Nelson v. Nelson , 2022 Ohio 658 ( 2022 )

[Cite as Nelson v. Nelson, 2022-Ohio-658.]
IN THE COURT OF APPEALS OF OHIO
ELEVENTH APPELLATE DISTRICT
LAKE COUNTY
WILLIAM DAVID NELSON, SR., CASE NO. 2021-L-037
Plaintiff-Appellant,
Civil Appeal from the
-v- Court of Common Pleas,
Domestic Relations Division
LISA DIMBERIO NELSON, et al.,
Defendant-Appellee. Trial Court No. 2015 DR 000030
OPINION
Decided: March 7, 2022
Judgment: Affirmed
Ashley Cooper Kirk, Thrasher, Dinsmore & Dolan, 100 Seventh Avenue, Suite 150,
Chardon, Ohio 44024 and Kevin Randall McMillan, McMillan & Sobel, LLC, 30195
Chagrin Boulevard, Suite 300, Pepper Pike, Ohio 44124 (for Plaintiff-Appellant).
Sandra A. Dray, Sandra A. Dray Co., L.P.A., 1111 Mentor Avenue, Painesville, Ohio
44077 (for Defendant-Appellee).
JOHN J. EKLUND, J.
{¶1} William Nelson (“appellant”) appeals from the Judgment Entry of Divorce of
the Lake County Common Pleas Court, Domestic Relations Division. Appellant raises
seven assignments of error relating to the trial court’s calculation of the parties’ income,
the duration of spousal support, the tax consequences of spousal support, the division of
property, and the denial of a new hearing. Finding no reversable error, we affirm.
{¶2} Appellant and Lisa Nelson (“appellee”) were married in November
1997.Appellant filed for divorce in the Lake County Domestic Relations Court in January
2015. Appellant was self-employed as a dentist in Lake County and both appellant and
appellee owned multiple business ventures making this divorce complex and litigious.
The trial and hearings the court held on post-trial motions for divorce took place over
October 13, 2016; October 14, 2016; October 27, 2016; December 16, 2016; December
22, 2016; January 6, 2017; July 20, 2017; August 24, 2017; and November 6, 2017. The
trial remained open pending the resolution of certain post-trial motions until the court held
a final hearing on May 10, 2019, at which time the parties dismissed their post-trial
pleadings, effective upon the court’s judgment entry of June 18, 2019.
{¶3} Thereafter, the magistrate issued a 59-page decision on September 14,
2019. The decision listed each factor in R.C. 3105.18(C)(1) and discussed the court’s
consideration of these factors while also referencing and incorporating relevant factual
discussion into the decision. Appellant filed objections to the decision and the court
granted leave until January 6, 2020, to supplement the objections and file the transcript
of proceedings. Appellant timely filed his supplemented objections. Appellee requested
leave to file her response; thereafter, appellee filed a timely response on February 13,
2020. On October 6, 2020, the trial court issued an eight-page Judgment Entry adopting
in part and modifying in part the Magistrate’s September 14, 2019, decision. Appellant
prematurely appealed and the case was dismissed by this court for lack of jurisdiction.
On February 17, 2021, the trial court issued its Judgment Entry of Divorce and appellant
timely filed the instant appeal.
Assignments of error and analysis:
{¶4} Appellant’s seven assignments of error are reviewed under an abuse of
discretion standard. “The term ‘abuse of discretion’ is one of art, connoting judgment
exercised by a court which neither comports with reason, nor the record.” State v.
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Underwood, 11th Dist. Lake No. 2008-L-113, 2009-Ohio-208 [2009 WL 1177050], ¶ 30,
citing State v. Ferranto, 112 Ohio St. 667, 676-678 [148 N.E. 362] (1925).” State v. Raia,
11th Dist. Portage No. 2013-P-0020, 2014-Ohio-2707, 2014 WL 2881994, ¶ 9. Stated
differently, an abuse of discretion is “the trial court’s ‘failure to exercise sound,
reasonable, and legal decision-making.’” Id., quoting State v. Beechler, 2d Dist. Clark No.
09-CA-54, 2010-Ohio-1900, 2010 WL 1731784, ¶ 62, quoting Black’s Law Dictionary 11
(8th Ed.Rev.2004). “When an appellate court is reviewing a pure issue of law, ‘the mere
fact that the reviewing court would decide the issue differently is enough to find error[.] *
* * By contrast, where the issue on review has been confined to the discretion of the trial
court, the mere fact that the reviewing court would have reached a different result is not
enough, without more, to find error.’” Id., quoting Beechler at ¶ 67.
{¶5} The record in this matter is voluminous, including nine days of trial
transcripts, while the magistrate’s decision and trial court’s review, amendments, and
adoption of that decision are comprehensive. Under an abuse of discretion standard, this
court reviews the facts in the record to determine whether the trial court exercised sound,
reasonable, and legal decision-making. Appellant has not asserted any assignment of
error that suggests that the trial court made an error of a pure issue of law, and we review
his assignments accordingly. Therefore, this court will not disturb the discretion of the trial
court if its findings are supported by the record.
Spousal Support
{¶6} A trial court has broad discretion to decide what award of spousal support
is equitable based upon the facts and circumstances of each case. Kunkle v. Kunkle, 51
Ohio St.3d 64, 67, 554 N.E.2d 83 (1990). When determining spousal support, the trial
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court must provide sufficient detail for the basis of the award to allow adequate appellate
review. Kaechele v. Kaechele, 35 Ohio St.3d 93, 96-97, 518 N.E.2d 1197 (1988). To
satisfy the Kaechele standard, a trial court must provide some factual support for the
award rather than simply stating it considered the factors listed in R.C. 3105.18(C)(1).
