Wolf-Sabatino v. SabatinoWolf-Sabatino v. Sabatino
Rendered on December 30, 2011
Tyack, Blackmore, Liston & Nigh Co., L.P.A., Thomas M. Tyack and Margaret L. Blackmore, for appellant/cross-appellee.
Friedman & Mirman, Co., LPA, Scott Friedman and Heather Gall; Jeffrey M. Lewis Co., LPA, and Jeffrey M. Lewis for appellee/cross-appellant.
APPEAL from the Franklin County Court of Common Pleas, Division of Domestic Relations.
BRYANT, P.J.
{¶1} Plaintiff-appellant and cross-appellee, Linda A. Wolf-Sabatino, appeals from a judgment of the Franklin County Court of Common Pleas, Division of Domestic Relations, terminating her marriage to defendant-appellee and cross-appellant, Philip R.
I. Facts and Procedural History
{¶2} The parties were married on June 25, 1994, preceded by a premarital, or prenuptial, agreement executed on May 19, 1994; one child was born as issue of the marriage on November 26, 1997. On July 1, 2008, plaintiff filed a complaint for legal separation that she later amended to a complaint for divorce. Defendant responded on August 6, 2008 with an answer and counterclaim for divorce. The trial court appointed a guardian ad litem to represent the minor child‘s interests in the divorce proceeding.
{¶3} Defendant “is a real estate person.” (Tr. Vol. I, 92.) Prior to and throughout the marriage, defendant‘s business consisted of purchasing and developing residential and commercial real estate. At the time of the parties’ marriage, defendant‘s net worth was $30,556,640; according to defendant‘s expert, the appraised value of defendant‘s net worth at the time of divorce was $46,170,012. Plaintiff worked as an oncology nurse prior to the marriage but was predominately a homemaker throughout the marriage.
{¶4} Prior to trial, the parties stipulated to the validity of the premarital agreement, and on September 25, 2009 plaintiff voluntarily dismissed her complaint for divorce without prejudice. Among the disputed issues for trial were the nature of numerous assets as either marital or separate property, interpretation of certain
{¶5} On August 12, 2010, the court issued its Judgment Entry – Decree of Divorce granting the divorce and addressing the disputed issues. The trial court also allowed defendant additional time to submit tracing evidence relevant to two of defendant‘s business holdings. Although defendant and his forensic accountant, Rebekah Smith, submitted affidavits attempting to trace the properties to his premarital assets, the court determined the evidence was insufficient and classified the properties as marital property. With that determination, the court filed a supplemental judgment entry on December 10, 2010 affirming its original decree of August 12, 2010 and granting the divorce.
II. Assignments of Error
{¶6} Plaintiff appeals, assigning the following errors:
ASSIGNMENT OF ERROR NO. I:
THE TRIAL COURT ERRED IN ITS INTERPRETATION AND APPLICATION OF THE PARTIES’ PRENUPTIAL AGREEMENT BY FAILING TO RECOGNIZE THAT MARITAL EFFORT WAS NOT BARRED BY THE TERMS OF THE PRENUPTIAL AGREEMENT AND THAT MARITAL EFFORT IN THE WITHIN CAUSE CREATED MARITAL ASSETS AND/OR CREATED A MARITAL COMPONENT TO A PREVIOUSLY RECOGNIZED SEPARATE ASSET.
THE TRIAL COURT ERRED IN FAILING TO PROPERLY MANDATE THAT THE BURDEN WAS UPON THE DEFENDANT TO PROVIDE APPROPRIATE TRACING TO DEMONSTRATE THAT CERTAIN ASSETS OR COMPONENTS THEREOF WERE SEPARATE PROPERTY.
ASSIGNMENT OF ERROR NO. III:
THE TRIAL COURT ERRED IN FINDING THAT BUSINESS ENTITIES AND ASSETS CREATED AFTER THE PARTIES’ MARRIAGE AND INCREASED VALUES BASED ON EFFORTS OF ONE OR MORE OF THE PARTIES WERE SEPARATE PROPERTY AS OPPOSED TO MARITAL PROPERTY.
ASSIGNMENT OF ERROR NO. IV:
THE TRIAL COURT ERRED AS A MATTER OF LAW WHEN IT MODIFIED THE PARTIES’ AGREED INTERIM SHARED PARENTING PLAN WITHOUT A TRIAL ON THE MERITS AND AGAINST THE MANIFEST WEIGHT OF THE EVIDENCE.
ASSIGNMENT OF ERROR NO. V:
THE TRIAL COURT ERRED IN ITS DETERMINATION OF CHILD SUPPORT.
ASSIGNMENT OF ERROR VI:
THE TRIAL COURT ERRED AND ABUSED ITS DISCRETION BY REFUSING TO AWARD ATTORNEY‘S FEES AND LITIGATION EXPENSES THAT WERE REASONABLE AND NECESSARY.
{¶7} Defendant cross-appeals, assigning the following error:
Assignment of Error #1: The Court erred when it awarded the parties’ marital residence to Plaintiff-Appellant/Cross-Appellee as her separate property.
{¶8} Plaintiff‘s first assignment of error asserts the trial court erred in interpreting and applying the parties’ premarital agreement. Plaintiff contends the agreement does not define separate property to include assets created during the marriage or the increased value of separate properties that resulted from the efforts of one or both parties during the marriage. Plaintiff thus contends that many of defendant‘s business entities, determined to be defendant‘s separate property, are either marital property or have a marital component. Plaintiff‘s third assignment of error identifies five specific entities that plaintiff believes demonstrate the trial court‘s alleged error. Plaintiff‘s second assignment of error asserts the trial court failed to properly place the burden on defendant to trace his separate property assets.
A. Applicable Law
{¶9} In divorce proceedings, the trial court must “determine what constitutes marital property and what constitutes separate property.”
