Worden v. Worden

[Cite as Worden v. Worden, 2017-Ohio-8019.]

IN THE COURT OF APPEALS OF OHIO
THIRD APPELLATE DISTRICT
MARION COUNTY

STEPHANIE N. WORDEN,
CASE NO. 9-16-54
PLAINTIFF-APPELLEE,

v.

CHAD M. WORDEN, OPINION

DEFENDANT-APPELLANT.

Appeal from Marion County Common Pleas Court
Family Division
Trial Court No. 16-DR-73

Judgment Affirmed in Part, Reversed in Part
and Cause Remanded

Date of Decision: October 2, 2017

APPEARANCES:

Jeff Ratliff for Appellant

Robert C. Nemo for Appellee
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WILLAMOWSKI, J.

{¶1} Defendant-appellant Chad M. Worden (“Chad”) appeals the judgment

of the Family Division of the Marion County Court of Common Pleas for (1)

classifying the house at issue in this appeal as the separate property of Stephanie N.

Worden (“Stephanie”) (2) failing to award him any share in the appreciation in the

value of the house, and (3) failing to give him any share in the equity in the home.

For the reasons set forth below, the judgment of the lower court is reversed in part

and affirmed in part.

Facts and Procedural History

{¶2} Prior to her marriage to Chad, Stephanie lived in a house in Caledonia,

Ohio that was owned by her mother, Jonelle Matthews (“Matthews”). Tr. 134. This

home had been owned by Matthews for roughly thirty years and was the home in

which Stephanie spent part of her childhood. Tr. 9, 70, 95. Chad moved in with

Stephanie in December of 2009, which was three years after Stephanie had moved

back into this home. Tr. 126, 131. In August 2011, Matthews began the process of

transferring ownership of this house to her daughter. Tr. 72, 94. On September 1,

2011, the house was valued by an appraiser at $140,000. Ex. 2. Tr. 15. Matthews

owed $5,858.36 on the mortgage at this time. Tr. 39.

{¶3} Viewing this as an early inheritance for her daughter, Matthews only

asked her daughter to pay $10,000 for the house because that amount would cover

the costs of the transfer and pay off the remainder of what Matthews owed on the

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house. Tr. 76, 84, 133. To finance this purchase, Stephanie went to AG Credit on

August 26, 2011, and submitted a membership application to begin the process of

obtaining a loan. Tr. 54. As part of this process, Matthews and Stephanie drew up

an agreement on September 29, 2011 that detailed the terms of this transfer. Ex. 18.

Tr. 75. Both Matthews and Stephanie signed this agreement. Ex. 18. Stephanie

was mentioned in the document as the buyer of the property. Id. No mention of

Chad was made in this document. Id.

{¶4} Before the transfer of the house was finalized, Chad and Stephanie were

married on October 8, 2011 in Las Vegas. Doc. 1. The transfer of the house was

not completed until January of 2012. Tr. 43, 72, 94. On January 13, 2012, Stephanie

signed a promissory note and mortgage agreement with AG Credit. Ex. 5. Tr. 45.

Only Stephanie signed the promissory note. Ex. 20. Both Chad and Stephanie

signed the mortgage. Id. The deed, which was recorded on January 17, 2012, lists

Stephanie as the owner and does not contain any reference to Chad. Ex. 1, 6. Tr.

61-62. After the deed was recorded, Chad and Stephanie decided to build an

addition to the house. To pay for this addition, Stephanie went to AG Credit and

borrowed an additional $112,200. Ex. 4. Tr. 16, 98. Only Stephanie’s signature

was on the promissory note. Ex. 20. Tr. 35-36. On July 11, 2012, both Chad and

Stephanie signed a mortgage modification agreement that secured this loan. Ex. 4.

Tr. 49. This mortgage modification was recorded on July 19, 2012. Ex. 4.

