Banchefsky v. BanchefskyBanchefsky v. Banchefsky
Rendered on September 9, 2010
Grossman Law Offices, and Andrew S. Grossman, for appellee.
Gary J. Gottfried Co., L.P.A., and Gary J. Gottfried, for appellant.
APPEAL from the Franklin County Court of Common Pleas, Division of Domestic Relations.
SADLER, J.
{¶1} Defendant-appellant, Robert B. Banchefsky (“appellant“), appeals from a judgment of the Franklin County Court of Common Pleas, Division of Domestic Relations, granting a divorce terminating the marriage of appellant and plaintiff-appellee, Debra K.
{¶2} The parties were married on January 13, 1985 and had two children during the marriage. At present, both children are beyond the age of majority; however, only the older child is emancipated. The younger child is not emancipated due to developmental disabilities.
{¶3} During the marriage, the parties resided in Bexley, Ohio. Appellee is employed as a speech and language pathologist. Appellant is a licensed practicing dentist and, during most of the marriage, was the sole shareholder of a dental practice known as Eastside Family Dental, Inc. (“Eastside Family Dental“).
{¶4} On January 23, 2008, appellee filed a complaint for divorce, naming both appellant and Eastside Family Dental as defendants. Appellant filed an answer and counterclaim on February 14, 2008; Eastside Family Dental did not file an answer. Upon motion of appellant, the trial court joined Raymond James Financial Services, Inc. (“Raymond James“) as a third-party defendant; Raymond James filed an answer on April 29, 2008. Upon the parties’ separate motions, the court issued standard temporary restraining orders pertaining to financial issues. In addition, the court, through a magistrate, issued temporary orders.
{¶5} On October 16, 2008, appellant filed a motion for modification of the temporary restraining orders to allow appellant to sell his dental practice. On May 19, 2009, the parties filed an agreed judgment entry modifying the temporary restraining orders to allow appellant to proceed with the sale. On May 21, 2009, appellant sold the practice to another dentist for $580,000 pursuant to an Asset Purchase Agreement
{¶6} Thereafter, the divorce proceeded to trial over several days in June, August, and September 2009. On September 28, 2009, the trial court filed a Decision and Judgment Entry Decree of Divorce. Therein, the court granted the parties a divorce, divided the marital property, determined that the parties are obligated to support the younger child beyond the age of majority, allocated parental rights and responsibilities for that child, ordered appellant to pay spousal support of $6,000 per month plus processing charge, and ordered appellant to pay child support in the amount of $1,500 per month plus processing charge. In addition, the court released the other defendants from the case.
{¶7} Appellant timely appeals, assigning five errors for our review:
- The trial court erred and abused its discretion when it concluded that Appellant was voluntarily underemployed.
- The trial court erred and abused its discretion when it calculated and averaged Appellant‘s income pursuant to
R.C. §3119.05(H) for the reason that Appellant‘s income was neither inconsistent nor unpredictable. The trial court erred and abused its discretion when it imputed income to Appellant [t]o determine his child support and spousal support obligations.1 - The trial court erred and abused its discretion when it ignored undisputed expert testimony and divided the sale proceeds from Appellant‘s dental practice with personal goodwill included as a marital asset subject to division.
- The trial court erred and abused its discretion for the reason that it failed to equitably allocate the parties’ assets when it allocated to Appellant as martial [sic] assets: (1) the difference between funds expended by Appellant to pay off an automobile and the current value of the automobile; and (2) the current value of the same automobile.
{¶8} Appellant contends in his first assignment of error that the trial court erred in concluding he was voluntarily underemployed. In calculating child support, a trial court must determine the parents’ income. Pursuant to
{¶9} Here, the trial court concluded that appellant was voluntarily underemployed. The court found that appellant was the sole shareholder of Eastside Family Dental for over 20 years, practicing for much of that time primarily in the area of cosmetic dentistry, and that for the three years preceding trial, i.e., 2006, 2007, and 2008, he earned $279,144, $369,961, and $287,288, respectively, from the dental practice. The court further determined that appellant unilaterally decided to sell his dental practice during the course of the litigation. The court further noted that appellant continues to practice dentistry as an independent contractor for Eastside Family Dental, and that appellant projected his gross income of $150,000 to $170,000 for 2009, from which appellant must pay all of his own expenses, including taxes, malpractice insurance, and personal expenses.
