Guagenti v. GuagentiGuagenti v. Guagenti
Appeal from Allen County Common Pleas Court Domestic Relations Division Trial Court No. DR 2013 0514
Judgment Affirmed
Date of Decision: May 8, 2017
APPEARANCES:
Jose M. Lopez for Appellant
Andrew B. King for Appellee, Mark Guagenti
{¶1} Plaintiff-appellant, Bridget C. Guagenti (“Bridget“) appeals the September 7, 2016 Amended Judgment Entry/Decree of Divorce issued by the Allen County Court of Common Pleas, Domestic Relations Division, granting her complaint for a divorce from Mark Guagenti (“Mark“). On appeal, Bridget assigns as error (1) the trial court‘s determination that the assets in the Samuel J. Guagenti 2007 Irrevocable Trust did not constitute marital property subject to equitable division; (2) the trial court‘s application of the $150,000 combined income level cap in calculating Mark‘s child support obligation; and (3) the trial court‘s decision to award Bridget only $300,000 for Mark‘s financial misconduct during the divorce proceedings.
Relevant Facts
{¶2} Bridget and Mark were married in 1992. Three children were born as issue of their marriage in 2000, 2002, and 2004.
{¶3} In 1996, Mark took a position as an office manager in the family business, C&G Distributing, Co., Inc., (“C&G Distributing“) an S-corporation operating in the wholesale beverage business. Mark eventually became the Chief Operations Officer of the business drawing an upper management salary, but was not a shareholder of the corporation. Rather, the record reflects that Mark‘s father,
Samuel J. Guagenti 2007 Trust
{¶4} In 2007, the shareholders of C&G Distributing began discussions of a possible sale of the corporation and considered estate planning matters attendant to their ownеrship interests. (See Atty. Pappas Depo. at 11-12). On October 11, 2007, Samuel Guagenti, as Grantor, executed the Samuel J. Guagenti 2007 Irrevocable Trust (“SJG 2007 Trust“). Mark was named Trustee. Another individual, who was not Mark, was also named as the “Special Trustee” under the terms of the Trust Agreement, “with respect to any stock or other equity interest of the trust in an entity that is a wholesaler of products of ANHEUSER-BUSCH INC., or any other brands, directly or through its affiliates * * *.” (Samuel J. Guagenti 2007 Irrevocable Trust at p. 1). The Trust Agreement named Mark and his children as beneficiaries; specifically, it provided that “[t]he purpose of the Grantor [i.e., Samuel] in entering into this agreement is to effectuate a plan for the orderly, businesslike administration of the trust estate for the benefit of the Grantor‘s descendants, in particular the Grantor‘s son and the Grantor‘s son‘s children.1 (Id.).
{¶5} The Trust Agreement further stated that the Trustee shall accumulate all income earned by the Trust, and permitted the Trustee to distribute portions of
The SJG 2007 Trust‘s Purchase of Corporate Shares
{¶6} In 2008, Samuel initially funded the SJG 2007 Trust with a contribution of $10,000 and the right to purchase his 33.3% stake in C&G Distributing. The same year, the SJG 2007 Trust borrowed $3,000,000 from Fifth-Third Bank to purchase Samuel‘s shares. Mark participated in the transaction in a fiduciary
{¶7} As a shareholder of the corporation, the SJG 2007 Trust received distributions which were used to pay the interest on the three-million-dollar loan with Fifth-Third. Shortly after purchasing Samuel‘s share, the SJG 2007 Trust also became a member of C&G Investment Properties, LLC, which held titles to certain real property, including the real estate upon which C&G Distributing‘s distribution centers were located. Thus, the SJG 2007 Trust had two streams of income, the accumulation of which Mark, as Trustee, was entitled to distribute to himself and the other beneficiaries for support, maintenance, health or education: (1) income flowing from the S-corporation shares of C&G Distributing and (2) rental income from C&G Investment Properties, LLC.
Sale to Anheuser-Busch
{¶8} On June 12, 2013, the shareholders of C&G Distributing—the Virginia M. Cajacob 2007 Irrevocable Trust, the Francis J. Guagenti 2007 Irrevocable Trust, and the Samuel J. Guagenti 2007 Irrevocable Trust each entered into an agreement, through their respective trustees, for the sale of C&G Distributing‘s assets to Anheuser-Busch for $47,700,000, of which one third or $15,900,000 was
Case Procedural History
{¶9} On November 12, 2013, Bridget filed a complaint for divorce initiating this action. Bridget filed a motion to join the SJG 2007 Trust as Third Party Defendant, claiming that she was entitled to the assets contained in the Trust because the assets were property acquired by Mark during the marriage and the profits thereof were attributable in part to Mark‘s employment at C&G Distributing. Thus, Bridget claimed that the trust assets resulting from the sale of the business to Anheuser-Busch were subject to equitable division in the divorce.