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{¶5} During their marriage, Chad and Stephanie maintained separate bank

accounts. Tr. 103, 108. In between January 2012 and November 2015, Chad paid

the amount due on the mortgage each month. Tr. 118-119. Stephanie was

responsible for other expenses associated with the house, such as the water bill and

the trash bill. Tr. 20. On November 17, 2015, Chad moved out of the house,

beginning the period of separation between Chad and Stephanie. Tr. 21. At this

time, Chad ceased paying any of the costs associated with the house. Tr. 21. On

March 16, 2016, Stephanie filed a complaint for divorce at the Family Division of

the Marion County Court of Common Pleas. Doc. 1.

{¶6} On August 31, 2016, a divorce hearing was held. Much of the testimony

addressed the issue of whether the house was marital or separate property. Tr. 22,

54, 64-66, 76, 125. Prior to this hearing, on May 20, 2016, Stephanie hired an

appraiser to place a value on the house. Ex. 2. When the home was transferred in

January of 2012, the home was valued at $140,000, placing the value of the equity

that Stephanie had in the home at $130,000. Ex. 23. At the time of the divorce in

2016, which was after the addition to the house was completed at a cost of roughly

$112,200, the house was valued at $170,000, leaving Stephanie with roughly

$64,302 in equity. Id. This represented a decrease in equity of $65,698. Id.

{¶7} At the hearing, Chad disputed that the house was a gift from Matthews

to Stephanie. Tr. 18. During his testimony, he also denied that the house was

transferred only to Stephanie but admitted that only Stephanie’s name was on the

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deed. Tr. 9-10. Chad pointed out that the house was transferred three months into

their marriage and testified that the house was transferred solely to Stephanie in the

deed without his knowledge. Tr. 10. Chad also admitted that he was not financially

liable for the sums borrowed from AG Credit but stated that the loan was in

Stephanie’s name alone because she had better credit than he did at the time of the

transaction. Tr. 12. Chad concluded by requesting that the court award him a share

of the equity in the home. Tr. 18.

{¶8} Stephanie then testified that she had been divorced prior to her marriage

to Chad and, as a consequence of her previous marriage, kept her finances separately

from Chad. Tr. 103. Stephanie stated that Chad was not listed on the promissory

note or the deed because she did not want him to have an interest in the house and

because Chad had poor credit. Tr. 99. She requested that the court award her the

equity in the home as separate property. Tr. 102, 125. Matthews also testified. Tr.

70. She said that she gifted the house to Stephanie, intending it to be an early

inheritance for her. Tr. 76. She also stated that she did not intend to give any interest

in the property to Chad as part of the transfer. Tr. 82.

{¶9} Karen Frederick (“Frederick”), a loan originator with AG Credit,

testified that Stephanie began the process of becoming a member of AG Credit on

August 26, 2011, which was a necessary step towards obtaining a mortgage loan

through that institution. Tr. 54. She explained that Stephanie was the sole borrower

on the promissory notes issued by AG Credit and that Chad was in no way liable to

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AG Credit for any of the debts assumed by Stephanie. Tr. 54. Frederick further

explained that Chad was referred to as a joint mortgagor on the mortgage agreement

for the purpose of releasing his dower interest as Stephanie’s spouse. Tr. 35.

{¶10} Kevin Hall (“Hall”), an attorney in Marion, also testified what

information could be gleaned from the deed and promissory notes. Tr. 59. Hall

stated that Stephanie is the sole owner on the deed and that the deed does not contain

any reference to Chad as an owner. Tr. 61-62. Hall also testified that Stephanie is

the only person liable on the promissory notes, explaining that Chad’s signature on

the mortgage note released his dower interest and did not create liability for him on

the promissory note. Tr. 64-66.

{¶11} On September 30, 2016, the trial court issued a ruling that found the

house was the separate property of Stephanie. Doc. 16. In the October 19, 2016

judgment entry, the trial court explained that it awarded the house to Stephanie as

separate property because it found that the house was gifted to Stephanie by her

mother. Doc. 17. Under this order, Chad was not awarded any share of the equity

in the house or any share in the appreciation in the value of the house. Id. Further,

Stephanie was responsible for all of the debts associated with this property. Id.

Chad filed a notice of appeal on November 18, 2016. Doc. 18. On appeal, he raises

the following four assignments of error:

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First Assignment of Error

The trial court erred by ruling that the real estate located at 338
Caledonia-Ashley Road South, Caledonia, Ohio 43314 was a gift
from Appellee’s mother as consideration was given to the
Appellee’s mother for the property.

