are taxed on their Federal adjusted gross income while corporations are taxed on their Federal taxable income. In reliance on Thorpe, this court in Brown v. Department of Revenue (1980), 89 Ill. App. 3d 238, 411 N.E.2d 882, stated that these differences justify the denial of the valuation limitation deduction to corporations. Thus, in accordance with Thorpe and Brown, we hold that the Illinois Income Tax Act does not unconstitutionally discriminate against corporations even though they are denied the valuation limitation deduction.

The final issue raised on appeal is whether the Trust should be treated as a corporation for Illinois income tax purposes when under Federal income tax laws it is treated as a real estate investment trust. The Trust contends that it is not a true corporation and does not receive the privileges and advantages that inhere to corporations and that, therefore, it should be treated like individuals, estates and trusts with regard to the valuation limitation deduction.

For the taxable year concerned in the case at bar, section 857 of the Internal Revenue Code of 1954 (I.R.C. sec. 857) specified that a real estate investment trust would be taxed as an ordinary corporation unless 90% or more of its taxable income was distributed. If such a distribution occurred, the trust would be taxed only on the balance of its retained income. As the trial court noted in the case at bar, the beneficiaries of a real estate investment trust could receive larger distributions than the shareholders of a corporation with similar income because the real estate investment trust is only taxed on its retained income. Thus, whether taxed as an ordinary corporation or in accordance with the provisions of section 857, the real estate investment trust received distinct privileges in earning or receiving income that were not enjoyed by individuals, estates or other trusts (see Thorpe v. Mahin, citing Flint v. Stone Tracy Co. (1911), 220 U.S. 107, 55 L. Ed. 389, 31 S. Ct. 342); and the differential treatment accorded those classes of taxpayers with regard to the valuation limitation deduction was proper.

For the foregoing reasons, the judgment of the circuit court of Cook County is affirmed.

Affirmed.

WHITE, P.J., and RIZZI, J., concur.

      The Trust argues that the valuation limitation is not a deduction since it affects the amount of gain realized. For purposes of this opinion, however, we will refer to the valuation limitation as a deduction since the Illinois Income Tax Act provides that the valuation limitation amount is to be deducted from an individual’s adjusted gross income and from the taxable income of trusts and estates. Ill. Rev. Stat. 1973, ch. 120, pars. 2-203(a)(2)(F), 2-203(c)(2)(F).

      The Trust argues that conclusive proof that Thorpe v. Mahin (1969), 43 Ill. 2d 36, 250 N.E.2d 633, involved the question of retroactivity can be found in the following quote from Bodine Electric Co. v. Allphin (1980), 81 Ill. 2d 502, 511, 410 N.E.2d 828, 832-33: “[0]ur holding does not result in the retroactive imposition of tax liability, the problem that concerned the court in Thorpe v. Mahin *** and Mitchell v. Mahin ***.” We do not find the Trust’s argument persuasive, however. While retroactivity was mentioned in both cases, no rulings were rendered on that subject in those cases.

      After January 1, 1980, the required distribution is 95% of the real estate investment trust’s taxable income.