Ohio Case Law Review by Topic: October 1, 2021 through November 30, 2021

Owing to Ohio’s geological history, parts of this gold decal are actually more topographical than the regions they represent.

Herman v. Herman, 3rd Dist. Putnam No. 12-12-01, 2019 DV 00165, 2021-Ohio-3876

Marital Property: gift, separate property

Dated: November 1, 2021
Affirming in Part and Reversing in Part

The parties married in 1994, Wife filed a complaint for divorce in 2019, and Husband filed an answer and counterclaim thereafter. At issue in the divorce, Wife had been gifted a lake property by her parents during the marriage, titled in hers and Husband’s name, which she sought to classify as her separate non-marital property. Husband disagreed, but was unsuccessful, with the trial court finding:

It is clear to the [trial court] that the intent of Wife’s parents was to gift the real estate to their children. The fact that the deeds of the other siblings were only in the name of the sibling themselves and not the spouses goes directly to the intent of the parents as it is to be a gift to the children and not to the children and their spouses. Even though [Wife] decided to include [Husband’s] name on the deed it does not change the donative intent of the parents. Also, [Wife’s] parents continued to use the property as their own for a period of sometime [sic] after the transfer.

Husband was, however, successful in arguing for an assignment of spousal support from Wife, and the parties’ cross-appeals (Husband’s concerning the lake property, and Wife’s concerning the spousal support) followed.

In his assignments of error, Husband argued that the trial court had erred in finding that the lake property was intended as a gift only to Wife, and he argued that -if the Court were to affirm such finding- then the Court should also find that Wife had gifted one half of her interest in the property. In her assignments of error, Wife argued the trial court abused its discretion in its spousal support award to Husband.

Noting Husband’s claims should be reviewed “under a manifest weight of the evidence standard,” the Court wrote that “the title is not dispositive of whether the property is marital, but rather is just evidence of intent… Thus, the first question is what was the intent of [the parents] at the time of the gift.” Noting again that the properties given to Wife’s siblings had been titled in their names only, and that both parties had testified that the gift had been intended as an early inheritance to Wife, the Court affirmed.

Next the Court addressed Husband’s claim that he had been gifted 50% interest in the property by Wife. Wife alleged that she had not wished to include Husband’s name on the deed, and had done so to placate him, only. Husband disagreed. Noting that the trial court “would have to weigh the evidence to determine which [testimony] was more credible,” the Court found that no such determination had been made in the record, and remanded the matter of Wife’s intent back to the trial court.

The Court addressed overlapping assignments of error from both Husband and Wife, and points of agreement therein, regarding the trial court’s calculation of debt, and valuation of certain assets, sustaining Husband’s and remanding the matter to the trial court to correct its error, and overruling Wife’s.

Finally, the Court sustained Wife’s assignment of error concerning the spousal support award to Husband, finding that the errors in the division of marital property necessitated the trial court revisiting and recalculating this assignment.

Editor’s Note: Click here to read the Court’s Opinion, following the subsequent remand and appeal of this case.

Flores v. Flores, 12th Dist. Warren No. 19DR041156, CA2021-01-009, 2021-Ohio-3965

Marital Property: deferred distribution, stock (options), vesting

Dated: November 8, 2021
Affirming

As part of a 2020 divorce decree, Wife was awarded an interest in Husband’s unexercised stock options received in 2016, 2017, and 2018. Under the terms of the decree, Husband was obligated to notify Wife 14 days prior to exercising the options, and to time any such exercise to maximize gains therefrom. Under the same terms, Wife would be responsible for any tax liability for proceeds transferred to her from Husband from the stock exercises.

Wife appealed, arguing the trial court erred when it granted Husband discretion over the timing of the exercise(s). Noting the trial court’s innate discretion in determining the parties’ respective marital property rights, the Court wrote that its review of the trial court’s “good faith” requirement for Husband’s stock options was under an abuse of discretion standard. The Court further noted the challenges in both transferring interest in stock options, as well as the challenges in valuing them.

Comparing the methods available to trial courts, the Court wrote that, while some trial courts may deem it appropriate to take the then-current value of the options and order the option-holder to pay other spouse half of that amount, or to establish a constructive trust for receipt and distribution of proceeds, these approaches can have the effect of forcing the option-holder spouse to exercise options when they would not otherwise have done so. This is avoided in the approach taken by the trial court, assigning Wife proceeds ‘if and when’ Husband receives the same.

The Court further found that valuing stock options, as is required if payment is made to the other spouse at the time of the divorce, is greatly complicated by factors such as vesting schedules and market effects.

We find that the trial court’s order that Husband exercise the marital stock options “when in good faith he believes is most prudent to maximize the gain from the stock options” was not unreasonable, arbitrary, or unconscionable. As stated above, Husband’s testimony indicates that the marital stock options at issue are nontransferable and may only be exercised by Husband for a seven-year period once the options vest three years after their grant… The trial court’s guidelines governing Husband’s exercise of the marital stock options, i.e., exercising the options in good faith and with the goal of maximizing gains, notifying Wife at least 14 days in advance of the execution, and paying Wife one-half of the net within 3 days of the execution, are reasonable. Furthermore, Husband and Wife equally share the risk that the exercise of the options may not be profitable and benefit if they are lucrative.

Additional Reading:

Did you know the American College of Employee Benefits Counsel holds an annual ‘Simplification Award’ contest for writing submissions related to employee benefits and ideas for simplifying their delivery? And what should make an appearance in this year’s winner? QDROs.

Blog Posts are intended to bring attention to developments in the law and are not intended as legal advice for any particular client or any particular situation. Please consult with counsel of your choice regarding any specific questions you may have.