Sullinger v. Sullinger

[Cite as Sullinger v. Sullinger, 2020-Ohio-3549.]

IN THE COURT OF APPEALS OF OHIO
SIXTH APPELLATE DISTRICT
LUCAS COUNTY

Douglas A. Sullinger Court of Appeals No. L-19-1261

Appellant Trial Court No. DR2015-0204

v.

Carol F. Sullinger and
Vendita Technology Group, Inc. DECISION AND JUDGMENT

Appellee Decided: June 30, 2020

*****

Joseph B. Clarke, for appellant.

Matthew T. Kemp, for appellee.

*****

ZMUDA, P.J.

{¶ 1} This is an appeal from the judgment of the Lucas County Court of Common

Pleas, Domestic Relations Division, which, upon remand, clarified specific matters

regarding the award of spousal support. Finding no abuse of discretion by the trial court

regarding a reasonable and appropriate award of spousal support, we affirm as to the

remaining issue on appeal.
 I. Background

{¶ 2} We address only the issue of spousal support in this appeal. We previously

addressed other aspects of the divorce decree and judgment in Sullinger v. Sullinger, 6th

Dist. Lucas No. L-18-1079, 2019-Ohio-1489, ¶ 127, appeal not allowed, 156 Ohio St.3d

1486, 2019-Ohio-3331, 129 N.E.3d 453, ¶ 127 (Sullinger I”). We outlined the facts and

history of proceedings of the parties’ dispute in the prior appeal, and for purposes of the

present matter, we limit our discussion of facts to those related to an appropriate award of

spousal support.

{¶ 3} Plaintiff-appellant Douglas Sullinger and defendant-appellee Carol Sullinger

married on October 8, 1994, and have two children together, both now emancipated.

During the marriage, Douglas and Carol formed a successful business, a technology

reseller that sells and renews licenses on Oracle products. The business was comprised

primarily of Vendita Technological Group, LLC (“VTG, LLC”) and Vendita

Technological Group, Inc. (“VTG, Inc.”). During the marriage, Carol owned 51 percent

of VTG, LLC and held the position of CEO, with Douglas owning 49 percent and

holding the position of Executive Vice President.

{¶ 4} Douglas controlled the company’s day-to-day operations. Carol did not

participate to the same extent in the business, but her majority ownership allowed VTG,

LLC to participate in supplier diversity initiatives with the Women’s Business Enterprise

National Council as a minority-owned business. VTG, LLC was the profit-generating

arm of the business, and made annual distributions to Douglas and Carol.

2.
 {¶ 5} Douglas owned and controlled VTG, Inc., as President and sole shareholder

of that entity. He used VTG, Inc. to pay the Vendita business expenses, and VTG, LLC

reimbursed VTG, Inc. for these expenses by paying it an annual management fee.

Douglas earned a salary from VTG, Inc., in addition to the annual distributions from

VTG, LLC. In dividing the marital property, the trial court adopted Douglas’s expert

valuation for the business of $1,248,000, as “more representative of the fair market

value” of the company, and rejected Carol’s much higher expert valuation. As part of the

division of marital assets, Douglas received the entire Vendita business, free and clear of

Carol’s interest.

{¶ 6} The trial court determined that Douglas engaged in financial misconduct

during the pendency of the divorce, while rejecting Douglas’s claim that Carol also

engaged in wrongdoing. The trial court found that Douglas violated court orders by

disposing of marital assets and incurring new debt, directing a change in revenue

recognition for the business in order to deprive or defeat Carol’s marital interest in the

business assets, and taking “excessive distributions totaling approximately $798,000

* * * labelled as ‘accounts receivable,’” obligating Douglas to repay $434,717 to the

business. The trial court also found that Douglas passed personal expenses through the

business, later reclassified as additional compensation or as a distribution. Because of

these findings and other instances of misconduct, the trial court exercised its equitable

authority and ordered an unequal division of marital property, awarding Carol an

additional $500,000 as part of the division of property.

3.
 {¶ 7} In considering spousal support, the trial court addressed the statutory factors

of R.C. 3105.18. The trial court specifically noted the standard of living enjoyed by the

parties during the marriage, as well as Carol’s contribution to the success of the business

and Douglas’s conduct during the proceedings to divest Carol of her proper distributions.