{¶10} Marital property does not include separate property.
{¶11} When parties contest whether an asset is marital or separate property, the asset is presumed marital property unless proven otherwise. Miller v. Miller, 7th Dist. No. 08 JE 26, 2009-Ohio-3330, ¶20, citing Sanor v. Sanor, 7th Dist. No. 2001 CO 37, 2002-Ohio-5248, ¶53. “The commingling of separate property with other property of any type does not destroy the identity of the separate property as separate property, except when the separate property is not traceable.”
{¶12} A domestic court has broad discretion to make divisions of property. Middendorf v. Middendorf (1998), 82 Ohio St.3d 397, 401, citing Berish v. Berish (1982), 69 Ohio St.2d 318. The characterization of property as marital or separate is a factual inquiry. Taub v. Taub, 10th Dist. No. 08AP-750, 2009-Ohio-2762, ¶15. An appellate court‘s job is not to reweigh the evidence but to determine whether competent, credible evidence in the record supports the trial court‘s findings. Dunham at ¶27; Taub at ¶15 (noting that we review the trial court‘s classification of property as either marital or separate “under a manifest weight of the evidence standard“).
B. The Premarital Agreement and “Marital Efforts”
{¶13} Throughout the trial, plaintiff attempted to persuade the court that, because their premarital agreement failed to reject the concept of “marital effort,” some portion of defendant‘s numerous business holdings was marital property subject to division.
{¶14} An antenuptial agreement is a contract two persons entered into in contemplation of marriage that defines the property rights and economic rights of the parties, usually upon the termination of the marriage or death of one of the parties. Gross v. Gross (1984), 11 Ohio St.3d 99, 102. “Antenuptial agreements are contracts and generally the law of contracts applies to their interpretation and application.” Fletcher v. Fletcher (1994), 68 Ohio St.3d 464, 466.
{¶15} The purpose of contract construction is to effectuate the intent of the parties, presumed to reside in the language they chose for the agreement. Skivolocki v. E. Ohio Gas Co. (1974), 38 Ohio St.2d 244, paragraph one of the syllabus. “Common
{¶16} The parties’ premarital agreement provides that each party would “continue to own and to solely and independently control, manage, direct, enjoy, use, and dispose of all of his or her separate non-marital property as set forth on Schedules ‘L-1’ and ‘R-1’ and ‘R-2’ including all separate non-marital property hereafter acquired by either of them.” (Premarital Agreement, §1.1.) Defendant disclosed all of his business holdings as they existed on December 31, 1993 on Schedules “R-1” and “R-2.”
{¶17} Section 1.1 of the agreement defines separate property to include, in relevant part (1) “[a]ny increase, accretion, or earnings of property separately owned before the marriage” and (2) “[a]ll cash proceeds from or property acquired in exchange or substitution for property or the cash proceeds from proceeds separately owned before the marriage, but not necessarily an exchange or substitution in kind so long as the property can be reasonably traced or identified.” The agreement also provided that “[a]ll property acquired after the marriage which [was] not separate property, or the source of which [was] not separate property, shall be deemed marital property.” (Premarital Agreement, §1.5.)
{¶19} The agreement also addressed the parties’ wages and salaries, stating that such were “deemed marital property (subject to the provisions of Section 1.7).” (Premarital Agreement, §1.6.) The agreement “capped” defendant‘s yearly salary at “an amount equal to $150,000, multiplied by a fraction, the numerator of which is the Consumer Price Index for the month during which this Premarital Agreement shall be executed, and the denominator of which is the Consumer Price Index for the first month of such Computation Year.” (Premarital Agreement, §1.7.)
{¶20} The resulting calculated amount comprised defendant‘s “deemed salary amount.” (Premarital Agreement, §1.7.) The amount of marital wages and salaries under §1.6 of the agreement was not to “exceed the amount of Ron‘s Deemed Salary Amount for such year.” (Premarital Agreement, §1.7.) Defendant‘s expert, Richard Ferguson, testified that, “from an accounting interpretation of the agreement,” everything over $150,000 “or over the deemed calculated amount would be Mr. Sabatino‘s separate property.” (Tr. Vol. I, 109.) The trial evidence indicated that every year of the marriage
{¶21} Given those provisions, plaintiff contends the trial court‘s “suggestion that the premarital agreement rejects the concept of marital effort simply misstates the terms of the prenuptial agreement,” as the parties did not use the term “marital effort” in the agreement. (Appellant‘s brief, 12.) Defendant responds that ” ‘any’ means what it says” in §1.1(A) of the premarital agreement “and includes all contingencies, even ‘marital labor.’ ” (Emphasis sic.) (Appellee‘s brief, 18.)
{¶22} Plaintiff correctly notes the term “marital effort” is not contained in the agreement. The premarital agreement, however, specifically states that any increase to one of the party‘s premarital properties during the marriage remains that party‘s separate property. (Premarital Agreement §1.1(A).) See Hyslop v. Hyslop, 6th Dist. No. WD 01-059, 2002-Ohio-4656, ¶20, appeal not allowed, 98 Ohio St.3d 1422, 2003-Ohio-259 (stating that “to prevent nonpassive increases in separate property from being denominated ‘marital’ property, an antenuptial agreement should contain * * * specific terms referring to the future of that property“).
{¶23} The parties’ intent, reflected in the agreement, that defines separate property to include “any” increase to premarital property and “all” exchanges or substitutions for premarital property, was to permit defendant to use his time and effort to increase and exchange his premarital properties and to have the resulting entities remain defendant‘s separate property. (Premarital Agreement, §1.1(A), (B).) See Millstein v. Millstein, 8th Dist. No. 79617, 2002-Ohio-4783, ¶98-102, appeal not allowed, 98 Ohio St.3d 1462, 2003-Ohio-644 (concluding the “parties intended any appreciation from
{¶24} Plaintiff nonetheless contends the terms of the premarital agreement do not permit the trial court to classify an entity created under defendant‘s construction pattern as defendant‘s separate property. Plaintiff explains defendant‘s construction pattern involved defendant‘s borrowing money to acquire ground, then “buildings were built and paid for by construction loans,” and eventually the property was “secured through permanent financing and the debt paid by the rents collected or the sale of the assets after they were built.” (Appellant‘s brief, 12.)