Call v. Call, 11th Dist. Portage No. 99-P-0004, 2000 WL 522458, * 3. In rendering its
decision, the trial court is in the best position to observe the witnesses, which “cannot be
conveyed to a reviewing court by a printed record.” Miller v. Miller, 37 Ohio St.3d 71, 74
(1988). Moreover, we are “guided by the presumption that the trial court's findings were
indeed correct.” Id.{¶7} Appellant’s first and second assignments of error are addressed together.
The first and second assignments state:
{¶8} “[1.] The Trial Court committed prejudicial error in determining Plaintiff-
Appellant’s income for support purposes where it arbitrarily added tax to Plaintiff’s pre-
tax income, and where it failed to use income averaging to calculate income for spousal
support purposes.”
{¶9} “[2.] The Trial Court committed prejudicial error in its determination of
Defendant-Appellee’s income for spousal support purposes where it failed to include
Defendant’s multiple income sources and relied on her self-serving testimony to use an
income year presenting significantly lower salary than all other available years.”
{¶10} Appellant claims that the trial court erred in the following ways: first, by
overcalculating his 2015 gross income by $60,000; second, by arbitrarily using a single
income year rather than income averaging; third, failing to include certain income sources
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for appellee when calculating her income; and fourth, improperly weighing appellee’s
testimony as to her loss in earnings. We will take each of these arguments in turn.
{¶11} The trial court did not err in calculating appellant’s gross income:
Appellant argues that the trial court incorrectly included $60,000 that he paid in federal
taxes in appellant’s pre-tax income. Appellant’s business paid his 2015 estimated income
tax directly to the IRS. Line 65 of appellant’s 2015 income tax return indicates that
appellant listed $60,000 as estimated tax payments. Schedule C of the 2015 tax return
shows the profit and loss of appellant’s business as $191,868, which is the same number
reported on line 12 of his individual return for business income. The question at issue
here, then, is whether the $60,000 tax payment was already included on line 12 of
appellant’s tax return.
{¶12} We start by noting that the $60,000 figure was not specifically delineated in
the net profits listed for his business in Schedule C, nor was it specifically delineated in
the total income reported on line 22 of his 2015 individual tax return. At trial, when asked
how he paid the income tax payment, appellant testified that the $60,000 came from his
business accounts and that a check was written directly from the business to the IRS. He
further clarified that he did not pay the money back to the business and that he considered
the payment on his behalf a distribution. When asked if this would be considered income
to him, his trial counsel objected. Further testimony at a later hearing date again
addressed this issue with appellee’s counsel asking appellant where his taxes show the
$60,000 came out of his businesses net profits. His response was “I can’t, but that’s what
happened.” The matter was left for the magistrate to decide whether to impute this sum
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in addition to the figure listed on appellant’s tax return under his gross income and there
was no further testimony on the matter.
{¶13} The trial court adopted the magistrate’s decision to impute the $60,000 as
additional income to appellant. In so doing, the court observed that appellant testified that
he did not do his own income taxes and instead gave his accountant the information
needed to complete his taxes. The court wrote that appellant “could have called his
accountant as a witness. He did not do so at his peril.” The trial court cited In re Sullivan,
167 Ohio App.3d 458, 2006-Ohio-3206, 855 N.E.2d 554 (11th Dist.), where this court
stated that “[i]t is not the duty of the trial court to ferret out those expenses that qualify as
ordinary and necessary. Rather, it is the duty of the obligor to assert that certain items
are exempt from inclusion as gross income * * *.” Id. at ¶ 25.
{¶14} The Dissent suggests that appellant’s 2015 income tax filings speak for
themselves, noting that he signed the filings under penalty of perjury and that the
document itself provides clear evidence of a party’s income. See Freeland v. Freeland,
4th Dist. Jackson No. 02CA18, 2003-Ohio-5272, ¶ 16. Although the record is clear that
appellant listed $60,000 on line 65 of his 2015 tax filing, what is not clear is whether that
amount was included on the figure reported as part of the business’ net profit in Schedule
C to appellant’s 2015 tax return, or as total income. Appellant’s own merit brief notes that
his tax return “does not break down the reported income to show whether or not such
draws were included * * *.” (Emphasis added). The documents do not speak for
themselves in this case.
{¶15} The parties do not disagree that the sum should be counted as income.
Appellant argues that the mere listing of the $60,000 on line 65 of his 2015 individual tax
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return as estimated taxes paid in 2015 proves that the $60,000 was already included in
his reported total income of $193,254 and that the trial court double counted the $60,000.
At oral argument, appellant asserted that Schedule C for his 2015 tax return would
support his claim, in that the $60,000 is not listed there as an itemized expense. However,
in reviewing the tax return in evidence, we find that there is no demonstrative proof that
the $60,000 was separately listed and distributed for appellant’s 2015 estimated tax
payment.
{¶16} Appellant argues that there is not a $60,000 itemized expense on Schedule
C, and that it was included in the total income on his return. But there is a void in the
evidence that appellant himself created. The $60,000 might be included in the total
income figure reported on his taxes as he claims – or it might not be reported. There is
no way to know from the evidence available. Appellant would have us, and the lower
court, presume of the $60,000, like a jar of Prego sauce, that “It’s in there.” This we cannot
do.