{¶10} On April 15, 2015, the trial court held a two-day final divorce hearing. Prior to the hearing, the parties stipulated to a number of matters related to the custody of the children and the division of certain marital property, including the allocation of the marital residence to Bridget. The matters remaining for the trial court to resolve focused upon whether the assets of the SJG 2007 Trust were marital
The Trial Court‘s Decision
{¶11} The trial court issued a decision on March 10, 2016. In a thorough and detailed opinion, the trial court outlined numerous reasons in support of its determination that “the creation of the Trust in and of itself is a separate entity and the assets contained within that Trust are * * * neither marital nor separate property. The assets are not property owned by either of the parties at the creation of the SJG Trust.” (Doc. No. 153 at 7). Thus, the trial court concluded that the trust assets were property of a third party, i.e., the SJG 2007 Trust, and not subject to equitable division in the parties’ divorce under
{¶12} However, the trial court did take the income distributions from the SJG 2007 Trust to Mark into consideration when devising an amount for spousal support and child support. The trial court noted that Mark earned an annual salary of $120,000 when he worked in upper management at C&G Distributing prior to the sale of the corporation‘s assets to Anheuser-Busch. As part of the purchase
{¶13} The trial court noted that Bridget had worked in the past earning an annual salary of $85,000. However, the trial court took into account the fact that Bridget had been out of the workforce for several years and imputed a minimum wage income to Bridget for the purposes of its child support calculation. As stipulated by the parties, Bridget was named the residential parent of the three minor children and Mark was given visitation according to the local rule. Mark agreed to pay the cost of the children‘s private education and to provide health insurance for the children. The trial court further determined that “[t]his Court cannot find there
{¶14} Accordingly, the trial court applied the $150,000 combined income level cap to its child support calculation and ordered Mark to pay $24,532 annually to Bridget in child support, or $681.45 per child when health insurance is being provided. If health insurance is not being provided, the trial court ordered Mark to pay $685.37 per child and an additional total of $971.00 per month as and for cash medical support.
{¶15} The trial court assessed the value of the marital property awarded to each party and divided by stipulation, which included the value of vehicles, investment accounts, insurance policies, and Mark‘s personal interest in various business ventures. Mark was ordered to pay Bridget $179,363.56 to equalize the distribution of these assets. The trial court also ordered Bridget to be entitled to the sum of $151,212, plus or minus any gains or loss associated therewith from April 15, 2015 to equalize the value of the parties’ IRA accounts.
{¶16} Upon Bridget‘s motion, the trial court also found that Mark had engaged in financial misconduct by failing to timely and accurately disclose information with respect to assets in the case which resulted in considerable delay
{¶17} The trial court‘s decision was incorporated and implemented in its April 6, 2016 Judgment Entry/Decree of Divorce. Bridget filed an appeal of that judgment, which was dismissed by this Court for a lack of a final appealable order due to the trial court‘s indication in the judgment entry that it intended to take further action with respect to the amount of attorney fees awarded to Bridget. Accordingly, the cause was remanded to the trial court to resolve this pending matter.
{¶19} Bridget filed this appeal, asserting the following assignments of error.
ASSIGNMENT OF ERROR NO. 1
THE TRIAL COURT ERRED AND ACTED CONTRARY TO LAW WHEN IT DETERMINED THAT APPELLEE, MARK GUAGENTI‘S, INTEREST IN THE SAMUEL J. GUAGENTI 2007 IRREVOCABLE TRUST DID NOT CONSTITUTE MARITAL PROPERTY SUBJECT TO DIVISION.
ASSIGNMENT OF ERROR NO. 2
THE TRIAL COURT ERRED IN SETTING THE CHILD SUPPORT OBLIGATION AT THE $150,000.00 LEVEL.
ASSIGNMENT OF ERROR NO. 3
THE TRIAL COURT ERRED IN ONLY AWARDING $300,000.00 FOR HUSBAND‘S FINANCIAL MISCONDUCT.
First Assignment of Error
{¶20} In her first assignment of error, Bridget claims that the trial court erred in determining that the SJG 2007 Irrevocable Trust did not constitute marital property subject to equitable division under
{¶21} Before we address Bridget‘s arguments on appeal, we must first review the evidence in the record regarding Mark‘s interest in the SJG 2007 Trust. Both Mark and Bridget presented expert testimony offering differing opinions characterizing the nature of Mark‘s interest in the SJG 2007 Trust.
Mark‘s Evidence Regarding the SJG 2007 Trust
{¶22} Mark presented the testimony of Robert Pappas, the attorney who drafted the SJG 2007 Irrevocable Trust.7 Mr. Pappas testified that he has maintained a private legal practice since 1984 focusing on the areas of business, tax, estate planning and probate. Mr. Pappas recalled meeting with the individual owners of C&G Distributing, including Samuel Guagenti, Mark‘s father in 2007. Mr. Pappas met with Samuel several times before the execution of the Trust Agreement
{¶23} Mr. Pappas testified that the 2007 SJG Trust expressed Samuel‘s intent to provide for Mark and Mark‘s descendants on a long term basis for at least two generations. There was no provision identifying Mark‘s spouse as a beneficiary. Mr. Pappas explained that “the purpose of the Trust was to make sure that these assets were owned and passed in the way Samuel J. Guagenti wanted them to be.” (Doc. No. 183 at 98). In other words, Samuel as the Grantor “had the right to create the rules under which that Trust was to operate.” (Id. at 145).