{¶25} Although plaintiff does not reject defendant‘s assertion that he leveraged his separate property assets to obtain funds to acquire new entities, plaintiff contends defendant failed “to trace certain assets to the leveraging of separate property only” because defendant utilized an RCR Disbursement account. As the trial court noted in its decree, defendant‘s RCR Disbursement Company, which appeared on defendant‘s premarital property schedule, “only handles disbursements for Defendant‘s other property related entities; it owns no assets.” (Decree, 39.) The court concluded the entity merely existed as a clearinghouse, and as defendant “tied the account to property listed on the
{¶26} Mortgaging separate real property in order to finance the purchase of a new asset “is the same as if the [party] had sold the real property, or a portion of it, outright to obtain the sum of money used to purchase the” new asset. Radcliffe v. Radcliffe (Apr. 27, 1994), 2d Dist. No. 14130 (determining a mobile home, purchased with a loan collateralized by the wife‘s separate real property, remained the wife‘s separate property under the terms of the parties’ prenuptial agreement that provided separate property included one parties’ using a premarital asset to produce an after-marriage asset). See also Fox v. Fox, 10th Dist. No. 01AP-83, 2002-Ohio-2010. The new assets acquired through defendant‘s business practice of leveraging separate property assets to acquire new assets were defendant‘s separate property under §1.1(B) of the premarital agreement, as defendant acquired the resulting asset in exchange or substitution for his separate property.
{¶27} Further, defendant‘s practice of leveraging separate assets and using the rents from a property he acquired to pay off the loan attached to the property did not result in the property becoming marital, as the funds used to pay the loan derived from a separate property asset. Cf. Steinke at ¶20-24 (concluding properties husband purchased during the marriage could not be classified as separate property under the terms of the parties’ prenuptial agreement where the husband acquired the properties using funds borrowed from the bank, but the “loan payments on the properties were made with undocumented funds from [the husband‘s] mother, undocumented payments from the sale of other real estate, or were partially paid by joint tax refunds which had been
{¶28} As a result, the trial court did not err in rejecting plaintiff‘s general argument about “marital efforts.” The parties’ intent, as expressed in the language of their premarital agreement, was to permit defendant to acquire and develop land much as he had before the marriage and to permit defendant‘s business ventures to remain his separate property. Plaintiff also challenges defendant‘s tracing related to specific businesses.
C. Tracing regarding Specific Entities
1. Presidential Construction Company
{¶29} Plaintiff asserts the trial court erred in determining the increase in value of Presidential Construction Company during the marriage was defendant‘s separate property. Presidential is an entity involved in construction, maintenance, and repairs; defendant is the chief executive officer of the company. At the time of marriage, Presidential had a fair market value of $3,664,504; at the time of divorce, its fair market value increased to $10,367,796. Defendant listed Presidential on the premarital property schedules attached to the agreement. The trial court properly determined Presidential was defendant‘s separate property pursuant to the premarital agreement, as the agreement defined separate property to include “[a]ny increase, accretion, or earning of property separately owned before the marriage.” (Premarital Agreement, §1.1(A).)
2. Mount Pisgah Development, LLC
{¶30} Plaintiff asserts the trial court erred in classifying Mount Pisgah Development, LLC, an entity created after the parties’ marriage, as defendant‘s separate property. Defendant created Mount Pisgah in February 2001 “for the purpose of
{¶31} Defendant‘s expert, Robert Weiler, described the Mount Pisgah property as “vacant land and improved residential homesites with various outbuildings“; defendant testified the outbuildings existed at the time of purchase. (Tr. Vol. X, 2149.) Plaintiff‘s expert, Dana Lavelle, opined the “property is not vacant land sitting there growing grass,” as the tax returns and defendant‘s exhibits showed development costs and income. (Tr. Vol. IX, 1891.) Defendant explained the income on the property came from “a cellular tower that existed at the time of the purchase” and from an oil and gas lease entered into in 2008. (Tr. Vol. X, 2149-50.)
{¶32} Defendant traced Mount Pisgah to his premarital property through a series of Internal Revenue Code §1031 exchanges. As an expert witness explained, a §1031 exchange occurs “[w]here you have like-kind property. It‘s a tax deferral method of taking the property of A and transferring it for B. You get to swap. You get a new property and you don‘t have to pay taxes. The taxes are deferred.” (Tr. Vol. I, 141.) See also
{¶33} Prior to the marriage, defendant owned land known as Woodhill Gardens. In 1994, defendant sold Woodhill Gardens and completed a §1031 exchange for 95 acres of land located off Cooper Road in Columbus, Ohio. The parties stipulated the Cooper Road land was defendant‘s separate property. In 1998, defendant completed a §1031 exchange of 2.765 acres of the Cooper Road land for land located off of Liberty
{¶34} Because defendant acquired Mount Pisgah in exchange or substitution for a premarital entity and from an advance of funds from a premarital entity, competent, credible evidence supports the trial court‘s determination that Mount Pisgah was defendant‘s separate property under the terms of the premarital agreement. (Premarital Agreement, §1.1.)
{¶35} Plaintiff nonetheless notes that Defendant‘s Exhibit Z reflects that, as of August 2009, Mount Pisgah had a payable to the shareholder in the amount of $1.2 million. Plaintiff contends the trial court did not address the tracing issue “to demonstrate that the payable actually came from the premarital asset.” (Appellant‘s brief, 17.)
