Stocker v. Stocker , 2012 Ohio 5821 ( 2012 )

[Cite as Stocker v. Stocker, 2012-Ohio-5821.]
STATE OF OHIO ) IN THE COURT OF APPEALS
)ss: NINTH JUDICIAL DISTRICT
COUNTY OF WAYNE )
SUSAN M. STOCKER C.A. No. 12CA0021
Appellee
v. APPEAL FROM JUDGMENT
ENTERED IN THE
JOHN W. STOCKER COURT OF COMMON PLEAS
COUNTY OF WAYNE, OHIO
Appellant CASE No. 09-DR-0192
DECISION AND JOURNAL ENTRY
Dated: December 10, 2012
WHITMORE, Presiding Judge.
{¶1} Appellant, John Stocker (“Husband”), appeals from the judgment of the Wayne
County Court of Common Pleas. This Court affirms.
I
{¶2} Husband and Susan Stocker (“Wife”) were married in 1978. On March 18, 2010,
the parties entered into an in court settlement agreement, which was incorporated into a divorce
decree filed on April 30, 2010. The divorce decree, in relevant part, required that the martial
home be sold. Pending the sale, Husband was required to make payments on the first mortgage
and Wife was required to make payments on the home equity loan. If the home were to sell for
less than the total loan obligations, each party would be liable for 50% of the deficiency balance
and would have to use their best efforts to pay such deficiency. It was made known that both
parties were contemplating bankruptcy, and the divorce decree stated that “nothing herein
2
prevents either party from filing for bankruptcy protection or discharge regarding any of the
debts set forth herein.”
{¶3} After the divorce, but prior to the sale of the home, both Husband and Wife filed
for bankruptcy and stopped making mortgage payments. Husband filed for Chapter 7
bankruptcy in July 2010, which was discharged in November 2010. Wife filed for Chapter 13
bankruptcy in May 2010, which was discharged March 2011.
{¶4} The home was sold in late December 2010 for $2,472.89 less than the combined
mortgages. Husband learned of the deficiency balance at the time of closing, which Wife paid in
full. Wife did not attempt to negotiate a lower payoff amount with the mortgage company.
Subsequently, Wife filed a motion for contempt, seeking compensation from Husband for his
failure to make payments on the first mortgage. After conducting hearings, the magistrate found
Husband was financially liable to Wife, and the trial court overruled Husband’s timely
objections. Husband now appeals and raises eight assignments of error for our review. For ease
of analysis, we rearrange and consolidate some of the assignments of error.
II
Assignment of Error Number Three
THE TRIAL COURT ERRED AS A MATTER OF LAW AS ITS DECISION
ON THE MOTION OF SUSAN EXCEEDS THE CONCURRENT
JURISDICTION OF THE COURTS OF THE STATE OF OHIO WHEN
ADDRESSING A DISCHARGE IN BANKRUPTCY.
Assignment of Error Number Four
THE TRIAL COURT ERRED AS A MATTER OF LAW, AND ABUSED ITS
DISCRETION, WHILE AWARDING JUDGMENT TO SUSAN AS THE
DIVORCE DECREE DOES NOT CONTAIN “HOLD-HARMLESS”
PROVISIONS CREATING A POST-DIVORCE OBLIGATION ON JOHN TO
PAY A POST-DECREE FINANCIAL DEFICIENCY.
3
Assignment of Error Number Six
THE TRIAL COURT ERRED BY FINDING THAT THE DEFICIENCY PAID
BY SUSAN AT THE TIME OF THE SALE OF THE MARITAL RESIDENCE
WAS AN OBLIGATION TO A FORMER SPOUSE ADDRESSED IN A
DIVORCE DECREE AND IS NON-DISCHARGEABLE IN THE
BANKRUPTCY PROCEEDINGS.
{¶5} In his third, fourth, and sixth assignments of error, Husband argues that the trial
court erred by (1) exceeding its jurisdiction when addressing the dischargeability of the mortgage
debt, (2) creating a post-divorce obligation when the decree did not contain a “hold-harmless”
provision, and (3) finding the past due mortgage payments were non-dischargeable debt.