{¶10} The court noted that appellant attributed his decreased income solely to the fact that the general downturn in the economy has resulted in a significant decrease in the number of cosmetic dentistry procedures he performs. The court recognized that the decrease in cosmetic procedures performed by appellant was partially responsible for the decrease in appellant‘s income; however, the court also found that appellant‘s decision to
{¶11} The court also discussed appellant‘s “curious” testimonial demeanor when questioned about his intention and/or his ability to continue working at Eastside Family Dental. (Decision and Judgment Entry, 33.) The court found appellant‘s testimony to be conflicting regarding his conversations with the dentist who purchased the practice as to whether appellant would continue his independent contract beyond the six-month timeframe set forth in the agreement. Indeed, the court stated that it “was left with the sense that the Defendant would be welcomed to extend his independent contract with Dr. Saunders [sic]. However, for reasons that are not clear, Defendant indicated personal and professional ambivalence as to whether he will stay employed in this capacity or not.” (Decision and Judgment Entry, 33.)
{¶12} Appellant challenges the trial court‘s characterization of the sale of the dental practice as unilateral, arguing that both parties agreed to sell it. In support of this argument, appellant cites the May 19, 2009 Agreed Judgment Entry modifying the temporary restraining orders to allow the sale of the practice. Appellant contends that the trial court should not have considered the decision to sell the practice in determining whether appellant is voluntarily underemployed. We disagree.
{¶13} Appellee testified that during the marriage she and appellant never discussed the possibility of selling the practice, and that appellant initiated the sale of his own accord after the divorce proceedings commenced. Appellee further testified that although she was not in favor of selling the practice, she ultimately permitted it through the agreed entry. The trial court expressly found appellee‘s testimony regarding her
{¶14} Furthermore, as appellee notes, the Agreed Judgment Entry provides that “[b]y agreeing to allow the sale of the practice pre-decree, neither party is waiving any arguments they may have relative to the practice, specifically including but not limited to the following: the extent to which indebtedness associated with the practice was an appropriate business expense; the classification of the proceeds, or any portion thereof, as marital or separate property; the extent to which a sale of the practice was a reasonable business decision in light of (a) the economy in general and (b) the fact that the Court has yet to rule on the division of property or the issue of support.” (May 19, 2009 Agreed Judgment Entry Modifying the Court‘s Temporary Restraining Order, 2-3.) In addition, the Agreed Judgment Entry provides that “[a]lthough the practice has been sold the trial court shall consider [appellant‘s] earnings from East Side Family Dental in setting a support order.” (May 19, 2009 Agreed Judgment Entry Modifying the Court‘s Temporary Restraining Order, 3.) The parties thus agreed that appellee could assert all arguments pertaining to the sale of the practice, presumably including the parties’ respective involvement in the decision to sell. In addition, pursuant to the terms of the Agreed Judgment Entry, the parties agreed, and the trial court accordingly ruled, that appellant‘s earnings from his dental practice must be considered by the court in fashioning a support order. By extension, those earnings must be considered in determining whether appellant was voluntarily underemployed. We also note that the trial court found no evidence indicating that appellant was either physically or mentally incapable of maintaining his dental practice. Appellant does not dispute the court‘s
{¶15} Appellant further argues that the trial court abused its discretion in finding him to be voluntarily underemployed because the non-competition clause in the APA effectively precludes him from being employed to his full capacity for a period of five years. We disagree. As noted above, the non-competition clause precludes appellant from practicing dentistry within a 10-mile radius of Eastside Family Dental for a period of five years, except as an associate of Eastside Family Dental. At trial, appellant conceded that the non-competition clause does not prohibit him from opening another dental practice or working as an independent contractor for another dentist more than ten miles from Eastside Family Dental. Thus, contrary to appellant‘s assertion, the non-competition clause in the APA does not preclude appellant from being employed to his full potential.