{¶17} The Dissent also grants far more credibility to appellant’s testimony than the
trial court, which characterized appellant’s testimony as unreliable by saying he “could
recollect almost nothing about the preparation of his federal tax returns with relevant
schedules.” He, himself, emphasized his own ignorance of his taxes by saying “I don’t do
my tax returns for exactly this reason. I just give my accountant the information and she
does the taxes.” Despite this, he failed to call Elizabeth Tilton the Certified Public
Accountant who prepared his tax returns. It is telling that in his brief, appellant states that
his tax return “does not break down the reported income to show whether or not such
draws were included * * *.” (Emphasis added). This statement only reinforces the trial
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court’s observation that appellant could have called his accountant as a witness to clarify
this portion of the record and failed to do so at his peril. Under an abuse of discretion
standard, we cannot find that the trial court did not use sound, reasonable, decision
making and the mere fact that Dissent would reach a different result is not enough to
justify overturning the lower court’s decision.
{¶18} On the record before the court, we do not conclude that the trial court
abused its discretion by imputing that distribution to appellant’s gross income. The trial
court was in the best position to weigh the evidence and appellant’s testimony to
determine the facts based upon the record. As the trial court observed, appellant had an
opportunity to “assert that” the $60,000 was “exempt from inclusion as gross income” and
chose not to present evidence demonstrative of that fact. See Id. at ¶ 25.
{¶19} The trial court used its authority to decide whether to use income
averaging: Next, appellant argues that the trial court abused its discretion by relying on
a single year of income rather than income averaging to determine the parties’ income.
Appellant states that the magistrate discussed the possibility of using income averaging
to determine income but ultimately relied upon a single year of income. This court has
held that the “decision regarding when the use of an averaging method is appropriate is
left to the sound discretion of the trial court because it is in the best position to weigh the
facts and circumstances.” In re Sullivan, at ¶ 29, citing Cook v. Cook, 11th Dist. Lake No.
95-L-115, 1996 WL 200573 and Worch v. Worch, 2d Dist. Darke No. 1502, 2000 WL
376643.
{¶20} In this case, the trial court referenced and relied upon the parties’ prior
income years as part of its analysis for determining spousal support. The court stated that
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appellant had income that “was increasing and demonstrates significantly more earnings
in 2012 and 2013 than in 2014 and 2015. However, for the purposes of determining
income, the plaintiff’s 2015 income tax return should be the base, starting point * * *.” In
reference to appellee’s income, the trial court modified the magistrate’s decision to modify
appellee’s income upward slightly. However, the court also relied upon testimony from
appellee that her business had been affected by the passage of the Affordable Care Act
and that certain provisions went into effect in 2014 which lowered her profits substantially.
The court found this testimony to be credible and relied upon it to determine appellee’s
income.
{¶21} These remarks indicate that the trial court had the necessary information to
use income averaging and made a specific decision to not use it. The trial court was in
the best position to weigh the facts and circumstances and we will not disturb that decision
here when the record demonstrates that the court weighed the appropriateness of income
averaging and specifically chose not to use it.
{¶22} The trial court appropriately considered all of appellee’s income
sources: Although appellant lists several potential sources of income that the trial court
could have considered in calculating appellee’s income, we do not find that the trial court
erred in excluding these sources such as appellee’s inheritance, retained business
earnings, and cash draws from her businesses. The court addressed these specific items,
weighed the evidence, and determined in each instance that they should not be counted
as income to the appellee.
{¶23} In reference to the inheritance, the court declined to impute this as income
to appellee because she had used significant inheritance monies to improve the marital
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estate, which appellant received in the distribution of assets. Further, appellee had used
portions of her inheritance to maintain the status quo both during and after the marriage.
On this basis, the court declined to include the inheritance as income.
{¶24} In reference to cash draws from appellee’s businesses, the court did not
include certain draws as income because appellee’s unrebutted trial testimony reflected
that she used these draws to pay independent contractors commissions that they were
owed for business related services. The magistrate found that appellee’s “testimony as
to commissions paid to independent contractors was highly credible.” In the absence of
countervailing facts to suggest that the trial court erred, we are “guided by the
presumption that the trial court’s findings were indeed correct.” Miller, supra, at 74.
{¶25} In reference to the retained business earnings, the court, again, noted that
appellee had to use these earnings to keep the financial boat afloat during the pendency
of the divorce. The trial court’s final judgment entry did make minor modifications on the
basis that the court found that appellee used $4,352 of business funds for her personal
expenses rather than business expenses. However, in reference to other payments, the
court said there was “no evidence to link those payments from the LLC to the personal
expenses of the Defendant.” Where, as here, the trial court provides specific facts and
reasoning for its decisions in calculating spousal support, the reviewing court will not find
error.
{¶26} The trial court was in the best position to weigh trial testimony:
Appellant argues that the trial court improperly weighed the trial testimony by relying upon
appellee’s “self-serving” testimony that provisions of the Affordable Care Act had
significantly reduced her income. However, the trial court is in the best position to weigh
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testimony and we presume that the trial court’s findings are correct. Appellee testified that
her income had been negatively impacted by the Affordable Care Act. She said that
various provisions of the law went into effect in 2014 which reduced the commissions that
appellee earned from the sale of health insurance policies. For instance, she said that
commissions she previously earned ranged from 10-14% per policy prior to the changes
and that after the changes, the commissions dropped to 4-5% per policy. Appellee
testified that in the second year after the sale of a health insurance policy, a commission
for a family of five dropped from $150 to $35. This testimony was unrebutted, and the trial
court did not err in finding it credible and relying upon it.