Second Assignment of Error

The trial court erred in ruling that the real property owned by the
parties during the marriage was separate in nature, as it was
acquired after the date of marriage and was not a gift.

Third Assignment of Error

Even if the Court was correct in classifying this property as a gift
and separate property, the real estate was converted to marital
property status due to improvements and payments made during
the marriage, and the Appellant should have been awarded one-
half (1/2) of any appreciation of improvements as the
improvements would be marital in nature.

Fourth Assignment of Error

The trial court erred by not awarding the Appellant one-half (1/2)
of the equity in the home, as the home was marital in nature and
the Appellant contributed to the mortgage payments and
property taxes during the term of the marriage.

We will consider the first and second assignments of error together. We will then

consider the third and fourth assignments of error.

First and Second Assignments of Error

{¶12} In his first assignment of error, Chad argues that the transfer of the

house from Matthews to Stephanie was not a gift but was a purchase. To support

this claim, he points to the payment of $10,000 to Matthews as consideration for the

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house. Chad contends that Matthews’s testimony regarding her intent to gift the

house to Stephanie does not change the fact that this house was purchased for

$10,000. On the basis of this argument, Chad asserts that the trial court erred in

classifying the house as separate property. He requests that this Court reverse this

determination and find that the house is marital property.

{¶13} Under his second assignment of error, Chad continues the argument

advanced by his first assignment of error. He contends that the house was not

separate property because the real estate was transferred after the date of his

marriage to Stephanie. Since the house was acquired after the date of the marriage,

Chad argues that the property qualifies as marital property. As part of this argument,

he returns to the primary assertion of his first assignment of error: that the house

was not a gift because Matthews’s testimony regarding her subjective intent to gift

the house does not change the fact that consideration was paid for the house. He

concludes this assignment of error by again asking this Court to find that the house

was marital property and not separate property.

Legal Standard

{¶14} In dividing property between the parties to a divorce action, the trial

court identifies what property is marital and what property is separate. R.C.

3105.171(B). Marital property does not include any separate property. R.C.

3105.171(A)(4). After the trial court has classified assets as either marital or

separate property, the separate property is generally awarded to the party who owns

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that property regardless of whether the separate property was acquired before or

during the marriage. R.C. 3105.171(D). The marital property is then to be divided

equally between the parties unless such a division would be inequitable. R.C.

3105.171(C)(1).

{¶15} Separate property includes “[a]ny gift of any real or personal property

or of an interest in real or personal property that is made after the date of the

marriage and that is proven by clear and convincing evidence to have been given to

only one spouse.” R.C. 3105.171(A)(6)(a)(vii). “The party claiming an inter vivos

gift bears the burden of showing by clear and convincing evidence that such a gift

was made.” Brandon v. Brandon, 3d Dist. Mercer No. 10-08-13, 2009-Ohio-3818,

¶ 25.

The essential elements of an inter vivos gift are (1) an intention on
the part of the donor to transfer the title and right of possession
to the donee, (2) delivery by the donor to the donee, (3)
relinquishment of ownership, dominion, and control over the gift
by the donor, and (4) acceptance by the donee. Therefore, a gift
is a voluntary transfer by the donor to the donee without any
consideration or compensation.

(Citations Omitted.) Williams v. Ormsby, 131 Ohio St.3d 427, 2012-Ohio-690, 966

N.E.2d 255, ¶ 20, citing Bolles v. Toledo Trust Co., 132 Ohio St. 21, 26-27, 4 N.E.2d

917, 919 (1936).

{¶16} “[T]he holding of title to property by one spouse individually or by

both spouses in a form of co-ownership does not determine whether the property is

marital property or separate property.” R.C. 3105.171(H). “However, ‘title can be

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some evidence of the parties’ intent as to the nature of the asset being marital or

separate.’” Strasburg v. Strasburg, 3d Dist. Auglaize No. 2-10-12, 2010-Ohio-

3672, ¶ 20, quoting Gallo v. Gallo, 11th Dist. No.2000-L-208, 2002-Ohio-2815, ¶

25. “The commingling of separate property with other property of any type does

not destroy the identity of the separate property as separate property, except when

the separate property is not traceable.” R.C. 3105.171(A)(6)(b).

