Lucas v. Lucas , 2011 Ohio 6411 ( 2011 )

[Cite as Lucas v. Lucas, 2011-Ohio-6411.]
STATE OF OHIO, NOBLE COUNTY
IN THE COURT OF APPEALS
SEVENTH DISTRICT
STACEY LUCAS, )
) CASE NO. 11 NO 382
PLAINTIFF-APPELLEE, )
)
- VS - ) OPINION
)
JEFFREY LUCAS, )
)
DEFENDANT-APPELLANT. )
CHARACTER OF PROCEEDINGS: Civil Appeal from Common Pleas Court,
Case No. 210-0142.
JUDGMENT: Reversed and Remanded.
APPEARANCES:
For Plaintiff-Appellee: Attorney Michael Buell
322 Third Street
Marietta, Ohio 45750
For Defendant-Appellant: Attorney Miles Fries
320 Main Street,
P.O. Box 190
Zanesville, Ohio 43702-0190
JUDGES:
Hon. Joseph J. Vukovich
Hon. Gene Donofrio
Hon. Cheryl L. Waite
Dated: December 6, 2011
VUKOVICH, J.
{¶ 1} Defendant-appellant Jeffrey Lucas appeals the division of assets and
assignment of debt ordered by the Noble County Common Pleas Court in its judgment
granting a divorce to appellee. First, the husband contests the court’s valuation of the
marital portion of the residence he shared with plaintiff-appellee Stacey Lucas. We
agree that the trial court overvalued the wife’s separate portion of the marital
residence.
{¶ 2} Next, the husband argues that the court abused its discretion in awarding
the wife the entire value of a neighboring rental unit that she purchased with her
separate property. As the husband performed labor on this unit over the years and
replaced the roof and the front porch months before the marriage end date, we
conclude that it was unreasonable to attribute none of the appreciation to active
marital labor.
{¶ 3} Finally, the husband contends that the court improperly labeled all of the
credit card debt as his separate debt and made him liable for his own medical bills
incurred during the marriage. We conclude that it was not unreasonable to have the
husband pay his own medical bills incurred just prior to the end of the marriage.
Although the trial court could rationally conclude that some of the credit card debt
should be attributed to the husband alone, we conclude that the wife failed to meet her
burden of establishing that all of the credit card debt incurred prior to the end of the
marriage date in the husband’s name was non-marital debt. As such, the judgment of
the trial court is reversed, and the case is remanded for reconsideration of these
issues.
STATEMENT OF THE CASE
{¶ 4} The parties were married in September of 1980. Their children are
emancipated. In 1991, the wife inherited from her grandmother $120,000 and 20% of
a house. The parties used $50,000 from the sale of a prior marital residence to
purchase the other 80% of the house. They then renovated the house for use as their
residence and as a bed and breakfast. The husband, who is a carpenter, performed
much of the labor on the renovations. In the first couple years, the husband worked on
the home full-time, instead of working outside jobs. The wife states that she thereafter
worked many hours on the home. (Tr. 25). The wife testified she spent $78,367.12
from her inheritance to renovate the residence. The remainder of the inheritance was
used to supplement their income and is now gone.
{¶ 5} In 1997, the wife inherited $40,000 from a step-grandmother. She used
the entire inheritance to purchase a neighboring property, which they used as a rental
property. (Tr. 27-28). Over the years, $9,406.82 was spent on materials for the
husband to renovate this property: $3,282 came from the wife’s separate property
inheritance from her great-aunt in 2009 and the rest of the renovations were financed
by rental income that property generated. (Tr. 30). In 2009, weeks of the husband’s
full-time labor was used to replace the roof and porch at the rental property.
{¶ 6} On December 15, 2009, the husband communicated information to the
wife that resulted in the end of the marriage. Thereafter, the husband moved above
the garage. The wife filed for divorce in April of 2010, and the divorce trial proceeded
in November of 2010.
{¶ 7} On March 1, 2011, the trial court entered the divorce decree, finding the
residence was worth $150,000 and that $88,767.12 of this was the wife’s separate
property. As to the neighboring rental property, the court found that the entire $55,000
value of the realty was the wife’s separate property. The court attributed all credit card
debt to the husband and made him responsible for his own medical bills. The husband
filed timely notice of appeal.