{¶24} Mr. Pappas confirmed that the 2007 SJG Trust was not initially funded at the time of execution, but that a contribution agreement between Samuel as “Grantor” and Mark as “Trustee” of the SJG 2007 Trust was executed the same day as the SJG 2007 Trust was created. The contribution agreement stated that the “Grantor intends to contribute to the Trust an initial contribution of cash and rights to acquire stock in C&G Distributing Co., Inc.” (3d Party Def. Ex B). A document entitled “Agreement for Purchase of Sale and Shares of C&G Distributing Co., Inc.,” which was also executed the same day the SJG 2007 Trust was created, provided the terms and conditions for the SJG 2007 Trust to purchase Samuel‘s 41 shares of C&G Distributing for $3,000,000.8 (3d Party Def. Ex. C). In addition to
{¶25} Mr. Pappas refuted Bridget‘s counsel‘s characterization that the SJG 2007 Trust was intended to be a “freely distributable trust” to Mark. (Doc. No. 183 at 144). Rather, Mr. Pappas pointed to the provisions of the Trust Agreement, which only permitted Mark as Trustee to distribute the accumulated income to himself аnd the other beneficiaries if the ascertainable standard contained in the Trust Agreement was met. The Trust Agreement further provided that, when Mark was acting as Trustee, the principal of the 2007 SJG Trust was only to be distributed to the beneficiaries upon approval by the “Protector Committee.” Mr. Pappas relayed that it is not unusual for the Trustee to also be a beneficiary under a trust and that is the case in an estimated ninety percent of the trusts he drafts. He further explained that Mark as Trustee is held to a fiduciary obligation and the 2007 SJG Trust provides standards to which he must adhere. Mr. Pappas noted that the 2007 SJG
{¶26} In March of 2008, Mr. Pappas assisted Samuel in the transaction in which he sold his shares of C&G Distributing to the SJG 2007 Trust by drafting the pertinent documents related to the purchase. As previously discussed, the SJG 2007 Trust‘s purchase of Samuel‘s interest in C&G Distributing was financed by a $3,000,000 loan obtained from Fifth-Third Bank for a term of seven years. The commitment letter from the lending institution identified SJG 2007 Trust as the “Borrower or Debtor” and C&G Distributing as the “Guarantor.” (3d Party Def. Ex. D). According to Mr. Pappas, which the record reveals is substantiated by the loan documents, there were no personal guarantees on the loan and Mark only participated in the transaction in a fiduciary capacity as Trustee of the “Borrower” and at no time ever individually owned any shares of C&G Distributing during the transaction. Notably, the “protector committee” was required to approve any borrowing by the Trust, which it did in this transaction with Fifth-Third Bank. (3d Party Def. Ex. D).10
{¶28} Mr. Pappas also counseled Samuel on the transaction involving the sale of the corporation‘s assets to Anheuser-Busch in June of 2013. He explained that while out of state attorneys for the buyer were lead counsel, he assisted with the navigation through applicable Ohio law and was aware of each step of the transaction. In June of 2013, Anheuser-Busch purchased the stock outright and the real estate held by C&G Investment Properties was purchased at a later time. The SJG 2007 Trust received its share of the proceeds from both of these sales.11
{¶30} Mark, in accordance with his powers as Trustee, placed most of the proceeds from the sale into investment accounts. Mr. Pappas assisted Mark in purchasing annuities for the beneficiaries of the SJG 2007 Trust, but did not have any personal knowledge of the other investments made with the Trust assets.12 Mark presented additional evidence regarding the Trust assets after the sale of C&G Distributing to Anheuser-Busch.
{¶32} Mark provided additional testimony regarding his purchase of the condo. Mark purchased a condo in 2014 after the divorce was filed by using a line of credit from his personal account secured against the SJG 2007 Trust account. Mark‘s testimony and the exhibits admitted into evidence revealed that on
{¶33} Mark also presented the testimony of Tiffany Crawford, a tech supervisоr with Rea & Associates Inc., with a background in accounting and a licensed attorney. Ms. Crawford assessed the disbursements from the SJG 2007 Trust for the time period of 2008 to 2014. According to Ms. Crawford, “if a check was written from the Trust, I determined to whom the check was written to [sic].” (Doc. No. 183 at 177). She recalled that during this timeframe, checks were written to Mark, Lincoln Financial, Northwestern Mutual and JP Morgan Chase.
{¶34} Ms. Crawford discussed Defendant‘s Exhibit S, a compilation of draft tax returns for the year 2014 prepared for Mark and Bridget to file jointly, as well as draft tax returns for the 2007 SJG Trust and Mark‘s other business entities. However, Bridget‘s counsel objected to the admission of the exhibit due to his claim that he had not seen these items prior to the final hearing and had not been given the opportunity to independently verify the accuracy of the document. The trial court sustained the objection for the documents related to 2014 and permitted Mark‘s counsel to question Ms. Crawford regarding the 1041 tax forms for the 2007 SJG Trust for the years 2008 to 2013 because those had already been admitted as exhibits in Bridget‘s case. Thus, the 2014 draft joint tax returns were not admitted as evidence. (See Doc. No. 183 at 173).