{¶17} The trial court’s classification of property as marital or separate is a

factual determination. Rinehart v. Rinehart, 4th Dist. Gallia No. 96 CA 10, 1998

WL 282622, (May 18, 1998). Appellate courts “[review] the trial court’s

classification of property as marital or separate property under a manifest weight of

the evidence standard.” Neville v. Neville, 3d Dist. Marion No. 9-08-37, 2009-Ohio-

3817, ¶ 9. Thomas v. Thomas, 2012-Ohio-2893, 974 N.E.2d 679, ¶ 31 (5th Dist.);

Miller v. Miller, 7th Dist. Jefferson No. 08 JE 26, 2009-Ohio-3330, ¶ 20; Dunham

v. Dunham, 171 Ohio App.3d 147, 2007-Ohio-1167, 870 N.E.3d 168, ¶ 26-27 (10th

Dist.). “An appellate court will not reweigh the evidence introduced at trial; rather,

we will uphold the findings of the trial court if the record contains some competent,

credible evidence to support the trial court's conclusions.” Eggeman v. Eggeman,

3d Dist. Auglaize No. 2-04-06, 2004-Ohio-6050, ¶ 27.

In determining whether competent, credible evidence exists, ‘[a]
reviewing court should be guided by a presumption that the
findings of a trial court are correct, since the trial judge is best
able to view the witnesses and observe their demeanor, gestures,

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and voice inflections, and use those observations in weighing the
credibility of the testimony.’

Bey v. Bey, 3d Dist. Mercer No. 10-08-12, 2009-Ohio-300, ¶ 15, quoting Barkley v.

Barkley, 119 Ohio App.3d 155, 159, 694 N.E.2d 989, 992 (4th Dist.1997).

Legal Analysis

{¶18} In this case, ample evidence was introduced to demonstrate that

Matthews gifted the house to her daughter, Stephanie. The house at issue had been

in the family for thirty years and was the house in which Stephanie was raised.

Stephanie had also lived in this house for the five years immediately preceding her

marriage. Further, the process of transferring the house to Stephanie appears to have

begun in August of 2011 according to the records at AG Credit. Tr. 54. Stephanie

and Matthews drew up a buyer’s agreement on September 29, 2011, which

discussed the details of the transfer. Ex. 18. This document did not mention Chad

and was signed by both parties to the transfer prior to the October 8, 2011 marriage

between Chad and Stephanie. Id. Thus, the context of this transfer strongly suggests

that this family property was gifted specifically to Stephanie as an early inheritance.

{¶19} During the hearing, Matthews testified that she intended to gift this

house solely to Stephanie as an early inheritance and that she made sure the property

was only deeded in Stephanie’s name. Tr. 76. Stephanie also testified that she

intended to retain sole ownership of the house and did not want Chad to have an

interest. Tr. 99, 103, 125. Since Stephanie and Matthews had both been through

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divorces previously, Stephanie testified that they took steps to maintain this gift as

separate property. Tr. 96-97. In support of these assertions, Stephanie pointed to

the fact that she had maintained separate finances from Chad throughout the course

of their marriage and had borrowed the money to finance the transfer and the

renovation of the house from AG Credit in her name alone. Tr. 103, 108.

{¶20} Further, two experts—Frederick and Hall—also testified that Chad

was not liable to AG Credit for the funds borrowed from that institution. Tr. 35, 64-

65. These two experts also testified that the deed transferred the property to

Stephanie and that Chad’s signature was on the mortgage paperwork for the sole

purpose of releasing his dower interest. Tr. 35, 66. Hall further testified that the

deed does not reference Chad as an owner. Tr. 62. While the fact that the deed lists

Stephanie as the sole owner does not conclusively establish that the house was

intended to be a gift only to Stephanie, this fact in the larger context of this case is

evidence that suggests this house was intended to be a gift.

{¶21} Chad argues that the fact that Stephanie paid $10,000 to her mother

for the transfer means consideration was given for the house, making this a

contractual arrangement and not a gift. However, the house was worth $140,000.