ASSIGNMENT OF ERROR NUMBER ONE
{¶ 8} Appellant’s first assignment of error provides:
{¶ 9} “THE TRIAL COURT ERRED IN CONCLUDING THAT ANY
APPRECIATION IN VALUE OF THE PARTIES’ REAL ESTATE WAS APPELLEE’S
SEPARATE PROPERTY.”
{¶ 10} The husband contests the court’s decision on what portion of the realty is
marital and what portion is the wife’s separate property. The burden of proving that an
asset acquired during the marriage is separate property is on the one claiming it is so.
Miller v. Miller, 7th Dist. No. 08JE26, 2009-Ohio-3330, ¶20. In reviewing the court’s
decision, we determine whether any discretionary decisions were unreasonable,
arbitrary, or unconscionable and whether any factual decisions were supported by
competent, credible evidence. Id. See, also, Cherry v. Cherry (1981), 66 Ohio St. 2d
348, 355 (the standard of review for decisions involving the division of marital property
is that the trial court's decision will not be reversed absent an abuse of discretion);
Blakemore v. Blakemore (1983), 5 Ohio St. 3d 217, 219 (an abuse of discretion implies
a decision that is unreasonable, arbitrary, or unconscionable).
{¶ 11} Marital property includes income or appreciation on separate property
due to the labor, monetary, or in-kind contribution of a spouse during the marriage.
R.C. 3105.1717(A)(3)(a)(iii). An inheritance is separate property as is the passive
appreciation of the property during the marriage. R.C. 3105.171(A)(6)(a)(i), (iii).
Commingling does not destroy the identity of separate property unless the separate
property is not traceable. R.C. 3105.171(A)(6)(b).
{¶ 12} The parties’ residence, which was also used as a bed and breakfast, was
valued by the court at $150,000. The wife inherited a 20% interest in this residence in
1991. The court valued this separate interest at $10,400.1 The court then found that
$78,367.12 spent on materials and labor for improvements to the residence between
1992 and 2009 were paid for out of the wife’s inheritance. The court thus concluded
that $88,767.12 was the wife’s separate property and $61,232.88 was the marital
portion of the residence.
{¶ 13} Notably, $50,000 of the original purchase price was paid for with marital
funds from the sale of the first marital residence. Thus, the husband’s argument
centers around the fact that only $11,000 was attributed to appreciation of the marital
portion and to marital labor while the wife was credited for every dollar she spent in
materials, urging that every dollar spent on material does not automatically and
proportionally increase the property value.
{¶ 14} Contrary to one argument set forth by the husband, the wife testified that
no money from the marital greenhouse business was used to renovate the residence.
(Tr. 62). Moreover, merely because she noted that they used some of the inheritance
1
This was because the estate’s probate filings had the house valued at $52,000, and 20% of
$52,000 is $10,400. However, the parties paid the estate $50,000 from marital property for the
remaining 80% of the property, which establishes that the wife’s inherited 20% of the property was
actually worth $12,500. Probate filings do not establish value when there exists an actual purchase
price paid by the very parties at issue.
money for living expenses does not mean that her other testimony that it was used to
renovate the house is incorrect. (Tr. 23). It is not disputed that the renovations on the
house cost $78,000 over the years, and the total cash from her inheritance was
$120,000. Thus, there was money left from that inheritance after the gradual
renovations; in fact, they both testified as to selling portions of it at a gain during stock
market peaks. The court’s factual determination that the wife’s separate money was
used to fund over $78,000 in materials (and some outside labor) for renovations is not
contrary to the manifest weight of the evidence. See Miller, 7th Dist. No. 08JE26 at
¶20. As the wife notes, her claims were a matter of credibility for the trial court as the
fact-finder. Knox v. Knox, 7th Dist. No. 04JE24, 2006-Ohio-1154, ¶42.
{¶ 15} Although the husband provided more labor than the wife, she did provide
many hours of labor over the years. Her outside work and her inheritance allowed the
husband to work on the house rather than work outside the house. Thus, the trial
court believed that his marital labor on the house was largely offset by her marital
labor and other contributions to the household, which financed their life as he worked
on the house.
