Guagenti v. Guagenti , 90 N.E.3d 297 ( 2017 )

[Cite as Guagenti v. Guagenti, 2017-Ohio-2706.]
IN THE COURT OF APPEALS OF OHIO
THIRD APPELLATE DISTRICT
ALLEN COUNTY
BRIDGET C. GUAGENTI,
PLAINTIFF-APPELLANT, CASE NO. 1-16-47
v.
MARK GUAGENTI, ET AL., OPINION
DEFENDANTS-APPELLEES.
Appeal from Allen County Common Pleas Court
Domestic Relations Division
Trial Court No. DR 2013 0514
Judgment Affirmed
Date of Decision: May 8, 2017
APPEARANCES:
Jose M. Lopez for Appellant
Andrew B. King for Appellee, Mark Guagenti
Case No. 1-16-47
SHAW, J.
{¶1} Plaintiff-appellant, Bridget C. Guagenti (“Bridget”) appeals the
September 7, 2016 Amended Judgment Entry/Decree of Divorce issued by the Allen
County Court of Common Pleas, Domestic Relations Division, granting her
complaint for a divorce from Mark Guagenti (“Mark”). On appeal, Bridget assigns
as error (1) the trial court’s determination that the assets in the Samuel J. Guagenti
2007 Irrevocable Trust did not constitute marital property subject to equitable
division; (2) the trial court’s application of the $150,000 combined income level cap
in calculating Mark’s child support obligation; and (3) the trial court’s decision to
award Bridget only $300,000 for Mark’s financial misconduct during the divorce
proceedings.
Relevant Facts
{¶2} Bridget and Mark were married in 1992. Three children were born as
issue of their marriage in 2000, 2002, and 2004.
{¶3} In 1996, Mark took a position as an office manager in the family
business, C&G Distributing, Co., Inc., (“C&G Distributing”) an S-corporation
operating in the wholesale beverage business. Mark eventually became the Chief
Operations Officer of the business drawing an upper management salary, but was
not a shareholder of the corporation. Rather, the record reflects that Mark’s father,
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Samuel Guagenti, owned 33.3% of the corporate shares, along with three other
individuals who owned the remaining shares.
Samuel J. Guagenti 2007 Trust
{¶4} In 2007, the shareholders of C&G Distributing began discussions of a
possible sale of the corporation and considered estate planning matters attendant to
their ownership interests. (See Atty. Pappas Depo. at 11-12). On October 11, 2007,
Samuel Guagenti, as Grantor, executed the Samuel J. Guagenti 2007 Irrevocable
Trust (“SJG 2007 Trust”). Mark was named Trustee. Another individual, who was
not Mark, was also named as the “Special Trustee” under the terms of the Trust
Agreement, “with respect to any stock or other equity interest of the trust in an entity
that is a wholesaler of products of ANHEUSER-BUSCH INC., or any other brands,
directly or through its affiliates * * *.” (Samuel J. Guagenti 2007 Irrevocable Trust
at p. 1). The Trust Agreement named Mark and his children as beneficiaries;
specifically, it provided that “[t]he purpose of the Grantor [i.e., Samuel] in entering
into this agreement is to effectuate a plan for the orderly, businesslike administration
of the trust estate for the benefit of the Grantor’s descendants, in particular the
Grantor’s son and the Grantor’s son’s children. 1 (Id.).
{¶5} The Trust Agreement further stated that the Trustee shall accumulate
all income earned by the Trust, and permitted the Trustee to distribute portions of
1
Section 23 of the Trust Agreement identifies the “Grantor’s Son” as Mark G. Guagenti.
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the accumulated income “to, among, or for” the beneficiaries’ benefit “as the
Trustee may from time to time deem appropriate to support, maintain, or provide
for the health or education of such beneficiaries.” (Id. at § 3(b)). The Trust
Agreement specified that the Trustee could only invade the principal of the Trust
with the consent of the “Protector Committee,” which consists of “three individuals,
acting by majority decision.”2 (Id. at §§ 3(b), 19(e)).3 Thus, the Trust Agreement
permitted Mark as Trustee to make distributions of the accumulated income to
himself at his discretion, so long as the ascertainable standard outlined in § 3(b) was
met and so long as Mark adhered to the fiduciary obligations set forth in the Trust
Agreement. However, Mark’s access to the SJG 2007 Trust’s principal had to be
approved by the Protector Committee.
The SJG 2007 Trust’s Purchase of Corporate Shares
{¶6} In 2008, Samuel initially funded the SJG 2007 Trust with a contribution
of $10,000 and the right to purchase his 33.3% stake in C&G Distributing. The
same year, the SJG 2007 Trust borrowed $3,000,000 from Fifth-Third Bank to
purchase Samuel’s shares. Mark participated in the transaction in a fiduciary
2
Section 19(e) of the Trust Agreement provides that “[a]n individual qualified to serve as a member of the
Protector Committee shall be an individual qualified to serve as an Independent Trustee under this instrument
or a descendant.” Section 3(b) defines an “Independent Trustee” as a trustee who, generally speaking, is not
a beneficiary or a contributor to the Trust and who is not appointed by a beneficiary or a contributor.
3
The attorney who drafted the SJG 2007 Trust testified that the Trust Agreement terms were similar to the
terms included in the generation skipping trust drafted for Samuel’s brother, Francis, also a 33.3%
shareholder of C&G Distributing prior to selling his shares to the trust bearing his name.
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capacity as Trustee. The loan documents identified the SJG 2007 Trust as the
“borrower” and C&G Distributing as the “guarantor.” (See Third Party Defendant’s
Ex. D). As a result of the purchase, the SJG 2007 Trust owned 33.3% of the shares
of C&G Distributing.
{¶7} As a shareholder of the corporation, the SJG 2007 Trust received
distributions which were used to pay the interest on the three-million-dollar loan
with Fifth-Third. Shortly after purchasing Samuel’s share, the SJG 2007 Trust also
became a member of C&G Investment Properties, LLC, which held titles to certain
real property, including the real estate upon which C&G Distributing’s distribution
centers were located. Thus, the SJG 2007 Trust had two streams of income, the
accumulation of which Mark, as Trustee, was entitled to distribute to himself and
the other beneficiaries for support, maintenance, health or education: (1) income
flowing from the S-corporation shares of C&G Distributing and (2) rental income
from C&G Investment Properties, LLC.
Sale to Anheuser-Busch
{¶8} On June 12, 2013, the shareholders of C&G Distributing—the Virginia
M. Cajacob 2007 Irrevocable Trust, the Francis J. Guagenti 2007 Irrevocable Trust,
and the Samuel J. Guagenti 2007 Irrevocable Trust each entered into an agreement,
through their respective trustees, for the sale of C&G Distributing’s assets to
Anheuser-Busch for $47,700,000, of which one third or $15,900,000 was
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attributable to the shares held by the SJG 2007 Trust.4 The SJG 2007 Trust paid
Federal and State income taxes incurred from the transaction. As a term of the asset
purchase agreement, the three senior managers of C&G Distributing, of which Mark
was one, signed non-competition agreements and received a consulting fee for a
period of three years.
Case Procedural History
{¶9} On November 12, 2013, Bridget filed a complaint for divorce initiating
this action. Bridget filed a motion to join the SJG 2007 Trust as Third Party
Defendant, claiming that she was entitled to the assets contained in the Trust
because the assets were property acquired by Mark during the marriage and the
profits thereof were attributable in part to Mark’s employment at C&G Distributing.
Thus, Bridget claimed that the trust assets resulting from the sale of the business to
Anheuser-Busch were subject to equitable division in the divorce.
{¶10} On April 15, 2015, the trial court held a two-day final divorce hearing.
Prior to the hearing, the parties stipulated to a number of matters related to the
custody of the children and the division of certain marital property, including the
allocation of the marital residence to Bridget. The matters remaining for the trial
court to resolve focused upon whether the assets of the SJG 2007 Trust were marital
4
The record reveals that $3,000,000 of the total purchase price was held in escrow until 2014 as part of the
terms of the sale. As of the final divorce hearing, the money was paid and transferred to an account under
the name of C&G Distributing, which appeared to remain open for the purpose of winding down the
corporation.
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property, the equitable distribution of the remaining marital assets between the
parties, the amount of spousal support to be awarded to Bridget, and the amount of
Mark’s child support obligation. At the final divorce hearing, the trial court heard
from both Mark and Bridget, as well as several witnesses who testified about the
nature of the assets in the SJG 2007 Trust and the circumstances surrounding the
Trust’s creation.
The Trial Court’s Decision
{¶11} The trial court issued a decision on March 10, 2016. In a thorough and
detailed opinion, the trial court outlined numerous reasons in support of its
determination that “the creation of the Trust in and of itself is a separate entity and
the assets contained within that Trust are * * * neither marital nor separate property.
The assets are not property owned by either of the parties at the creation of the SJG
Trust.” (Doc. No. 153 at 7). Thus, the trial court concluded that the trust assets
were property of a third party, i.e., the SJG 2007 Trust, and not subject to equitable
division in the parties’ divorce under R.C. 3105.171.