{¶16} The trial court weighed the facts and circumstances in the instant case and concluded that appellant was voluntarily underemployed. Upon thorough review of the record, we cannot find that the trial court abused its discretion in so concluding. Accordingly, we overrule the first assignment of error.
{¶17} In his second assignment of error, appellant contends the trial court abused its discretion in averaging appellant‘s income from his dental practice because: (1) he no longer held that employment and such employment cannot be duplicated; and (2) his income from his dental practice was neither inconsistent nor unpredictable. Once a parent is found to be voluntarily underemployed, the court may then impute income to the parent. In the present case, the court imputed income of $312,131 to appellant. The
{¶18}
{¶19} Appellant cites numerous cases for the proposition that it is inappropriate to employ income averaging when income decreases significantly due to job loss and is not expected to rise again. In McGuire v. McGuire, 4th Dist. No. 01CA2789, 2002-Ohio-1061, the court concluded that the trial court erred by averaging the obligor‘s income when the income did not fluctuate, but, instead, had decreased significantly due to a disabling injury. In Johnson v. Huddle, 4th Dist. No. 03CA19, 2004-Ohio-410, the court found income averaging inappropriate where the obligor‘s income did not fluctuate within his job, but, instead, dropped precipitously due to job loss and would not rise again until he located a new job. Appellant urges that his transition from business owner to independent contractor is analogous to the circumstances in McGuire and Johnson in that his income dropped sharply due to a change in employment status and is not expected to rise again. As such, appellant contends the trial court abused its discretion in averaging his income from his dental practice for the three years preceding the 2009 trial and, instead, should have utilized his income from his employment as an independent contractor. We disagree.
{¶21} This court has determined that income averaging is particularly appropriate where income is unpredictable or inconsistent. Marquard v. Marquard (Aug. 9, 2001), 10th Dist. No. 00AP-1345. Appellant suggests that in so holding, we effectively foreclosed income averaging in cases where income is neither unpredictable nor inconsistent. We do not agree. As noted, a trial court has considerable discretion in calculating income for purposes of determining child support, and this discretion extends to the use of income averaging in appropriate circumstances. In any event, in this case, appellant‘s income from his dental practice was inconsistent over the three years preceding the sale. As noted above, in 2006, 2007, and 2008, appellant earned $279,144, $369,961, and $287,288, respectively. Appellant argues that his 2007 income was simply an anomaly, but offers no explanation for this proposition.
{¶22} Finally, appellant contends that the trial court abused its discretion in including in his earnings used in the average an amount for the personal use of appellant‘s 2005 BMW. Appellant argues that no evidence establishes that appellant‘s
{¶23} For all these reasons, we conclude that income averaging was an appropriate and fair method to assess appellant‘s gross income. Accordingly, we cannot say that the trial court abused its discretion in the use of averaging to calculate appellant‘s income. We thus overrule the second assignment of error.
{¶25} Appellant argues that the trial court was required to consider the statutory mandates of
{¶26} Appellant‘s primary argument is that the trial court failed to consider the factors set forth in
{¶27} Appellant concedes that the trial court properly considered
{¶28} Appellant also concedes that the trial court considered
{¶29} Appellant further contends that because the court acknowledged that no evidence was presented on two of the statutory factors,
{¶30} We note initially that appellant is correct in asserting that the trial court acknowledged that no evidence was presented as to either of these factors; however, the court went on to state that appellant “made it clear that he is searching for employment outside of the Columbus Ohio area.” (Decision and Judgment Entry, 37.) Thus, the court did consider these factors, at least to the extent that they may not have been applicable.