{¶ 16} However, active appreciation on a separate asset from labor during
marriage is considered a marital asset regardless of which spouse rendered the labor.
R.C. 3105.171(A)(3)(a)(iii) (“appreciation of separate property, due to the labor,
monetary, or in-kind contribution of either or both spouses that occurred during the
marriage.”). See, also, Middendorf v. Middendorf (1998), 82 Ohio St. 3d 397, 400
(when either spouse makes a labor contribution to increase the value of separate
property, the increase is deemed marital). Thus, both parties’ marital labor, which
increased the house’s value, constitutes a marital portion of the residence.
{¶ 17} Moreover, it is a matter of common knowledge that an expenditure on a
fixture in a house does not actually increase the house’s value by the amount of the
fixture. For instance, the wife spent $8,500 in 2002 on a wood burning furnace. She
provided no proof that the house in 2009 was worth $8,500 more because of that
purchase. Thus, a dollar for dollar credit on renovations is inappropriate. This is
especially true where the wife testified that she was concerned that they over-
renovated in excess of the house’s value.
{¶ 18} Thus, we remand for reconsideration of the issue regarding the marital
portion of the residence. It must be remembered that the wife inherited 20% of the
property, but they both purchased the remaining 80% for $50,000 as a marital asset
from money earned on the sale of their first marital residence.2 It should also be
considered that any passive appreciation on the marital portion (from increased
property values during the more than seventeen years that they owned the property) is
marital property. And, the increased value on the entire property from the labor of both
the husband and the wife is a marital asset.
{¶ 19} Attributing only $11,000 to active appreciation due to marital labor on the
entire property (and to passive appreciation on the marital portion) is unreasonable
considering the amount of renovations performed over the years. The husband
submitted Exhibit 17, which lists all the extensive remodeling he did on the property.
The trial court’s decision that only $61,232.88 out of $150,000 was marital meant that
the husband received only his original $25,000 investment back (half of their $50,000
marital investment) plus a mere $5,600 for their more than seventeen years of living in
(passive appreciation) and working on (active appreciation) the residence. Notably, he
spent the first two years working full-time on the home and then intermittently took
more time off his outside work to renovate the marital home. (Tr. 25, 52-53, 62).
Although the wife is entitled to some credit for use of her separate property to buy
materials for these renovations, a dollar for dollar credit is inequitable.
{¶ 20} Before moving on, we dispose of certain responses set forth by the wife.
That is, the husband did not waive the argument that he helped increase the value of
the residence. Both parties admitted below that he had a hand in most renovations
and that he performed more labor than she did. The wife fails to realize that the house
itself was not her original separate property. As aforementioned, 20% of it was
separate and 80% of it was marital when they first purchased it.
{¶ 21} Contrary to her other contention, the husband did not invite an error by
testifying that he often charges a customer an amount for labor that is equal to the
amount of materials. The wife states that this formula does not work here because
2
Her proposed findings and conclusions noted that the first marital residence was constructed
due to a $30,000 gift from her grandmother. However, testimony showed that the land was a gift from
the husband’s family. In any event, the wife stated that her grandmother gifted both of them the money.
there is not enough equity to use it since she spent $78,000 in materials. However,
the husband did not ask the court to apply this formula. It was the wife’s attorney who
asked him questions about how much he charges on outside jobs. Moreover, the
marital portion of an asset’s appreciation is not valued by what the labor is worth but
rather by how much it contributed to the appreciation.
{¶ 22} Next, we move to discuss the trial court’s decision to award the wife the
entire value of the neighboring rental property. This property was purchased with
$40,000 that the wife received as a separate property inheritance in 1997. We note
that it has been stated that once evidence is presented of the property’s separate
character, the burden shifts to the other party to show that marital labor caused
appreciation on the separate property. See, e.g., Harrington v. Harrington, 4th Dist.