{¶12} However, the trial court did take the income distributions from the SJG
2007 Trust to Mark into consideration when devising an amount for spousal support
and child support. The trial court noted that Mark earned an annual salary of
$120,000 when he worked in upper management at C&G Distributing prior to the
sale of the corporation’s assets to Anheuser-Busch. As part of the purchase
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agreement terms, Mark and the other two senior managers at C&G Distributing were
given a consulting salary of $265,000 per year for a period of three years after the
sale took place. The trial court found at the time of the final divorce hearing that
“the income from the [SJG 2007 Trust] assets in total has been substantial and will
be substantial in the future. Mark has, in compliance with the Trust, disbursed the
income for his use as the primary beneficiary. In the first year this was
approximately $330,000.00 he utilized in distributions and the Court would find that
is an appropriate figure to utilize for income in calculating the spousal support and
* * * the child support.” (Doc. No. 153 at 13). Using this figure, the trial court
ordered Mark to pay $5,000 per month in spousal support to Bridget for a period of
eleven years. The trial court retained jurisdiction over the amount of spousal
support, but not over the term of spousal support.
{¶13} The trial court noted that Bridget had worked in the past earning an
annual salary of $85,000. However, the trial court took into account the fact that
Bridget had been out of the workforce for several years and imputed a minimum
wage income to Bridget for the purposes of its child support calculation. As
stipulated by the parties, Bridget was named the residential parent of the three minor
children and Mark was given visitation according to the local rule. Mark agreed to
pay the cost of the children’s private education and to provide health insurance for
the children. The trial court further determined that “[t]his Court cannot find there
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has been any establishment that the needs and standard of living of the children are
in excess of the child support schedule and this Court consequently cannot find that
it would be unjust or inappropriate and not in the best interest of the children to
order the [child support] amount at the $150,000.00 level.” (Doc. No. 153 at 15).
{¶14} Accordingly, the trial court applied the $150,000 combined income
level cap to its child support calculation and ordered Mark to pay $24,532 annually
to Bridget in child support, or $681.45 per child when health insurance is being
provided. If health insurance is not being provided, the trial court ordered Mark to
pay $685.37 per child and an additional total of $971.00 per month as and for cash
medical support.
{¶15} The trial court assessed the value of the marital property awarded to
each party and divided by stipulation, which included the value of vehicles,
investment accounts, insurance policies, and Mark’s personal interest in various
business ventures. Mark was ordered to pay Bridget $179,363.56 to equalize the
distribution of these assets. The trial court also ordered Bridget to be entitled to the
sum of $151,212, plus or minus any gains or loss associated therewith from April
15, 2015 to equalize the value of the parties’ IRA accounts.
{¶16} Upon Bridget’s motion, the trial court also found that Mark had
engaged in financial misconduct by failing to timely and accurately disclose
information with respect to assets in the case which resulted in considerable delay
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in the proceedings.5 As a result, the trial court ordered Mark to pay Bridget
$300,000, in addition to the martial distributive awards previously mentioned, based
upon “Mark’s failure to disclose assets and continual usurpation of the discovery
process in this case and his flagrant refusal to comply.” (Doc. No. 153 at 16). The
trial court also ordered Mark to pay Bridget’s attorney fees associated with the
prosecution of a contempt order based upon discovery violations in the amount of
$1,458.75, as well as the total amount of attorney fees Bridget incurred in the
underlying divorce action, which totaled $90,858.31 at the time of the trial court’s
decision.6
{¶17} The trial court’s decision was incorporated and implemented in its
April 6, 2016 Judgment Entry/Decree of Divorce. Bridget filed an appeal of that
judgment, which was dismissed by this Court for a lack of a final appealable order
due to the trial court’s indication in the judgment entry that it intended to take further
action with respect to the amount of attorney fees awarded to Bridget. Accordingly,
the cause was remanded to the trial court to resolve this pending matter.
5
It should be noted that throughout the discovery phase of the case Mark failed to comply with the discovery
deadlines, despite Bridget obtaining multiple orders from the trial court compelling his compliance, by
neglecting to fully divulge financial statements and documents when required. This resulted in a considerable
amount of delay in the case coming to a final hearing and in Bridget incurring a substantial amount of attorney
fees related to discovery and pursuing contempt matters. Mark also failed to comply with the trial court’s
restraining order as it related to the parties’ finances. Specifically, Mark purchased a condo and a luxury
sports car while the divorce proceedings were pending.
6
The trial court credited the $25,000 Mark had previously advanced to Bridget for attorney fees against the
$90,858.31, for a total amount ordered of $65,858.31 as of March 31, 2015.
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{¶18} On September 7, 2016, the trial court issued an Amended Judgment
Entry/Decree of Divorce addressing the outstanding issue of attorney fees and
ordering Mark to “pay the additional sum of $34,830.20 for attorneys fees and
litigation expenses for both the Final Divorce Hearing and the Motion for Citation
in Contempt that had been litigated.” (Doc. No. 168 at 7).
{¶19} Bridget filed this appeal, asserting the following assignments of error.
ASSIGNMENT OF ERROR NO. 1
THE TRIAL COURT ERRED AND ACTED CONTRARY TO
LAW WHEN IT DETERMINED THAT APPELLEE, MARK
GUAGENTI’S, INTEREST IN THE SAMUEL J. GUAGENTI
2007 IRREVOCABLE TRUST DID NOT CONSTITUTE
MARITAL PROPERTY SUBJECT TO DIVISION.
ASSIGNMENT OF ERROR NO. 2
THE TRIAL COURT ERRED IN SETTING THE CHILD
SUPPORT OBLIGATION AT THE $150,000.00 LEVEL.
ASSIGNMENT OF ERROR NO. 3
THE TRIAL COURT ERRED IN ONLY AWARDING
$300,000.00 FOR HUSBAND’S FINANCIAL MISCONDUCT.
First Assignment of Error
{¶20} In her first assignment of error, Bridget claims that the trial court erred
in determining that the SJG 2007 Irrevocable Trust did not constitute marital
property subject to equitable division under R.C. 3105.171(B). Specifically, Bridget
argues that the trial court erred in determining that the appreciation in the value of
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the trust assets—i.e., the value of C&G Distributing stock from the time of the
Trust’s acquisition of Samuel’s shares to the sale of the corporation’s assets to
Anheuser-Busch, which Bridget argues is traceable to Mark’s employment as a
manager, did not constitute marital property. Bridget also maintains that Mark’s
authority under the Trust Agreement as Trustee and primary beneficiary was
tantamount to outright ownership of the Trust and therefore the 2007 SJG Trust
assets should be considered marital property on this basis.
{¶21} Before we address Bridget’s arguments on appeal, we must first
review the evidence in the record regarding Mark’s interest in the SJG 2007 Trust.
Both Mark and Bridget presented expert testimony offering differing opinions
characterizing the nature of Mark’s interest in the SJG 2007 Trust.
Mark’s Evidence Regarding the SJG 2007 Trust
{¶22} Mark presented the testimony of Robert Pappas, the attorney who
drafted the SJG 2007 Irrevocable Trust.7 Mr. Pappas testified that he has maintained
a private legal practice since 1984 focusing on the areas of business, tax, estate
planning and probate. Mr. Pappas recalled meeting with the individual owners of
C&G Distributing, including Samuel Guagenti, Mark’s father in 2007. Mr. Pappas
met with Samuel several times before the execution of the Trust Agreement
7
The record reflects that a waiver of attorney-client privilege was obtained in order for Mr. Pappas to testify.
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establishing the 2007 SJG Trust. He explained that the purpose of these meetings
was to discuss the creation of the 2007 SJG Trust as an estate planning device.
{¶23} Mr. Pappas testified that the 2007 SJG Trust expressed Samuel’s intent
to provide for Mark and Mark’s descendants on a long term basis for at least two
generations. There was no provision identifying Mark’s spouse as a beneficiary.
Mr. Pappas explained that “the purpose of the Trust was to make sure that these
assets were owned and passed in the way Samuel J. Guagenti wanted them to be.”
(Doc. No. 183 at 98). In other words, Samuel as the Grantor “had the right to create
the rules under which that Trust was to operate.” (Id. at 145).
{¶24} Mr. Pappas confirmed that the 2007 SJG Trust was not initially funded
at the time of execution, but that a contribution agreement between Samuel as
“Grantor” and Mark as “Trustee” of the SJG 2007 Trust was executed the same day
as the SJG 2007 Trust was created. The contribution agreement stated that the
“Grantor intends to contribute to the Trust an initial contribution of cash and rights
to acquire stock in C&G Distributing Co., Inc.” (3d Party Def. Ex B). A document
entitled “Agreement for Purchase of Sale and Shares of C&G Distributing Co.,
Inc.,” which was also executed the same day the SJG 2007 Trust was created,
provided the terms and conditions for the SJG 2007 Trust to purchase Samuel’s 41
shares of C&G Distributing for $3,000,000.8 (3d Party Def. Ex. C). In addition to
8
At oral argument, Bridget’s counsel claimed that Mr. Pappas testified that the 2007 SJG Trust’s right to
acquire the C&G Distributing stock had a zero value because that was the value assigned to the right to
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the right to acquire his shares in C&G Distributing, Samuel later contributed
$10,000 to the 2007 SJG Trust in 2008, which all parties agree was a gift to the 2007
SJG Trust.