{¶31} Moreover, this court has considered the argument appellant propounds. In Chapman v. Chapman, 10th Dist. No. 05AP-1238, 2007-Ohio-1414, the plaintiff argued that although the trial court cited
{¶32} This court determined that the plaintiff‘s argument wrongly “relie[d] upon the assumption that defendant had the burden of presenting evidence as to each factor set forth in
{¶33} Upon thorough review of the record in the instant case, we cannot conclude that the trial court‘s application of
{¶34} Finally, appellant argues that since the trial court erred in imputing income to him for child support purposes, it correspondingly erred in imputing that same income to him for spousal support calculation purposes. Having determined, however, that the trial court did not abuse its discretion in imputing income of $312,121, the court appropriately imputed that same income to appellant for purposes of calculating spousal support. For all these reasons, we overrule appellant‘s third assignment of error.
{¶35} Appellant‘s fourth assignment of error contends that the trial court abused its discretion in disregarding his expert‘s testimony regarding the value of his separate property interest in Eastside Family Dental. Appellant maintains that he presented uncontroverted expert testimony that the value of his separate property interest in Eastside Family Dental was $215,500. Appellant argues that the trial court ignored this
{¶36} In Hood v. Hood, 10th Dist. No. 09AP-764, 2010-Ohio-3618, ¶13-15, this court set forth the standard for reviewing property divisions in domestic relations cases:
A domestic court has broad discretion to make divisions of property. Middendorf v. Middendorf, 82 Ohio St.3d 397, 401, 1998-Ohio-403, citing Berish v. Berish (1982), 69 Ohio St.2d 318. In divorce proceedings, the trial court must classify property as marital or separate property, determine the value of the property, and divide the marital and separate property equitably between the spouses.
R.C. 3105.171(B) ; Roberts v. Roberts, 10th Dist. No. 08AP-27, 2008-Ohio-6121, ¶16. We review a trial court‘s classification of property as marital or separate under a manifest weight of the evidence standard and will affirm if some competent, credible evidence supports the classification. Taub v. Taub, 10th Dist. No. 08AP-750, 2009-Ohio-2762, ¶15. We will uphold a trial court‘s valuation and division of property absent an abuse of discretion. Roberts at ¶16; Middendorf at 401. * * * If there is some competent, credible evidence to support the trial court‘s decision, there is no abuse of discretion. Middendorf at 401, citing Ross v. Ross (1980), 64 Ohio St.2d 203.“Marital property” includes “[a]ll real and personal property that currently is owned by either or both of the spouses * * * and that was acquired by either or both of the spouses during the marriage” and “[a]ll interest that either or both of the spouses currently has in any real or personal property * * * and that was acquired by either or both of the spouses during the marriage.”
R.C. 3105.171(A)(3)(a)(i) and(ii) . By contrast, “separate property” includes “[a]ny real or personal property or interest in real or personal property that was acquired by one spouse prior to the date of the marriage” and “[p]assive income and appreciation acquired from separate property by one spouse during the marriage.”R.C. 3105.171(A)(6)(a)(ii) and(iii) .A party requesting that an asset be classified as separate property bears the burden of tracing that asset to his or her separate property. Dunham v. Dunham, 171 Ohio App.3d 147, 2007-Ohio-1167, ¶20, 26. When parties contest whether
an asset is marital or separate property, there is a presumption that the asset is marital property, unless proven otherwise. Miller v. Miller, 7th Dist. No. 08 JE 26, 2009-Ohio-3330, ¶20. An appellate court‘s job is not to reweigh the evidence but to determine whether there was competent, credible evidence to support the trial court‘s findings. Dunham at ¶27.
{¶37} As noted above, appellant sold Eastside Family Dental for $580,000 pursuant to the APA executed on May 21, 2009. The parties do not dispute that the sale was an arm‘s-length transaction and that the sale price reflected the fair market value of the practice.