No. 08CA6, 2008-Ohio-6888, ¶13. However, this court has held that the burden
remains on the spouse seeking to declare the appreciation on separate property as
separate. Teaberry v. Teaberry, 7th Dist.. No. 07MA168, 2008-Ohio-3334, ¶17-18;
Spier v. Spier, 7th Dist. No. 05 MA 26, 2006-Ohio-1289, ¶50. See, also, Harrington,
4th Dist. No. 08CA6 (J. Kline, dissenting) (listing cases and noting that the burden
remains on the one claiming separate property because there is a presumption that
property acquired during marriage is marital); R.C. 3105.17(A)(3)(a)(iii) (marital labor
on separate property is merely a definition of marital property). Either way, some part
of the increase here should be attributed to the husband under the facts of this case.
{¶ 23} The wife stated that materials for renovations to this property cost
$9,406.82. The labor was mostly performed by the husband. Rental income from the
property financed over $6,000 in materials. In 2009, the husband replaced the roof
and reconstructed the front porch which was rotting away. Specifically, he removed
the front porch floor, replaced it, repaired certain architectural features of the porch,
removed, repaired, and replaced the columns, painted the finished product. He
testified that he spent five to six weeks on this project instead of working outside jobs.
He also painted the back porch at that time. (Tr. 98). The money for these materials,
$3,282.04, came from a third inheritance that the wife received.
{¶ 24} The property is now worth $55,000. The husband testified that the
$15,000 was a marital asset due to all of the physical labor he performed on the
property, and he opined that it should therefore be divided equally. (Tr. 97-98, 103). In
addition to the 2009 roof and porch project, he provided a list of the work he performed
on the rental unit. He installed a new furnace and ducts, new electrical service panel
and service line, five windows, two toilets, a ceiling fan, two ceiling fixtures, a hand rail,
a basement door, two storm doors, and service lines for the washer and dryer. He
repaired the plumbing, ceilings, and gutters. He repointed the foundation blocks. He
also painted and laid carpet. (Tr. 30-31). He built a new bath vanity and repaired,
stripped, and refinished woodwork.
{¶ 25} By awarding the wife the entire $55,000, the court found that not one
cent of this $15,000 increase in value was attributable to marital labor. The court
provided the wife with not only a dollar-for-dollar credit, which we disapproved of
above, but also provided her with the entire remaining increase in value. It was
undisputed that marital labor was used to renovate this property and install materials.
Most notably is the husband’s weeks of full-time work, just months before the marriage
end date, which he spent installing a new roof and constructing a new front porch for
the rental unit. (Tr. 30). It is clear that these renovations actively increased the value
of the current property.
{¶ 26} The wife provided no evidence that the increased value was not due in
part to the husband’s labor or her own marital labor. In any event, the husband
sufficiently met any reciprocal burden. He was a contractor by trade, and he claimed
that his labor accounted for the $15,000 increase in value. Even if the trial court
believes that the husband failed to show that he is entitled to half of the entire $15,000
increase (since the wife used separate property to fund the renovations), he did
establish that he is entitled to some part of the increased value of the rental unit.
{¶ 27} The wife acknowledged that marital labor was used to renovate this
property. Besides generally asking for the entire value of the property, she did not
dispute that the husband’s marital labor had an effect on the value, and her separate
contributions to materials do not cover the entire appreciation. As aforementioned,
she received more than a dollar-for-dollar credit for materials here. It is unreasonable
to find that her $9,000 in material and/or passive appreciation accounted for the entire
$15,000 increase in value without considering the amount of labor performed on the
property by the husband, most notably the recent renovations to the roof and porch.
Thus, we remand for reconsideration of the marital portion of the rental unit.
ASSIGNMENT OF ERROR NUMBER TWO
{¶ 28} The husband’s second assignment of error provides:
{¶ 29} “APPELLEE FAILED TO SUSTAIN HER BURDEN OF PROVING THAT
CERTAIN DEBTS WERE APPELLANT’S SEPARATE DEBTS.”
{¶ 30} At the time of the divorce hearing, the wife had no credit card debt in her
name, and the husband had $20,000 in his name. The court attributed all of this debt
to the husband. In his proposed findings of fact and conclusions of law, the husband
asked that $9,288.84 in credit card debt be considered marital debt as it existed prior
to December 15, 2009, the date chosen as the marriage end date.
