DeMarco v. DeMarcoDeMarco v. DeMarco
Rendered on February 11, 2010
Solove and McCormick, Ronald L. Solove, Kerry L. McCormick, and Elizabeth M. Fischer, for appellee.
Mary Jo Cusack, for appellant.
APPEAL from the Franklin County Court of Common Pleas, Division of Domestic Relations.
BROWN, J.
{¶1} Peter F. DeMarco, defendant-appellant, appeals from a judgment of the Franklin County Court of Common Pleas, Division of Domestic Relations, in which the court granted him a divorce from Cynthia D. DeMarco, plaintiff-appellee.
{¶2} Peter and Cynthia were married July 2, 1983. One child was born as issue of the marriage, and that child is emancipated. During the time of the marriage, one or
{¶3} On July 13, 2007, the magistrate issued a temporary order, pursuant to
{¶4} The final hearing on the matter commenced January 30, 2009. On March 26, 2009, the trial court issued a decision and judgment entry decree of divorce (“decree“). In the decree, the court identified the parties’ marital and separate property and debt, divided the marital property and debt, awarded spousal support to Cynthia, denied Peter‘s motion with regard to the temporary orders, and found Peter guilty of contempt for failure to comply with the temporary orders. Specifically, the trial court found Peter‘s shares in PSI and Detyzco to be marital property and equally divided them
[I.] THE COURT ERRED AND ABUSED ITS DISCRETION IN DIVIDING THE SHARES OF PSI AND DETYZCO BETWEEN THE PARTIES RATHER THAN MAKING A DISTRIBUTIVE AWARD PURSUANT TO 3105.171(A) AND (E)(1) AND (2) O.R.C.
[II.] THE COURT ERRED AND ABUSED ITS DISCRETION IN FAILING TO COMPLY WITH THE AGREED ENTRY FINDING THE DATE OF TERMINATION OF MARRIAGE FOR PURPOSES OF PROPERTY VALUATION WAS DECEMBER 31, 2007.
[III.] THE COURT ERRED AND ABUSED ITS DISCRETION IN FAILING TO MAKE AN EQUAL OR EQUITABLE DIVISION OF THE PROPERTIES.
[IV.] THE COURT ERRED AND ABUSED ITS DISCRETION IN SUSTAINING THE TEMPORARY ORDER AWARD OF SPOUSAL SUPPORT, EXPENSE MONEY, AND PAYMENT OF DEBTS SET FORTH IN THE MAGISTRATE‘S DECISION DATED JULY 11, 2007, AND IN ORDERING ADDITIONAL SPOUSAL SUPPORT.
[V.] THE COURT ERRED AND ABUSED ITS DISCRETION IN FINDING MR. DEMARCO IN CONTEMPT FOR FAILING TO COMPLY WITH THE TEMPORARY ORDER.
{¶5} Peter argues in his first assignment of error that the trial court erred when it divided the shares of PSI and Detyzco between the parties rather than making a distributive award pursuant to
{¶6} With regard to PSI, the trial court found the parties owned combined shares of approximately 51 percent of the total outstanding shares. The court also found that approximately 80 shares were the separate property of Cynthia, while approximately 363 shares were in Peter‘s name and were deemed marital property. Other large shareholders were Dr. William Tyznick, who owned approximately 28 percent of the shares, and Robert Maynard, who owned approximately 12 percent of the shares. Both Peter and Cynthia were involved in the company since 1977, originally developing a frozen dog treat, the rights to which were sold to Nestle in 1987. Peter has been primarily responsible for the continued development of additional products and stock solicitation thereafter, and Cynthia has been involved in a minor capacity. It was undisputed at trial that the idea for the frozen dog treat was Cynthia‘s, and Peter gifted her 80 shares in PSI in recognition of the fact. Heinz Ickert, who performed business valuations on PSI and Detyzco, valued PSI at $962.20 per share. Thus, as of December 31, 2007, the value of the marital shares was $349,279. The court equally divided the marital shares in PSI between the parties and found the 80 shares gifted to Cynthia to be separate property.
{¶7} With regard to Detyzco, which held the original frozen dog treat patent, the trial court found Peter held a 50 percent interest in the corporation, which was a marital asset, while Dr. Tyznick owned the other 50 percent. The trial court found that, as of December 31, 2007, Peter‘s interest in Detyzco was $21,500. The court equally divided the marital shares in Detyzco between the parties, with Peter and Cynthia each holding a 25 percent interest in the corporation.