{¶36} The trial court stated that because “there was no substantive testimony relative to the alleged $1,234,167 payable to Defendant,” the court lacked “sufficient evidence to form an opinion as to its relevance.” (Decree, 35.) Section 1.3 of the premarital agreement provides that “[e]ach of the subparagraphs in Paragraph 1.1 shall refer to each other so that ‘separately owned before the marriage’ and ‘separately acquired’ shall include, for example, increases, accretions, and earnings on property acquired in exchange or substitution for property separately owned before the
3. T&R Gender, LLC
{¶37} Defendant owns T&R Gender, LLC, incorporated June 28, 2001, and did not personally invest any funds into the entity. The entity serves as a general partner in Gender Road Limited Partnership, which the parties stipulated was defendant‘s separate property. The parties also stipulated T&R Gender had a fair market value of $4,312,607 at the time of divorce.
{¶38} The Gender Road LP was “a premarital partnership * * * formed in the 1980s.” (Tr. Vol. IV, 780.) Defendant personally served as a limited partner, and T&R Properties, another entity defendant owned prior to the marriage, served as a general partner. In the 1980s, the partnership “purchased vacant land, * * * built apartments on part of the vacant land, sold the apartments, and distributed a lot of the original investors’ money back to them and retained undeveloped land.” (Tr. Vol. IV, 787.)
{¶39} On July 1, 2001, T&R Properties assigned its general partner interest in Gender Road LP to T&R Gender. Defendant explained that “his accountants and lawyers suggested replacing” T&R Properties with a limited liability company because “the tax rules were changing, and the [limited liability companies] were then apparently provided [sic] some accounting benefit.” (Tr. Vol. IV, 784-85.)
{¶40} At some point after the marriage in 1994, the Kroger Co. began negotiating with Gender Road LP to lease the partnership‘s undeveloped land for the purpose of constructing a grocery store. Kroger required more land than the partnership had and, in
{¶41} On September 17, 2002, Gender Road LP and T&R Gender executed a $5.6 million promissory note payable to Fifth Third Bank; defendant personally guaranteed the note. As defendant explained, “Gender Road Limited Partnership was able to leverage the income flow from those land leases to borrow the money to do specific improvements that were required by Kroger * * * and then also build some [auxiliary] store fronts.” (Tr. Vol. IV, 800.) In 2007, T&R Gender purchased the land it was leasing from the adjacent landowner “because the cost of purchasing the land was less than the cost of the lease payments.” (Tr. Vol. IV, 793.) To do so, Gender Road LP and T&R Gender borrowed $1.4 million from Fifth Third Bank; the bank added the new debt onto the preexisting and outstanding loan from 2002.
{¶42} The trial court concluded T&R Gender was defendant‘s separate property under the terms of the premarital agreement. Plaintiff contends that “while there may have been a small non-marital component to the asset, it was inappropriate [for the court] to assign the entire asset” as defendant‘s separate property because defendant created the entity after the parties marriage through “borrowed funds and paid for by rents then coming from the buildings that were built.” (Appellant‘s brief, 18.)
{¶43} The evidence demonstrated that T&R Gender simply substituted for T&R Properties as the general partner in Gender Road LP. Defendant owned T&R Properties and its interest in Gender Road LP prior to the marriage, making T&R Gender defendant‘s
4. Tiffany Lakes, Inc.
{¶44} Tiffany Lakes, Inc., incorporated October 2, 1998, owned Tiffany Lake Apartments at the time of trial. Tiffany Lake Apartments was “a 202-unit apartment project that was constructed in 1996 and consists of one and two-bedroom units” located off of Cooper Road in Columbus, Ohio. (Defendant‘s Exhibit F, Tab 40.) The parties stipulated that Tiffany Lakes, Inc. had a fair market value of $4,018,357 at the time of trial.
{¶45} T&R Communities, Inc., incorporated in 1995, owned Tiffany Lakes, Inc.; T&R Holding Co., an entity listed on defendant‘s premarital property schedules, owned T&R Communities. T&R Communities received Cooper Road land from T&R Properties, and T&R Communities, as relevant to Tiffany Lakes, Inc., consisted of office buildings built on land “from our original Cooper Road land.” (Tr. Vol. V, 1051; Vol. VIII, 1717.)
{¶46} T&R Communities built the Tiffany Lakes Apartment complex on the Cooper Road land through a September 28, 1995 loan from Provident Bank of $10,552,250. Defendant explained that T&R Communities had its own assets, “so it borrowed the money, * * * built the community, and then deeded it out to Tiffany Lakes, Inc.” (Tr. Vol. VI, 1064.) Defendant presented the general warranty deed demonstrating
{¶47} Lavelle admitted that, based on the Cooper Road land transfer, “there was separate property transferred into” Tiffany Lakes, Inc., but he also testified that “[t]here was $10 million worth of buildings built on that * * * through marital efforts.” (Tr. Vol. X, 2015.) The trial court noted Lavelle‘s testimony and concluded defendant proffered sufficient tracing evidence to classify Tiffany Lakes as defendant‘s separate property pursuant to the premarital agreement. The evidence supports the trial court‘s determination.
{¶48} T&R Communities built the Tiffany Lakes Apartment complex on Cooper Road land by leveraging defendant‘s separate property assets consisting of land and buildings off of Cooper Road, property the parties stipulated was defendant‘s separate property. T&R Communities then transferred the apartment complex to Tiffany Lakes, Inc. The trial court properly classified Tiffany Lakes as defendant‘s separate property pursuant to the premarital agreement. Premarital Agreement, §1.1(B); Radcliffe; Fox. Moreover, no evidence indicated defendant either used the funds from his “deemed salary” to finance the construction of Tiffany Lakes, Inc. or placed Tiffany Lakes, Inc. in some form of joint ownership with plaintiff. See Premarital Agreement, §1.4, 1.7.