The trial court also noted the age and health of the parties, the disparate income after the

award of the Vendita business to Douglas, and Carol’s sacrifices in her own career in

order to take care of the child-rearing duties and assist Douglas in realizing his own

career success.

{¶ 8} As to the parties’ income, Douglas testified that his 2017 salary was

$200,000. Douglas also argued that the K-1 distributions should not count as income for

purposes of determining an appropriate award of spousal support. The trial court

disagreed, and noted Douglas received income in three categories: salary/wage earnings,

K-1 distributions, and interest payments. The trial court further noted that Douglas

controlled his salary and distributions, and manipulated this income to minimize wage

earnings and maximize distributions, which are subject to less taxation. Additionally, the

trial court noted that Douglas ran his “personal expenses through the business,” deflating

his income from distributions. The trial court determined Douglas’s average annual

distributions totaled $763,333, and his average annual interest income totaled $6,806.

{¶ 9} In contrast, post-divorce, Carol ceased receiving any distributions from the

business, and her sole earnings consisted of a salary and benefits from the University of

Toledo, where she teaches full-time in a non-tenure track position. Carol’s salary

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fluctuated, depending on the number of semesters taught, but she anticipated earnings of

$58,700 in 2017.

{¶ 10} The trial court determined an award of $14,000 per month for seven years

to be a reasonable and appropriate award of spousal support, and retained jurisdiction

over the amount of the award.1 Douglas appealed the award of spousal support, among

other assignments of error, arguing the trial court abused its discretion in considering

income from the business as “double-dipping.” Douglas also argued the trial court failed

to consider all income, including the assets awarded to Carol, in determining the amount

of support, and included expenses for the couple’s emancipated children in the

calculation. Finally, Douglas challenged the requirement for life insurance, arguing the

judgment did not explicitly terminate spousal support upon his death.

{¶ 11} We disposed of some of these issues in the initial appeal, rejecting

Douglas’s assertion that the trial court “double-dipped” by considering K-1 distributions

in determining Douglas’s future earnings. We also determined that the trial court did not

include expenses for the couple’s emancipated children in its consideration of spousal

support. The trial court’s calculation of Douglas’s salary income, however, was unclear,

with the trial court apparently adding Douglas’s 2017 salary to his three-year average

1
Douglas filed a motion for modification of spousal support on May 1, 2019, followed by
a supplemental motion on August 30, 2019. The trial court scheduled hearing in
November, after the October 11, 2019 judgment now on appeal. The trial court granted
Carol’s motion to continue hearing on Douglas’s request for modification of spousal
support, and the issue appears to remain pending in the trial court.

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salary “instead of merely using this figure to calculate his average salary based on a four-

year average.”

{¶ 12} On April 19, 2019, we affirmed in part, reversed in part, and remanded the

matter with instruction to the trial court to “either explain why it added Douglas’s 2017

salary or correct this aspect of its calculation and any effect it may have had on its

spousal-support award.” Sullinger I at ¶ 101. Additionally, the trial court had ordered

Douglas to obtain life insurance without clearly indicating its intent for the spousal

support order to survive his death. We therefore also remanded for clarification on this

issue. Sullinger I at ¶ 113.

{¶ 13} On May 20, 2019, Douglas filed a motion for findings by the court, asking

the trial court to prepare findings of fact in issuing its decision upon remand, asserting

that he “has been unable to determine how [the trial court] arrived at its income figure.”2

On October 11, 2019, the trial court issued its judgment, explaining the addition of

Douglas’s 2017 salary as follows:

In determining Carol’s request for an award of spousal support, the

Court had to determine numerous factors pursuant to R.C. 3105.18

including the respective incomes of the parties.

2
Douglas also filed a motion seeking a stay of execution of the judgment in the trial court
and this court. The parties resolved the request for a stay through a consent entry in the
trial court.

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 Douglas’s income came from three separate sources – K-1 pass-

through income, interest income and wages. No information was available

as to K-1 and interest income for the year 2017 as those amounts are only

determined at year-end. Therefore, the Court averaged those incomes for

the years 2014 through 2016.

Douglas’s wage income was treated differently, it was not averaged.

The Court had specific testimony from Douglas as to his 2017 wages. He

is the CEO and CFO of Vendita, Inc., the entity paying his wages. He

testified his 2017 wages would be $200,000. Therefore, there was no need

to average his wages.

