AFFIRMED IN PART AND REVERSED IN PART Civil Appeal from the Cuyahoga County Court of Common Pleas Domestic Relations Division Case No. D-318177
ATTORNEYS FOR APPELLANT Robert M. Fertel Christopher R. Reynolds Andrew A. Zashin Zashin & Rich Co., L.P.A.
ATTORNEY FOR APPELLEE Adam J. Thurman Schoonover, Rosenthal, Thurman, & Daray, L.L.C.
BEFORE: E.T. Gallagher, J., Jones, P.J., and Kilbane, J.
JOURNAL ENTRY AND OPINION
EILEEN T. GALLAGHER, J.
(¶ 1} Plaintiff-appellant Kathleen M. Walpole ("Kathleen") appeals a judgment entry of divorce that awarded: (1) temporary spousal support, (2) denied her request for pretrial attorney fees, and (3) divided the marital assets. Defendant-appellee Thomas L. Walpole, III ("Thomas") cross-appeals from the judgment entry of divorce and challenges: (1) the spousal support award, (2) the award of attorney fees, and (3) the trial court's conclusion that certain assets were separate property. We find some merit to the appeal, affirm in part, and reverse in part.
(¶2} Kathleen and Thomas were married on January 6, 1975, and had two children, both of whom were emancipated at the time of trial. Throughout the divorce proceedings, Thomas was employed by Novelis Corporation ("Novelis") on an expatriate assignment in Seoul, South Korea. Kathleen, who previously worked as a teacher, had not worked for several years prior to the divorce.
(¶ 3} Kathleen filed the complaint for divorce on October 4, 2007, and a motion for temporary spousal support on October 19, 2007. At trial, the parties disputed the actual amount of compensation Thomas received from Novelis for purposes of calculating spousal support and temporary spousal support. There are several components to Thomas's compensation package from Novelis, including a base salary, "expatriate compensation, " a "location allowance, " a "goods and services adjustment, " and "additional income taxes" (also referred to as "hypothetical" or "grossed up" tax) and bonuses. The expatriate compensation and the location allowance were each calculated as 10 percent of Thomas's base salary. In 2007, Thomas's base salary was $270, 000 and the addition of these components brought it up to $324, 000. In 2008, his base salary was $285, 000 and the two 10 percent premiums brought it to $342, 000. At the time of trial, Thomas's base salary had increased by 5 percent each year since 2005. Thomas also received substantial bonuses and retirement benefits.
(¶ 4} The magistrate issued its order for support pendente lite, on April 23, 2008, and ordered Thomas to pay Kathleen $15, 000 per month, plus a two percent processing fee, retroactive to October 19, 2007. Shortly thereafter, Thomas filed a request for an oral hearing to modify the support pendente lite pursuant to Civ.R. 75 (N) and the court scheduled a hearing for August 28, 2008. However, pursuant to an agreed judgment entry, the hearing was continued to the final trial.
(¶ 5} The first payment of spousal support was disbursed to Kathleen on May 30, 2008. At the time of trial, which took place over several days in November and December 2008, Thomas had a temporary spousal support arrearage in the amount of $103, 621. The arrearage was the result of the retroactivity of the magistrate's April 23, 2008 order.
(¶ 6} The magistrate who presided over the trial released her decision in September 2009. The trial court released its decision adopting most of the magistrate's decision while sustaining some objections on May 16, 2011. The magistrate found, and the court agreed, that it was inequitable to require Thomas to pay the entire amount of the temporary spousal support arrearage under the circumstances in this case. The court explained that Kathleen removed $1, 100, 000 from the parties' joint Fidelity Investments account, and Thomas maintained the marital residence without any contribution from Kathleen. The court determined that the commencement date for temporary supposal support should be April 1, 2008, the month of the magistrate's original order of support pendente lite. Consequently, Thomas was ordered to pay a retroactive temporary support arrearage from April 1, 2008, through June 1, 2008, in the amount of $30, 000.
(¶7} With respect to permanent spousal support, the trial court adopted the magistrate's recommendation and ordered Thomas to pay Kathleen $14, 000 per month for a period of ten years. The court reserved jurisdiction to modify the amount of spousal support within the ten-year term based on Thomas's retirement "or any other change in accordance with Ohio Revised Code Section 3105.18."