{¶49} At the time of trial, Residences at Scioto Crossing, LLC was “an existing apartment community here in central Ohio that [was] part of a development that was started five or six years ago by Scioto Crossing Development, LLC.” (Tr. Vol. V, 980-81.) The Residences at Scioto Crossing, which defendant owned, was incorporated on October 12, 2004 for the purpose of developing the Residences at Scioto Crossing Apartments. The parties stipulated the Residences at Scioto Crossing had a fair market value of $2,276,189 at the time of trial.
{¶50} Defendant incorporated Scioto Crossing Development, LLC on July 19, 2004 and at the time of trial owned the entity. Defendant asserted Scioto Crossing Development was worth negative $5,866,639, while plaintiff asserted the asset was worth $0. Defendant explained that Scioto Crossing Development “was created to acquire land here in Central Ohio off of Sawmill Road.” (Tr. Vol. V, 982.)
{¶51} Scioto Crossing Development purchased land located off Sawmill Road on August 13, 2004 for $6.3 million. In February 2001, T&R Properties placed $100,000 in escrow to reserve the right to purchase the property from Sawmill Partners Investment Company. On August 13, 2004, T&R Holding Co. advanced $407,141.83 to Hummel Title Agency to finance the purchase of the property. Defendant financed the remainder of the purchase price with a commercial loan from US Bank “collateralized by separate property of all of Scioto Crossing Development and eventually The Residence at Scioto Crossing.” (Tr. Vol. V, 990.)
{¶53} US Bank eventually released the land belonging to the Residences at Scioto Crossing, mortgaged originally as collateral for the Scioto Crossing Development 2004 loan. The land Scioto Crossing Development then held consisted of “unsold condominiums and land to build future condominiums on.” (Tr. Vol. VI, 1307.) The bank reappraised the remaining property of Scioto Crossing Development and required additional collateral to secure the loan. Accordingly, the loan on the land Scioto Crossing Development held was cross-collateralized with four of defendant‘s other business entities.
{¶54} The trial court noted in the divorce decree that “[a]llocating the Residence at Scioto Crossing and Scioto Crossing Development LLC are particularly vexing to the Court as they represent that hybrid situation in which Defendant leveraged premarital assets to secure a totally new entity after the date the parties were married.” (Decree, 42.) The court observed that §1.1 of the premarital agreement “clearly delineates * * * exchanges/cash proceeds as Defendant‘s separate property while §1.7 sets the ‘marital floor’ above which everything else is Defendant‘s separate property.” (Decree, 44.) The
{¶55} Plaintiff contends the trial court, in relying on defendant‘s “deemed wages” under the premarital agreement, “simply disregarded the fact that the cost of the construction was not paid for by Appellee with income that was described in the prenuptial agreement (in excess of deemed wages), but from rents received from the new construction after the project was completed.” (Appellant‘s brief, 20.)
{¶56} The initial funds to acquire the land off of Sawmill Road came from T&R Properties and T&R Holding Co., two of defendant‘s premarital properties. As a result, defendant‘s using the funds of those separate properties to acquire new property rendered the new property defendant‘s separate property under the terms of §1.1(B) and 1.3 of the premarital agreement. Scioto Crossing Development then leveraged the land to obtain a loan to finance the remainder of the purchase price. Because the initial cash exchanged to acquire the property came from defendant‘s premarital assets, the resulting loan money and property remained defendant‘s separate property as well. Radcliff; Fox; Premarital Agreement, §1.1(B); 1.3.
{¶57} Similarly, when Scioto Crossing Development transferred a portion of the land to the Residences at Scioto Crossing, which then obtained a construction loan to construct the apartment complex, that also remained defendant‘s separate property under §1.3 of the Premarital Agreement. Nor did defendant‘s practice of using the rents from the apartment complex to pay the mortgage change the nature of the property, as the rents were derived from defendant‘s separate property. Cf. Steinke at ¶20-24. Lastly, defendant
{¶58} Competent, credible evidence supports the trial court‘s finding the entities at issue were defendant‘s separate properties.
D. Tracing
{¶59} Plaintiff asserts “[t]he trial court failed to properly mandate that the burden was upon [defendant] to provide appropriate tracing to demonstrate certain assets or components thereof were separate property.” (Appellant‘s brief, 14.) Plaintiff further contends the trial court disregarded certain assets, specifically the value of notes receivable listed on Defendant‘s Exhibit Z and Joint Exhibit A. As to the latter, the trial court stated in its decree that the notes receivable and bank accounts “associated with business entities which the Court has deemed separate to Defendant shall also be deemed [defendant‘s] separate property.” (Decree, 81.)
{¶60} The majority of the parties’ 24-day trial consisted of testimony from defendant and his experts tracing defendant‘s many business holdings back to premarital assets. Nothing suggests the trial court did not hold defendant to his burden to adequately trace his business holdings. Indeed, although the court determined defendant presented sufficient tracing evidence as to the majority of his business holdings, the court found defendant failed to offer sufficient tracing evidence as to two assets and classified them
{¶61} Based on the foregoing, plaintiff‘s first, second, and third assignments of error are overruled.
IV. Defendant‘s Cross-Assignment of Error – Marital Residence
{¶62} Defendant‘s sole assignment of error on cross-appeal asserts the trial court erred in awarding the parties’ marital residence to plaintiff as her separate property. The parties stipulated that the value of the marital residence was $800,000 at the time of trial.