{¶25} Mr. Pappas refuted Bridget’s counsel’s characterization that the SJG
2007 Trust was intended to be a “freely distributable trust” to Mark. (Doc. No. 183
at 144). Rather, Mr. Pappas pointed to the provisions of the Trust Agreement, which
only permitted Mark as Trustee to distribute the accumulated income to himself and
the other beneficiaries if the ascertainable standard contained in the Trust
Agreement was met. The Trust Agreement further provided that, when Mark was
acting as Trustee, the principal of the 2007 SJG Trust was only to be distributed to
the beneficiaries upon approval by the “Protector Committee.” Mr. Pappas relayed
that it is not unusual for the Trustee to also be a beneficiary under a trust and that is
the case in an estimated ninety percent of the trusts he drafts. He further explained
that Mark as Trustee is held to a fiduciary obligation and the 2007 SJG Trust
provides standards to which he must adhere. Mr. Pappas noted that the 2007 SJG
purchase the shares on an IRS gift tax return filed by the Trust. A close reading of Mr. Pappas’ testimony
reveals that he consistently disputed Bridget’s counsel’s attempt to oversimplify the matter and blur the
values which were considered for two different purposes. Specifically, Mr. Pappas maintained that the
Trust’s right to acquire Samuel’s shares did have a “value” higher than zero in the sense that Samuel would
not have sold those share to anyone else, but that the value for IRS gift tax purposes was zero.
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Trust also provides for an “Independent Trustee” other than Mark to be named in
which case the power of distribution to the beneficiaries is even broader.9
{¶26} In March of 2008, Mr. Pappas assisted Samuel in the transaction in
which he sold his shares of C&G Distributing to the SJG 2007 Trust by drafting the
pertinent documents related to the purchase. As previously discussed, the SJG 2007
Trust’s purchase of Samuel’s interest in C&G Distributing was financed by a
$3,000,000 loan obtained from Fifth-Third Bank for a term of seven years. The
commitment letter from the lending institution identified SJG 2007 Trust as the
“Borrower or Debtor” and C&G Distributing as the “Guarantor.” (3d Party Def. Ex.
D). According to Mr. Pappas, which the record reveals is substantiated by the loan
documents, there were no personal guarantees on the loan and Mark only
participated in the transaction in a fiduciary capacity as Trustee of the “Borrower”
and at no time ever individually owned any shares of C&G Distributing during the
transaction. Notably, the “protector committee” was required to approve any
borrowing by the Trust, which it did in this transaction with Fifth-Third Bank. (3d
Party Def. Ex. D).10
9
Section 3(b) of the Trust Agreement further provides that if an Independent Trustee is acting on behalf of
the Trust, then the ascertainable standard for income distributions is what the Independent Trustee believes
is in “best interest” of the beneficiary. See, supra, footnote 2. Furthermore, the Trust Agreement appears to
state that if an Independent Trustee is appointed, there is no requirement that the “Protector Committee”
approve of distribution of the Trust principal to the beneficiaries.
10
Mr. Pappas’ testimony established that this transaction was not isolated to Samuel’s shares and estate
planning wishes, but were part of a larger, collective plan of the C&G Distributing shareholders to transfer
ownership of the business. Specifically, the record indicates that the corporate minutes, admitted by
stipulation of the parties as exhibits, demonstrated that the four individual shareholders of the stock in C&G
Distributing adopted a resolution to guarantee loans in the amount of $3,000,000 to each the Francis J.
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{¶27} Mr. Pappas testified that in 2008 the limited liability company, C&G
Investment Properties, LLC, was created. The three members of the LLC were the
Virginia M. Cajacob 2007 Irrevocable Trust, the Francis J. Guagenti 2007
Irrevocable Trust, and the Samuel J. Guagenti 2007 Irrevocable Trust. The titles to
various real estate holdings were transferred to C&G Investment Properties, some
of which were to the land upon which C&G Distributing had its distribution centers
in Lima and Versailles. The rent from these properties provided a stream of income
for the SJG 2007 Trust, in addition to the distributions the SJG 2007 Trust received
as shareholder of the C&G Distributing stock.
{¶28} Mr. Pappas also counseled Samuel on the transaction involving the
sale of the corporation’s assets to Anheuser-Busch in June of 2013. He explained
that while out of state attorneys for the buyer were lead counsel, he assisted with the
navigation through applicable Ohio law and was aware of each step of the
transaction. In June of 2013, Anheuser-Busch purchased the stock outright and the
real estate held by C&G Investment Properties was purchased at a later time. The
SJG 2007 Trust received its share of the proceeds from both of these sales.11
Guagenti 2007 Irrevocable Trust and the Samuel J. Guagenti 2007 Irrevocable Trust in order to finance the
sale of their respective shares to these trusts. (3d Party Def. Ex. I)
11
The parties stipulated that SJG 2007 Trust paid taxes on the proceeds from the sale in the amounts of $2.9
million to the Federal Government and $350,000 to the State of Ohio. Plaintiff’s Ex. 21, which is the 1041
Income Tax Return for the year 2013 filed by the SJG 2007 Trust indicates that another $1,095,663 was paid
in expenses associated with the sale of C&G Distributing’s assets to Anheuser-Busch, which included
attorney fees, brokerage fees, and distributions rights. (See Doc. No. 183 at 190).
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{¶29} Mr. Pappas’ testimony established that under the terms of the 2007
SJG Trust Agreement there was a clear distinction between Mark’s capacity as
Trustee and Mark’s individual capacity as beneficiary, and that Mark never
personally owned any of the shares in C&G Distributing. However, Mr. Pappas
declined to opine whether the Trust was separate or marital under R.C. 3105.171
due to the fact that his area of expertise did not encompass domestic relation matters.
{¶30} Mark, in accordance with his powers as Trustee, placed most of the
proceeds from the sale into investment accounts. Mr. Pappas assisted Mark in
purchasing annuities for the beneficiaries of the SJG 2007 Trust, but did not have
any personal knowledge of the other investments made with the Trust assets.12
Mark presented additional evidence regarding the Trust assets after the sale of C&G
Distributing to Anheuser-Busch.
12
Mr. Pappas testified in some detail about the creation of a “decanting trust” entitled The Guagenti Family
Trust, which was executed on August 23, 2013, pursuant to R.C. 5808.18. According to Mr. Pappas, this
trust was created because the annuity company had issues with Samuel’s life being the proposed measuring
life for the annuities to be purchased by the SJG 2007 Trust. Thus, The Guagenti Family Trust was created
and named Mark as a grantor for the sole purpose of purchasing the annuities. Mr. Pappas explained that
creating this specific type of trust allows for the Trustee holding property under one trust agreement to
transfer the assets to a second trust which benefits the same group of people under the first trust. He noted
that “the provisions in the Guagenti Family Trust are for Mark and his descendants, just like [the ones
provided in] the Sam Guagenti Trust are.” (Doc. No. 183 at 118). Mr. Pappas further explained that the sole
purpose for creating this decanting trust was to obtain the annuities and that if the Trustee decided to no
longer hold those annuities, he would then advise the Trustee to decant the assets back to the original trust
because there is no reason to have two trusts for the same purpose. While Bridget did not specifically assign
error to the creation of this decanting trust on appeal, nor present any evidence opposing Mr. Pappas’
testimony, we note that there seemed to be some confusion as to the nature of this trust on Bridget’s behalf
throughout the proceedings and an imputation that this action somehow transmuted the nature of the trust
assets used to buy the annuities. However, there is nothing in the record to substantiate such an allegation.
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{¶31} Kimberly Chase, an Auditor with Rea & Associates, Inc., an
accounting firm, stated that she completed a balance sheet as part of a general audit
performed on the SJG 2007 Trust.13 She testified that as of the end of 2014, the SJG
2007 Trust had one bank account containing a substantial amount of cash and also
owned three investment accounts with Lincoln Financial Group, JP Morgan Chase,
and Northwestern Mutual, which totaled approximately $7.9 Million. Ms. Chase
also reviewed disbursements from the SJG 2007 Trust account to Mark’s personal
account and the joint account, held by both Mark and Bridget, for the period of
January 2013 through December 2014. She noted that there was a purchase of a
condominium which was financed through a loan directly to the Trust. Ms. Chase
clarified that the Trust assets were not invaded but merely “pledged” to effectuate
this purchase. (See Doc. No. 183 at 161).14
{¶32} Mark provided additional testimony regarding his purchase of the
condo. Mark purchased a condo in 2014 after the divorce was filed by using a line
of credit from his personal account secured against the SJG 2007 Trust account.