{¶27} Accordingly, Appellant’s first and second assignments of error are without
merit.
{¶28} Appellant’s third assignment of error states:
{¶29} “[3.] The Trial Court committed prejudicial error in determining the duration
of the term of spousal support when it sustained Plaintiff’s objection to the length of the
term, but added an additional thirty months without explanation.”
{¶30} The trial court properly modified the duration of spousal support:
Although appellant argues that the trial court added an additional thirty months to his term
of spousal support without explanation, the record does not reflect this. The magistrate’s
decision ordered a 72-month support term retroactive to January 1, 2016, to December
31, 2021. The trial court modified this order saying that appellant’s “objection as to
duration is well taken” and in sustaining that objection ordered appellant to pay spousal
support for a term of 54 months retroactive to January 1, 2020, to June 30, 2024.
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{¶31} The trial court’s Judgment Entry specifically discussed the magistrate’s
decision to order a 72-month spousal support term retroactive to January 1, 2016, with
the amount $5,000 per month retroactive to January 1, 2016. The court also noted that
the temporary spousal support order effective March 4, 2015, was only $2,585 per month.
The court said that a “temporary spousal and/or child support order is to keep the financial
status quo of the parties pending trial. The transcript shows the Defendant used some of
her inheritance to pay bills during the pending divorce.” Therefore, the court’s modification
of support changed the initial 72 months at $5,000 per month retroactive to January 1,
2016, to a modified duration of 54 months at $5,000 per month retroactive to January 1,
2020. The total months that appellant is paying the full support order are indeed less than
the magistrate’s initial order. The court finds no error in the trial court’s modification of the
support order.
{¶32} Accordingly, appellant’s third assignment of error is without merit.
{¶33} Appellant’s fourth assignment of error states:
{¶34} “[4.] The Trial Court erred in failing to address the tax consequences of the
award of spousal support in violation of O.R.C. 3105.18.”
{¶35} Appellant failed to raise the effects of the Tax Cuts and Jobs Act
during post-trial briefing when he had opportunity to do so: Appellant claims that the
trial court erred by failing to address the tax consequences of the award for spousal
support as required by R.C. 3105.18(C)(1)(l). R.C. 3105.18(C)(1)(l) requires the court to
consider the tax consequences under “the general rule * * * that, ordinarily, ‘if the award
is such that, in effect, it forces a party to dispose of an asset to meet obligations imposed
by the court, the tax consequences of that transaction should be considered.’” Rice v.
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Rice, 11th Dist. Nos 2006-G2716 and 2006-G2717, 2007-Ohio-2056, ¶ 31, quoting, Day
v. Day, 40 Ohio App. 3d 155, 159, 532 N.E.2d 201 (10th Dist. 1988). “[W]here an appellant
has failed to produce evidence of tax consequences in the trial court * * * tax
consequences are speculative and need not be considered.” Id., quoting Bauman v.
Bauman, 6th Dist. Erie No. E-01-025, 2002-Ohio-2172, ¶ 16. Otherwise, the trial court
would be engaging “in determining the tax consequences of the transaction based upon
mere conjecture or speculation.” Id. citing White v. White, 9th Dist. Summit No. 18275,
1998 WL 103338, * 3.
{¶36} In Rice, we relied upon Ferrero v. Ferrero, 5th Dist. Stark No. 98-CA-00095,
1999 WL 744431, where the court found that the appellant had raised a tax issue to the
court but failed to produce any evidence as to what the tax consequences would be. Rice.
at ¶ 32, citing Ferrero, at *15-16. When a party does not present evidence on the tax issue
beyond argumentation, the trial court need not consider the tax consequences because
to do so would be speculative. Id. The failure to offer evidence on the tax consequences
waives the right to assert the argument on appeal. Id.{¶37} In this case, appellant cites the passage of the Tax Cuts and Jobs Act which
eliminated the alimony deduction for spousal support for divorces executed after January
1, 2019. Appellant claims that the length of time between the trial in January 2017 and
the magistrate’s decision in September 2019 resulted in the passage of a law, the effects
of which he was unable to argue to the court and which the court did not consider. To
remedy this, appellant seeks remand for the trial court to consider this issue.
{¶38} However, the facts of this case reveal that the reason there was a significant
delay between the conclusion of the trial and the magistrate’s decision was the parties’
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resolution of all post-trial briefs. The post-trial briefs were not resolved until June 18, 2019,
and the magistrate’s lengthy decision was issued shortly thereafter on September 14,
2019. Although the trial ended prior to the passage of the Tax Cuts and Jobs Act,
appellant had ample opportunity between its passage and the resolution of all post-trial
briefs to raise this issue and present facts outlining how, if at all, the passage of this act
would have tax consequences on him or appellee. Appellant did not raise this issue until
he objected to the magistrate’s decision. At that point, it would have been speculative for
the court to rule upon this issue because appellant had not presented any facts or
evidence on the issue.
{¶39} Contrary to appellant’s claims, he could have raised the issue prior to the
magistrate’s decision. This is particularly true in this case where post-trial motions were
pending for an extended period. Appellant did not present evidence on this issue at the
trial level and the court did not abuse its discretion in not addressing a topic which
appellant did not raise until after the magistrate’s decision. Moreover, his failure to offer
evidence or raise the issue prior to the magistrate’s decision waives his right to assert this
argument on appeal.
{¶40} Accordingly, appellant’s fourth assignment of error is without merit.