{¶38} The APA specially allocated the $580,000 sale price as follows:
| Dental and Office Furniture | $126,000 |
| Dental Supplies | $ 3,000 |
| Patient Records | $ 20,000 |
| Covenant-Not-To-Compete | $ 15,000 |
| Goodwill | $416,000 |
{¶39} Appellant contends that the trial court should have awarded him $215,500 of the sale proceeds as separate property, which, according to appellant, represents the amount of personal goodwill directly attributable to him. In support of his argument, appellant relies on the testimony of his business valuation expert, Brian Russell, whom he engaged to analyze the sale price of the practice, and more specifically, the enterprise versus personal component of the goodwill portion of the sale, and to provide an opinion regarding those matters. Russell reviewed a business valuation report prepared by another business analyst prior to the sale, along with other relevant documentation, including the APA. In addition, Russell asked appellant to complete a self-reporting goodwill questionnaire and professional practice background questionnaire. In addition to his testimony, Russell submitted a report relative to his opinion.
{¶41} Russell subtracted the value of the tangible property (furniture, supplies, and records), $149,000, from the total sale price of $580,000. Russell opined that the remainder of the sale price, $431,000, should be applied to enterprise and personal goodwill. Russell opined that the amount assigned in the APA to appellant‘s non-competition clause, $15,000, was an arbitrary designation and that the appropriate allocation for appellant‘s willingness not to compete is $215,500, which takes into account all of appellant‘s personal goodwill attributes. In reaching his conclusion, Russell applied the Multiattribute Utility Model (“MUM“), a tool Russell averred is utilized and accepted in the business valuation profession as an objective method of quantifying and weighing the impact of the various characteristics and attributes of personal and enterprise goodwill in assessing the fair market value of a business.
{¶42} The trial court acknowledged the utility of the MUM in determining the impact an individual‘s departure might have on the fair market value of a business. However, the court determined that application of the MUM was neither appropriate nor necessary in the instant case, as the practice had actually been sold in an arm‘s-length
{¶43} Appellant contends the trial court erred and abused its discretion in disregarding Russell‘s expert testimony in favor of its own interpretation of the sales contract. We disagree.
{¶44} We agree with the trial court‘s conclusion that although the MUM may be useful in determining the fair market value of a business, its application and use is inappropriate in the instant case. Here, there was an actual, not hypothetical, sale of appellant‘s dental practice. There is no dispute that the APA, a two-party contract governing the sale of the practice, was an arm‘s-length transaction. The APA includes a breakdown and classification of the total purchase price of the practice, including the
{¶45} A covenant-not-to-compete is considered a nonmarital asset. Brown v. Brown (Dec. 2, 1993), 10th Dist. No. 93AP-634, citing Blodgett v. Blodgett (Oct. 19, 1988), 9th Dist. No. 13547. The trial court thus properly found the $15,000 value of the covenant-not-to-complete included in the APA to be appellant‘s separate property. Accordingly, we overrule the fourth assignment of error.
{¶46} Appellant‘s fifth assignment of error argues that the trial court abused its discretion in allocating to him as a marital asset the current value of appellant‘s 2005 BMW, along with the difference between the amount he paid, through his business checking account, to pay off the car and its current value.
{¶47} The evidence at trial established that appellant is the titled owner of the car, which he purchased for $25,610 while the divorce was pending. (Plaintiff‘s Exhibit 5.) Appellant financed the purchase by obtaining a loan. At the time of trial, the car was valued at $16,340. Appellant utilized his business checking account to pay off the loan in its entirety, in the amount of $24,539. As part of its equitable distribution of assets, the trial court attributed the entire $24,539 to appellant. The court noted that appellant made the unilateral decision to pay off the balance owed. The court concluded that “equity demands that the [appellant] be deemed to have control of the difference between the funds expended and the current value of the automobile. The difference of $8,199 shall also be allocated to the [appellant] for purposes of equalization of marital assets and liabilities herein.” (Decision and Judgment Entry, 17.)
{¶49} Having overruled each of appellant‘s five assignments of error, we hereby affirm the judgment of the Franklin County Court of Common Pleas, Division of Domestic Relations.
Judgment affirmed.
KLATT and FRENCH, JJ., concur.
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