Mark’s testimony and the exhibits admitted into evidence revealed that on
13
The balance sheet prepared by Ms. Chase was not admitted as an exhibit based upon the trial court
sustaining Bridget’s counsel’s objection on the ground that he had not received a copy of the exhibit prior to
the day of the final divorce hearing. Accordingly, Ms. Chase testified from her personal knowledge of the
Trust assets in creating the balance sheet.
14
Section 9(d) of the Trust Agreement specifically authorizes that the “Trustee may, upon such terms and
conditions and for such considerations as the Trustee deems acceptable, grant options respecting, sell or
exchange at public or private sale, pledge, hypothecate, mortgage, lease, donate, abandon, or otherwise
dispose of, deal with, or encumber (for any period of time whatsoever, whether or not ending during the term
of the trust) any real or personal property comprising part of the trust estate.”
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September 11, 2014, he received a cashier’s check in the amount of $544,133.81
from the SJG 2007 Trust’s bank account to secure payment for the condominium.
(Pl. Ex. 3f). On the same day, he received a cashier’s check from his personal
account at Chase bank and repaid the money that he utilized to obtain the personal
line of credit to the Trust account. (Pl. Ex. 3e). Mark testified that there is no
mortgage on the condominium because he is personally making the payments, not
the Trust, on the line of credit he obtained from his bank. (Doc. No. 182 at 106).
Notably, there was no evidence in the record establishing that the amounts that Mark
pledged from the SJG 2007 Trust bank account invaded the principal of the Trust or
exceeded his authority as Trustee to make distributions of the accumulated income
to himself as a beneficiary for his support, maintenance, health or education. And
in fact the parties at trial stipulated that this transaction did not invade the Trust
principal. (Doc. No. 183 at 37-38).
{¶33} Mark also presented the testimony of Tiffany Crawford, a tech
supervisor with Rea & Associates Inc., with a background in accounting and a
licensed attorney. Ms. Crawford assessed the disbursements from the SJG 2007
Trust for the time period of 2008 to 2014. According to Ms. Crawford, “if a check
was written from the Trust, I determined to whom the check was written to [sic].”
(Doc. No. 183 at 177). She recalled that during this timeframe, checks were written
to Mark, Lincoln Financial, Northwestern Mutual and JP Morgan Chase.
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Specifically, she testified that a total of $1,600,000 was disbursed to Lincoln
Financial, a total of $3,000,000 was disbursed to Northwest Mutual, and a total in
the amount of $1,750,000 was disbursed to JP Morgan Chase.
{¶34} Ms. Crawford discussed Defendant’s Exhibit S, a compilation of draft
tax returns for the year 2014 prepared for Mark and Bridget to file jointly, as well
as draft tax returns for the 2007 SJG Trust and Mark’s other business entities.
However, Bridget’s counsel objected to the admission of the exhibit due to his claim
that he had not seen these items prior to the final hearing and had not been given the
opportunity to independently verify the accuracy of the document. The trial court
sustained the objection for the documents related to 2014 and permitted Mark’s
counsel to question Ms. Crawford regarding the 1041 tax forms for the 2007 SJG
Trust for the years 2008 to 2013 because those had already been admitted as exhibits
in Bridget’s case. Thus, the 2014 draft joint tax returns were not admitted as
evidence. (See Doc. No. 183 at 173).
{¶35} However, the trial court permitted Ms. Crawford to testify to her
personal knowledge obtained from working with those documents. She specifically
recalled that on the joint tax returns the income sources of both parties were
included, which reflected investment income, capital gain income, and Mark’s
consulting income. The record demonstrates that this information was only
significant to the parties at the hearing regarding the allocation of a certain tax credit,
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in the amount of $34,628 from 2013, that remained to be allocated in the property
settlement.
Bridget’s Evidence Regarding the SJG 2007 Trust
{¶36} Bridget presented the testimony of James Kordik, a CPA and licensed
attorney whose legal practice focused on estate planning. Mr. Kordik surmised that
the reason for Samuel creating the SJG 2007 Trust was for income planning
purposes.15 Mr. Kordik stated his opinion that all the funds from C&G Distributing
stock constituted marital property under R.C. 3105.171(A)(3)(a). In support of his
opinion, Mr. Kordik attributed the appreciation of the C&G Distributing stock value
to Mark’s labor and effort in his upper management position at the company until
2013. Mr. Kordik also stated that he reviewed the Trust Agreement establishing the
SJG 2007 Trust and made generalized statements regarding Mark’s powers as
Trustee under the Trust Agreement to make distributions to the Trust beneficiaries,
in particular to himself as primary beneficiary, and characterized Mark has having
“near complete” control of the Trust assets. (Kordik Report, Pl.’s Ex. 1 at 4). Mr.
Kordik minimized the authority of the “Protector Committee” by loosely referring
15
We note that the record reflects that the SJG 2007 Trust made an ESBT election on its federal tax status,
which Mr. Kordik claimed was for the purpose to avoid paying state income tax rather, than a method to
protect third party property. However, Mr. Pappas, the attorney who drafted the SJG 2007 Trust and filed
the tax returns for the years 2008 and 2009, disputed this characterization on cross-examination stated that
the ESBT election was in this instance made as an estate and gift tax planning device, not as an income tax
planning device. Mr. Pappas’ clarified that an “ESBT is an election that a trust can make so that it can hold
stock in a S corporation, even though it has more than a single beneficiary.” (Doc. No. 183 at 134).
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to distributions that Mark made as Trustee from the SJG 2007 Trust for his and his
family’s support, maintenance, health and education.
{¶37} For example, Mr. Kordik highlighted distributions made by Mark as
Trustee for the purchase of a vehicle ($45,000), a remodel of a bathroom in the
marital home ($50,000), the purchase of sports equipment including a 4-wheeler
($16,000), and an investment for a business partially owned by Mark ($300,000),
all of which the record indicates was also deemed marital property and included in
the trial court’s equitable division thereof. There were also payments made from
the Trust account for the children’s private school tuition, country club dues, and
political contributions.
{¶38} However, it should be noted that in drawing his conclusion with
respect to the marital character of the SJG 2007 Trust, specifically the proceeds of
the C&G Distributing stock, Mr. Kordik did not discuss when these distributions
were made and whether they exceeded Mark’s authority as Trustee to distribute the
accumulated income to the beneficiaries, including himself, for support,
maintenance, health, and education. Rather, Mr. Kordik’s opinion gave little regard
to the fact that Samuel created the SJG 2007 Trust with the intent of selling his
shares of C&G Distributing to the Trust. Where Mr. Pappas’ testimony appeared to
emphasize the third party nature of this transaction, Mr. Kordik viewed Mark’s
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authority as Trustee as giving Mark outright ownership rights to the assets of the
Trust.
{¶39} Thus, Mr. Kordik opined that Mark’s participation in the transaction
as Trustee in acquiring Samuel’s shares in C&G Distributing was no different than
if Mark “would have received [the shares] as an owner of a corporation or an LLC
or himself individually. Under any of the foregoing arrangements, he could have
purchased, owned and sold the C&G Distributing Co. stock.” (Kordik Report, Pl.’s
Ex. 1 at 5). Accordingly, Mr. Kordik stated that “in substance Mark Guagenti
should be treated as the owner of the C&G Distributing Co. stock during the
marriage.” (Id.).
{¶40} Bridget also presented the testimony of David Fortney, a Certified
Public Accountant. Mr. Fortney prepared a report summarizing Mark’s and
Bridget’s personal assets. Specifically, he created summaries detailing the
disbursements from the SJG 2007 Trust from March of 2008 through February of
2014. According to Mr. Fortney, the SJG 2007 Trust had a balance of
$4,778,011.17. He noted that in addition to the substantial amount of funds that
were transferred into three investment accounts (Northwestern Mutual, JP Morgan
Chase, and Lincoln Financial Group), there were also two primary accounts that
received distributions from the Trust. The first was a joint checking account
belonging to Mark and Bridget to which $1,674,000 was transferred from the Trust
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during this nearly six-year timeframe, and the other was a checking account under
Mark’s name to which $405,000 was transferred from the Trust during this relevant
time period. Mr. Fortney opined that these funds transferred from the Trust into the
parties’ joint checking and Mark’s separate checking account were “commingled”
funds.
{¶41} With regard to the income accumulated by the SJG 2007 Trust, Mr.
Fortney agreed that prior to the sale of C&G Distributing’s assets to Anheuser-
Busch, in June of 2013, two streams of income were derived from the shareholder
distributions from the corporate stock and the rental income from C&G Investment
Properties. He further acknowledged that prior to the sale to Anheuser-Busch the
corpus of the SJG 2007 Trust consisted of the land held by C&G Investment
Properties LLC, the C&G Distributing Stock purchased from Samuel, and the
$10,000 gifted by Samuel.
{¶42} In tracing the disbursements from the SJG 2007 Trust account to the
jointly held checking account and Mark’s personal checking account, Mr. Fortney
never identified any disbursement from the SJG 2007 Trust account as exceeding
the accumulated income. In other words, there was no testimony indicating that
Mark as Trustee exceeded the scope of his authority under the terms of the Trust
Agreement in distributing the accumulated income for his or his children’s support,
maintenance, health, and education, nor was there any testimony that the principal
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of the Trust was invaded in making these disbursements from the SJG 2007 Trust
account.