{¶35} However, the trial court permitted Ms. Crawford to testify to her personal knowledge obtained from working with those documents. She specifiсally recalled that on the joint tax returns the income sources of both parties were included, which reflected investment income, capital gain income, and Mark‘s consulting income. The record demonstrates that this information was only significant to the parties at the hearing regarding the allocation of a certain tax credit,
Bridget‘s Evidence Regarding the SJG 2007 Trust
{¶36} Bridget presented the testimony of James Kordik, a CPA and licensed attorney whose legal practice focused on estate planning. Mr. Kordik surmised that the reason for Samuel creating the SJG 2007 Trust was for income planning purposes.15 Mr. Kordik stated his opinion that all the funds from C&G Distributing stock constituted marital property under
{¶37} For example, Mr. Kordik highlighted distributions made by Mark as Trustee for the purchase of a vehicle ($45,000), a remodel of a bathroom in the marital home ($50,000), the purchase of sports equipment including a 4-wheeler ($16,000), and an investment for a business partially owned by Mark ($300,000), all of which the record indicates was also deemed marital property and included in the trial court‘s equitable division thereof. There were also payments made from the Trust account for the children‘s private school tuition, country club dues, and political contributions.
{¶38} However, it should be noted that in drawing his conclusion with respect to the marital character of the SJG 2007 Trust, specifically the proceeds of the C&G Distributing stock, Mr. Kordik did not discuss when these distributions were made and whether they exceeded Mark‘s authority as Trustee to distribute the accumulated income to the beneficiaries, including himself, for support, maintenance, health, and education. Rather, Mr. Kordik‘s opinion gave little regard to the fact that Samuel created the SJG 2007 Trust with the intent of selling his shares of C&G Distributing to the Trust. Where Mr. Pappas’ testimony appeared to emphasize the third party nature of this transaction, Mr. Kordik viewed Mark‘s
{¶39} Thus, Mr. Kordik opined that Mark‘s participation in the transaction as Trustee in acquiring Samuel‘s shares in C&G Distributing was no different than if Mark “would have received [the shares] as an owner of a corporation or an LLC or himself individually. Under any of the foregoing arrangements, he could have purchased, owned and sold the C&G Distributing Co. stock.” (Kordik Report, Pl.‘s Ex. 1 at 5). Accordingly, Mr. Kordik stated that “in substance Mark Guagenti should be treated as the owner of the C&G Distributing Co. stock during the marriage.” (Id.).
{¶40} Bridget also presented the testimony of David Fortney, a Certified Public Accountant. Mr. Fortney prepared a report summarizing Mark‘s and Bridget‘s personal assets. Specifically, he created summaries detailing the disbursements from the SJG 2007 Trust from March of 2008 through February of 2014. According to Mr. Fortney, the SJG 2007 Trust had a balance of $4,778,011.17. He noted that in addition to the substantial amount of funds that were transferred into three investment accounts (Northwestern Mutual, JP Morgan Chase, and Lincoln Financial Group), there were also two primary accounts that received distributions from the Trust. The first was a joint checking account belonging to Mark and Bridget to which $1,674,000 was transferred from the Trust
{¶41} With regard to the income accumulated by the SJG 2007 Trust, Mr. Fortney agreed that prior to the sale of C&G Distributing‘s assets to Anheuser-Busch, in June of 2013, two streams of income were derived from the shareholder distributions from the corporate stock and the rental income from C&G Investment Properties. He further acknowledged that prior to the sale tо Anheuser-Busch the corpus of the SJG 2007 Trust consisted of the land held by C&G Investment Properties LLC, the C&G Distributing Stock purchased from Samuel, and the $10,000 gifted by Samuel.
{¶42} In tracing the disbursements from the SJG 2007 Trust account to the jointly held checking account and Mark‘s personal checking account, Mr. Fortney never identified any disbursement from the SJG 2007 Trust account as exceeding the accumulated income. In other words, there was no testimony indicating that Mark as Trustee exceeded the scope of his authority under the terms of the Trust Agreement in distributing the accumulated income for his or his children‘s support, maintenance, health, and education, nor was there any testimony that the principal
The Trial Court‘s Ruling: The SJG 2007 Trust Belongs to a Third Party
{¶43} It is clear from the trial court‘s March 10, 2016 decision that it carefully considered the above testimony offering differing characterizations of Mark‘s property interest in the SJG 2007 Trust, in determining whether the Trust itself was subject to equitable division in the divorce.
{¶44} The trial court addressed Bridget‘s argument equating the SJG 2007 Trust to that of a corporation or LLC created during the marriage and noted that “the analysis does not take into consideration [that] the SJG Trust was created by a third party and its a separate viable legal entity in and of itself.” (Doc. No. 153 at 5). The trial court highlighted Mr. Pappas’ testimony on the circumstances surrounding the creation of the SJG 2007 Trust and noted that the Trust was created by a third party—Samuel J. Guagenti—“to accomplish the purchase of the stock by the SJG Trust for the benefit of the beneficiaries of the SJG Trust.” (Id. at 6).