(¶ 8} The court ordered that the marital residence be sold and the net proceeds divided equally. The court also divided the parties' automobiles, mint coin collection, and frequent flier miles as of November 5, 2008, the date the marriage ended. The parties stipulated during trial that the division of household goods and furnishings as it existed at the time of trial represented an equal division of such items including a camera in Thomas's possession. Kathleen was awarded Thomas's entire interest in the Novelis Savings Plan ("40IK") in the amount of $887, 359. Thomas was awarded his entire interest in his Alcan Corporation Non-Qualified Deferred Compensation Plan, with a value of $724, 956. However, the court's order requires Thomas to pay Kathleen five equal annual installments of a predetermined amount. Thomas was awarded 50 percent of Kathleen's State Teacher Retirement System Pension Plan. The court further awarded Kathleen 50 percent of Thomas's Novelis Pension Plan and his Novelis Supplemental Retirement Benefit Plan.
(¶ 9} Part of Thomas's compensation package included payments under Novelis's Long Term Incentive Plan ("LTIP"). The magistrate's decision limited Kathleen's share of the LTIP to one-half of any additional LTIP bonus (beyond $22, 773 previously released to Thomas) that was earned during any period prior to November 5, 2008. The court sustained Kathleen's objection to the award and ordered Thomas to provide Kathleen an accounting of his receipt of any LTIP bonus received after the trial date, but earned prior to the termination date of the marriage. The court found that Kathleen was entitled to one-half of any portion of Thomas's LTIP bonus (beyond that which had already been received prior to trial) to the extent that LTIP funds were earned prior to the termination of the marriage, net Thomas's payable taxes on the funds.
(¶10} The trial court found that Thomas's bonuses in 2008, including the JB-Bonus-Pensionable in the amount of $129, 938, the JP-Bonus-non-pensionable, in the amount of $16, 843, and the LTIP in the amount of $22, 773, totaled $169, 554. Pursuant to an agreed judgment entry dated September 2, 2008, Thomas used these funds to pay marital expenses and they were not subject to division.
(¶ 11} The magistrate determined that Thomas's last installment of the Recognition Award in the amount of $157, 255, payable in 2009, is a marital asset subject to equal division. Thomas objected to the value of the Recognition Award, arguing that it should be adjusted by the stipulated marginal tax rate of 35 percent. The trial court sustained the objection and adjusted the value down to $102, 216.
(¶ 12} Prior to filing the complaint for divorce, the parties had four individual retirement ("IRA") accounts and an investment account with Fidelity. The parties' joint Fidelity investment account ("Fidelity Account 1935") had a value of $1, 936, 484 on October 1, 2007. The parties stipulated that on October 22, 2007, Kathleen withdrew $1, 100, 000 from that account. She withdrew the entire cash balance of $535, 727 and obtained the remainder through a margin loan of $562, 707 against the value of the stock in the account.
(¶ 13} As of October 31, 2007, the total market value of the remainder of Fidelity Account 1935 was $1, 439, 704. By the time of trial in November 2008, the value had dropped to $890, 929. The court adjusted this amount by the amount of the original margin loan in the amount of $562, 707, the interest accrued on it over the previous year in the amount of $35, 109, and Kathleen's repayments of the margin loan in the amount of $92, 000. The trial court determined that Fidelity Account 1935 should not have been divided until the time of trial "in order to fairly distribute the losses of the market between the parties." At the time of trial, the total value of Fidelity Account 1935, including the $1, 100, 000 Kathleen previously removed, was $1, 990, 929. The trial court determined that the actual value of the remainder of Fidelity Account 1935, minus Kathleen's $1, 100, 000 and the margin loan, was $400, 573. The court awarded the remainder of Fidelity Account 1935 to Thomas and awarded Kathleen the $1, 100, 000 she removed from the account in 2007.
(¶ 14} The court also divided several bank accounts, savings bonds, a Fidelity money market account, and the parties' IRAs. The court found that certain accounts at Solvay Bank and First Charter Bank were not marital property and therefore not subject to division. Although Kathleen suggested that Thomas was hiding funds in offshore accounts, the court found there was no compelling evidence proving that Thomas had any other bank accounts or investment accounts.
(¶ 15} Both parties filed motions for attorney fees. The court denied Thomas's motion for attorney fees and awarded Kathleen attorney fees incurred during the trial, but denied her request for any attorney fees incurred prior to trial.
(¶16} Kathleen filed a timely notice of appeal in August 2011. However, this court remanded the appeal to the trial court for lack of a final, appealable order. Following the trial court's final resolution of all issues in the case, Kathleen filed a second notice of appeal. In this appeal, she raises 21 assignments of error. Thomas cross-appeals and raises five assignments of error. We address some of the assigned errors together for the sake of economy.