{¶9} With regard to PSI, Peter‘s interest in the company after the decree is 26.78 percent, Cynthia‘s 36.38 percent, Tyznick‘s 28 percent, and Maynard‘s 12 percent. Peter argues that Maynard testified regarding Peter‘s deficiencies as a business manager and said he would like to find a replacement for him, suggesting Cynthia had the credentials to run PSI. Peter points out that Maynard said he thinks he could work with Cynthia, although he also said he could work with either party, as long as Peter and Cynthia could get along. Peter also asserts that Maynard was unable to recall during his testimony many business details surrounding PSI. Peter again opines he is the only person capable of running the business, and the court‘s decree will prompt years of ongoing litigation.
{¶10} Peter asserts case law consistently supports the concept that, where a small business is concerned, a distributive award should be made rather than dividing the shares in order to disentangle the parties’ economic partnership because the circumstances are not usually conducive to joint decision making by the parties. Peter
{¶11} The trial court has broad discretion in dividing marital assets and liabilities in a divorce action. Cherry v. Cherry (1981), 66 Ohio St.2d 348. Accordingly, an appellate court is limited to a determination of whether, under the totality of the circumstances, the trial court abused its discretion in dividing the property. Holcomb v. Holcomb (1989), 44 Ohio St.3d 128, 131. The term “abuse of discretion” implies more than just an error of law or judgment; it implies that the court‘s attitude is unreasonable, arbitrary or unconscionable. Blakemore v. Blakemore (1983), 5 Ohio St.3d 217, 219.
{¶12} We find Peter‘s arguments unpersuasive. The trial court examined this precise issue in the decree and explained its rationale, as follows:
The Plaintiff requests that the marital shares of PSI, Detyzco and TCC be equally divided between the parties.
Defendant, Peter DeMarco, requests that the value, as determined by his expert, be accepted by this Court and he be given an opportunity to buy-out Plaintiff‘s interest before the shares are physically divided. Defendant argues that Plaintiff has not been significantly involved in the negotiating of any contracts, and development of the production of any of these business entities in any significant manner. Moreover, Defendant suggests that the Plaintiff‘s lack of relationships with current purchasers, manufacturers etc. make a distributive award inappropriate and irretrievably damaging to the corporations. Moreover, Defendant argues maintaining these parties as business associates would be detrimental to the corporations. Finally, Peter DeMarco argues that he is much better suited and experienced to run a manufacturing company and to sell interests in the companies. Further, he indicates that outside of this divorce litigation he can be
counted on to pay Plaintiff her fair share of the value of these businesses. The evidence when taken as a whole does not, however, support Defendants’ claims. * * *
Wherever possible, the Court should attempt to disentangle divorce litigants post decree. This is especially true when business interests are concerned. That said, the facts of this case, taken as a whole, lead the Court to the conclusion that equity will not allow him to “buy” his wife‘s share of PSI at his price. This is most certainly true when, as here, sufficient assets do not exist with which to set off either party‘s respective marital interest. Moreover, this Court does not believe that Peter DeMarco would ever in fact comply with a court order requiring him to pay Plaintiff the value of her share of the assets. Instead, equality and equity can only be served in this case by equally dividing the marital shares of PSI and Detysco [sic] as these are companies that the Plaintiff has been involved and with whom the Plaintiff will be able to remain involved after division of the marital shares. * * *
The credible testimony presented by Robert Maynard and Dr. Tyznick is the combined experiences of mismanagement by the Defendant, his repeated pattern of lack of follow through in promises to pay or repay funds and lack of trustworthiness.
All concerned give the impression that these are viable, valuable business interests. This is certainly re-iterated by the fact that both Plaintiff and Defendant express his and her strong desire to remain an owner of these business interests. In stating such, this Court is keenly aware that this is not a contested shareholder action, but merely a divorce action in which this Court is charged with determining an equitable division of these two parties’ interest in these entities.
Defendant, Peter DeMarco‘s, claims that he will be able to raise the money to buy Plaintiff out of the marital shares of PSI is not credible. By his own testimony, the Defendant indicates the viability of her continued business involvement in his offer to divide and distribute shares to Plaintiff in the event he is unable to pay.