Division of Marital Property:
{¶41} A domestic relations court's division of property in a divorce proceeding is
reviewed under an abuse of discretion standard. Cherry v. Cherry, 66 Ohio St.2d 348,
355, 421 N.E.2d 1293 (1981); Hutchison v. Hutchison, 11th Dist. Lake No.2014–L–048,
2014–Ohio–5471, ¶ 14. In reviewing the court’s division of property, an appellate court “is
not required to conduct an item-by-item review of a property division. Fazenbaker v.
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Fazenbaker, 11th Dist. Trumbull No. 2009-T-0131, 2010-Ohio-5400, ¶26, citing Winkler
v. Thomas, 5th Dist. Tuscarawas No. 2000AP03-0031, 2001 WL 81701, * 4. “[W]hen
considering whether a trial court has abused its discretion in dividing marital property, a
reviewing court should not review discrete aspects of the property division out of context
of the entire award.” Baker v. Baker, 83 Ohio App.3d 700, 615 N.E.2d 699 (1992), citing
Briganti v. Briganti, 9 Ohio St.3d 220, 222, 459 N.E.2d 896 (1984). Instead, a reviewing
court ‘should consider whether the trial court’s disposition of marital property as a whole
resulted in a property division which was an abuse of discretion.’ Baker [702].” (Emphasis
added.) Rice, supra, at ¶ 33.
{¶42} A “‘trial court's characterization of property, as separate or marital, is a
question of fact, thus, a reviewing court must apply a manifest weight of the evidence
standard of review to the trial court's characterization.” Humphrey v. Humphrey, 11th Dist.
No. 2000–A0092, 2002 Ohio 3121, at ¶ 16. “‘Under this standard, the judgment of the trial
court will not be reversed as being against the weight of the evidence if the court's
decision is supported by competent, credible evidence.’” Id. quoting Frederick v.
Frederick, 11th Dist. Portage No. 98-P-0071, 2000 WL 522170, *13-14.
{¶43} Appellant’s fifth and sixth assignments of error both relate to the court’s
division of marital property, and we analyze them together. Appellant’s fifth and sixth
assignments of error state:
{¶44} “[5.] The Trial Court committed prejudicial error when it allocated the division
of the Fredle Drive LLC business checking account.”
{¶45} “[6.] The Trial Court committed prejudicial error when it failed to divide the
marital portion of the Defendant’s personal injury award.”
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{¶46} Appellant claims that the trial court incorrectly allocated the division of the
parties’ “Fredle Drive LLC” business account and that the court abused its discretion by
not dividing appellee’s personal injury award.
{¶47} In reference to the allocation of the Fredle Drive LLC business account,
appellant claims that the lower court improperly divided this asset by ordering it to be
divided twice. The parties were both owners of Fredle Drive LLC and the bank accounts
associated with the business. Prior to the divorce filing, appellee managed the accounts,
but appellant assumed control after the divorce filing and for approximately two years
thereafter. At trial, appellee testified that at the end of every year, the monies from the
accounts were distributed to appellant and appellee equally. After appellant took control
of the account, appellee did not receive the end of year distribution for 2015 or 2016.
Appellee provided evidence that the balance of the account for the 2015 distribution
period was $15,492.19 and that the balance for the 2016 distribution period was
$19,990.00.
{¶48} The magistrate’s decision weighed the testimony on this issue and found
that the appellant “was disingenuous as to his position related to this asset as he stated
he did not remember receiving K1s [distributions] and failed to make even the most
cursory glance at his prior tax returns that clearly explained these usual distributions.”
The magistrate’s decision granted appellee a total of $19,263.80, an amount the
magistrate said was “borne out by the Citizens’ Bank account exhibits and are in line with
the 2012 and 2013 pay-outs.” In its Judgment Entry, the trial court agreed with this
assessment saying that appellant “could not provide substantive evidence as to his
handling of the Fredle Drive account. Based on the evidence adduced at trial, this Judge
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concurs with the Magistrate’s division as to the Citizen Bank account year end balances
for 2015 and 2016.”
{¶49} In reference to the personal injury award, appellee suffered a personal injury
in Charleston, South Carolina and filed suit to recover for her injuries. Appellant did not
join this action and did not file a loss of consortium claim. Although the injury and the filing
of the lawsuit occurred prior to the divorce proceedings, the case was not settled until
after appellant initiated the divorce proceedings. At trial, appellee testified that she “just
paid the medical bills as they came in like if they were any other bill.” However, she also
testified that she was not expecting a windfall saying that the $28,500 settlement she
expected to receive would only be enough to cover attorneys’ fees, costs, and the
remaining unpaid medical bills.
{¶50} R.C. 3105.171(A)(6)(a)(vi) provides that marital property does not include
“[c]ompensation to a spouse for the spouse’s personal injury, except for loss of marital
earnings and compensation for expenses paid from marital assets[.]” R.C.
3105.171(A)(6)(a)(vi) “‘The party seeking to have a particular asset classified as separate
property has the burden of proof, by a preponderance of the evidence, to trace the asset
to separate property.’” Campbell v. Campbell, 11th Dist. Lake No. 2014-L-015, 2014-
Ohio-5614, ¶ 21, quoting Smith v. Smith, 11th Dist. Trumbull No. 98-A-0034, 1999 WL
1488950, *13. The trial court is required to make findings determining whether the party
requesting the court to classify an asset as separate property has met the burden. Id.,citing Letson v. Letson, 11th Dist. Trumbull No. 95-T-5356, 1997 WL 663514, *11. Where
a personal injury settlement is made payable in one check to both husband and wife, the
parties comingle their separate property. Id. at ¶ 28, citing Modon v. Modon, 115 Ohio
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App.3d 810, 816, 686 N.E.2d 255 (1996). In cases where the monies are comingled, the
party seeking to characterize the property as separate has the “burden of convincing the
trial court how much of the check was compensation” for personal injuries and associated
expenses. Id., quoting Modon.