{¶45} The trial court further considered the position of Bridget‘s expert Mr. Kordik on Mark‘s individual ownership of the Trust assets due to the authority conferred to him as Trustee while also being the primary beneficiary and found that:
Merely because Mark Guagenti serves in both of those capacities, as well as an officer of the corporation, C&G Distributing Company, Inc., we cannot automatically discount the intent of
Samuel J. Guagenti in formulating the Trust as set forth in the Trust purpose to “effectuate a plan for the orderly business like administration of the Trust Estate for the benefit of the Grantor‘s descendant‘s, in particular the Grantor‘s son and the Grantor‘s son‘s children.” The comparisons to a corporate entity that is created during the term of a marriage or even prior to marriage and ownership of stock of that corporate entity by a husband or wife during the marriage and the proposed inclusion in that corporation of assets that would otherwise be marital can be easily differentiated from the current creation of the Trust by a third party, father of Mark Guagenti.
(Doc. No. 153 at 6).
{¶46} Thus, the trial court found evidence establishing Samuel‘s intent, including the fact that the SJG 2007 Trust was intended to benefit at least two generations of Samuel‘s descendants and that similar trusts were created by other shareholders of C&G Distributing with the pending sale to Anheuser-Busch in mind. The trial court also considered the specific trust provisions contained in the document creating the SJG 2007 Trust. Specifically, that “Mark has unfettered right to distribute the income of the Trust, but must obtain the consent [] from the protector committee before distributing the principal of the trust.16” (Doc. No. 153 at 7).
{¶48} The trial court also reviewed whether Mark had engaged in any conduct inconsistent with the terms of the Trust Agreement, in which he exceeded the scope of his authority as Trustee or which indicated collusion for a dubious purpose to defraud Bridget that would somehow transmute the third party character of the SJG 2007 Trust to make it subject to equitable distribution under
There was no indication that the money distributed to the Samuel J. Guagenti Trust, which was then applied to the three million dollar loan, was a diversion of any funds normally paid to Mark Guagenti as an employee or officer of the corporation. In fact, evidence indicated that like distributions were made to other stock owners, who wеre also trusts, purchasing stock by trusts created by two other previous owners of the C&G Distributing Company, Inc. stock.
There was no evidence to indicate this distribution of funds constituted the redirection of modification of any distributions that Mark would have otherwise individually been entitled to.
* * *
(Doc. No. 153 at 8).
{¶49} The trial court then turned to the parties’ arguments regarding the application of
As all counsel have indicated in their references to [R.C.] 3105.171, marital property consists of all real and personal property that is OWNED (emphasis added) by either or both of the spouses. The creation of the Trust and the purchase of the stock, without any consideration as to how that purchase was accomplished, is not marital property, nor is it the separate property of one of the parties.
(Doc. No. 153 at 7-8) (emphasis sic).
{¶50} Accordingly, the trial court determined that the SJG 2007 Trust was not subject to division in the parties’ divorce and, therefore, that the statutory definitions of marital and separate property set forth in
Standard of Review
{¶51} In a divorce proceeding, the division of the parties’ property is governed by
{¶52} In a manifest weight analysis, the reviewing court weighs the evidence and all reasonable inferences, considers the credibility of witnesses and determines whether, in resolving conflicts in the evidence, the finder of fact clearly lost its way and created such a manifest miscarriage of justice that the judgment must be reversed. Krohn v. Krohn, 6th Dist. Wood No. WD-16-010, 2016-Ohio-8379, ¶ 11.
{¶53} “If the evidence is susceptible of more than one construction, the reviewing court is bound to give it that interpretation which is consistent with the verdict and judgment, most favorable to sustaining the verdict and judgment.” Eastley v. Volkman, 132 Ohio St.3d 328, 2012-Ohio-2179, ¶ 21.17
Discussion
{¶54} Bridget‘s argument on appeal that the trial court erred in finding that the SJG 2007 Trust is not subject to equitable division is premised upon her interpretation of the language in
(3)(a) “Marital property” means, subject to division (A)(3)(b) of this section, all of the following:
(i) All real and personal property that currently is owned by either or both of the spouses, including, but not limited to, the retirement benefits of the spouses, and that was acquired by either or both of the spouses during the marriage; (ii) All interest that either or both of the spouses currently has in any real or personal property, including, but not limited tо, the retirement benefits of the spouses, and that was acquired by either or both of the spouses during the marriage;
(iii) Except as otherwise provided in this section, all income and appreciation on separate property, due to the labor, monetary, or in-kind contribution of either or both of the spouses that occurred during the marriage[.]