{¶6} “Generally, absent an error of law, ‘the decision to adopt, reject, or modify a
magistrate’s decision lies within the discretion of the trial court and should not be reversed on
appeal absent an abuse of discretion.’” Cirino v. Cirino, 9th Dist. No. 11CA009959, 2011-Ohio-
6332, ¶ 7, quoting Barlow v. Barlow, 9th Dist. No. 08CA0055, 2009-Ohio-3788, ¶ 5. An abuse
of discretion indicates that the court’s decision was arbitrary, unconscionable, or unreasonable.
Blakemore v. Blakemore, 5 Ohio St.3d 217, 219 (1983).
{¶7} In our review, “we consider the trial court’s action with reference to the nature of
the underlying matter.” Tabatabai v. Tabatabai, 9th Dist. No. 08CA0049-M, 2009-Ohio-3139, ¶
18. “An agreed divorce decree * * * is an agreement of the parties that is made an order of the
court. Contract principles apply to the interpretation of such agreements, and the interpretations
are reviewed de novo on appeal as questions of law.” (Emphasis omitted.) Miller v. Miller, 9th
Dist. No. 10CA0034-M, 2011-Ohio-4299, ¶ 22, quoting Zimmer v. Zimmer, 10th Dist. No.
00AP383, 2001 WL 185356, *2 (Feb. 27, 2001).
4
Jurisdiction
{¶8} Federal law determines whether a debt is non-dischargeable in bankruptcy.
However, state and federal courts share concurrent jurisdiction to determine whether a debt
should be characterized as non-dischargeable. See Barnett v. Barnett, 9 Ohio St.3d 47, 49-50
(1984), modified by statute, 11 U.S.C. 523(a)(15).
{¶9} To the extent that Husband argues that the trial court exceeded its concurrent
jurisdiction because the federal bankruptcy court had already determined the debt was
dischargeable, there is nothing in the record to support Husband’s assertion that the bankruptcy
court had already determined the mortgage debt was dischargeable. Husband filed a notice of his
Chapter 7 bankruptcy discharge with the trial court. However, the notice did not indicate which
debts were discharged. Therefore, the trial court was not precluded from deciding if the debt fell
within §523(a)(15), making it non-dischargeable under federal law. See Barnett at 49-50.
{¶10} Husband further argues that the trial court exceeded its jurisdiction because Wife
“did not object to the discharge or commence adversary proceedings to determine
dischargeability [in federal court].” “However, with the enactment of BAPCPA, [the
Bankruptcy Abuse Prevention and Consumer Protection Act of 2005,] a non-debtor spouse no
longer has an affirmative duty to file an adversary proceeding when seeking to have a
nondischargeability determination made pursuant to [11 U.S.C.] §523(a)(15).” In re Holmes,
N.D.Ohio Nos. 08-3113 & 08-31595, 2009 WL 1586792, *2 (Feb. 20, 2009). The trial court was
within its jurisdiction to decide if the debt should be characterized as non-dischargeable under
federal law. See Barnett, 9 Ohio St.3d at 49-50. See also §523(a)(15).
Debt Between Former Spouses
{¶11} The divorce decree, in relevant part, provided the following:
5
Marital Residence. The parties are the owners of a residence located at 1410
West Market Street, Orrville, Ohio which shall be immediately listed for sale and
sold. Upon sale the proceeds shall be applied to the first mortgage indebtedness
due National City Bank, nka, PNC Bank, the home equity loan due National City
Bank, nka, PNC Bank, any valid liens and expenses of sale. Thereafter, the net
sale proceeds, if any, shall be divided fifty percent to each party.
If this residence has not been sold through a realtor by August 1, 2010 the same
shall be advertised and sold at auction on September 1, 2010.
In the event of a short sale, each party shall be jointly liable on any deficiency and
each party shall use their best efforts to pay such deficiency, however, either party
may file bankruptcy proceedings, if otherwise eligible, in that regard.