The Trial Court’s Ruling: The SJG 2007 Trust
Belongs to a Third Party
{¶43} It is clear from the trial court’s March 10, 2016 decision that it
carefully considered the above testimony offering differing characterizations of
Mark’s property interest in the SJG 2007 Trust, in determining whether the Trust
itself was subject to equitable division in the divorce.
{¶44} The trial court addressed Bridget’s argument equating the SJG 2007
Trust to that of a corporation or LLC created during the marriage and noted that “the
analysis does not take into consideration [that] the SJG Trust was created by a third
party and its a separate viable legal entity in and of itself.” (Doc. No. 153 at 5).
The trial court highlighted Mr. Pappas’ testimony on the circumstances surrounding
the creation of the SJG 2007 Trust and noted that the Trust was created by a third
party—Samuel J. Guagenti— “to accomplish the purchase of the stock by the SJG
Trust for the benefit of the beneficiaries of the SJG Trust.” (Id. at 6).
{¶45} The trial court further considered the position of Bridget’s expert Mr.
Kordik on Mark’s individual ownership of the Trust assets due to the authority
conferred to him as Trustee while also being the primary beneficiary and found that:
Merely because Mark Guagenti serves in both of those capacities,
as well as an officer of the corporation, C&G Distributing
Company, Inc., we cannot automatically discount the intent of
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Samuel J. Guagenti in formulating the Trust as set forth in the
Trust purpose to “effectuate a plan for the orderly business like
administration of the Trust Estate for the benefit of the Grantor’s
descendant’s, in particular the Grantor’s son and the Grantor’s
son’s children.” The comparisons to a corporate entity that is
created during the term of a marriage or even prior to marriage
and ownership of stock of that corporate entity by a husband or
wife during the marriage and the proposed inclusion in that
corporation of assets that would otherwise be marital can be
easily differentiated from the current creation of the Trust by a
third party, father of Mark Guagenti.
(Doc. No. 153 at 6).
{¶46} Thus, the trial court found evidence establishing Samuel’s intent,
including the fact that the SJG 2007 Trust was intended to benefit at least two
generations of Samuel’s descendants and that similar trusts were created by other
shareholders of C&G Distributing with the pending sale to Anheuser-Busch in
mind. The trial court also considered the specific trust provisions contained in the
document creating the SJG 2007 Trust. Specifically, that “Mark has unfettered right
to distribute the income of the Trust, but must obtain the consent [] from the
protector committee before distributing the principal of the trust.16” (Doc. No. 153
at 7).
16
Moreover, as previously indicated the 2007 SJG Trust provisions clearly make a distinction between the
power conferred to Mark as Trustee as opposed to an Independent Trustee by giving the latter broader power
to distribute the accumulated income and principal to the beneficiaries. If the 2007 SJG Trust was meant to
be a “freely distributable trust” as Bridget contends, then there would be no need for this difference in Trustee
authority.
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{¶47} The trial court concluded that based upon the evidence in the record
establishing the factual circumstances underpinning the creation of the SJG 2007
Trust and the provisions limiting Mark’s access to the principal that “the assets
contained within that Trust are * * * neither marital or separate property. The assets
are not property owned by either of the parties at the creation of the SJG Trust.”
(Id.)
{¶48} The trial court also reviewed whether Mark had engaged in any
conduct inconsistent with the terms of the Trust Agreement, in which he exceeded
the scope of his authority as Trustee or which indicated collusion for a dubious
purpose to defraud Bridget that would somehow transmute the third party character
of the SJG 2007 Trust to make it subject to equitable distribution under R.C.
3105.171. The trial court carefully examined the evidence and concluded that:
There was no indication that the money distributed to the Samuel
J. Guagenti Trust, which was then applied to the three million
dollar loan, was a diversion of any funds normally paid to Mark
Guagenti as an employee or officer of the corporation. In fact,
evidence indicated that like distributions were made to other
stock owners, who were also trusts, purchasing stock by trusts
created by two other previous owners of the C&G Distributing
Company, Inc. stock.
There was no evidence to indicate this distribution of funds
constituted the redirection of modification of any distributions
that Mark would have otherwise individually been entitled to.
***
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In this case, the Trust itself defines the parameters within which
the trustee/beneficiary must operate and there is absolutely no
evidence to establish that Mark Guagenti violated any of the
terms of the Trust in any regard[.]
(Doc. No. 153 at 8).
{¶49} The trial court then turned to the parties’ arguments regarding the
application of R.C. 3105.171 and whether the SJG 2007 Trust is subject to equitable
division in the divorce.
As all counsel have indicated in their references to [R.C.]
3105.171, marital property consists of all real and personal
property that is OWNED (emphasis added) by either or both of
the spouses. The creation of the Trust and the purchase of the
stock, without any consideration as to how that purchase was
accomplished, is not marital property, nor is it the separate
property of one of the parties.
(Doc. No. 153 at 7-8) (emphasis sic).
{¶50} Accordingly, the trial court determined that the SJG 2007 Trust was
not subject to division in the parties’ divorce and, therefore, that the statutory
definitions of marital and separate property set forth in R.C. 3105.171 did not apply
to the Trust itself.
Standard of Review
{¶51} In a divorce proceeding, the division of the parties’ property is
governed by R.C. 3105.171. The trial court must first determine what constitutes
marital property and what constitutes separate property. R.C. 3105.171(B). This is
done under the manifest weight of the evidence standard of review. Welly v. Welly,
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3d Dist. Seneca No. 13–15–15, 2015-Ohio-4804, ¶ 34. Manifest weight “concerns
the inclination of the greater amount of credible evidence, offered in a trial, to
support one side of the issue rather than the other.” Ohmer v. Renn–Ohmer, 12th
Dist. Butler No. CA2012-02-020, 2013-Ohio-330, ¶ 36.
{¶52} In a manifest weight analysis, the reviewing court weighs the evidence
and all reasonable inferences, considers the credibility of 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. Krohn v. Krohn, 6th Dist. Wood No. WD-16-010, 2016-Ohio-8379, ¶ 11.
{¶53} “If the evidence is susceptible of more than one construction, the
reviewing court is bound to give it that interpretation which is consistent with the
verdict and judgment, most favorable to sustaining the verdict and judgment.”
Eastley v. Volkman, 132 Ohio St.3d 328, 2012-Ohio-2179, ¶ 21.17
Discussion
{¶54} Bridget’s argument on appeal that the trial court erred in finding that
the SJG 2007 Trust is not subject to equitable division is premised upon her
interpretation of the language in R.C. 3105.171(A)(3)(a)(i)-(iii), which statutorily
defines marital property as the following:
(3)(a) “Marital property” means, subject to division (A)(3)(b) of
this section, all of the following:
17
For the reasons that follow, we decline to accept Bridget’s position on appeal that this issue presents a
question of law that must be reviewed de novo.
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(i) All real and personal property that currently is owned
by either or both of the spouses, including, but not limited
to, the retirement benefits of the spouses, and that was
acquired by either or both of the spouses during the
marriage;
(ii) All interest that either or both of the spouses currently
has in any real or personal property, including, but not
limited to, the retirement benefits of the spouses, and that
was acquired by either or both of the spouses during the
marriage;
(iii) Except as otherwise provided in this section, all
income and appreciation on separate property, due to the
labor, monetary, or in-kind contribution of either or both
of the spouses that occurred during the marriage[.]
R.C. 3105.171(A)(3) (emphasis added).
{¶55} Bridget argues that the trial court erred in narrowly construing the
scope of marital property under R.C. 3105.171(A)(3) to only real property or
personal property owned by a spouse. Bridget maintains that the SJG 2007 Trust
falls under the purview of R.C. 3105.171 for two primary reasons.
1. Middendorf v. Middendorf
{¶56} Bridget’s first argument focuses upon the proceeds from the sale of
C&G Distributing stock, which makes up the vast majority of the value of the
Trust’s assets. Specifically, she argues that the appreciation in the value of the
C&G Distributing stock contained in the SJG 2007 Trust is attributable to Mark’s
employment at C&G Distributing during the marriage. In Middendorf v.
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Middendorf, the Supreme Court of Ohio held that “[u]nder R.C. 3105.171, an
increase in the value of separate property due to either spouse’s efforts is marital
property.” Middendorf, 82 Ohio St.3d 397, 400, 1998-Ohio-403, syllabus.
{¶57} In Middendorf, Husband was a co-owner and a livestock buyer for
Middendorf Stockyard Company, Inc. when he married Wife. Middendorf, 82 Ohio
St.3d at 397. There was no dispute that Husband’s interest in the stockyard company
was his separate property. Id. After six years of marriage, the parties separated. Id.