Ex. 2. Matthews testified that she requested that Stephanie pay $10,000 to her

because this would cover the costs of the transfer and the remaining balance on the

mortgage, which was $5,858.36. Tr. 73, 84. Ex. 4. Matthews also stated that she

was never offered fair market value from either Chad or Stephanie and reported this

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transfer on her taxes as a gift. Tr. 76-77. Again, the context of this situation and

the facts surrounding this transfer strongly suggest that Matthews gifted the house

to Stephanie. Chad also argues that the final transfer of the house occurred after the

marriage, making this a marital asset. However, the Revised Code recognizes that

gifts to one spouse are separate property even if the transfer occurs during the course

of the marriage. R.C. 3105.171(A)(6)(a)(vii). Thus, in this case, the timing of the

transfer does not preclude the house from being a gift or from being separate

property.

{¶22} After reviewing the record, we find that the trial court had some

competent, credible evidence that supported its conclusion that the house was a gift

from Matthews to Stephanie. Thus, the decision of the trial court to classify the

house as Stephanie’s separate property was not made against the manifest weight of

the evidence. For these reasons, appellant’s first and second assignments of error

are overruled.

Third Assignment of Error

{¶23} In his third assignment of error, Chad puts forward an argument to be

considered in the event that this Court found that the trial court correctly determined

that the house was separate property. In this event, Chad argues that the trial court

erred by failing to give him one half of the appreciation that resulted from

improvements made to the house during the course of the marriage. Since the house

was valued at $140,000 at the time of the transfer in 2012 and was valued at

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$170,000 at the time of the divorce, Chad contends that he should be awarded one

half of the $30,000 increase in value that occurred over the course of the marriage.

Legal Standard

{¶24} Under R.C. 3105.171(A)(3)(a)(iii), marital property includes “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)(a)(iii). An increase in value resulting from the contributions

of either spouse is referred to as active appreciation. Iacampo v. Oliver-Iacampo,

11th Dist. Geauga No. 2011-G-3026, 2012-Ohio-1790, ¶ 19. “Appreciation of

separate property due solely to market forces, such as location and inflation, is

passive appreciation * * *.” Colley v. Colley, 10th Dist. Franklin No. 09AP-333,

09AP-335, and 09AP-336, 2009-Ohio-6776, ¶ 19, citing Sterbenz v. Sterbenz, 9th

Dist. Summit No. 21865, 2004-Ohio-4577, ¶ 5. “Passive appreciation value remains

separate property.” Neville, supra, at ¶ 22. An increase in value due to active

appreciation, on the other hand, is marital property. Middendorf v. Middendorf, 82

Ohio St.3d 397, 401, 696 N.E.2d 575, 578 (1998).

{¶25} However, appreciation does not necessarily need to be divided into

two equal shares that are then awarded to each party. Brandon, supra, at ¶ 21; Wurm

v. Wurm, 6th Dist. Huron No. H-15-018, 2017-Ohio-861, ¶ 18; Munroe v. Munroe,

119 Ohio App.3d 530, 695 N.E.2d 1115 (8th Dist.1997); Sterbenz at ¶ 6. R.C.

3105.171(C)(1) reads, in its relevant part, as follows:

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[T]he division of marital property shall be equal. If an equal
division of marital property would be inequitable, the court shall
not divide the marital property equally but instead shall divide it
between the spouses in the manner the court determines
equitable. In making a division of marital property, the court
shall consider all relevant factors * * *.

R.C. 3105.171(C)(1). Thus, under the Revised Code, the ultimate duty of the trial

court in a divorce proceeding is not to create a perfectly equal distribution of assets

but an equitable distribution of assets. Kaechele v. Kaechele, 35 Ohio St.3d 93, 95,

518 N.E.2d 1197, 1200 (1988) (holding that “[a]n unequal property division does

not, standing alone, amount to an abuse of discretion” and that “[e]quitable need not

mean equal.”).