(Emphasis sic.)
{¶14} Under the present circumstances, we cannot find the trial court abused its discretion in finding that fully disentangling the parties’ business interests in PSI and Detyzco was not a viable alternative. The trial court fully explained its reasoning and rationale behind its decision to split the companies’ shares equally. The most apparent reason to reject Peter‘s proposed “buy out” is, as explained by the trial court, sufficient assets do not exist in the marital estate to set off his wife‘s marital interest in the businesses, and there is no evidence that Peter has sufficient separate property to carryout his proposal. The trial court also voiced concern that Peter would fail to comply with a court order to pay Cynthia her share of the marital estate and did not believe that Peter could raise the funds to buy out Cynthia‘s marital share of the businesses. Although Peter testified he could sell enough shares in the businesses to raise sufficient funds, there is nothing in the record to otherwise support this assertion. Also, Peter paid
{¶15} Furthermore, Peter claims throughout his first assignment of error that the other associates with business interests in PSI and Detyzco will “align” themselves with Cynthia, thereby giving Cynthia and the others control of the businesses. There is no definitive evidence to support Peter‘s concerns. Both Maynard and Tyznick testified that they thought Peter‘s guidance of PSI was lacking and indicated their desire to find another CEO. However, neither was particularly active or interested in the companies. Therefore, whether they would eventually attempt to replace Peter is speculative and not an overriding concern of the domestic court. As the court pointed out, the present action is a domestic relations action, not a shareholder action. The parties entered into personal and business relationships that were intertwined without contingency plans in place to guide their respective rights should the marital relationship fail. The court was required to divide the marital assets equitably, if not equally, and the court gave its reasons for its decision.
{¶16} In addition, as explained above, Peter proposed that he pay Cynthia the value of her half share of the businesses via a distributive award under
{¶17} However, the problem in the present case, as already explained, is that there exists insufficient separate property or income from which to make a distributive award. For the trial court to order a distributive award despite the absence of apparent sufficient assets to cover such would place the parties in a different situation. Further, the possibility that Peter might be able to sell shares of the companies to raise sufficient cash to meet such an award within six months is highly speculative. Maynard testified that he has had difficulty raising investment capital in the companies because there is no solid management in place. As the trial court indicated, the alternative in Peter‘s proposal was that he transfer half of the shares in the companies to Cynthia, which is precisely what the trial court did. Given the speculative nature of a distributive award, the trial court was clearly within its discretion not to order such an award and, instead, order the immediate division of shares in the companies. For these reasons, Peter‘s first assignment of error is overruled.
{¶19} Peter argues in his third assignment of error that the trial court erred when it failed to make an equal or equitable division of the properties. Specifically, Peter argues that the trial court ordered that all of the marital debts, including those loans that went into the companies, were to be paid by him, while controlling interest in the companies was
{¶20} However, again, Cynthia has not been given a “controlling” interest in the companies. She does not own more than 50 percent of the stock in any company. Furthermore, as explained above, the record does not reveal that Cynthia, Tyznick, and Maynard have “promised” to takeover the companies. To be sure, Tyznick and Maynard voiced their displeasure of Peter‘s management of the companies in their testimony, but we cannot say that they, along with Cynthia, have promised to oust Peter. Regardless, as the trial court explained, the issue before the court is the equitable division of marital assets, not the governance of these companies. Furthermore, the trial court cannot base its division of marital assets on things that may never occur. With regard to Peter‘s argument that the trial court ordered him to pay debts that had historically been paid by the company, he fails to direct us to any evidence from the trial that indicates which, if any, debts were historically paid by the companies. Neither his nor Cynthia‘s testimony reveals such.