The Supreme Court engaged in a two-step analysis under R.C. 3105.171(A)(3)(iii)
to determine whether any appreciation of the value in the stockyard company was
marital property subject to division in the divorce. First, the Court determined that
competent credible evidence, by way of expert testimony, established that the
stockyard company increased in value by $108,541 during the six years the parties
were married. Second, the Court reviewed evidence demonstrating that the increase
in value of the stockyard company was due to labor, monetary or in-kind
contribution by Husband. Id. at 401. This evidence included the nature of the
business and Husband’s involvement in management. Id. at 402.
{¶58} The Supreme Court found that record showed no abuse of discretion
in the trial court’s and appellate court’s findings that “ ‘the increase in value of
Middendorf Stockyard Company was the direct result of the pivotal role which
[Husband] played in the management of the company during the course of the
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marriage’ and that [Husband] ‘played a vital role in the management of the
Stockyards. * * * [He] clearly dedicated himself to his work, spending significant
amounts of time working to keep his business profitable in an increasingly risky
market.’ ” Middendorf, 82 Ohio St.3d at 402. Accordingly, the Supreme Court
found that, despite the fact that Husband’s ownership in the stockyard was separate
property, the record supported the conclusion that the appreciation in the value of
the stockyard during the parties’ marriage was “due” to Husband’s labor and efforts
and therefore was marital property subject to division under R.C.
3105.171(A)(3)(iii). Id. at 403.
{¶59} The trial court specifically addressed Bridget’s Middendorf argument
in its decision.
Bridget argues that the contribution of Mark Guagenti to the
corporation C&G Distributing, Inc. during the course of the
marriage between the purchase of the stock in March of 2008 and
its ultimate sale to Anheuser-Busch in June of 2013 resulted in an
increase of twelve million six hundred and sixty-six thousand six
hundred and sixty-six dollars and sixty-seven cents
[$12,666,666.67] in the value of the stock purchased by the Trust
and therefore that increase in the value should be marital in
accordance with Middendorf v. Middendorf, 82 Ohio St.3d 397(1998).
First of all, once again we have a situation where the Trust is a
separate entity whereas in Middendorf or such cases one marital
party owned the interest in the business entity, that being a
separate interest, but there was enhancement to the business
entity during the course of the marriage that was not passive in
nature, causing the courts in those cases to determine that
increase should be a marital asset subject to division.
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***
Even if owned by one or more of the parties, it would appear that
there was no “business” reason for the increase in the value of the
stock. While Mark testified he was a valuable contributing factor
to the ongoing business, from the purchase of the stock by the SJG
Trust until the sale to Anheuser-Busch, there was no
demonstrative increase in the sales; there was no evidence of
change in market shares, increased distribution territory or
acquisition of assets. Mark testified the business stayed the same
during this time and there was no conflicting evidence. In short,
the evidence indicated that the SJG Trust purchased a good
business that continued on basically the same pace so long as
management continued to distribute product efficiently.
(Doc. No. 153 at 9).
{¶60} Notably, the trial court’s observation regarding the lack of evidence in
the change of value of C&G Distributing between the time Samuel sold his shares
to the SJG 2007 Trust and the asset purchase by Anheuser-Busch is accurately
reflected in the record. At the final divorce hearing, Bridget only presented the
testimony of Mr. Kordik who offered an opinion simply reiterating the principle set
forth in Middendorf and its progeny without pointing to any evidence of the
financial change in the value of C&G Distributing that could be attributable to Mark
as an employee of the corporation.
2. Mark’s Interest in the SJG 2007 Trust
{¶61} Bridget appears to acknowledge the primary obstacle in making her
claim that this case is analogous to Middendorf is that the trial court determined the
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2007 SJG Trust is neither separate or marital, but belongs to a third party. Bridget
attempts to surmount this impediment on appeal by construing certain provisions of
the Trust Agreement which defines the parameters of Mark’s authority as Trustee
and his capacity as primary beneficiary.
{¶62} Bridget specifically directs us to the testimony of her witness, Mr.
Kordik, who found no significant distinction between Mark’s fiduciary capacity as
Trustee and Mark’s capacity individually, stating that it made no difference that
Mark only participated in the acquisition of Samuel’s shares of C&G Distributing
and the subsequent sale to Anheuser-Busch as Trustee of the SJG 2007 Trust.
Kordik opined that Mark’s capacity as Trustee and primary beneficiary as stated in
the Trust “is tantamount to outright ownership.” (Doc. No. 183 at 23). Mr. Kordik
based his opinion upon the broad authority conferred to Mark as Trustee to distribute
the accumulated income to himself for his health, support and maintenance.18
{¶63} In a making this argument, Bridget appears to advocate for the position
that mere existence of provisions in a trust agreement naming a spouse as trustee
18
We note that at oral argument, Bridget’s counsel was asked to direct this Court’s attention to the evidence
in the record which supported her contention that Mark exceeded his authority as Trustee to distribute the
accumulated income and invaded the principal of the 2007 SJG Trust to make distributions to himself.
Bridget’s counsel generally referred to the report of Bridget’s witness CPA David Fortney who traced
$405,000 that was distributed to Mark’s personal account during a six-year period and identified these funds
as being “commingled.” However, the “commingled” nature of the income distributions to Mark’s personal
account during the parties’ marriage is irrelevant to the consideration of whether Mark exceeded his authority
as Trustee and impermissibly invaded the Trust principal. Mark admitted that he wrote checks from the SJG
2007 Trust account to support Bridget and the children during the marriage. (See Doc. No. 182 at 48).
Moreover, it is evident from the trial court’s equitable award that all of Mark’s income distributions from the
SJG 2007 Trust were included in the property settlement in the divorce.
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and primary beneficiary with certain discretionary powers as a matter of law brings
the trust itself under the purview of R.C. 3105.171, as either a spouse’s “outright
ownership interest,” or at the very least as an “interest” the spouse “currently has”
under R.C. 3105.171(A)(3)(a)(ii), akin to a retirement benefit. Bridget maintains
this to be true without regard to whether the trust is funded with a third party’s
property, whether the trust agreement placed certain requirements limiting a
trustee/spouse’s access to the principal in line with the third-party grantor’s intent
to provide for two or more generations, and without regard to whether a
trustee/spouse has exceeded the authority granted under the parameters of the trust
agreement.
{¶64} Bridget claims that at least one Ohio appellate court has addressed this
issue and directs our attention to Maloney v. Maloney, 160 App.3d 209, 2005-Ohio-
1368 (2d Dist.). In Maloney, Husband challenged the trial court’s determination
that Wife’s interest in a trust was not marital property. Wife’s father owned a self-
storage company, where Wife was employed as a manager. Wife’s parents
established a limited partnership that owned the real estate the self-storage company
leased and operated its business upon.
{¶65} During the marriage, a twenty-six percent share of the limited
partnership was conveyed to Wife’s father, as Trustee, for the benefit of Wife. The
trial court characterized the conveyance as a gift and noted that Wife received the
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income from the trust. Husband offered evidence that the value of the twenty-six
percent stake in the limited partnership in the trust, from which Wife was entitled to
the income, increased by $286,000 during the marriage and argued that the
appreciation in the limited partnership shares was marital property because it was a
product of Wife’s work as a manager. On appeal, the appellate court addressed
“whether the trust is marital property the court is charged by R.C. 3105.171 to
divide.” Maloney, 2005-Ohio-1368 at ¶ 55.
{¶66} Bridget specifically highlights the comments made by the appellate
court in Maloney in setting the background for the discussion that “R.C.
3105.171(A)(3)(a) defines marital property in the broadest terms to include any
property that either spouse currently owns or ‘has’ ” to argue that the trial court
erred as a matter of law in this case when it determined that the SJG 2007 Trust was
neither separate or marital property, but that belonging to a third party. Maloney,
2005-Ohio-1368, ¶ 56. However, we note that the appellate court in Maloney never
reached a conclusion on whether the trust corpus was marital property because the
trustee was not joined as a party to the action under Civ. R. 75.
{¶67} Moreover, there are insufficient facts included in the Maloney case to
draw a fair comparison to the instant case in order to say that the statements of the
appellate court in Maloney, in dicta, regarding “any property that either spouse
currently owns” or “has” in the context of determining the marital or separate
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character of a spouse’s interest in a trust is dispositive to the outcome here.
Notwithstanding this fact, the appellate court in Maloney found, similar to the trial
court in the instant matter, that Husband’s mere assertion that Wife’s efforts “have
increased the value” of the limited partnership or the interest in it owned by the trust,
was insufficient absent any evidence showing that the increase in the value of either
was “due to” Wife’s labor as a manager in any material respect. Maloney, 2005-
Ohio-1368, ¶ 57.
{¶68} Bridget also directs us to several cases from other jurisdictions in
support of her position that the trial court erred in concluding that the 2007 SJG
Trust was not subject to equitable division under R.C. 3105.171. In reviewing these
cases it becomes apparent that there is no uniform approach applied across
jurisdictions on this issue. Rather, each case cited by Bridget employs a case-by-
case analysis of the facts presented instead of applying a bright line rule based
simply upon the provisions contained in the trust agreement.19
{¶69} As the Supreme Court of Vermont observed in Chilkott, a case cited
by Bridget on appeal, a “review of opinions from other states on this question
reveals there is no unanimity as to whether trial courts should consider or divide
future interests in trusts in making a property division * * * [b]ecause characteristics
19
Moreover, we note that the factual distinctions of the cases cited by Bridget in her brief from the facts of
the instant case are readily apparent upon initial review. See, e.g., In re Marriage of Romano, 2012 IL App
(2d) 091339, 968 NE.2d 115 (2012); Caruso v. Caruso, 71 Mass App.Ct 1105 (2008).