{¶55} Bridget argues that the trial court erred in narrowly construing the scope of marital property under
1. Middendorf v. Middendorf
{¶56} Bridget‘s first argument focuses upon the proceeds from the sale of C&G Distributing stock, which makes up the vast majority of the value of the Trust‘s assets. Specifically, she argues that the appreciation in the value of the C&G Distributing stock contained in the SJG 2007 Trust is attributable to Mark‘s employment at C&G Distributing during the marriage. In Middendorf v. Middendorf, the Supreme Court of Ohio held that “[u]nder
{¶57} In Middendorf, Husband was a co-owner and a livestock buyer for Middendorf Stockyard Company, Inc. when he married Wife. Id. at 397. There was no dispute that Husband‘s interest in the stockyard company was his separate property. Id. After six years of marriage, the parties separated. Id. The Supreme Court engaged in a two-step analysis under
{¶58} The Supreme Court found that record showed no abuse of discretion in the trial court‘s and appellate court‘s findings that “‘the increase in value of Middendorf Stockyard Company was the direct result of the pivotal role which [Husband] played in the management of the company during the course of the
{¶59} The trial court specifically addressed Bridget‘s Middendorf argument in its decision.
Bridget argues that the contribution of Mark Guagenti to the corporation C&G Distributing, Inc. during the course of the marriage between the purchase of the stock in March of 2008 and its ultimate sale to Anheuser-Busch in June of 2013 resulted in an increase of twelve million six hundred and sixty-six thousand six hundred and sixty-six dollars and sixty-seven cents [$12,666,666.67] in the value of the stock purchased by the Trust and therefore that increase in the value should be marital in accordance with Middendorf v. Middendorf, 82 Ohio St.3d 397 (1998).
First of all, once again we have a situation where the Trust is a separate entity whereas in Middendorf or such cases one marital party owned the interest in the business entity, that being a separate interest, but there was enhancement to the business entity during the course of the marriage that was not passive in nature, causing the courts in those cases to determine that increase should be a marital asset subject to division.
Even if owned by one or more of the parties, it would appear that there was no “business” reason for the increase in the value of the stock. While Mark testified he was a valuable contributing factor to the ongoing business, from the purchase of the stock by the SJG Trust until the sale to Anheuser-Busch, there was no demonstrative increase in the sales; there was no evidence of change in market shares, increased distribution territory or acquisition of assets. Mark testified the business stayed the same during this time and there was no conflicting evidence. In short, the evidence indicated that the SJG Trust purchased a good business that continued on basically the same pace so long as management continued to distribute product efficiently.
(Doc. No. 153 at 9).
{¶60} Notably, the trial court‘s observatiоn regarding the lack of evidence in the change of value of C&G Distributing between the time Samuel sold his shares to the SJG 2007 Trust and the asset purchase by Anheuser-Busch is accurately reflected in the record. At the final divorce hearing, Bridget only presented the testimony of Mr. Kordik who offered an opinion simply reiterating the principle set forth in Middendorf and its progeny without pointing to any evidence of the financial change in the value of C&G Distributing that could be attributable to Mark as an employee of the corporation.
2. Mark‘s Interest in the SJG 2007 Trust
{¶61} Bridget appears to acknowledge the primary obstacle in making her claim that this case is analogous to Middendorf is that the trial court determined the
{¶62} Bridget specifically directs us to the testimony of her witness, Mr. Kordik, who found no significant distinction between Mark‘s fiduciary capacity as Trustee and Mark‘s capacity individually, stating that it made no difference that Mark only participated in the acquisition of Samuel‘s shares of C&G Distributing and the subsequent sale to Anheuser-Busch as Trustee of the SJG 2007 Trust. Kordik opined that Mark‘s capacity as Trustee and primary beneficiary as stated in the Trust “is tantamount to outright ownership.” (Doc. No. 183 at 23). Mr. Kordik based his opinion upon the broad authority conferred to Mark as Trustee to distribute the accumulated income to himself for his health, support and maintenance.18
{¶63} In a making this argument, Bridget appears to advocate for the position that mere existence of provisions in a trust agreement naming a spouse as trustee
{¶64} Bridget claims that at least one Ohio appellate court has addressed this issue and directs our attention to Maloney v. Maloney, 160 App.3d 209, 2005-Ohio-1368 (2d Dist.). In Maloney, Husband challenged the trial court‘s determination that Wife‘s interest in a trust was not marital property. Wife‘s father owned a self-storage company, where Wife was employed as a manager. Wife‘s parents established a limited partnership that owned the real estate the self-storage company leased and operаted its business upon.
{¶65} During the marriage, a twenty-six percent share of the limited partnership was conveyed to Wife‘s father, as Trustee, for the benefit of Wife. The trial court characterized the conveyance as a gift and noted that Wife received the
{¶66} Bridget specifically highlights the comments made by the appellate court in Maloney in setting the background for the discussion that ”
{¶67} Moreover, there are insufficient facts included in the Maloney case to draw a fair comparison to the instant case in order to say that the statements оf the appellate court in Maloney, in dicta, regarding “any property that either spouse currently owns” or “has” in the context of determining the marital or separate
{¶68} Bridget also directs us to several cases from other jurisdictions in support of her position that the trial court erred in concluding that the 2007 SJG Trust was not subject to equitable division under
{¶69} As the Supreme Court of Vermont observed in Chilkott, a case cited by Bridget on appeal, a “review of opinions from other states on this question reveals there is no unanimity as to whether trial courts should consider or divide future interests in trusts in making a property division * * * [b]ecause characteristics
{¶70} In taking this approach, we note that other jurisdictions have generally taken a similar position as the trial court in this instance that a trust such as the 2007 SJG Trust, which is an irrevocable trust, is an independent third-party entity and that assets held by such a trust are not property owned by either spouse, but rather property owned by a third party, namely the trust itself and as such cannot be subject to equitable division in a divorce. See e.g., McGinn v. McGinn, 273 Ga. 292, 540 S.E.2d 604 (2001); Findlen v. Findlen, 695 A.2d 1216 (Me. 1997); In re Marriage of Jones, 159 Or. App. 377, 981 P.2d 338 (1999); Endrody v. Endrody, 914 P.2d 1166 (Utah Ct. App. 1996).