{¶21} The trial court explained its division of the debts in the decree. As indicated above, the main problem confronting the trial court with regard to the division of assets and liabilities was that there were very few liquid marital assets, thereby making a division of debts difficult. Peter requested the marital home, and, given a 50/50 split in the marital interest in the businesses, the only way to achieve equality and equity under these
{¶22} We will address Peter‘s fourth and fifth assignments of error together, as they are related. Peter argues in his fourth assignment of error that the trial court erred when it sustained the temporary order of spousal support, expense, money, and payment of debts set forth in the magistrate‘s July 11, 2007 decision, and in ordering additional spousal support in its final order. Peter argues in his fifth assignment of error that the trial court erred when it found him in contempt for failing to comply with the temporary order. Specifically, Peter argues that, despite income tax returns showing income of $55,546 for 2004, a loss of $1,164 for 2005, and a loss of $33,034 for 2006, the magistrate ordered him to pay $36,900 per year on the mortgage, $8,670.31 per year in taxes, maintenance on the home, credit card debts, $20,000 in joint debts, and $30,000 per year in spousal support, for a total payment of $104,043.72 per year. Peter asserts there is no evidence that he ever made the amount of money necessary to pay the order.
{¶23} With regard to the magistrate‘s temporary orders, the trial court found that because Peter failed to present any evidence as to his 2007 and 2008 income, and he had been able to maintain his other bills, Peter failed to demonstrate that the original temporary orders were inappropriate. With regard to Cynthia‘s motion for contempt related to Peter‘s failure to comply with the temporary orders, the trial court determined
{¶24}
{¶25} Furthermore, failure to pay court-ordered spousal support is classified as a civil contempt. See Pugh v. Pugh (1984), 15 Ohio St.3d 136, 139-40. A prima facie case of contempt is established when the order is before the court along with proof of the contemnor‘s failure to comply with it. Dzina v. Dzina, 8th Dist. No. 83148, 2004-Ohio-4497. Because the nature of the contempt is civil, “willful disobedience” is not a necessary element. Pugh at 140. However, inability to pay support is a valid defense in a contempt proceeding. Courtney v. Courtney (1984), 16 Ohio App.3d 329, 334. The party who failed to comply with the court order to pay support bears the burden of proving an inability to pay. Pugh at 140. We will not reverse a contempt sanction absent an abuse of discretion by the trial court. State ex rel. Ventrone v. Birkel (1981), 65 Ohio St.2d 10, 11.
{¶26} In the present case, Peter‘s fifth assignment of error lacks argument and citations to the record asserting only that it was “clear” he was unable to pay the temporary orders. We cannot find an abuse of discretion when he failed to present any evidence of his 2007 or 2008 income. The court also explained that the parties clearly derived income from their business interests, as indicated by the lifestyle enjoyed during the marriage, albeit beyond their actual means. The court also did not believe that the 2006 income tax return was indicative of the actual earnings. Instead, the court indicated it was inclined to believe that the losses as noted were due to the financial and emotional constraints of the divorce litigation. Peter did not sufficiently rebut any of these bases to demonstrate he was unable to pay the ordered spousal support and attorney fees.
{¶27} We also note that Peter asserts in his fourth assignment of error that the trial court erred when it granted a “punitive” $100 per month spousal support order to Cynthia and retained jurisdiction, which he claims was intended to give Cynthia a “second bite” if Peter makes a lot of money with the companies after the agreed termination date of the marriage or if she fails with the companies. The trial court ordered that Peter must pay Cynthia $100 per month in permanent modifiable spousal support. Peter complains the trial court made no like provision for him if Cynthia were to make “a fortune” on the companies.
{¶28} In the decree, the trial court found there was uncertainty as to the income from the parties’ business interests. The court found that, given Peter‘s actions and demeanor during the course of the litigation, the court was not convinced that Peter will not attempt to thwart Cynthia‘s right to an interest in the businesses. Should Peter succeed, the trial court found, Cynthia may be entitled to an increase in spousal support. However, there is no indication that the trial court was retaining jurisdiction so that it could increase Cynthia‘s spousal support should Peter make “a fortune” with the companies, as Peter alleges herein. Given the distribution of shares, Cynthia would be entitled to any “fortune” made from PSI and Detyzco to at least the same extent as Peter. The trial court‘s concern, based upon its observation of Peter‘s demeanor and his history of failing to pay Cynthia her due monies, was that Peter might manipulate some aspect of the companies’ finances, structure, or other facet to diminish her rights or economic benefits
{¶29} Accordingly, Peter‘s five assignments of error are overruled, and the judgment of the Franklin County Court of Common Pleas, Division of Domestic Relations, is affirmed.
Judgment affirmed.
FRENCH and CONNOR, JJ., concur.
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