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of trusts differ so greatly, case law turns ‘on the attributes of the respective disputed
interests’ and construction of the enabling statute.” Chilkott, 158 Vt. 195, 607 A.2d
883, fn, quoting Lauricella v. Lauricella, 409 Mass. 211, 214-15, 565 N.E.2d 436,
438 (1991) (stating that “no clear consensus” among states on the propriety of
considering or dividing trusts in property distributions). As a result, we find the
case-by-case approach based upon the intent and conduct of the relevant parties with
regard to the formation and the operation of the trust to be the better approach and
more consistent with the manifest weight standard of appellate review applied to a
trial court’s determination of marital and separate property pursuant to R.C.
3105.171(B). 20
{¶70} In taking this approach, we note that other jurisdictions have generally
taken a similar position as the trial court in this instance that a trust such as the 2007
SJG Trust, which is an irrevocable trust, is an independent third-party entity and
that assets held by such a trust are not property owned by either spouse, but rather
property owned by a third party, namely the trust itself and as such cannot be subject
to equitable division in a divorce. See e.g., McGinn v. McGinn, 273 Ga. 292, 540
S.E.2d 604 (2001); Findlen v. Findlen, 695 A.2d 1216 (Me. 1997); In re Marriage
20
See, e.g., D.L. v. G.L., 61 Mass. App. Ct. 488, 496–97, 811 N.E.2d 1013, 1023 (2004) (stating that “while
a judge is not necessarily precluded from including within the marital estate * * * a party’s beneficial interest
in a discretionary trust * * * because of the peculiar nature of such a trust, the trust instrument and other
relevant evidence must be examined closely to determine whether that party’s interest is too remote or
speculative to be so included”).
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of Jones, 159 Or. App. 377, 981 P.2d 338 (1999); Endrody v. Endrody, 914 P.2d
1166 (Utah Ct. App. 1996).
{¶71} However, to be clear, in this instance Mark does have certain property
interests flowing from the 2007 SJG Trust which are subject to R.C.
3105.171(A)(3). While the 2007 SJG Trust itself may not be subject to division, the
distributed income received by Mark from the SJG 2007 Trust is a property interest
held by Mark. Therefore, the trial court properly included the $330,000 of annual
income distributions to Mark from the 2007 SJG Trust in its calculation of Mark’s
child support and spousal support obligations.
{¶72} Based on the foregoing, and in the particular circumstances of this
case, we do not find that Bridget has demonstrated a compelling reason for us to
determine that the trial court erred when it found that the SJG 2007 Trust was
property of a third party, not marital property, and not subject to equitable division
under R.C. 3105.171(A)(3). Accordingly, the first assignment of error is overruled.
Second Assignment of Error
{¶73} In her second assignment of error, Bridget argues that the trial court
erred in applying the $150,000 combined income level cap when calculating Mark’s
child support obligation. Specifically, Bridget maintains that the trial court failed
to consider evidence indicating that the children were accustomed to higher standard
of living in excess of that afforded by the trial court in its child support calculation.
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{¶74} “A trial court has considerable discretion related to the calculation of
child support, and, absent an abuse of discretion, an appellate court will not disturb
a child support order.” Clark v. Clark, 3d Dist. Henry No. 7-15-09, 2015-Ohio-3818,
¶ 28, citing Pauly v. Pauly, 80 Ohio St.3d 386, 390 (1997). An abuse of discretion
is “more than an error of law or judgment; it implies that the court's attitude is
unreasonable, arbitrary or unconscionable.” Blakemore v. Blakemore, 5 Ohio St.3d
217, 219 (1983).
{¶75} “The level of support for a combined gross income of $150,000 is the
starting point from which a trial court exercises its discretion in fashioning a child
support award for parents with higher incomes.” Bajzer v. Bajzer, 9th Dist. Summit
No. 25635, 2012-Ohio-252, ¶ 5; R.C. 3119.04(B). If the parties have a combined
income exceeding $150,000, the child support guidelines do not apply. Phelps v.
Saffian, 8th Dist. Cuyahoga No. 103549, 2016-Ohio-5514, ¶ 9. Instead, R.C.
3119.04(B) states that if the combined income of the parties exceeds $150,000, the
court must establish the amount of child support on a case-by-case basis, taking into
consideration “the needs and the standard of living of the children who are the
subject of the child support order and of the parents.” R.C. 3119.04(B). Trial courts
need not consider the deviation factors set forth in R.C. 3119.23 and 3119.24 when
setting support amounts higher than the statutory amount for a combined gross
income of $150,000 since “[s]upport awards in excess of that minimum * * * are
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anticipated by R.C. 3119.04(B) and are not deviations.” Wuscher v. Wuscher, 9th
Dist. Summit No. 27697, 2015-Ohio-5377, ¶ 27. For purposes of R.C. 3119.04(B),
the “needs” of a child are the same as they were at common law: food, clothing,
shelter, medical care, and education. Phelps, 2016-Ohio-5514 at ¶ 9.
{¶76} Under R.C. 3119.04(B), “domestic relations courts have more
discretion in computing child support when the parents’ combined income is greater
than $150,000 annually.” Macfarlane v. Macfarlane, 8th Dist. Cuyahoga No.
93012, 2009-Ohio-6647, ¶ 17. This statute “neither contains nor references any
factors to guide the court’s determination in setting the amount of child support;
instead, the court must determine child support on a case-by-case basis.” Siebert v.
Tavarez, 8th Dist. Cuyahoga No. 88310, 2007-Ohio-2643, ¶ 31. Thus, R.C.
3119.04(B) “leaves the determination entirely to the court’s discretion, unless the
court awards less than the amount of child support listed for combined incomes of
$150,000.” Cyr v. Cyr, 8th Dist. Cuyahoga No. 84255, 2005-Ohio-504, ¶ 54, citing
R.C. 3119.04(B).
{¶77} It is undisputed in this instance that the parties’ combined incomes are
in excess of $150,000 annually. The trial court made the following findings in its
March 10, 2016 decision, which were incorporated into the parties’ final divorce
decree.
Immediately before the termination of this marriage the parties
had a very lucrative standard of living as there were discussions
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about buying additional homes, or remodeling homes and buying
some new automobiles, all of the same was a result of the
distribution of the Trust fund containing the proceeds of the sale
of the C&G Distributing stock. Prior to that time, the parties had
a good standard of living, merely as a result of the income received
by Mark from his work * * * at C&G Distributing, Inc.
(Doc. No. 153 at 13).
This Court cannot find there has been any establishment that the
needs and standard of living of the children are in excess of the
child support schedule and this Court consequently cannot find
that it would be unjust or inappropriate and not in the best
interest of the children to order the [child support] amount at the
$150,000.00 level.
(Doc. No. 153 at 15).
{¶78} At the outset we note that the trial court’s observation regarding the
change of the parties’ standard of living from a “good” to a “very lucrative” lifestyle
immediately prior to Bridget filing for divorce is supported by the record. However,
in addition to applying the $150,000.00 combined income level cap and ordering
Mark to pay an annual child support obligation of $24,532, the trial court also
ordered Mark to continue to pay the cost of the three children to attend private
school and the cost of the children’s health insurance. See Roberts v. Roberts, 12th
Dist. Butler Nos. CA2004-04-081, CA2004-04-087, 2005-Ohio-2792, ¶ 21 (stating
that “[p]rivate school tuition is a form of child support”); see also, Pearlstein v.
Pearlstein, 11th Dist. Geauga No.2008-G-2837, 2009-Ohio-2191, ¶ 66-67
(concluding the trial court did not abuse its discretion when, in lieu of an upward
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deviation from the $150,000 cap on the child support guidelines, the court ordered
father to pay 100 percent of the children’s uncovered medical expenses, private
school tuition, and expenses for the extracurricular activities in addition to the
father’s child support obligation).
{¶79} Moreover, the record establishes that the children each had sizable 529
plans,21 life insurance policies, and custodial accounts, which the parties agreed to
retain for the children’s benefit without credit or accommodation. There is no
indication from the record that in assessing the needs and the standard of living of
the children and of the parents in this case that the trial court overlooked or failed
to accord appropriate weight to certain evidence as Bridget now maintains on
appeal.
{¶80} The dissent would find that the trial court abused its discretion in
failing to calculate Mark’s child support at a higher amount based upon the dissent’s
contention that Mark will receive at least $330,000 in annual income from the 2007
SJG Trust in perpetuity. However, the record establishes that the trial court only
used the $330,000 amount to impute income to Mark for purposes of calculating his
child support and spousal support based upon its determination that this figure
21
“529 Plans, also known as 529 College Savings Accounts, are so named because they are permitted under
Section 529 of the Internal Revenue Code, 26 U.S.C. 529.” Wolf-Sabatino v. Sabatino, 10th Dist. Franklin
No. 12AP–1042, 2014-Ohio-1252, ¶ 49. See also Albers v. Albers, 2d Dist. No.2012 CA 41, 2013-Ohio-
2352, fn. 4.