{¶63} On September 26, 1996, defendant purchased the marital residence for slightly under $600,000, financing the purchase with funds which were separate and apart from the monies he would transfer into plaintiff‘s account every year as his “deemed salary.” Defendant paid the contract price in full, so a mortgage never attached to the property. When defendant purchased the property, he purposely titled the residence in both his and plaintiff‘s name, making the property marital under §1.4(A) of the premarital agreement. Plaintiff explained that, when the couple initially looked at the property, defendant “did not particularly like the house.” (Tr. Vol. X, 2103.) Defendant eventually purchased the house and told plaintiff, “I bought you your house and you got your backyard, which was kind of a joke because [the backyard] was a mess.” (Tr. Vol. X, 2104.) Plaintiff explained she believed the house was her separate property because defendant said “he bought [her] the house.” (Tr. Vol. X, 2103.)
{¶64} On November 28, 1997, defendant transferred his half interest in the marital residence to plaintiff by means of a general warranty deed, leaving plaintiff the sole titled owner of the residence, a transfer that was tax exempt. Defendant transferred his interest
{¶65} Plaintiff argued that, since defendant transferred the land to her “and because such gifts are permitted under the terms of the pre-marital agreement, the Court should award Plaintiff the” marital residence. (Decree, 12.) The trial court found the marital residence to be plaintiff‘s separate property. The court noted defendant transferred his entire interest in the marital residence to plaintiff, presented the court with “no documentation evidencing his retention of any rights/legal interests to that property” and admitted “that on numerous subsequent loan applications, [he] did not assert any interest or control in the real estate.” (Decree, 12.) The court quoted §1.4(A) of the premarital agreement and decided that “given this specific statement of intent set forth in the parties’ Premarital Agreement, it is difficult for the Court to rule in any other manner with respect to the marital residence, except as Plaintiff suggests.” (Emphasis sic.) (Decree, 13.)
{¶66} The mere “holding of title to property by one spouse individually or by both spouses in a form of co-ownership does not determine whether the property is marital property or separate property.”
{¶67} “It is well-settled that a spouse can change the nature of property, and its designation as separate or marital property, through conduct performed during the marriage.” Rank v. Rank, 10th Dist. No. 10AP-273, 2010-Ohio-5717, ¶11, quoting Smith v. Smith, 10th Dist. No. 07AP-717, 2008-Ohio-799, ¶14, citing Moore v. Moore (1992), 83 Ohio App.3d 75, 77. The most commonly recognized method for changing the nature of property is through an inter vivos gift of the property from the donor spouse to the donee spouse. Bell v. Bell, 2d Dist. No. 2002 CA 13, 2002-Ohio-5542, ¶15. The essential elements of an inter vivos gift are (1) the intent of the donor to make an immediate gift; (2) delivery of the property to the donee; and (3) acceptance of the gift by the donee. Barkley at 161, n.2, citing Bolles v. Toledo Trust Co. (1936), 132 Ohio St. 21.
{¶68} The key issue in determining the nature of the property “is typically whether the donor spouse had the requisite donative intent to transfer an interest to the donee spouse at the time of the transfer.” Rank at ¶11, citing Neighbarger v. Neighbarger, 10th Dist. No. 05AP-651, 2006-Ohio-796, ¶26, citing Hippley. “Donative intent is established if a transferor intends to transfer a present possessory interest in an asset.” Brate v. Hurt, 174 Ohio App.3d 101, 2007-Ohio-6571, ¶21. The donee spouse has the burden of proving by clear and convincing evidence that the donor
{¶69} Defendant initially asserts the trial court improperly placed the burden on him to prove that he did not gift the marital residence to plaintiff. See Howcroft v. Howcroft, 192 Ohio App.3d 307, 2010-Ohio-6410, ¶67-83, 88-89 (concluding wife failed to present any evidence that the husband‘s transfer to her of a half interest in the subject property was an inter vivos gift, thereby failing to carry her evidentiary burden). Defendant cites to a portion of the decree where the court stated it had “no evidence supporting Defendant‘s contention that he never intended to gift the marital residence to Plaintiff” to support his contention. (Decree, 13.)
{¶70} The court‘s statement that defendant lacked evidence came after the court cited evidence favorable to plaintiff, including defendant‘s testimony indicating defendant had gifted his interest in the residence to plaintiff. Defendant agrees with plaintiff that no case law or evidentiary rule prohibits a party from meeting his or her evidentiary burden through the testimony of the opposing party. See AAAA Enterprises, Inc. v. River Place Community Urban Redevelopment Corp. (1990), 50 Ohio St.3d 157, paragraph two of the syllabus. The trial court did not improperly place the evidentiary burden on defendant; rather, the court found that plaintiff had met her burden and defendant had not presented the court with evidence to the contrary.
{¶71} Defendant also contends the essential elements of a valid inter vivos gift are lacking. The issue resolves to whether competent, credible evidence in the record supports the trial court‘s conclusion that defendant acted with the requisite donative intent in transferring his half interest in the property to plaintiff.
{¶72} The cases defendant cites in that regard are not persuasive. They either are cases where the party claiming gift failed to present evidence of a donative intent or cases where one spouse transferred property into joint ownership with the other to obtain financing or a mortgage based on the subject property, causing the courts to conclude the requisite donative intent was lacking. See, e.g., Smith v. Emery-Smith, 190 Ohio App.3d 335, 2010-Ohio-5302, ¶9, 39 (finding no donative intent where bank required wife to re-title property in joint ownership with husband in order to obtain mortgage loan proceeds).