{¶51} Here, the lower court characterized the personal injury settlement as
separate property. The parties’ funds were not comingled. Appellant’s name was not on
the settlement check, and he did not join the action or file his own claim for loss of
consortium. Therefore, the personal injury settlement itself was properly characterized as
separate marital property pursuant to R.C. 3105.171(A)(6)(a)(vi) – provided that the
marital estate did not suffer losses for “expenses paid from marital assets[.]”
{¶52} In this case, the trial court rejected appellant’s claim that appellee had paid
medical expenses out of marital funds. The court said that the parties had largely
separated their finances from 2014 to the present and maintained separate accounts
through their marriage while appellee paid the greater portion of the medical bills between
2014 and 2016. The court further found appellee’s statements credible that the award
was only enough to cover appellee’s outstanding medical expenses. The court said it
would be inequitable to divide appellee’s settlement when she needed the full amount to
pay her remaining, separate medical expenses. On this evidence, the court found that
appellee satisfied her burden of proof to establish the settlement as separate property.
Thus, the trial court relied upon competent credible evidence to determine that the
personal injury settlement was separate property under R.C. 3105.171(A)(6)(a)(vi).
{¶53} We review appellant’s assignments as to the division of marital property
mindful the reviewing court is not required to engage in item-by-item reviews of the lower
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court’s division of property. Instead, we are guided by the overall equity of the award. In
the above instances, we cannot say on this record that the court abused its discretion in
the disposition of marital property.
{¶54} Accordingly, appellant’s fifth and sixth assignments of error are without
merit.
Civ. R. 53(D)(4)(d) additional evidence:
{¶55} Appellant’s seventh assignment of error states:
{¶56} “[7.] The Trial Court committed prejudicial error and abused its discretion in
failing to grant a new hearing.”
{¶57} Appellant relies upon Civ. R. 54(D)(4)(d) which deals with the court’s action
on objections to magistrate’s decisions. Appellant asserts that the trial court abused its
discretion by not hearing additional evidence that appellant says became available
between the trial and the magistrate’s decision.
{¶58} Civ. R. 54(D)(4)(d) provides,
(D) Proceedings in Matters Referred to Magistrates.
***
(4) Action of Court on Magistrate's Decision and on Any
Objections to Magistrate's Decision; Entry of Judgment or
Interim Order by Court.
***
(d) Action on Objections. If one or more objections to a
magistrate's decision are timely filed, the court shall
rule on those objections. In ruling on objections, the
court shall undertake an independent review as to the
objected matters to ascertain that the magistrate has
properly determined the factual issues and
appropriately applied the law. Before so ruling, the
court may hear additional evidence but may refuse to
do so unless the objecting party demonstrates that the
party could not, with reasonable diligence, have
produced that evidence for consideration by the
magistrate.
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{¶59} After the magistrate’s decision, appellant objected and requested a new
evidentiary hearing pursuant to Civ. R. 53(D)(4)(b) so that the court could hear new
evidence – namely new income tax returns to determine the parties’ income. Appellant
cites several cases outside of the Eleventh District which hold that “a court does not have
discretion to refuse to consider new evidence if the objecting party demonstrates that it
could not, with reasonable diligence, have presented the evidence to the magistrate.”
Welch v. Welch, 4th Dist. Athens No. 12CA12, 2012–Ohio–6297, ¶ 12; Morrison v.
Morrison, 9th Dist. Summit No. 27150, 2014-Ohio-2254, ¶27 (quoting Welch); Maddox v.
Maddox, 2016-Ohio-2908, 65 N.E.3d 88. ¶ 14 (1st Dist.). (A trial court is required to accept
“additional evidence if the objecting party demonstrates that with reasonable diligence, it
could not have produced the evidence for the magistrate’s consideration. See Riley v.
Riley, 6th Dist. Huron No. H–08–019, 2009-Ohio-2764, 2009 WL 1652837, ¶ 20,
quoting Johnson–Wooldridge v. Wooldridge, 10th Dist. Franklin No. 00AP–1073, 2001
WL 838986 (July 26, 2001).”).
{¶60} The Eleventh District has held that “‘[w]hile the trial court has the discretion
to refuse to consider additional evidence, the trial court must first give the offering party
an opportunity to demonstrate that such evidence could not have been produced before
the magistrate.’” Porter v. Ferrall, 11th Dist. Portage No. 2002-P-0109, 2003-Ohio-6685,
¶ 16, quoting McClain v. McClain 11th Dist. No. 98-P-0002, 1999 Ohio App. LEXIS 4655,
12-13 (Sept. 30, 1999).
{¶61} In Morrison, the court noted that a request for an additional evidentiary
hearing could be subject to abuse. The court said that Civ. R. 53(D)(4)(d) “‘contemplates
that new events may arise or be discovered between the time of a magistrate’s decision
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and a trial judge’s final judgment.’” Morrison, supra, at ¶ 27, quoting In re A.S., 9th Dist.
Summit No. 26462, 2013–Ohio–1975, ¶ 14–15 (analyzing identical language in Juv.R.
40(D)(4)(d)). The court in Morrison said that a blanket rule requiring a hearing based on
the invocation of talismanic words “could lead to an abuse of that rule.” Id. at ¶ 28. In that
case, the court found the moving party had satisfied the requirements of Civ. R.
