Ohio Case Law Review by Topic: July 2023

Ruff v. Ruff, 11th Dist. Trumbull No. 2018 DR 00187, 2021-T-0043, 2023-Ohio-2349

Marital Property: appreciation (house), equitable division, financial misconduct, separate property, tracing, valuation
Witness: credibility, lay

Dated: July 10, 2023
Affirming

Wife filed a complaint for divorce in 2018, to which Husband responded with a counterclaim. The trial court held proceedings in 2020, and a decree was issued in 2021. Following the latter, Husband appealed, arguing the trial court erred: (1) in its valuation of separate/marital property interests in Nebraska properties he purchased before the marriage; (2) in its finding he engaged in financial misconduct; (3) in its valuation of his business; (4) in its calculation of the parties’ respective incomes; and (5) in designating Wife the residential parent for the parties’ minor child.

What’s round on the ends and high in the middle? QDROs, that’s what.

In its consideration of Husband’s second assignment of error, concerning the trial court’s finding he engaged in financial misconduct, the Court affirmed the finding. At issue, Husband had loaned $360,000 from his business to another entity (owned by an employee) for the purchase of a bar and grill he frequented. Husband failed to cite any legal authority for his assertion that his actions could not constitute misconduct, and the Court found that his conflicting testimony, the timing of the transfer during the pendency of the divorce, and Wife’s non-involvement in the decision provided the manifest weight of the evidence needed to support the trial court’s finding.

The Court similarly upheld the trial court’s valuation of Husband’s business, notwithstanding its tax liabilities (due to Husband’s failure to file and pay taxes owed). Noting that the trial court made no distributive award for Husband’s financial misconduct, the Court found that the trial court’s non-discounting of tax liabilities against the value of Husband’s business was not an abuse of discretion. The Court similarly upheld the trial court’s decision to include the value of Husband’s $360,000 loan in the valuation of Husband’s business: “the trial court appears to have reasonably concluded that [Husband], as the party who unilaterally loaned the funds, was the appropriate party to bear the risk of nonpayment.”

Finding that there was credible evidence to support the trial court’s rulings as to the residential parent and the parties’ respective incomes, the Court also affirmed on these matters.

Finally, the Court affirmed the trial court’s valuation of the separate/marital property interests in Husband’s Nebraska properties (a dissenting Opinion was appended as to this aspect of the appeal, which is explained further below). Observing it was bound by the ‘manifest weight of evidence’ standard of review for trial courts’ findings of fact, the Court determined its role was solely to “consider all the evidence in the record, the reasonable inferences, and the credibility of the witnesses to determine whether the trier of fact clearly lost its way and created such a manifest miscarriage of justice that the decision must be reversed.” The Court noted as a preliminary matter that it would, “not reweigh the evidence introduced in court but instead will uphold the trial court’s findings when the record contains some competent and credible evidence to sustain its conclusions.” The Court opined that – even if a reviewing court were to reach a different opinion – the tasks of judging the credibility of witnesses and weighing evidence are within the exclusive province of the trial court – and that while a trial court’s failure to exercise sound, reasonable, and legal decision-making would be grounds for reversal, a mere difference of opinion would not.

Husband purchased the properties prior to the parties’ marriage, and a mortgage balance existed on the date of marriage. While Husband argued that the trial court should have utilized the method set forth in Sauer v. Sauer, 8th Dist. Cuyahoga No. 68925, 1996 WL 284873, he failed to provide the value for either property as of the date of marriage, which is needed for such analysis. Nor did he provide evidence tracing any mortgage payments made during the marriage to his separate interest. Further, the Court wrote, it is not obligated to require a particular method of valuation, but should only disturb a trial court’s findings if such findings were an abuse of discretion.

The Court upheld the trial court’s decision to calculate Husband’s separate property claims by subtracting the mortgage balances as of the date of marriage from the original loan amounts. The remainder of the stipulated value of both properties was divided evenly.

In the appended dissent, this method of valuation for the Nebraska properties was deemed “contrary to law, fact, and logic.” The dissent argued that a more logical valuation would have combined the overall changes in mortgage balances over the course of the marriage, which were known, with the stipulated increases in value of the properties between the parties, yielding a substantially different ‘marital’ amount. And that the difference between the two ‘marital’ amounts, being over $70,000, meant that the trial court had in fact abused its discretion.

Editor’s Note: I’ve done the math on this myself, and someone correct me if I am wrong, but it seems to me that the dissent is on to something here. The ~$70,000.00 difference represents the outstanding mortgages on the two properties, which are a liability (arguably of Husband), not equity. Last night I nearly destroyed a longtime friendship squabbling over the Principle of Mathematical Induction (I mean duh, how could I forget? 1+2+3+…+n=n(n+1)2), so someone really does need to check behind me on this.

Bozhenov v. Pivovarova, 12th Dist. Clermont No. 2021 DRB 00225, CA2022-11-080, 2023-Ohio-2437

Marital Property: appreciation (house), equitable division, separate property, tracing, valuation

Dated: July 17, 2023
Reversing and Remanding

Immediately prior to the parties’ marriage in 2016, Husband purchased a home for $147,600, making a down payment of $7,197.74. The mortgage balance was reduced by $1,280 from payments made toward the mortgage prior to the date of marriage. As part of the parties’ 2021-22 divorce, Husband was awarded the house as his separate property, and the trial court determined the overall marital interest therein by subtracting the sum of Husband’s premarital payments ($8,477.74) from the overall equity in the home as of May 2022 ($110,004.83, based on a stipulated value of $212,000 and a mortgage balance of $101,995.17). Husband was ordered to pay Wife an amount representing half of the overall marital property equity interest, with adjustments related to other amounts owed between the parties.

Husband appealed, arguing that appreciation in the value of the house during the marriage was passive, and not due to improvements. And that the trial court should have valued Wife’s share in the equity by assigning her half of the decrease in the mortgage amount between the parties’ marriage and May 2022. Husband further argued that the trial court failed to make written findings of fact explaining its separate/marital property determinations.

Noting that it will not reverse a trial court’s property division absent an abuse of discretion, the Court agreed, reversing and remanding the matter back to the trial court. During the trial, Husband testified that few if any substantial or non-cosmetic improvements were made to the house during the marriage. Wife’s testimony, which noted painting and landscaping, did not refute this.

[T]here is no evidence in the record to suggest that the value of the Loveland house was anything but passive income and appreciation acquired from separate property by Husband during the marriage.

Finding thus, the Court reversed, remanded, and reduced the marital equity share from $101,527.09 to $37,229.83 (i.e., the difference between the stipulated mortgage balances on May 2022 and the date of marriage, or $139,225.00 - $101,995.17).

Editor’s Note: It is worth noting that July was a busy month in the Court of Appeals for review of 12th District cases related to the equitable division of residential marital property. In Doty v. Doty, 12th Dist. Butler No. DR2020-02-0123, CA2022-01-002, 2023-Ohio-2519, the Court held – after canvassing significant case law within and outside the District – that there is no “bright-line rule” when it comes to whether a trial court must credit the spouse residing in the marital home for mortgage payments made by that spouse during the pendency of divorce (and in dicta, the Court observed that even where such amounts are credited at the sole discretion of the trial court, there is no rule that a trial court must also then credit principal and interest paid).

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