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Palnik v. Crane

Court of Appeals of Ohio, Eighth District, Cuyahoga

August 22, 2019

MATTHEW PALNIK, Plaintiff-Appellant,
KRISTEN CRANE, Defendant-Appellee.

          Civil Appeal from the Cuyahoga County Court of Common Pleas Domestic Relations Division Case No. DR-15-357079


          Lipson O'Shea Legal Group, and Michael J. O'Shea, for appellant.

          Stafford Law Co., L.P.A., Joseph G. Stafford, and Nichole A. Cruz, for appellee.



         (¶1} Plaintiff-appellant, Matthew Palnik ("Husband"), appeals the decision of the Cuyahoga County Court of Common Pleas, Division of Domestic Relations, finding him in civil contempt of a temporary support order. He raises the following assignments of error for review:

1. The temporary support order was not based upon Ohio law and violated federal law.
2. The trial court's failure to hold a modification hearing in the time required by Ohio Civ.R. 75(N) violated Ohio law.
3. Ohio law permits the modification of a temporary support order at anytime.
4. There was no proof that the show cause motions were served according to Ohio Civ.R. 4.1, et seq.
5. Defendant's contempt motions and the evidence introduced at the hearing, did not comply with Loc.R. 20 of the Cuyahoga County Domestic Relations Court.
6. Husband clearly demonstrated an inability to completely comply with the temporary support order.
7. The trial court placed impossible and/or unconscionable terms on Husband to purge the contempt.

         {¶ 2} After careful review of the record and relevant case law, we affirm in part, reverse in part, and remand for proceedings consistent with this opinion.

         I. Procedural History

         {¶3} Husband and defendant-appellee, Kristen Crane ("Wife"), were married on November 25, 2006. They have two minor children together. In May 2015, Husband filed a complaint for divorce and a motion for temporary support, with an accompanying affidavit. In response, Wife filed an answer brief and a counter motion for temporary support, with an accompanying affidavit.

         {¶ 4} The trial court held hearings on July 1, 2015, October 2, 2015, and October 29, 2015, to address the issue of temporary support. The matter was scheduled to resume on April 6, 2016, to provide Husband the opportunity to re-cross-examine Wife "on the issues associated with the temporary support and temporary parenting plan." However, on March 28, 2016, Husband filed a motion waiving his right to present further evidence on the issue of temporary support. The motion further requested the trial court to issue the "long-overdue temporary support and temporary parenting orders."

         {¶ 5} On April 25, 2016, the trial court issued a temporary support order. In relevant part, the trial court found that "[Husband] is a self-employed attorney and for the purposes of temporary support [Husband]'s gross annual income from all sources is $360, 000 and [Wife] is a W-2 employee and her annual gross income is $80, 000." Upon consideration of the factors set forth under R.C. 3105.18(C)(1), including "the disparity in income" and the "need to maintain status quo," the court ordered Husband to "pay spousal support to [Wife] in the sum of $9, 000 per month, plus 2% processing." In addition, the trial court ordered Husband to pay child support in the amount of $2, 222 per month. Finally, the court ordered Husband to pay Wife certain expenses, including (1) household expenses for cable television, telephone service, and internet service; (2) Wife's lease payments for her vehicle; (3) work-related childcare for the children; (4) Wife's auto-insurance payments; and (5) health insurance coverage.

         {¶ 6} On April 28, 2016, just three days after the temporary support order was issued, Husband filed a motion to modify the temporary support order. In the motion, Husband argued the trial court's judgment was not based upon his current income and expenses for the year 2016. In an attached affidavit, Husband estimated that his 2016 income would be approximately $100, 000 lower than the amount relied on by the trial court. Thus, Husband alleged, "given [his] current income and expenses," that he "[did] not have the income to comply with the Divorce Case April 25, 2016 temporary support order and also support myself."

         {¶ 7} In October 2017, the trial court held a two-day hearing to address Husband's motion to modify the temporary support order. Ultimately, the trial court "dismissed" the motion to modify temporary support, finding that Husband (1) failed to authenticate the 2016 tax returns referenced in support of his modification request; and (2) failed to demonstrate a change of circumstances. Following the trial court's judgment, Husband filed a second motion to modify the temporary support order on November 1, 2017.