Pending sale, [Husband] shall have exclusive possession of this residence. Debt
service on the residence until sale be paid as follows: the first mortgage payable
to National City Bank, nka, PNC Bank shall be paid by [Husband] and the home
equity loan due National City Bank, nka, PNC Bank shall be paid by [Wife].
***
The court was advised that bankruptcy is being contemplated by [both parties]
and nothing herein prevents either party from filing for bankruptcy protection or
discharge regarding any of the debts set forth herein.
{¶12} Husband argues that the divorce decree intentionally did not contain any
indemnification or “hold-harmless” language as it relates to the mortgage debt, and therefore,
§523(a)(15) does not apply and the debt is dischargeable in bankruptcy. Wife argues the lack of
“hold-harmless” language is not relevant and the debt is non-dischargeable because §523(a)(15)
applies. We agree that the lack of indemnification language by itself is not dispositive of
whether a debt falls within §523(a)(15), but it is a factor to consider when determining whether a
debt even exists.
{¶13} The enactment of BAPCPA in 2005 made “any debt falling with[in] the scope of
[11 U.S.C.] §523(a)(15) absolutely non[-]dischargeable.” In re Williams, 398 B.R. 464, 468
(N.D.Ohio 2008).
To qualify as the type of marital debt excepted from discharge under §523(a)(15),
the [party contesting the dischargeability of the debt] bears the burden to establish
6
the existence of three elements: (1) the debt in question is to a spouse, former
spouse or child of the debtor; (2) the debt is not a support obligation of the type
described in §523(a)(5); and (3) the obligation was incurred in a separation
agreement, divorce decree or other order of a court of record.
Id. We must first determine, therefore, “whether there is a debt owed within the meaning of the
statute.” In re Gibson, 219 B.R. 195, 203 (6th Cir.1998), quoting In re Henson, 197 B.R. 299,
302-303 (E.D.Ark.1996). Specifically, we must determine whether Husband has incurred a debt
to Wife.
{¶14} An example of where Husband incurs a non-dischargeable debt under §523(a)(15)
is when a divorce decree specifically requires Husband to “pay a third-party obligation directly
to [Wife] or to hold [Wife] ‘harmless’ on a third-party obligation.” In re Gibson at 202-203.
This is because “[a] requirement in a divorce decree to hold harmless or indemnify a spouse for
joint obligations incurred during a marriage creates a ‘new’ debt, running solely between the
former spouses.” In re Williams at 469. “[H]owever, the determination of whether a debtor
incurs a debt in connection with a [divorce decree] is not limited to the use of hold harmless or
other specific indemnification language.” In re Gibson at 203.
{¶15} The Bankruptcy Code defines a “debt” as the “liability on a claim.” 11 U.S.C.
§101(12). The Code further defines a “claim” as a:
(A) right to payment, whether or not such right is reduced to judgment, liquidated,
unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed, legal,
equitable, secured, or unsecured; or
(B) right to an equitable remedy for breach of performance if such breach gives
right to a right to payment, whether or not such right to an equitable remedy is
reduced to judgment, fixed, contingent, matured, unmatured, disputed,
undisputed, secured, or unsecured.
11 U.S.C. §101(5). The United States Supreme Court has said that “a ‘right to payment,’ * * *
‘is nothing more nor less than an enforceable obligation.’” Cohen v. de la Cruz, 523 U.S. 213,
218 (1998). See also In re Gibson at 202.
7
{¶16} Here, the divorce decree required, while the sale of the home was pending,
Husband to pay the first mortgage and Wife to pay the home equity loan. The language in this
portion of the decree is firm; “[t]he first mortgage * * * shall be paid by [Husband] * * *.” In
contrast, the language used with respect to any deficiency balance created by a short sale is not
absolute. Instead, that portion provided that “each party will use their best efforts to pay [half of]
such deficiency.” Under the plain language of the divorce decree, Wife had the right to seek
enforcement of Husband’s obligation to pay the first mortgage. Therefore, we conclude that
Husband, in the divorce decree, incurred a debt in favor of Wife. See In re Gibson, 219 B.R. at
205. This debt is non-dischargeable under §523(a)(15), “notwithstanding that the debt is payable
to a third party and the [divorce decree] lacks hold harmless or other indemnification language.”