{¶73} By contrast, defendant‘s specific objective in transferring the property from joint ownership with plaintiff to plaintiff alone was to avoid having the marital residence “subject to creditors [sic] attachment because of [his] real estate deals.” (Tr. Vol. IV, 807.) Courts have held that when “a transferor transfers his interest in real property for a specific purpose other than ownership, the transferor has demonstrated donative intent.” Dever v. Dever (Apr. 12, 1999), 12th Dist. No. CA98-07-050 (concluding husband‘s transfer of property held in joint ownership with wife to wife‘s name alone “made to protect his assets from creditors,” demonstrated his intent to transfer to his wife a present possessory interest “in the property and establish[ed] donative intent as a matter of law“); Strausburg v. Strausburg, 3d Dist. No. 2-10-12, 2010-Ohio-3672, appeal not allowed, 127 Ohio St.3d 1546, 2011-Ohio-647 (determining husband who transferred inherited farmland into his wife‘s name solely “because he was concerned about the risk that he would be sued” acted with donative intent); cf. Howcroft at ¶66-88 (deciding donative intent was lacking because husband testified his only intent in transferring the property into joint ownership with his wife was to ensure the house would
{¶74} Defendant further contends the trial court erred in relying on §1.4(A) of the premarital agreement. Although §1.4(A) concerns the transmutation of separate property into marital property, the premarital agreement is silent on the method by which the parties may change marital property into separate property. The premarital agreement, however, provides that “[a]ll gifts * * * received by either party during the marriage including gifts from the other party” shall constitute that party‘s separate property. (Premarital Agreement, §1.1(C).) The agreement further provides that “each party may make such disposition of his or her property by sale, gift, * * * or otherwise, during his or her lifetime, as he or she may desire.” (Premarital Agreement, §6.2.) Although defendant suggests plaintiff should have produced “other evidence” of defendant‘s intent to gift the real estate to her, “such as a card memorializing the gift or statements made by” defendant, the premarital agreement pertaining to gifts does not require written evidence memorializing a gift between the spouses. (Cross-appellant‘s brief, 15.)
{¶75} While we agree with plaintiff that title is a factor relevant for determining separate property, the trial court here relied heavily on §1.4(A) of the premarital agreement. Because the agreement does not address a transfer of marital property to separate, we sustain defendant‘s sole assignment of error on cross-appeal to the extent that the issue is remanded to the trial court to determine whether defendant made a gift of his half of the marital home to plaintiff.
V. Plaintiff‘s Fourth Assignment of Error – Shared Parenting Plan
{¶76} Plaintiff‘s fourth assignment of error asserts the trial court erred both in failing to conduct an evidentiary hearing regarding the parties’ respective shared parenting plans and in adopting defendant‘s proposed plan. On September 23, 2009, prior to the first day of trial, the parties filed a Joint Shared Parenting Plan, including a provision that the parenting time schedule contained therein would come before the court for review on January 21, 2010 at 9:30 a.m. The trial court approved the September 23 plan through an Agreed Interim Order.
{¶77} Although both parties admit the January meeting occurred, no transcript of the meeting is in the record. Following the January meeting, each party presented the court with their respective proposed shared parenting plan. The court issued an Amended Judgment Entry Shared Parenting Decree on April 22, 2010, determined defendant‘s proposed plan was an appropriate allocation of parental rights and responsibilities, and adopted it. Due to a filing error, the court refiled the Amended Judgment Entry Shared Parenting Decree on July 22, 2010 and attached defendant‘s plan to the entry. In neither entry did the court reference a hearing on the two proposed shared parenting plans.
{¶78} Although a trial court‘s discretion in custody proceedings is broad, it is not absolute, and the trial court must follow the procedure described in
{¶79} “Shared parenting” means that the parents share, in the manner set forth in the plan the court approves, all or some of the aspects of the physical and legal care of their children.
{¶80} If each parent requesting shared parenting files a separate proposed plan for shared parenting, “the court shall review each plan filed to determine if either is in the best interest of the children. If the court determines that one of the filed plans is in the best interest of the children, the court may approve the plan.”
{¶81} Plaintiff contends the “trial court‘s failure to hold a hearing and accept sworn testimony about the terms of a shared parenting plan was not only an abuse of discretion; it was contrary to law.” (Appellant‘s brief, 24.) Defendant asserts plaintiff waived any argument regarding the trial court‘s failure to hold an evidentiary hearing, pursuant to
{¶82} Under the circumstances here, plaintiff‘s failure to request a hearing did not waive the trial court‘s obligation to hold an evidentiary hearing regarding the contested shared parenting plan. The requirement in
{¶83} Although the parties initially filed a joint shared parenting plan, each party submitted different proposed shared parenting plans after the joint plan was scheduled for review in January. The proposed shared parenting plans reflect the parties disagreement on the terms of the shared parenting plan going forward, including defendant‘s proposal that involved one extra overnight per week not present in plaintiff‘s plan. Because the “parties were unable to reach an agreement on shared parenting, the trial court was required to conduct a hearing at which time appellee and appellant could present testimony as to the contested matters.” Kelm at ¶18, citing Snouffer. See also Stroud v. Lyons, 11th Dist. No. 2002-A-0050, 2003-Ohio-6773, ¶36 (deciding that when the parties contested the allocation of parental rights, “based on Docie, the trial court was required to determine which plan was in the best interest of the child and such a hearing cannot be waived“).
{¶84} In light of the conflicting proposed shared parenting plans, a hearing was necessary to determine which plan was in the best interests of the parties’ child. Docie. Other factors present in the case only support the need for a hearing. For example, although the guardian ad litem (“GAL“) signed the court‘s April 22, 2010 amended judgment entry, refiled on July 22, 2010, the GAL noted the “terms are consistent with Judge‘s recommendation, but not as desired by the child or recommended by the GAL.” (R. 539, 552.) Nonetheless, the court‘s decree states that “on July 27, 2010, the Court, in full agreement with the recommendation of the Guardian ad Litem, declined to further modify the existing allocation of parenting time.” (Decree, 84.) Given those notations, the parties’ inability to agree on a shared parenting plan, and the lack of a record on which we
{¶85} Moreover, where each party submits a proposed shared parenting plan and the court approves one of the plans, the court must enter “in the record of the case findings of fact and conclusions of law as to the reasons for the approval.”
{¶86} Based on the foregoing, plaintiff‘s fourth assignment of error is sustained.