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represented a fair approximation of the annual income distributed to Mark from the
2007 SGJ Trust after he no longer received a salary, either as an employee of C&G
Distributing or as a consultant for Anheuser-Busch. Notably, the trial court retained
jurisdiction to modify both support amounts.
{¶81} As previously discussed in detail the Trust Agreement provides Mark
with a right to withdraw the accumulated income subject to the discretion of the
Trustee and so long as the distribution meets a defined ascertainable standard—i.e.,
the distribution must be appropriate to support, maintain or provide for the health
and education of the beneficiaries, which will vary from year to year. In addition,
in the event Mark becomes unable or unwilling to serve as Trustee, a successor
trustee shall be designated. In other words, there is no guarantee that Mark will
remain the Trustee throughout his life. The record further establishes that the lion’s
share of the 2007 SGJ Trust principal has been invested in market based accounts.
Each of these variables affect not only amount of income distributed to Mark, and
the other beneficiaries, on a yearly basis, but also the amount of income accumulated
by the Trust itself.
{¶82} Accordingly, we find no abuse of the trial court’s discretion in
applying the $150,000 combined income level cap on the guidelines to Mark’s child
support obligation. The second assignment of error is therefore overruled.
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Third Assignment of Error
{¶83} In her third assignment of error, Bridget claims that the trial court’s
distributive award to her in the amount of $300,000 for Mark’s financial misconduct
was unreasonable and argues that her compensation should be larger.
Section 3105.171(E) of the Revised Code states as follows:
(4) If a spouse has engaged in financial misconduct, including, but
not limited to, the dissipation, destruction, concealment,
nondisclosure, or fraudulent disposition of assets, the court may
compensate the offended spouse with a distributive award or with
a greater award of marital property.
(5) If a spouse has substantially and willfully failed to disclose
marital property, separate property, or other assets, debts,
income, or expenses as required under division (E)(3) of this
section, the court may compensate the offended spouse with a
distributive award or with a greater award of marital property
not to exceed three times the value of the marital property,
separate property, or other assets, debts, income, or expenses that
are not disclosed by the other spouse.
{¶84} While a trial court enjoys broad discretion in deciding whether to
compensate one spouse for the financial misconduct of the other, the initial finding
of financial misconduct must be supported by the manifest weight of the evidence.
Davis v. Davis, 11th Dist. Geauga No. 2011-G-3018, 2013-Ohio-211, ¶ 77. Once
financial misconduct is established, the decision to make a compensating
distributive award rests within the discretion of the trial court and will not be
disturbed absent an abuse of that discretion. Epperson v. Epperson, 6th Dist. Wood
No. WD-03-1195, 2015-Ohio-2443, ¶ 41.
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{¶85} Here, there is no assignment of error relating to the trial court’s finding
of Mark’s financial misconduct. Rather, Bridget simply quarrels with the amount
of the distributive award ordered by the trial court. Accordingly, we shall review
the trial court’s decision for an abuse of discretion. An abuse of discretion is “more
than an error of law or judgment; it implies that the court’s attitude is unreasonable,
arbitrary or unconscionable.” Blakemore v. Blakemore, 5 Ohio St.3d 217, 219
(1983).
{¶86} The trial court made the following findings relative to its
determination that Mark committed financial misconduct during the trial court
proceedings:
Throughout the proceedings Mark had failed to timely disclose
information with respect to the assets in this case and there was a
large amount of responses he had given in response to
interrogatories and requests for discovery that was either
incomplete, inaccurate or quite frankly false.
A great deal of the delay in this case coming to trial was a result
of Mark’s inability and failure to present accurate and complete
information.
This resulted in the Court having additional hearings with respect
to the failure of Mark to comply with the requests for discovery
and to make full disclosure.
As indicated by counsel the record is replete with inaccurate
responses to discovery and one of the most notable failures to
disclose was regarding a million dollars that was in an account
which was not disclosed by Mark Guagenti until a late date being
some of the final depositions in this matter.
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As a result, this Court finds Mark has engaged in financial
misconduct under both [R.C.] 3105.171(E)(4) and (5).
Under subsection (4) referred to the Court has the ability to make
a distributive award between the parties and under [subsection]
(5) the Court [may] make a distributive award not to exceed three
times the value of the marital property, or other assets not
disclosed.
While the Court recognizes the million dollar account we were
talking about was ultimately found to be a separate asset of the
SJG Trust, the disclosure was still germane to the process of this
divorce case and the full disclosure of all possible assets that may
be subject to division. 22
Irrespective of this, the Court further would note that under
subsection (4) of the aforementioned code section, Mark has
received [a] distribution of assets of $507,683.00 and was ordered
to pay Bridget an amount to equalize the distribution of assets.
Based upon Mark’s failure to disclose assets and continual
usurpation of the discovery process in this case and his flagrant
refusal to comply, it is appropriate for a distributive award to be
made wherein Mark shall pay Bridget Guagenti, in addition, to
the amount of $179,363.56 to equalize the property distribution
hereinbefore referred to, the amount of $300,000.00 to be paid
within seven (7) days after the filing of the Judgment Entry
Decree of Divorce in this case.
(Doc. No. 153 at 15-16).
{¶87} As previously indicated, Bridget’s primary contention on appeal with
respect to this assignment of error is her claim that the trial court should have given
22
It appears that the trial court is referring the $1,000,000 belonging to the SJG 2007 Trust, which was held
in escrow by Anheuser-Busch under the terms of the June 13, 2013 asset purchase agreement. The record
reflects that in fact $3,000,000 was held in an escrow account under the name C&G Distributing, with a
million dollars belonging to each of the shareholders who were the three trusts previously discussed in the
narration of the facts.
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her a higher distributive award for Mark’s financial misconduct. As acknowledged
by the trial court, Mark was not forthcoming in disclosing information about certain
assets during discovery, which frustrated the legal process and unnecessarily
extended the trial court’s resolution of this case. However, in addition to the
$300,000 distributive award compensating her for Mark’s financial misconduct, the
trial court also awarded Bridget over $127,000 in attorney fees, which included the
fees Bridget incurred while pursuing motions for orders to compel Mark to comply
with discovery requests and to hold him in contempt for violating the restraining
order when he purchased a condo and a luxury vehicle during the divorce
proceedings. It should be noted that the record establishes that Mark purchased
these items with funds that he was entitled to from the SJG 2007 Trust, and without
invading the principal of the trust. The trial court nevertheless sanctioned Mark for
violating the protection order as his misconduct was pervasive throughout the case
and hampered the parties’ efforts to assess an accurate summation of marital
property subject to division.
{¶88} Bridget specifically claims the trial court’s distributive award for
Mark’s financial misconduct was unreasonably low in light of the high value of
assets Mark failed to timely disclose. However, as discussed in the first assignment
of error, most of these high value, yet undisclosed assets, were determined by the
trial court to be neither marital nor separate property, but the assets belonging to a
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Case No. 1-16-47
third party and therefore not subject to division. Based on the foregoing, we find
no abuse of discretion in the trial court’s decision to award Bridget $300,000, in
addition to over $127,000.00 in attorney fees, for Mark’s misconduct during the trial
court proceedings. The third assignment of error is therefore overruled.
{¶89} Having found no prejudicial error to Bridget in the assignments of
error raised herein and overruling the same, the judgment of the Allen County Court
of Common Pleas, Domestic Relations Division, is affirmed.
Judgment Affirmed
PRESTON, P.J., concurs.
/jlr
ZIMMERMAN, J., concurs in part and dissents in part.
{¶90} While I agree with the majority that the SJG 2007 Trust is neither
marital nor separate property, I disagree with the trial court’s failure to award
spousal and child support using, at a minimum, the sum of $330,000.
{¶91} The trial court determined, and the majority overlooked, that the SJG
2007 Trust generated a “substantial” income for Mark every year. Specifically, the
trial court found that “… the principal [sic] still exists in that regard and the Court
would indicate the income from the assets in total has been substantial and will be
substantial in the future”. (Emphasis added). (Doc. 16 Pg. 13). This being the case,
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the trial court found $330,000 to be the past substantial figure, even though the trust
corpus has increased several times fold upon the Trusts’ sale of stock to Anheuser-
Busch in 2014.
{¶92} Thus, Mark continues to have access to the trust income, at its
increased value, which he can receive without oversight by the Trusts’ protective
committee.
{¶93} Using basic math, Bridget’s annual income to raise her family of 4 is
just shy of $85,000 ($60,000 in alimony and approximately $25,000 in child
support) while Mark’s income, at a minimum, is $245,000 ($330,000 - $85,000) to
support a family of 1.
{¶94} I would reverse on the issue of child support.
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