Id.
{¶17} Husband argues that it was the express intent of both parties to file bankruptcy
and to discharge all of the debt in the divorce decree. Moreover, Husband argues, the trial court
had already determined the debts in the divorce decree were dischargeable in bankruptcy, and
therefore, collateral estoppel prevented the court from revisiting the issue. The divorce decree
provided the following provision:
The court was advised that bankruptcy is being contemplated by [both parties]
and nothing herein prevents either party from filing for bankruptcy protection or
discharge regarding any of the debts set forth herein.
{¶18} To be clear, Husband was permitted to file bankruptcy with regard to his
obligation on the first mortgage. See In re Williams, 398 B.R. at 469-470. The mortgage was a
joint debt, owned by both Husband and Wife. Husband’s bankruptcy discharged only his
obligation to PNC Bank. See id. However, Husband is not permitted to discharge the “new
debt” he incurred in the divorce decree in favor of Wife. “[W]here a spouse is obligated under a
8
separation agreement to pay a third-party debt, a debt in favor of the other spouse arises which is
non[-]dischargeable under §523(a)(15), ‘notwithstanding that the debt is payable to a third party
and the Separation Agreement lacks hold harmless or other indemnification language.’” Id. at
469, quoting In re Gibson, 219 B.R. at 205. “[A]ny debt falling with[in] the scope of
§523(a)(15) [is] absolutely non[-]dischargeable.” In re Williams at 468.
{¶19} Because Husband incurred a debt in favor of Wife in the divorce decree, such
debt is non-dischargeable under §523(a)(15). Further, the trial court was within its jurisdiction in
so finding. Accordingly, Husband’s third, fourth, and sixth assignments of error are overruled.
Assignment of Error Number One
THE TRIAL COURT ERRED AS A MATTER OF LAW BY DENYING
JOHN’S MOTION TO DISMISS THE MOTION OF SUSAN AS HER
MOTION REQUESTED A MODIFICATION OF A DIVISION OF PROPERTY
ORDER.
Assignment of Error Number Two
THE TRIAL COURT ABUSED ITS DISCRETION BY DENYING JOHN’S
MOTION TO DISMISS AS THE DOCTRINE OF COLLATERAL ESTOPPEL
PRECLUDED THE TRIAL COURT FROM MODIFYING ITS PRIOR
DIVISION OF PROPERTY AND DEBT ORDER.
Assignment of Error Number Seven
THE TRIAL COURT ABUSED ITS DISCRETION BY AWARDING
JUDGMENT TO SUSAN AND AGAINST JOHN IN AN AMOUNT THAT
EXCEEDS THE AMOUNT OF THE PAYMENT PAID BY SUSAN AT THE
TIME OF THE SALE OF THE MARTIAL RESIDENCE.
{¶20} In his first, second, and seventh assignments of error, Husband argues that the
court erred when it modified the divorce decree’s division of martial property and abused its
discretion when it determined the amount of the award. We disagree.
{¶21} We incorporate the standard of review set forth above. Accordingly, we review
the trial court’s decision to adopt the magistrate’s decision for an abuse of discretion. Cirino,
9
2011-Ohio-6332, at ¶ 7, quoting Barlow, 2009-Ohio-3788, at ¶ 5. In conducting our review, “we
consider the trial court’s action with reference to the nature of the underlying matter.”
Tabatabai, 2009-Ohio-3139, at ¶ 18. The underlying matter is an agreed divorce decree, a
contract, which is review de novo. Miller, 2011-Ohio-4299, at ¶ 22, quoting Zimmer, 2001 WL
185356, at *2.
{¶22} The court may not, absent consent by both parties, modify a property division
incorporated into a divorce decree. R.C. 3105.171(I); Straw v. Straw, 9th Dist. No.