{¶71} However, to be clear, in this instance Mark does have certain property interests flowing from the 2007 SJG Trust which are subject to
{¶72} Based on the foregoing, and in the particular circumstances of this case, we do not find that Bridget has demonstrated a compelling reason for us to determine that the trial court erred when it found that the SJG 2007 Trust was property of a third party, not marital property, and not subject to equitable division under
Second Assignment of Error
{¶73} In her second assignment of error, Bridget argues that the trial court erred in applying the $150,000 combined income level cap when calculating Mark‘s child support obligation. Specifically, Bridget maintains that the trial court failed to consider evidence indicating that the children were accustomed to higher standard of living in excess of that afforded by the trial court in its child support calculation.
{¶75} “The level of support for a combined gross income of $150,000 is the starting point from which a trial court exercises its discretion in fashioning a child support award for parents with higher incomes.” Bajzer v. Bajzer, 9th Dist. Summit No. 25635, 2012-Ohio-252, ¶ 5;
{¶76} Under
{¶77} It is undisputed in this instance that the parties’ combined incomes are in excess of $150,000 annually. The trial court made the following findings in its March 10, 2016 decision, which were incorporated into the parties’ final divorce decree.
Immediately before the termination of this mаrriage the parties had a very lucrative standard of living as there were discussions
about buying additional homes, or remodeling homes and buying some new automobiles, all of the same was a result of the distribution of the Trust fund containing the proceeds of the sale of the C&G Distributing stock. Prior to that time, the parties had a good standard of living, merely as a result of the income received by Mark from his work * * * at C&G Distributing, Inc.
(Doc. No. 153 at 13).
This Court cannot find there has been any establishment that the needs and standard of living of the children are in excess of the child support schedule and this Court consequently cannot find that it would be unjust or inappropriate and not in the best interest of the children to order the [child support] amount at the $150,000.00 level.
(Doc. No. 153 at 15).
{¶78} At the outset we note that the trial court‘s observation regarding the change of the parties’ standard of living from a “good” to a “very lucrative” lifestyle immediately prior to Bridget filing for divorce is supported by the record. However, in addition to applying the $150,000.00 combined income level cap and ordering Mark to pay an annual child support obligation of $24,532, the trial court also ordered Mark to continue to pay the cost of the three children to attend private school and the cost of the children‘s health insurance. See Roberts v. Roberts, 12th Dist. Butler Nos. CA2004-04-081, CA2004-04-087, 2005-Ohio-2792, ¶ 21 (stating that “[p]rivate school tuition is a form of child support“); see also, Pearlstein v. Pearlstein, 11th Dist. Geauga No.2008-G-2837, 2009-Ohio-2191, ¶ 66-67 (concluding the trial court did not abuse its discretion when, in lieu of an upward
{¶79} Moreover, the record establishes that the children each had sizable 529 plans,21 life insurance policies, and custodial accounts, which the parties agreed to retain for the children‘s benefit without credit or accommodation. There is no indication from the record that in assessing the needs and the standard of living of the children and of the parents in this case that the trial court overlooked or failed to accord appropriate weight to certain evidence as Bridget now maintains on appeal.
{¶80} The dissent would find that the trial court abused its discretion in failing to calculate Mark‘s child support at a higher amount based upon the dissent‘s contention that Mark will receive at least $330,000 in annual income from the 2007 SJG Trust in perpetuity. However, the record establishes that the trial court only used the $330,000 amount to impute income to Mark for purposes of calculating his child support and spousal support based upon its determination that this figure
{¶81} As previously discussed in detail the Trust Agreement provides Mark with a right to withdraw the accumulated income subject to the discretion of the Trustee and so long as the distribution meets a defined ascertainable standard—i.e., the distribution must be appropriate to support, maintain or provide for the health and education of the beneficiaries, which will vary from year to year. In addition, in the event Mark becomes unable or unwilling to serve as Trustee, a successor trustee shall be designated. In other words, there is no guarantee that Mark will remain the Trustee throughout his life. The record further establishes that the lion‘s share of the 2007 SGJ Trust principal has been invested in market based accounts. Each of these variables affect not only amount of income distributed to Mark, and the other beneficiaries, on a yearly basis, but also the amount of income accumulated by the Trust itself.
{¶82} Accordingly, we find no abuse of the trial court‘s discretion in applying the $150,000 combined income level cap on the guidelines to Mark‘s child support obligation. The second assignment of error is therefore overruled.