         {¶ 8} During the pendency of the litigation, Wife filed separate motions to show cause on June 27, 2016, September 16, 2016, February 2, 2017, and May 1, 2018. In each motion, Wife alleged that Husband had failed to abide by the terms of the April 25, 2016 temporary support order. Hearings were held to address Wife's pending motions to show cause on May 7, 2018, and May 11, 2018.

         {¶ 9} At the hearing, defense counsel called Husband as a witness as if on cross-examination. At the onset of his testimony, Husband was presented with copies of the four motions to show cause. At that time, plaintiffs counsel objected to the reference to the show-cause motion filed on May 1, 2018. Counsel maintained that the motion was not properly before the court because it had not been served in compliance with the Ohio Rules of Civil Procedure. Following a brief discussion on the record, the trial court overruled the objection and permitted defense counsel to question Husband about the specific allegations set forth in the May 1, 2018 show-cause motion.

         {¶ 10} Regarding the arguments set forth by Wife in each motion to show cause, Husband testified that he was aware of the temporary spousal support order and its mandates. He agreed with defense counsel that he knowingly failed to comply with the specific requirements of the court order. Husband was presented with records from the Cuyahoga County Child Support Enforcement Agency ("CSEA"), which reflected that he owed arrearages in the amount of $159, 960.80. Husband did not dispute the record or the amount reflected as due and owing.

         {¶ 11} Wife provided testimony in support of her show-cause motions. When presented with copies of her motions to show cause, Wife stated that Husband continuously failed to comply with the court's order to pay certain "extracurricular/medical" expenses and various household expenses, including telephone, internet, and cable bills, child-care expenses, and monthly lease payments for Wife's personal vehicle. In addition, Wife testified that Husband failed to make all required child support and spousal support payments. She conceded that Husband had been paying "approximately $3, 000 a month." However, she emphasized that he still owes an unpaid balance of support in the amount of $159, 960.80. Wife opined that Husband "has the ability to pay the court order," and that a finding of contempt for Husband's noncompliance was appropriate because Husband would never comply with the court order "unless there's a penalty."

         {¶ 12} In the midst of the cross-examination of Wife, counsel for Husband attempted to challenge the merits of the underlying temporary support order. Reiterating many of the arguments previously raised in the dismissed motion to modify, counsel argued that the temporary support order is "fundamentally inequitable in violation to a certain degree of federal law." Counsel asserted that Husband was "essentially [made] to pay close to 130, 140, 000 dollars a year" when "the evidence will show he made just around 200, 000 [dollars] in 2016." Counsel further argued that the insufficiency of the temporary support order was relevant to the contempt proceedings and his current ability to comply with the order, stating:

Now why this is all important, Judge, for the purposes you have what we're here for today because Ms. Wife and/or her lawyer seek to have this man incarcerated, Judge, found in contempt because he cannot meet an order that the math will clearly show you, and had in fact, shown you he cannot meet, that essentially consumes more than 50 percent of his gross pretax income.

When given the opportunity to respond, defense counsel challenged Husband's credibility, suggesting that his total earnings "could be subject to manipulation" because Husband is "a self-employed person."

         {¶ 13} Upon resuming cross-examination, Wife stated that she had no knowledge of Husband's income for the year 2016. However, she conceded that prior to the hearing on Husband's motion to modify the temporary support order, Husband's personal accountant, Frank Krempasky, sent her a draft of Husband's 2016 tax return in order to determine whether the parties wished to file their taxes jointly or individually. Wife testified that she told Krempasky that she "did not have faith in the information reported on a federal and state return and therefore needed to speak with [her] attorney." Wife further conceded that CSEA records reflect that from June 1, 2016 to May 6, 2018, Husband paid $131, 185.32 towards his temporary support obligation.

         {¶ 14} Husband then testified on his own behalf. Husband provided extensive testimony concerning his employment as an attorney and the unpredictable nature of his annual income under the payment structure utilized by his law firm. Husband explained that pursuant to his partnership agreement, when one of the partners "draws against [their] respective operating account," the other partner is entitled to 20 percent of those funds. Husband was presented with the parties' federal and state joint-tax returns for the years 2014 and 2015. For the year 2014, Husband confirmed that Wife's salary was $80, 000, and that his Schedule C income was $13, 259, and his Schedule K-1 income was $373, 112. For the year 2015, Husband confirmed that Wife's salary was $80, 000, and that his Schedule C income was $3, 512, and his Schedule K-1 income was $360, 015.