04CA008433, 2004-Ohio-4065, ¶ 4. However, a court may enforce its own orders, including
divorce decrees. R.C. 3105.65(B); Straw at ¶ 4.
{¶23} Here, the trial court merely enforced the divorce decree and did not modify the
property division. The divorce decree required, pending sale of the marital property, Husband to
pay the first mortgage and Wife to pay the home equity loan. Both parties failed to comply. In
its decision, the magistrate thoroughly detailed the current positions of the parties and what the
positions of the parties would have been if they had both made payments on the loans as required
by the terms of the divorce decree. In summary, the sale of the home resulted in a $2,472.89
deficiency, which was paid by Wife. If both parties had paid the respective mortgages the sale of
the home would have netted each party $2,850.43. In total, Wife would have had an additional
$5,323.32 if both parties had complied with the terms of the divorce decree. The court then
made adjustments to this total, subtracting the deficit created by her failure to pay the home
equity loan and Husband’s portion of escrow refunds that had been paid to Wife.1 In total, the
1
The court found Wife received a total of $471.50 from two separate escrow refunds. The
record is unclear as to whether Wife actually received two escrow refunds. However, neither
party challenges this amount and the issue does not prevent the resolution of Husband’s
assignments of error.
10
court determined Wife would have had an additional $4,896.68 if the terms of the divorce decree
had been obeyed by both parties.
{¶24} The trial court’s order did not modify the property division in the divorce decree.
Instead, the judgment granted to Wife was merely an amount she was entitled to under the terms
of the decree. Further, the court did not abuse its discretion in calculating the award amount.
Accordingly, Husband’s first, second, and seventh assignments of error are overruled.
Assignment of Error Number Eight
THE TRIAL COURT’S DECISION AWARDING JUDGMENT TO SUSAN IN
AN AMOUNT THAT EXCEEDS THE AMOUNT PAID BY SUSAN AT THE
TIME OF THE SALE OF THE MARTIAL RESIDENCE IS AGAINST THE
MANIFEST WEIGHT OF THE EVIDENCE.
{¶25} In his eighth assignment of error, Husband argues that the court’s award amount
was against the manifest weight of the evidence. We disagree.
{¶26} A trial court’s decision to adopt a magistrate’s decision should not be reversed on
appeal absent an abuse of discretion. Cirino, 2011-Ohio-6332, at ¶ 7, quoting Barlow, 2009-
Ohio-3788, at ¶ 5. In our review, “we consider the trial court’s action with reference to the
nature of the underlying matter.” Tabatabai, 2009-Ohio-3139, at ¶ 18. “When reviewing
whether a judgment is against the manifest weight of the evidence in a civil context, the standard
of review is the same as that in the criminal context.” Boggs v. Boggs, 9th Dist. No. 3229-M,
2002 WL 432372, *1 (Mar. 20, 2002). In a challenge as to the weight of the evidence:
[t]he [reviewing] court * * * weighs the evidence and all reasonable inferences,
considers the credibility of the witnesses and determines whether in resolving
conflicts in the evidence, the [finder of fact] clearly lost its way and created such a
manifest miscarriage of justice that the [judgment] must be reversed and a new
trial ordered.
11
(Alterations sic.) Eastley v. Volkman, 132 Ohio St.3d 328, 2012-Ohio-2179, ¶ 20, quoting State
v. Thompkins, 78 Ohio St.3d 380, 387 (1997). Manifest weight challenges the burden of
persuasion. Eastley at ¶ 19.
{¶27} Husband argues that the court erred in entering a judgment for $4,896.68 because
the decree specifically states that each party shall be liable for one half of any deficiency balance
resulting from a short sale of the martial property. The deficiency balance was $2,472.89;
therefore, according to Husband, he should only be liable for $1,236.45.