53(D)(4)(d) because,
Wife noted the evidence did not become available until after trial. She
identified a factual change in circumstances regarding her
employment. Finally, she detailed that the parties’ legal parental
rights and responsibilities could be affected by the change. We take
no position on the merits of Wife’s allegations, but simply find a
hearing was warranted under the circumstances.
Id.
{¶62} The “crux” of the reasonable diligence standard of Civ. R. 53(D)(4)(d) “is
whether the party was put on notice that they would be reasonably expected to introduce
the evidence at the hearing before the magistrate. If the party had notice that they would
be reasonably expected to introduce evidence on the subject, then the trial court has
discretion to accept or reject that evidence.” (Citations omitted). Maddox, supra, at ¶ 15.
The court should consider whether or not the record demonstrates that an appellant “with
reasonable diligence, could not have produced that evidence for the magistrate’s
consideration.” Porter, supra, at ¶ 19. (Holding that appellant “had ample opportunity to
gather that evidence and present it to the magistrate at the previous evidentiary hearings.
Thus, the trial court lawfully exercised its discretion in refusing to allow that additional
evidence, which was by no means ‘newly discovered.’”)
{¶63} In this case, appellant identified that his evidence of newly filed tax returns
had become available between the time of trial and the magistrate’s decision. However,
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as noted above, the cause for the substantial time between trial and the magistrate’s
decision was that multiple post-trial motions remained pending until the parties resolved
those issues. Had appellant used reasonable diligence in that period, he would have filed
an additional post-trial brief prior to the magistrate’s decision seeking to supplement the
record with newly filed tax returns which were available well before the magistrate’s
decision. See Id. at ¶ 16.
{¶64} Appellant has also indicated that a change in income could affect the
parties’ rights and responsibilities. However, appellant has failed to identify any factual
change in circumstance regarding the parties’ income. Instead, appellant speculates
about a change in circumstances and does nothing more than invoke the talismanic words
of Civ. R. 53(D)(4)(d). See Morrison, supra, at ¶ 28.
{¶65} Finally, in this case, the court retained jurisdiction to modify the spousal
support order. If there has been a substantial change in circumstances that was not
contemplated by the parties in the original decree, appellant may present such to the trial
court. See Riley v. Riley, 11th Dist. Ashtabula No. 2012-A-0037, 2013-Ohio-1604, ¶ 37-
38. However, appellant did not present any argument or evidence that would suggest
there has been a substantial change in circumstances. Rather, he has merely made
suggestions that new income information from subsequent years could be different. We
decline to conclude that the trial court abused its discretion under these circumstances.
{¶66} Accordingly, appellant’s seventh assignment of error is without merit.
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{¶67} For the foregoing reasons, the judgment of the Lake County Court of
Common Pleas, Domestic Relations Division, is affirmed.
THOMAS R. WRIGHT, P. J., concurs,
MATT LYNCH, J., concurs in part and dissents in part, with a Dissenting Opinion.
_____________________________
MATT LYNCH, J., concurs in part and dissents in part, with a Dissenting Opinion.
{¶68} While I concur with the disposition of the second through seventh
assignments of error, I dissent from the majority’s decision to affirm the addition of
$60,000 to appellant’s 2015 income above the amount stated in his tax return. This
determination results in unfairly counting the $60,000 in question twice, rejects appellant’s
credible testimony, and places an unreasonable burden on appellant to provide additional
evidence of his income where his tax return already established such fact. Given the lack
of any rebuttal evidence establishing this amount was not accounted for in appellant’s tax
return, the trial court’s determination of appellant’s income must be reversed.
{¶69} The majority finds that the trial court did not abuse its discretion when
adding $60,000 to appellant’s 2015 claimed income, finding he failed to “present evidence
demonstrative of” the fact that the $60,000 was exempt from inclusion as additional
income. It concludes, like the trial court, that he should have called his accountant as a
witness to demonstrate whether the $60,000 was included in the reported taxable income.
There are several flaws in this conclusion. Significantly, it places a burden on appellant
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that is not required by law and is unwarranted under the facts of this case. Here, appellant
introduced a copy of his tax return stating his income for 2015, which he signed
electronically, under penalty of perjury, affirming that the income information was
accurate. See 26 U.S.C. 6065 (“Except as otherwise provided by the Secretary, any
return, declaration, statement, or other document required to be made under any
provision of the internal revenue laws or regulations shall contain or be verified by a
written declaration that it is made under the penalties of perjury.”). Such a document
provides credible and clear evidence of a party’s income. It has been held that, “in
determining what constitutes ‘income,’ * * * a trial court should typically use the figures
shown on a party’s annual income tax return” and that such figures “are preferred to a
party’s oral representations in determining what constitutes the party’s ‘income’ for the
purposes of R.C. 3105.18(C)(1)(a).” Freeland v. Freeland, 4th Dist. Jackson No. 02CA18,
2003-Ohio-5272, ¶ 16; Wagshul v. Wagshul, 2d Dist. Montgomery No. 23564, 2010-Ohio-
3120, ¶ 21. To add $60,000 to appellant’s reported income is essentially to determine
that he fraudulently stated his income on his tax return, which conclusion the evidence
simply does not support.