Amount and Duration of Spousal Support
(¶ 17} In the first assignment of error, Kathleen argues the trial court abused its discretion by improperly determining the amount and duration of spousal support. She contends that despite the trial court's intention to award support to maintain a lifestyle comparable to the parties' marital standard of living, it failed to account for a gross disparity in the parties' incomes. She also argues the court erroneously limited the spousal support award to a period of ten years while retaining jurisdiction to modify the amount of the award.
(¶ 18} In Thomas's second assignment of error in the cross-appeal, he argues the trial court abused its discretion by awarding Kathleen any temporary or permanent spousal support. He contends that it was error to award spousal support because Kathleen does not need the support.
(¶ 19} A trial court has broad discretion in determining whether an award of spousal support is proper based on the facts and circumstances of each case. Kunkle v. Kunkle, 51 Ohio St.3d 64, 67, 554 N.E.2d 83 (1990). Therefore, a spousal support award should not be disturbed on appeal, absent an abuse of discretion. Id.
(¶ 20} When determining whether spousal support is appropriate and reasonable, the trial court must consider the factors set forth in R.C. 3105.18(C)(1) as a whole, and not consider any one factor in isolation. Kaletta v. Kaletta, 8th Dist. Cuyahoga No. 98821, 2013-Ohio-1667, ¶ 22, citing Kaechele v. Kaechele, 35 Ohio St.3d 93, 96, 518 N.E.2d 1197 (1988). The court need not expressly comment on each factor but must indicate the basis for an award of spousal support in sufficient detail to enable a reviewing court to determine that the award is fair, equitable, and in accordance with the law. Id.
(¶21} The factors enumerated in R.C. 3105.18(C)(1) include consideration of: (1) the parties' income from all sources, including income derived from the property division made by the court; (2) the relative earning abilities of the parties; (3) their ages and physical, mental, and emotional conditions; (4) their retirement benefits; (5) the duration of the marriage; (6) their standard of living during the marriage; (7) the relative extent of education of the parties; (8) their relative assets and liabilities; (9) the contribution of each party to the education, training, or earning ability of the other party; (10) tax consequences of spousal support, and (11) the lost income production capacity of either party that resulted from that party's marital responsibilities. R.C. 3105.18(C)(1).
(¶ 22} Kathleen argues the trial court abused its discretion because the spousal support award does not equalize the parties' income. She also argues the ten-year term of spousal support is too short in light of the length of the parties' marriage. Thomas contends the trial court should not have awarded any spousal support to Kathleen because she failed to establish any "need" for support, regardless of any of the other factors. Both parties ignore the fact that the court is required to consider all of the relevant factors listed in R.C. 3105.18(C)(1) and that no single factor, by itself, is determinative. Kaletta at ¶ 22.
(¶ 23} Although there is no prohibition against the equalization of incomes in appropriate cases, income equalization is not a factor that must be considered under R.C. 3105.18(C)(1). And while a trial court may consider any factor it considers relevant, a party's "need" is also not one of the enumerated factors set forth in R.C. 3105.18, nor is it the primary standard against which to evaluate the factors. McConnell v. McConnell, 8th Dist. Cuyahoga No. 74974, 2000 Ohio App. LEXIS 347 (Feb. 3, 2000). The goal of spousal support is to reach an equitable result. Kaletta at ¶ 22.
(¶ 24} In this case, the trial court separately addressed each of the factors set forth in R.C. 3105.18(C)(1) in relation to the evidence presented at trial. The court found that both Kathleen and Thomas were 54 years old at the time of trial and had been married for 33 years. During the marriage, the parties lived a comfortable upper middle class lifestyle. Despite Kathleen's statements that she suffers from debilitating osteoporosis and liver disease, she presented no medical evidence to substantiate her claim. There was no evidence that either party has any physical, mental, or emotional defects that would prevent either of them from working full time.
(¶ 25} The court noted that Kathleen received the majority of the liquid assets from the division of marital assets, including the $1, 100, 000 she removed from the Fidelity Account 1935, out of which she used $160, 000 to purchase a condominium and returned $92, 000 to pay margin calls. She maintained $550, 000 in bank accounts. The parties' respective retirement accounts, exclusive of the Fidelity IRAs, were divided equally between the parties but would be unavailable until retirement.
(¶ 26} The court also found that both parties are college graduates, and Thomas obtained his MBA from Case Western Reserve University in 1995. Evidence showed that Kathleen is capable of earning $33, 200 as a school teacher and that Thomas's base salary in 2008 was $285, 000 per year plus a 10 percent expatriate premium, 10 percent location allowance, housing and other benefits, and bonus income. Although Kathleen was unemployed at the time of trial, the court found she is capable of obtaining employment as a school teacher.