{¶28} While the divorce decree does expressly provide that Husband and Wife will each
be responsible for 50% of any balance owed after a short sale, the decree also expressly requires
Husband to pay the first mortgage on the property pending sale of the residence. As discussed
above, the court arrived at the judgment amount by comparing the current financial positions of
the parties to the financial position the parties would have been in had they both complied with
the terms of the divorce decree. In reviewing the record, the figures used by the magistrate were
testified to and reflected in the admitted exhibits. The judgment award granted in favor of Wife
was not against the manifest weight of the evidence. Accordingly, Husband’s eighth assignment
of error is overruled.
Assignment of Error Number Five
THE TRIAL COURT ERRED AS A MATTER OF LAW BY FINDING THAT
SUSAN WAS ENTITLED TO JUDGMENT AGAINST JOHN AS THE TRIAL
COURT LACKS JURISDICTION OVER PROPERTY OF THE
BANKRUPTCY ESTATE THAT WAS NOT SCHEDULED, OR ANY
PROPERTY THAT WAS ACQUIRED SUBSEQUENT TO THE FILING OF
THE BANKRUPTCY PROCEEDINGS, AS SUCH PROPERTY DOES NOT
VEST IN THE DEBTORS AND REMAINS THE EXCLUSIVE PROPERTY OF
THE TRUSTEE OF THE BANKRUPTCY ESTATE. STATED
DIFFERENTLY, THE TRIAL COURT’S DECISION EXCEEDS THE
CONCURRENT JURISDICTION OF THE STATE COURTS AS SUSAN
CANNOT RETAIN ANY MONEY COLLECTED AS SUCH MONEY MUST
BE PAID TO THE TRUSTEE AND DISTRIBUTED AMONG ALL
12
UNSECURED CREDITORS THROUGH THE BANKRUPTCY
PROCEEDINGS.
{¶29} In his fifth assignment of error, Husband argues that if the judgment is
enforceable the award amount “constitutes unscheduled property that existed at the time of
[Wife’s] bankruptcy” and must be paid to the trustee. Specifically, the trial court had no
“authority to award one party money that is due and owing to a trustee in bankruptcy.”
{¶30} However, a court may enforce its own orders, including divorce decrees. R.C.
3105.65(B); Straw at ¶ 4. As discussed above, Husband’s failure to pay the first mortgage while
the sale of the marital home was pending was a breach of the terms of the divorce decree. The
trial court’s judgment sought to put Wife in the position she would have been if both parties had
complied with the terms of the divorce decree. The trial court’s judgment was merely an
enforcement of the court’s previous order, therefore, the court had jurisdiction to enter the
judgment.
{¶31} To the extent that Husband argues the trial court had no “authority to award one
party money that is due and owing to a trustee in bankruptcy,” Husband cites no law to support
the argument that the trial court had authority to determine whether the amount recovered by
Wife was “unscheduled property.” As this Court has repeatedly held, “[i]f an argument exists
that can support [an] assignment of error, it is not this [C]ourt’s duty to root it out.” Cardone v.
Cardone, 9th Dist. No. 18349, 1998 WL 224934, *8 (May 6, 1998). Husband’s fifth assignment
of error is overruled.
III
{¶32} Husband’s assignments of error are overruled. The judgment of the Wayne
County Court of Common Pleas is affirmed.
Judgment affirmed.
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There were reasonable grounds for this appeal.
We order that a special mandate issue out of this Court, directing the Court of Common
Pleas, County of Wayne, State of Ohio, to carry this judgment into execution. A certified copy
of this journal entry shall constitute the mandate, pursuant to App.R. 27.
Immediately upon the filing hereof, this document shall constitute the journal entry of
judgment, and it shall be file stamped by the Clerk of the Court of Appeals at which time the
period for review shall begin to run. App.R. 22(C). The Clerk of the Court of Appeals is
instructed to mail a notice of entry of this judgment to the parties and to make a notation of the
mailing in the docket, pursuant to App.R. 30.
Costs taxed to Appellant.
BETH WHITMORE
FOR THE COURT
CARR, J.
DICKINSON, J.
CONCUR.
APPEARANCES:
JAMES M. RICHARD, Attorney at Law, for Appellant.
R. J. HULMUTH, Attorney at Law, for Appellee.