{¶26} “Trial courts have ‘broad discretion to determine what property

division is equitable in a divorce proceeding.’” Collins v. Collins, 3d Dist. Marion

No. 9-10-53, 2011-Ohio-2339, ¶ 28, quoting Cherry v. Cherry, 66 Ohio St.2d 348,

421 N.E.2d 1293 (1981), paragraph two of the syllabus. “A trial court's decision

allocating marital property and debt will not be reversed absent an abuse of

discretion.” Huelskamp v. Huelskamp, 185 Ohio App.3d 611, 2009-Ohio-6864, 925

N.E.2d 167, ¶ 12 (3d Dist.), citing Jackson v. Jackson, 3d Dist. No. 11-07-11, 2008-

Ohio-1482, ¶ 15. “An abuse of discretion is more than an error of judgment; rather,

it implies that the trial court's decision was unreasonable, arbitrary, or capricious.”

Schroeder v. Niese, 2016-Ohio-8397, 78 N.E.3d 339, ¶ 7, quoting Heilman v.

Heilman, 3d Dist. Hardin No. 6-12-08, 2012-Ohio-5133, ¶ 14. “When applying the

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abuse of discretion standard of review, this court is not free merely to substitute its

judgment for that of the trial court.” Kreitzer v. Anderson, 157 Ohio App.3d 434,

2004-Ohio-3024, 811 N.E.2d 607, ¶ 16 (3d Dist.).

Legal Analysis

{¶27} In this case, Stephanie obtained the house when it was valued at

$140,000. In 2012, Stephanie borrowed $112,200 to build an addition to the home.

By the time of the divorce, the house was valued $170,000. Thus, Stephanie’s

investment appears to have increased the value of the home by $30,000. Chad

argues that he should be awarded half of this sum because this amount represents

active appreciation. However, in these circumstances, we find that the trial court

did not abuse its discretion in deciding not to award half the value of this

appreciation to Chad for three key reasons.

{¶28} First, the house is under a greater encumbrance now than it was at the

time the house was gifted to Stephanie. While the appraised value of the house has

increased, the equity Stephanie had in the house has decreased dramatically. At the

time the house was transferred from Matthews to Stephanie, the house was worth

$140,000. Ex. 2, 23. Stephanie had to borrow $10,000 to finance the transfer, which

means that Stephanie had $130,000 in equity at that time. Ex. 23. During the course

of the marriage, she borrowed $112,200 to finance the construction of an addition

to the house. Ex. 4. The balance on the mortgage at the time of the divorce was

$105,698.34, which left Stephanie with $64,301.66 in equity. Ex. 4, 23. Thus,

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Stephanie invested $112,200 to make an addition to the house that resulted in a

$30,000 increase in value. In this process, she lost roughly $65,698 in equity,

leaving her with less than half of the equity that she had at the beginning of the

marriage. Ex. 23. While the appraisal shows an increase in value, the mortgage

documents show a loss in value. See Brandon, supra, at ¶ 21; Sterbenz at ¶ 6; Hood

v. Hood, 10th Dist. Franklin No. 10AP-999, 2011-Ohio-3704, ¶ 22. Under Chad’s

proposed division, he would get one half of the $30,000 appreciation in the house’s

value. This would cause Stephanie to lose an additional $15,000, bringing her total

loss on this investment to roughly $80,698 in equity. It would be inequitable for

Chad to gain $15,000 from Stephanie’s loss.

{¶29} Second, this was a separate investment undertaken by Stephanie with

separate funds. Stephanie essentially spent the equity in her house on this addition.

The funds she borrowed can easily be traced to the equity that her mother gifted to

her, which was separate property. Ex. 4. Thus, Stephanie used the value of her

separate property to make improvements on her separate property. Other than

paying monthly mortgage payments, Chad does not mention in the record that he

made contributions that resulted in the increase in the appraised value of the house.1

Marital money did not finance the investment that Stephanie made in the house and

1
Chad’s monthly mortgage payments did not generate the appreciation in the house as the house was under
a greater encumbrance at the time of the divorce than it was at the time of the gift. Rather, these payments
made Stephanie’s loss on the investment smaller, increasing the equity in the house. Since this is the subject
of the fourth assignment of error, we will address Chad’s monthly mortgage payments under that assignment
of error. See Brandon, supra, at ¶ 21.