VI. Plaintiff‘s Fifth Assignment of Error – Child Support
{¶87} Plaintiff‘s fifth assignment of error asserts the trial court erred in calculating child support when it failed to properly calculate defendant‘s gross income pursuant to
{¶88} At the time a trial court orders child support, the court must complete a child support guideline worksheet and make it part of the trial court‘s record. Marker v. Grimm (1992), 65 Ohio St.3d 139, paragraph one of the syllabus;
{¶89} Both parties prepared a child support worksheet, but the court declined to accept either. Rather, the court determined plaintiff had an annual income of $60,000 per year and defendant had an annual income of $144,789 per year. (Decree, 87.) Based on those figures, the trial court completed the
{¶90} For purposes of child support, the “income” of a parent employed to full capacity is “the gross income of the parent.”
{¶91} Gross income does not include “[n]onrecurring or unsustainable income or cash flow items,” meaning “an income or cash flow item the parent receives in any year or for any number of years not to exceed three years that the parent does not expect to continue to receive on a regular basis.”
{¶92} Plaintiff contends the trial court simply averaged defendant‘s gross wages for the three years prior to the decree and failed to include all of the applicable
{¶93} Defendant contends that due to the “unpredictability of the real estate business as well as the formula in the parties’ Prenup to determine [his] income, it was appropriate for the Court to use the formula to determine [his] deemed income for a three-year period, and then average that income over the 3 year period.” (Appellee‘s brief, 38.) Although the trial court used defendant‘s deemed salary only for 2009, not for the entire three-year period as defendant indicates, the court‘s decision to follow the prenuptial formula raises public policy issues.
{¶94} Antenuptial agreements containing provisions for the disposition of property and setting forth amounts to be paid as sustenance alimony upon a subsequent divorce of the parties are not contrary to public policy. Gross at paragraph one of the syllabus. Nonetheless, “[t]he duty owed by the courts to children under the doctrine of parens patriae cannot be severed by agreement of the parties.” Kelm v. Kelm, 92 Ohio St.3d 223, 226, 2001-Ohio-168. The applicable law permits parents to agree as to the amount of child support in a separation agreement. See Gross at 104, citing
{¶95} Although defendant‘s expert, Darci Congrove, testified at trial regarding defendant‘s personal tax returns,
{¶96} A trial court fails to comply with the statutory mandates of
{¶97} On remand, the trial court will need to calculate the gross income of the parties based on the statutory definition and the evidence in the record. In calculating gross income, the court, when appropriate, may average income over a reasonable
{¶98} “If the combined gross income of both parents is greater than one hundred fifty thousand dollars per year,” the court must “determine the amount of the obligor‘s child support obligation on a case-by-case basis and shall consider the needs and the standard of living of the children * * * and of the parents.”
{¶99} As part of defendant‘s child support obligation, the trial court ordered that defendant be solely responsible for the cost of the child‘s medical insurance and private school tuition. (Decree, 87.) The court, upon remand, may consider those expenses in adjusting the child support order. See Pearlstein v. Pearlstein, 11th Dist. No. 2008-G-2837, 2009-Ohio-2191, ¶66-67 (concluding the trial court did not abuse its discretion when, in lieu of an upward deviation from the $150,000 cap on the child support guidelines, the court ordered father to pay 100 percent of the children‘s uncovered medical expenses, private school tuition, and expenses for the extracurricular activities in addition to the father‘s child support obligation).
{¶100} Based on the foregoing, plaintiff‘s fifth assignment of error is sustained.
VII. Plaintiff‘s Sixth Assignment of Error – Attorney Fees
{¶101} Plaintiff‘s sixth assignment of error asserts that the trial court erred in denying her November 20, 2009 motion for attorney fees and expenses. Plaintiff contends she has outstanding attorney fees of $150,000 and owes her expert witness $10,000.
{¶102} In an action for divorce, a court may award all or part of reasonable attorney fees and litigation expenses to either party if the court finds the award equitable.
{¶103} Noting
{¶104} Plaintiff contends the court should not have considered her refusal to accept defendant‘s first $100,000 payment pursuant to the terms of the premarital agreement. She asserts she “was not foregoing a possible source of income for payment of her attorney fees, as the court intimates, but was instead preserving her right to litigate her interpretation of the premarital agreement.” (Appellant‘s brief, 33-34.) Plaintiff further contends the court erred in considering her bad conduct during discovery because “the conduct was previously censured.” (Appellant‘s brief, 34.)
{¶105} The trial court did not err in considering plaintiff‘s conduct.
{¶106} Plaintiff nonetheless contends that, since defendant‘s income is much greater than her own, “requiring [her] to bear the burden of fees which would be no burden upon Appellee is a clear abuse of discretion.” (Appellant‘s brief, 34.) During the
{¶107} Although plaintiff points to defendant‘s higher earning potential, that fact did not require the trial court to award plaintiff her requested fees, when plaintiff has income and assets available to her from which to pay her fees. Meeks v. Meeks, 10th Dist. No. 05AP-315, 2006-Ohio-642, ¶26 (deciding the trial court did not abuse its discretion in refusing to award wife her attorney fees where the wife‘s “income and her awarded marital assets would enable her to pay her attorney fees“); Schultz v. Schultz (1996), 110 Ohio App.3d 715, 725 (concluding that “[a]lthough there is a substantial income disparity between the parties, appellant has income available to her and it [was] not unreasonable to award almost one half of her attorney fees“).
{¶108} The trial court did not abuse its discretion in refusing to award plaintiff her attorney fees and litigation expenses. Plaintiff‘s sixth assignment of error is overruled.
VIII. Disposition
{¶109} Having overruled plaintiff‘s first, second, third, and sixth assignments of error, but having sustained plaintiff‘s fourth and fifth assignments of error and defendant‘s
Judgment affirmed in part and reversed in part; cause remanded with instructions.
BROWN and FRENCH, JJ., concur.
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