{¶70} In addition to the tax return, appellant provided testimony in relation to the
disputed $60,000, which he had used to make a tax payment. Appellant testified that the
money “came out of that $190,000,” i.e., the amount of his income stated in the 2015 tax
return. In other words, although he used $60,000 from his business account to pay
quarterly taxes, this amount was included as part of the approximately $190,000 income
claimed. This testimony, coupled with the tax return, supports a conclusion contrary to
that reached by the trial court and demonstrates no additional income should have been
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added to the amount stated in the tax return. It is irrelevant how appellant spent the
$60,000; it is only pertinent whether the evidence supports that appellant reported it as
taxable income.
{¶71} The decision to increase appellant’s income by $60,000 appears to be
based solely on a few comments in his testimony which the trial court interpreted to mean
he had not claimed the $60,000 as income on his tax return. Appellant, when asked how
his taxes were paid, stated that the money “came from [his] business.” When asked if it
was a “distribution,” he indicated that he did not understand the question. He explained
that it was income but when asked if it should have been declared as part of his income
for tax purposes he explained, “That’s not how this works.” He later clarified that, since
the money was part of his income, he reported it on the return for tax purposes, and,
regarding the previous confusion over whether it was a distribution, he was “looking at it
from a semantic standpoint.” Far from establishing a failure to correctly report his income,
appellant’s testimony, viewed as a whole, only serves to demonstrate his confusion about
financial terms and intricacies of tax reporting. While the testimony used by the trial court
to justify its decision was equivocal and uncertain, when asked questions to clarify, he
definitively and clearly stated that the $60,000 was part of the $190,000 in income he
made in 2015. This is also consistent with his statement that he keeps funds in the
business account that are part of his claimed income. Such testimony is credible, even if
he was not fully cognizant of the terminology utilized when discussing these matters.
Appellee argues that, as a businessman, appellant should understand tax-related
matters, however, a decision to increase appellant’s income by over 25 percent and
thereby greatly increasing the amount of the support award, cannot be based on
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conjecture. Appellant is a dentist and there is nothing to indicate he is well-versed on
matters relating to finances or taxes; he emphasized in his testimony that he is not and
repeatedly noted his use of an accountant to handle various business matters.
{¶72} The emphasis on the appellant’s failure to call his accountant as a witness
is also misplaced. As noted above, given the significance of the tax return itself in
establishing his income and his own testimony that the $60,000 was part of his reported
income, such evidence was sufficient to demonstrate his 2015 income. There is no
authority requiring an accountant’s testimony to establish this fact nor should a party be
required to have an accountant explain the tax implications of every withdrawal from a
business account. Such testimony would be cumulative as to the issue in dispute, i.e.,
whether the amount claimed on the tax return included the $60,000 paid for appellant’s
quarterly taxes. The accountant would only be able to provide testimony as to what
appellant reported to her as his income when aiding in the preparation of his return. If
the accountant had been aware of an additional amount of income, she would have been
obligated to report it on his return. Thus, the accountant’s testimony would add nothing
of value to the record that was not already present through appellant’s testimony and the
return. Further, the accountant signed the tax return electronically and would be subject
to penalties if she willfully aided in the preparation of a fraudulent or false tax return. See
26 U.S.C. 7206. It appears that calling the accountant would be fruitless in resolving the
sole issue in dispute, i.e., whether appellant failed to report income on his tax return, since
if she had knowledge of his failure to report, she would be admitting she aided in preparing
a false tax return.
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{¶73} To the extent that the majority notes it is “not the duty of the trial court to
ferret out * * * expenses,” supra at ¶ 13, appellant did not ask the court to do so. The
court had the evidence it needed to reach its decision before it, by way of the tax return.
No additional evidence or witnesses were required nor was the court asked to look into
any other evidence to make a finding. The evidence and testimony indicated that funds
in the business account were part of appellant’s income that he may withdraw for personal
expenses.
{¶74} Further, the accountant’s testimony was of little necessity where there was
no evidence presented by the opposing side to rebut appellant’s testimony and tax return.
The failure of a party to present evidence to rebut testimony is correctly attributed to that
party and unrebutted testimony is of significant value. Haynes v. Washington, 373 U.S.
503, 510, 83 S.Ct. 1336, 10 L.Ed.2d 513 (1963). See also State v. Edgell, 30 Ohio St.2d
103, 117, 283 N.E.2d 145 (1972) (O’Neill, J., dissenting) (“[w]hile credibility is a matter to
be resolved by the trial judge, there is significance in the uncontradicted testimony of the
defendant”). The burden for additional evidence properly lies with appellee, not appellant.
{¶75} Finally, the majority argues that we have no way of knowing whether
appellant reported the $60,000 in the tax return and concludes that the court cannot
“presume of the $60,000, like a jar of Prego sauce, that ‘It’s in there.’” As outlined above,
however, there is a way to know whether the $60,000 was reported and that is through
appellant’s testimony and tax return. The Prego sauce label, like appellant’s tax returns,
lists its contents, and this court has no evidence to suggest either is inaccurate. In matters
relating to spousal support, while the trial court is given broad discretion to determine
what is equitable, “‘such discretion is not unlimited.’” Dilley v. Dilley, 11th Dist. Geauga
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No. 2019-G-0207, 2020-Ohio-984, ¶ 12, citing Kunkle v. Kunkle, 51 Ohio St.3d 64, 67,
554 N.E.2d 83 (1990). The judgment here, which goes against the evidence presented
by appellant and is unsupported by any evidence from the opposing party, constitutes an
abuse of discretion.
{¶76} For the foregoing reasons, I dissent in part and would reverse the lower
court’s judgment as to the decision to add $60,000 to the income stated in appellant’s
2015 tax return.
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