(¶27} Kathleen asserts that Thomas's income in 2008 was approximately $825, 474. As such, she argues her spousal support in the amount of $168, 000 per year is unequal and inequitable when compared to Thomas's income. Indeed the court found that as of October 31, 2008, Thomas was projected to earn $666, 951, consisting of his base salary ($285, 000) plus 10 percent expatriate premium ($28, 500), plus 10 percent location allowance ($28, 500), plus housing and other benefits ($155, 397), and bonuses.
(¶28} However, the court also found that there is an inherent variability in Thomas's income because his bonuses, which have contributed substantially to his gross income, are based on company performance. Thomas predicted a dramatic decrease in future bonuses due to the economic downturn, which began in 2008. The court found that such things as the uncertainties of the global economy, the temporary nature of Thomas's current assignment, and the possibility of retirement make Thomas's projected gross income unpredictable.
(¶ 29} As previously stated, an equitable and reasonable award does not require income equalization nor is it limited solely to a spouse's most basic needs. The court awarded Kathleen spousal support in the amount of $14, 000 per month for a period often years. This figure is equivalent to $168, 000 per year for ten years, or a total of $1, 680, 000 over the ten-year term. She also received substantial assets and retirement benefits. By the time spousal support payments stop, Kathleen will be eligible to withdraw from her retirement accounts. These assets and income will allow Kathleen to maintain the upper middle class lifestyle she enjoyed during the marriage. The trial court's decision is well supported by the record, and we find no abuse of discretion in the court's spousal support award.
(¶30} Accordingly, Kathleen's first assignment of error and Thomas's second assignment of error in the cross-appeal are overruled.
(¶ 31} In the second assignment of error, Kathleen argues the trial court abused its discretion when it denied her request for pretrial attorney fees. In her third assignment of error, Kathleen argues the court failed to consider the reasonableness of her attorney fees when it denied her request for pretrial attorney fees. In Thomas's fourth cross-assignment of error, he argues the court abused its discretion by awarding Kathleen $8, 000 in attorney fees and not awarding him attorney fees.
(¶ 32} Kathleen argues the award of attorney fees should have been greater, but the trial court improperly punished her for withdrawing the $1, 100, 000 from Fidelity Account 1935. She contends the court failed to consider Thomas's lack of cooperation during the pretrial proceedings and asserts that the court would have awarded her pretrial attorney fees if the court had considered the complexity of the issues involved in calculating Thomas's income. Thomas contends the award of spousal support to Kathleen is unwarranted and inequitable.
(¶33} Pursuant to R.C. 3105.73(A), a divorce court "may award all or part of reasonable attorney's fees * * * to either party if the court finds the award equitable." When deciding whether to award attorney fees, the court must start with a presumption that attorney fees are the responsibility of the party who retains the attorney. Gourash v. Gourash, 8th Dist. Cuyahoga Nos. 71882 and 73971, 1999 Ohio App. LEXIS 4074 (Sept. 2, 1999), citing Farley v. Farley, 97 Ohio App.3d 351, 358, 646 N.E.2d 875 (8th Dist. 1994). In determining whether an award of fees is equitable, "the court may consider the parties' marital assets and income, any award of temporary spousal support, the conduct of the parties, and any other relevant factors the court deems appropriate." Id; R.C. 3105.73(A). An award of attorney fees under R.C. 3105.73 lies within the sound discretion of the trial court and will not be reversed absent an abuse of that discretion. Rand v. Rand, 18 Ohio St.3d 356, 359, 481 N.E.2d 609 (1985).
(¶ 34} Despite Kathleen's statements to the contrary, the court never stated that her attorney's time was inflated or unreasonable. Indeed, the court acknowledged that determining Thomas's actual compensation involved complex issues. However, the court found that Kathleen had substantial resources with which to pay her own attorney fees.
(¶ 35} Moreover, significant attorney fees were incurred as a direct result of Kathleen's acts of "self-help" beyond the withdrawal of the $1, 100, 000 from Fidelity Account 1935. Much of Thomas's pretrial discovery consisted of efforts to find out what Kathleen did with the $1, 100, 000. Thomas was forced to file two motions to compel because Kathleen failed to appear for deposition and failed to produce requested documents.
(¶ 36} To make matters worse, Thomas later discovered that Kathleen deposited a large portion of the marital funds into an account in her sister's name. The sister had check-writing authority and used the account to pay for her own as well as Kathleen's expenses. In addition, Kathleen took a margin loan secured against the Fidelity account when she withdrew $1, 100, 000 which accrued interest in the amount of $2, 000 per month. The trial court found that Kathleen's actions created conflict, set the tone for the proceedings, and contributed to the cost of her own ...