{¶83} In her third assignment of error, Bridget claims that the trial court‘s distributive award to her in the amount of $300,000 for Mark‘s financial misconduct was unreasonable and argues that her compensation should be larger.
(4) If a spouse has engaged in finаncial misconduct, including, but not limited to, the dissipation, destruction, concealment, nondisclosure, or fraudulent disposition of assets, the court may compensate the offended spouse with a distributive award or with a greater award of marital property.
(5) If a spouse has substantially and willfully failed to disclose marital property, separate property, or other assets, debts, income, or expenses as required under division (E)(3) of this section, the court may compensate the offended spouse with a distributive award or with a greater award of marital property not to exceed three times the value of the marital property, separate property, or other assets, debts, income, or expenses that are not disclosed by the other spouse.
{¶84} While a trial court enjoys broad discretion in deciding whether to compensate one spouse for the financial misconduct of the other, the initial finding of financial misconduct must be supported by the manifest weight of the evidence. Davis v. Davis, 11th Dist. Geauga No. 2011-G-3018, 2013-Ohio-211, ¶ 77. Once financial misconduct is established, the decision to make a compensating distributive award rests within the discretion of the trial court and will not be disturbed absent an abuse of that discretion. Epperson v. Epperson, 6th Dist. Wood No. WD-03-1195, 2015-Ohio-2443, ¶ 41.
{¶86} The trial court made the following findings relative to its determination that Mark committed financial misconduct during the trial court proceedings:
Throughout the proceedings Mark had failed to timely disclose information with respect to the assets in this case and there was a large amount of responses he had given in response to interrogatories and requests for discovery that was either incomplete, inaccurate or quite frankly false.
A great deal of the delay in this case coming to trial was a result of Mark‘s inability and failure to present accurate and complete information.
This resulted in the Court having additional hearings with respect to the failure of Mark to comply with the requests for discovery and to make full disclosure.
As indicated by counsel the record is replete with inaccurate responses to discovery and one of the most notable failures to disclose was regarding a million dollars that was in an account which was not disclosed by Mark Guagenti until a late date being some of the final depositions in this matter.
As a result, this Court finds Mark has engaged in financial misconduct under both [R.C.] 3105.171(E)(4) and (5).
Under subsection (4) referred to the Court has the ability to make a distributive award between the parties and under [subsection] (5) the Court [may] make a distributive award not to exceed three times the value of the marital property, or other assets not disclosed.
While the Court recognizes the million dollar account we were talking about was ultimately found to be a separate asset of the SJG Trust, the disclosure was still germane to the process of this divorce case and the full disclosure of all possible assets that may be subject to division.22
Irrespective of this, the Court further would note that under subsection (4) of the aforementioned code section, Mark has received [a] distribution of assets of $507,683.00 and was ordered to pay Bridget an amount to equalize the distribution of assets.
Based upon Mark‘s failure to disclose assets and continual usurpation of the discovery process in this case and his flagrant refusal to comply, it is appropriate for a distributive award to be made wherein Mark shall pay Bridget Guagenti, in addition, to the amount of $179,363.56 to equalize the property distribution hereinbefore referred to, the amount of $300,000.00 to be paid within seven (7) days after the filing of the Judgment Entry Decree of Divorce in this case.
(Doc. No. 153 at 15-16).
{¶87} As previously indicated, Bridget‘s primary contention on appeal with respect to this assignment of error is her claim that the trial court should have given 22
{¶88} Bridget specifically claims the trial court‘s distributive award for Mark‘s financial misconduct was unreasonably low in light of the high value of assets Mark failed to timely disclose. However, as discussed in the first assignment of error, most of these high value, yet undisclosed assets, were determined by the trial court to be neither marital nor separate property, but the assets belonging to a
{¶89} Having found no prejudicial error to Bridget in the assignments of error raised herein and overruling the same, the judgment of the Allen County Court of Common Pleas, Domestic Relations Division, is affirmed.
Judgment Affirmed
PRESTON, P.J., concurs.
/jlr
ZIMMERMAN, J., concurs in part and dissents in part.
{¶90} While I agree with the majority that the SJG 2007 Trust is neither marital nor separate property, I disagree with the trial court‘s failure to award spousal and child support using, at a minimum, the sum of $330,000.
{¶91} The trial court determined, and the majority overlooked, that the SJG 2007 Trust generated a “substantial” income for Mark every year. Specifically, the trial court found that “... the principal [sic] still exists in that regard and the Court would indicate the income from the assets in total has been substantial and will be substantial in the future“. (Emphasis added). (Doc. 16 Pg. 13). This being the case,
{¶92} Thus, Mark continues to have access to the trust income, at its increased value, which he can receive without oversight by the Trusts’ protective committee.
{¶93} Using basic math, Bridget‘s annual income to raise her family of 4 is just shy of $85,000 ($60,000 in alimony and approximately $25,000 in child support) while Mark‘s income, at a minimum, is $245,000 ($330,000 - $85,000) to support a family of 1.
{¶94} I would reverse on the issue of child support.