{¶ 31} Adopting the wife’s proposed findings and conclusions, the court held
that the husband did not present credible evidence that the debt incurred prior to
December 15, 2009 represented marital obligations. The court found that the
evidence showed that the husband has been rapidly increasing his debt since mid-
2009 as if in preparation for a divorce. The court noted that the husband admitted that
some charges related to materials for outside construction jobs. The court found that
the husband admitted that some charges were for internet dating sites, personal trips,
and other non-marital expenses. The court concluded that it could not determine
which portions of the cards were marital and thus it would consider the entire balance
non-marital.
{¶ 32} On appeal, the husband reiterates that the court should have found
$4,014.84 on a Chase card and $5,274 owed on a Discover card to be marital debt.
He urges that the wife had the burden to show the debt incurred during the marriage
was not marital debt and that she failed to meet her burden.
{¶ 33} One of the factors to consider in dividing marital property is the assets
and liabilities of the spouse. R.C. §3105.171(F)(2). Marital debt has been defined as
any debt incurred during the marriage for the joint benefit of the parties or for a valid
marital purpose. Ketchum v. Ketchum, 7th Dist. No. 2001CO60, 2003-Ohio-2559, ¶47,
citing Turner, Equitable Distribution of Property (2 Ed.1994, Supp.2002) 455, Section
6.29. Debts incurred during the marriage are presumed to be marital unless it can be
proved that they are not. Vergitz v. Vergitz, 7th Dist. No. 05JE52, 2007-Ohio-1395,
¶12, citing Knox v. Knox, 7th Dist. No. 04JE24, 2006-Ohio-1154, ¶ 25-26. The party
seeking to establish a debt is separate rather than marital bears the burden of proving
this to the trial court. Id, citing Hurte v. Hurte, 164 Ohio App. 3d 446, 2005-Ohio-5967,
¶ 21.
{¶ 34} As the trial court pointed out, the Chase card once had a low balance:
$947 on the statement due in April of 2009 and $672 on the statement due in June of
2009. Thereafter, this card saw more use. The bill due in July showed a $2,872
balance; the bills due in August and September showed balances over $4,000. The
next statement shows the husband made a payment of $2,500 and $768 in purchases,
leaving a balance of $2,473 due in October. The statement due in November was not
provided in the packet. However, the next statement showed a prior balance of
$5,000, a $1,000 payment, $900 in returns, and $1,000 in purchases, including food,
automotive, and gas purchases. The January statement (ending December 11, 2009)
showed a $300 payment and $853 in purchases.
{¶ 35} The wife’s attorney made much of expensive online clothing purchases;
however, the items were returned the next month and credited back to the card. There
was an $80 hotel bill incurred on November 28, 2009, which the wife’s attorney
suggested was his personal expense. The court could agree with this
characterization. The husband admitted that he used the Chase card for his business
as well as personal purchases. There were a multitude of home improvement store
purchases on the card. He stated that the monthly payments included money that
customers paid him for the materials he bought for their projects. (Tr. 110). The trial
court could conclude that he did not use all the money received from his clients to pay
off their materials and the trial court can use its discretion to decide how to allocate
payments to purchases.
{¶ 36} Still, the trial court expressly and improperly imposed the burden on the
husband. Vergitz v. Vergitz, 7th Dist. No. 05JE52, 2007-Ohio-1395, ¶12 (The party
seeking to establish a debt is separate rather than marital bears the burden of proving
this to the trial court). The wife can use the husband’s testimony to meet this burden
on certain items such as home improvement store purchases. However, various
purchases on this card appear on their face to be marital obligations, such as food,
pharmacy, gas and pet store. Besides the presumption that credit cards purchases
during the marriage are marital debt, the husband testified that marital purchases were
made on his cards. He stated that he put all the family groceries on his credit cards
and that he bought many items for the house. (Tr. 109-110, 125). The wife did not
dispute this.
{¶ 37} In fact, the wife did not testify on the topic of these credit cards at all.
Thus, she did not sufficiently establish that the entire balance existing as of December
15, 2009 was non-marital. Although she did present some evidence (through the
husband’s admissions) that certain charges should be labeled separate debt, this does
not allow recategorization of all purchases, including food, pharmacy, gas, and pet
bills, as not being for a valid marital purpose.