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was not lost in this investment. While this fact is not dispositive, it should be

considered in examining the equity of the trial court’s award in this particular case.

Since it was her separate equity that financed the appreciation in the appraised value

of her separate property, we find that it is equitable that the value of the appreciation

remains with Stephanie in these circumstances.

{¶30} Finally, Stephanie is willing to assume the entire mortgage debt on the

house. She is not seeking to impose liability on Chad for a debt that he did not incur.

She is willing to shoulder the losses associated with her investment in her separate

property. In so doing, Stephanie is taking responsibility for roughly $105,698.34 in

costs for $30,000 in benefits. Ex. 4. Chad is seeking $15,000 in benefits without

shouldering any of these costs. Under the facts of this specific case, it is equitable

for the appreciation in the appraised value of the house to remain with the party who

is financially responsible for the mortgage debt that is supporting that appreciation.

It would be inequitable for Chad to obtain one half of the appreciation without

bearing the burden of any of the corresponding mortgage debt. Thus, we do not find

an abuse of discretion on the part of the trial court regarding this issue. For these

reasons, Chad’s third assignment of error is overruled.

Fourth Assignment of Error

{¶31} In his fourth assignment of error, Chad advances another argument to

be considered in the event that this Court found that the trial court correctly

determined that the house was separate property. In this argument, Chad argues that

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the trial court erred in failing to award him a portion of the equity in the house. He

contends that the mortgage on the house was reduced by his monthly mortgage

payments, which were made with his income. For this reason, Chad argues that he

should have been awarded one half of the marital equity that was built up during the

course of the marriage through mortgage payments made with marital monies.

Legal Standard

{¶32} “The commingling of separate property with other property of any

type does not destroy the identity of the separate property as separate property,

except when the separate property is not traceable.” R.C. 3105.171(A)(6)(b).

“[I]ncome or monies earned during the marriage are marital property.” Celeschi v.

Celeschi, 5th Dist. Coshocton No. 10-CA-6, 2011-Ohio-375, ¶ 21. See Hood, supra,

at ¶ 24. Even if a house is the separate property of one spouse, a portion of the

equity in the home may still be marital. See Huelskamp, supra, at ¶ 14. See

Davenport v. Davenport, 7th Dist. Belmont No. 02 BE 47, 2003-Ohio-4877, ¶ 7;

Oberly v. Oberly, 2d Dist. Greene No. 06-CA-90, 2007-Ohio-4571, ¶ 17; Meeks v.

Meeks, 10th Dist. Franklin No. 5AP-315, 2006-Ohio-642.

{¶33} In the course of divorce proceedings, the trial court must determine

whether property is marital or separate. R.C. 3105.171(B). “[T]he characterization

of property as marital or separate under R.C. 3105.171 is not discretionary; rather,

it is a mixed question of law and fact.” Herron v. Herron, 3d Dist. Allen No. 1-04-

23, 2004-Ohio-5765, ¶ 14, citing Bechara v. Essad, 7th Dist. No. 03 MA 34, 2004-

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Ohio-3042, ¶ 82. The trial court’s classification of property is reviewed under a

manifest weight standard. For this reason,

[t]he factual findings of a trial court relating to its classification
of property as marital or separate are reviewed to determine
whether they are against the manifest weight of the evidence and
will not be reversed if they are supported by some competent and
credible evidence. In determining whether competent, credible
evidence exists, ‘[a] reviewing court should be guided by a
presumption that the findings of a trial court are correct, since
the trial judge is best able to view the witnesses and observe their
demeanor, gestures, and voice inflections, and use those
observations in weighing the credibility of the testimony.’

(Citations omitted.) Barrientos v. Barrientos, 3d Dist. Hancock No. 5-12-13, 2013-

Ohio-424, ¶ 20.

{¶34} After the trial court has properly classified property, the trial court

divides the marital property equitably between the two parties. R.C. 3105.171(B).

Under R.C. 3105.171, “the division of marital property should be equal unless an

equal division would not be equitable, in which case the court shall divide the

property in a manner that it determines to be equitable.” Welsh-Pojman v. Pojman,

3d Dist. Crawford No. 3-03-12, 2003-Ohio-6708, ¶ 21, citing R.C. 3105.171(C)(1).