         {¶ 15} When questioned about the spike in his income during 2014 and 2015, Husband explained that he inherited approximately 400 workers' compensation cases from a retired colleague. He indicated that at the time the temporary spousal support was issued in April 2016, his annual income at that time was no longer $360, 000. In an effort to corroborate Husband's testimony, counsel introduced Husband's 2016 federal tax return. Viewing his "Two Year Comparison Report" for the years 2015 and 2016, Husband testified that while his total "partnership/S Corp. income" for the year 2015 was $360, 015, his total "partnership/S Corp. income" for the year 2016 was only $183, 177 - a reduction of income in the amount of $176, 838. Taking in consideration the increase in Husband's "business income" of $26, 013 in 2016 versus his "business income" of $3, 512 in 2015, the exhibit reflects that Husband's "total income" income was $363, 574 in 2015, and $209, 252 in 2016 - a difference of $154, 322. (Plaintiffs exhibit No. NNN-2.) Counsel also introduced Husband's 2016 state tax return, which designated Husband's adjusted gross income as being $120, 870. (Plaintiffs exhibit No. OOO.) Husband testified that the 2016 tax returns accurately reflected his income for the year 2016 and that the exhibits reflected the "actual tax return[s]" he filed for the year 2016.

         {¶ 16} At the time of the contempt hearing, Husband had yet to file his 2017 tax returns. However, counsel introduced a draft IRS Schedule K-1 for the year 2017 that reflected Husband's "self-employment earnings" in the amount of $248, 055. (Plaintiffs exhibit No. SSS.)

         {¶ 17} Husband confirmed that the CSEA records accurately represented the amount of spousal support payments he has made since the temporary spousal support order was issued. Thus, Husband agreed that he has not paid the full amount of support required by temporary support order. In an effort to explain why he has not been able to comply with the court's order, Husband testified, in relevant part:

Well, one, I don't make currently the money I made in 2014 and 2015. I haven't made that kind of money since 2016. It was a little over $200, 000-and 2017 it's going to go up, but it's probably going to be about $250, 000, somewhere around there give or take. * * * And [2018] will probably be similar in that range too, between 200 or 210 or the 250, and I don't know.

         {¶ 18} Husband asserted that due to the reduction in his annual income, he could not renew his lease agreement and was forced to move in with his parents. Husband stated that he made the decision to move in with his parents because he wanted to comply with his "ethical obligation to try and meet the order." In light of these circumstances, Husband testified that he filed the motion to modify the temporary support order and the motion to stay because he "couldn't afford to pay it all."

         {¶ 19} During his cross-examination, Husband agreed that for the year 2016, he paid a total of $44, 339.32 towards his support obligation. He further agreed that $9, 800 of the amount was paid towards his child support obligation, and $24, 539.32 was paid towards his spousal support obligation. However, when presented with plaintiffs exhibit No. NNN-2, Husband agreed that the exhibit reflected that in 2016 he claimed to have paid $54, 668 towards "alimony," an amount significantly higher than the $24, 539.32 actually paid through CSEA. In light of this information, Husband agreed with the trial court that "something is very, very wrong here." In an effort to explain this oversight, Husband suggested that plaintiffs exhibit No. NNN-2 may not have been the actual tax return he filed in 2016. Husband maintained that he did not intentionally manipulate the information set forth in his 2016 tax return, and that he assumed his tax return was drafted by his accountant to "match up with CSEA."

         {¶ 20} Regarding his draft IRS Schedule K-1 for the year 2017, as reflected in plaintiffs exhibit No. SSS, Husband admitted that the exhibit did not include his Schedule C income. Thus, Husband agreed that his total income in 2017 "will be more" than that reflected in the draft Schedule K-1 form. Husband further conceded that in April 2018, he made a payment in the amount of $50, 000 towards his estimated tax liability for the year 2017. In light of this payment, Husband agreed that he ...

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