{¶ 38} This is true for the Discover card as well. The husband notes that
$5,274 worth of debt on his Discover card represents debt incurred during the
marriage. This balance was previously on a First National Bank Visa which was later
transferred to a new Discover card to save interest. Thus, we view the transactions on
the Visa to determine the propriety of the court’s decision to label all this debt as non-
marital.
{¶ 39} The wife’s attorney took issue with a September payment to Sirius radio,
which service the husband testified that he had for years, and a $95 hotel bill from
November of 2009, which the husband said was a gift from them to his sisters. The
wife’s attorney also emphasized charges for certain online personal services.
However, this concerns only approximately $150.3 (Tr. 134-135).
{¶ 40} Even if various items were not marital obligations, this does not establish
that none of the charges on the card had a valid marital purpose. As with the other
card, the husband testified that he bought all the groceries for the house and that
many of his family purchases were represented on the credit card. (Tr. 125-126). The
wife did not dispute this. The party seeking to establish a debt is separate rather than
3
The wife’s attorney also detailed charges for trips to Florida, noting that the husband’s
paramour lives there. (Tr. 128). The court mentioned this as well. However, these charges were made
after the December 15, 2009 marriage end date and thus were not within the court’s consideration in
any event.
marital bears the burden of proving this to the trial court. Vergitz v. Vergitz, 7th Dist.
No. 05JE52, 2007-Ohio-1395, ¶12.
{¶ 41} Notably, in November of 2008, more than a year before any mention of
marital demise, this card had a balance of $2,311. Thus, it did not have a low balance
in the year the marriage ended, like the Chase card may have. Thereafter, many
purchases represented groceries and restaurants. There were also theater tickets,
books, pet store purchases, home improvement store charges, and clothing. In fact,
the husband testified and the wife admitted that he used the credit cards to purchase
some items from the internet for the kitchen renovation. (Tr. 57, 104).
{¶ 42} Although the trial court could rationally find that the wife sufficiently
established that some charges lacked a valid marital purpose, she failed to meet her
burden with regard to most of the items on the card. In fact, she did not present any
testimony to dispute the husband’s testimony that she benefitted from many of the
purchases made on the cards. As such, the court’s decision allocating the credit card
wholly to the husband is reversed and remanded.
{¶ 43} Finally, the husband states that the $3,129.36 bill remaining from his
hernia surgery should be considered a marital debt. This surgery took place
December 1, 2009, just prior to the December 15, 2009 date that the court used as the
marriage end date. The total is apparently derived from two bills contained in his
exhibit number 10: $2,806.14 from St. Joseph’s Hospital, and $323.22 from
Anesthesia Associates. The court made him responsible for the entire bill.
{¶ 44} Initially, we note that the husband did not testify that these bills were still
outstanding. In fact, at the deposition, he stated that the hospital bill was a mistake
and that the only bills outstanding were $323 (paid down to $275) and $600 (also part
of exhibit 10 but not sought in his proposed findings and conclusions). His proposed
findings and conclusions claimed that he testified that he has $3,129.36 in unpaid
medical bills from the hernia surgery. Yet, such testimony cannot be found in the
transcript. Where three bills are submitted in an exhibit, only two are later asked to be
considered toward the marital debt, and no testimony is presented on any of them to
establish that they are actual and outstanding debts, the court does not abuse its
discretion in refusing to allocate half the debt to the wife.
{¶ 45} Moreover, it is within the court’s discretion to make a party liable for their
own medical bills incurred just weeks before disclosing the marriage is ending. See
Middendorf v. Middendorf, 82 Ohio St. 3d 397, 401, 1998-Ohio-403 (a trial court has
broad discretion in making divisions of property in domestic cases). It was not
unreasonable for the court to find that it would be inequitable to make the wife liable
for these bills under the circumstances of the case. See R.C. 3105.171(C)(1) (equality
is the starting point). As such, this argument is without merit.
{¶ 46} For the foregoing reasons, the judgment of the trial court is hereby
reversed, and the case is remanded for reconsideration of certain issues detailed
above.
Donofrio, J., concurs.
Waite, P.J., concurs.