“Trial courts are vested with broad discretion when fashioning equitable divisions

of marital property.” Link v. Link, 3d Dist. Mercer No. 10-11-21, 2012-Ohio-4654,

¶ 58, citing Hendricks v. Hendricks, 3d Dist. Van Wert No. 15-08-08, 2008-Ohio-

6754, ¶ 25. As such, a trial court’s decision in the division of property is reviewed

under an abuse of discretion standard. Id. “An abuse of discretion is more than an

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error of judgment; rather, it implies that the trial court's decision was unreasonable,

arbitrary, or capricious.” Niese, supra, at ¶ 7, quoting Heilman, supra, at ¶ 14.

“When applying the abuse of discretion standard of review, this court is not free

merely to substitute its judgment for that of the trial court.” Kreitzer, supra, at ¶ 16.

Legal Analysis

{¶35} In this case, Matthews gifted Stephanie a house with $130,000 in

equity. See Ex. 4, 19. Stephanie used the equity in the house to borrow $112,200

to build an addition to the house. Ex. 20. The addition, in turn, added $30,000 in

value to the house, bringing the value of the home from $140,000 to $170,000. Ex.

2. Thus, this loan had the effect of bringing the equity in the home down from

$130,000 at the time of the transfer to roughly $57,800 by the time that the addition

was completed.2 By the time Stephanie and Chad filed for divorce, the equity in the

home had risen to $64,301.66, which represents an increase in equity of $6,501.66.

Ex. 4.

{¶36} During the course of their marriage, Chad and Stephanie maintained

separate finances and each took responsibility for different expenses. Both

Stephanie and Chad testified that Chad made the monthly mortgage payments on

the house. These payments were made with funds that Chad earned while he was

2
The equity in the home went from $130,000 to $27,800 after Stephanie took out the loan of $112,200. Ex.
2, 5, 6, 23. Once the addition was completed, the value of the home increased by $30,000, bringing the equity
in the home to $57,800. Ex. 2, 23. Thus, this number—$57,800 in equity—accounts for the appreciation in
the house’s value from $140,000 to $170,000 as the result of the addition financed by the $112,200 loan. Ex.
2, 4, 5, 23.

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working during the marriage and were, thus, made with marital monies. The fact

that marital monies were used to pay down the balance on the mortgage does not

change the status of the house as separate property. Similarly, the fact that a portion

of the equity is traceable to marital monies does not change the equity that was gifted

to Stephanie from separate to marital property. The $57,800 in equity that existed

after the addition was built on the house is Stephanie’s separate property as this

ownership interest in the house is easily traceable to the gift that Stephanie received

from Matthews. As this is Stephanie’s separate property, Chad is not entitled to one

half of the $57,800 that remained from Matthews’s gift to Stephanie.

{¶37} However, since Chad used marital funds to pay down the mortgage

balance on the house, the $6,501.66 increase in equity that accrued in between July

of 2012—which is the month in which Stephanie obtained the $112,200 loan—and

the time of the divorce is marital property. Ex. 20. As this is marital property, Chad

should have been awarded one half of this amount, which is $3,250.83. In failing

to classify this portion of the equity as marital property, the trial court made a ruling

that was against the manifest weight of the evidence as both sides admitted that it

was marital monies that accounted for this increase. In turn, the failure to divide

this sum equally between the parties to this action constitutes an abuse of discretion.

For these reasons, Chad’s fourth assignment of error is sustained.

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Conclusion

{¶38} Having found no error prejudicial to the appellant in the particulars

assigned and argued in the first, second, and third assignments of error, the judgment

of the Family Division of the Court of Common Pleas of Marion County is affirmed

as to these issues. Having found error prejudicial to the appellant in the particulars

assigned and argued in the fourth assignment of error, the judgment of the Family

Division of the Court of Common Pleas of Marion County is reversed in part and

affirmed in part.

Judgment Affirmed in Part
Reversed in Part
And Cause Remanded
ZIMMERMAN and SHAW, J.J., concur.

/hls

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