Additionally, in determining the parties’ income, the Court

considered Carol’s testimony that her wages from the University of Toledo

for 2017 was going to be $58,700. As with Douglas’s wages, the Court did

not average her wages to determine current income based upon her

testimony.

The trial court also clarified its intent regarding its order to Douglas to maintain a life

insurance policy. The trial court stated:

It was the intention of the Court that Douglas’s spousal support

obligation continue in the event of his death. The Court reached that

decision after considering Douglas’s age and health, the duration of the

marriage, the standard of living enjoyed by the parties during the time they

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 lived together, Carol’s loss of income by awarding the Vendita Entities to

Douglas, and the other factors set forth in the Court’s Judgment Entry of

March 23, 2018. * * *.

With the trial court’s judgment, it addressed all matters on remand.

II. Assignments of Error

{¶ 14} Douglas now appeals only the determination regarding spousal support,

asserting the following assignments of error:

No. 1: The trial court abused its discretion when it incorrectly

calculated [Douglas’s] average income based on his tax returns.

a. Entire K-1 distributions cannot be considered income for the

purpose of determining spousal support.

No. 2: The trial court committed prejudicial error when it failed to

calculate [Douglas’s] W-2 income based on a four-year average.

{¶ 15} Carol responded to Douglas’s first assignment of error, arguing it

represented an attempt to reargue a settled issue. On May 28, 2020, Carol filed a motion

seeking sanctions under App.R. 23, which Douglas opposed on June 17, 2020. We shall

address the motion for sanctions with the issues on appeal.

III. Spousal Support

{¶ 16} Douglas argues the trial court abused its discretion in awarding $14,000 in

monthly spousal support to Carol. We addressed some of the issues raised by Douglas in

the prior appeal, remanding the matter back to the trial court for clarification of his

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salary/wage earnings. Accordingly, we continue our review of the spousal support

award, addressing the new assignments of error raised after the trial court’s judgment on

remand.

A. Determination of average K-1 Income

{¶ 17} In his first assignment of error, Douglas argues the trial court incorrectly

calculated his average income, and erred in considering the entire K-1 distributions as

part of its calculation. Carol challenges the claimed error as issues either never raised in

the initial appeal, or beyond the scope of issue on remand.

{¶ 18} In his first appeal, Douglas challenged the award of $14,000 in spousal

support, based on various arguments, including the determination of his annual salary

income—an issue remanded for clarification as to the inclusion of his 2017 salary. In the

present appeal, Douglas asserts assignments of error related to the determination of his

income, specifically challenging the trial court’s treatment of his K-1 earnings in

determining the award of spousal support. Carol argues the law of the case precludes

our review of issues beyond the issue of Douglas’s salary determination.

{¶ 19} The law of the case doctrine provides that a “decision of a reviewing court

in a case remains the law of that case on the legal questions involved for all subsequent

proceedings in the case at both the trial and reviewing levels.” Singleton v. Singleton, 95

Ohio App.3d 467, 470, 642 N.E.2d 708 (9th Dist.1994), quoting Nolan v. Nolan, 11 Ohio

St.3d 1, 3, 462 N.E.2d 410 (1984) (citation omitted); see also Lauber v. Grime, 6th Dist.

Fulton No. F-01-017, 2002-Ohio-2684, ¶ 50 (citations omitted). After remand for

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consideration of a specific issue, the trial court has no authority to enlarge its review

beyond the mandate given. Singleton at 471, citing Nolan at 3.

{¶ 20} The sole issue on remand, pertinent to this appeal, was the trial court’s

clarification of Douglas’s wage income in considering an appropriate award of spousal

support. Previously, the trial court considered the three types of income for Douglas:

salary/wages, distributions, and interest. To clarify the trial court’s determination, we

remanded the matter to the trial court for clarification of its salary/wage consideration

and any effect that clarification might have on the award of spousal support.

{¶ 21} At issue in this appeal is the income attributed to Douglas as part of the

consideration of R.C. 3108.15(C)(1) factors. In the initial appeal, Douglas argued that

the trial court abused its discretion based on the theory that K-1 distributions are not

appropriately included as earnings, and based on the theory that including K-1

distributions as earnings results in “double dipping.” We rejected these arguments, and

found the trial court properly considered Douglas’s K-1 earnings, as additional income

beyond his salary, and found no “double dipping” based on this inclusion.

{¶ 22} In the prior appeal, Douglas also raised specific issues regarding the trial

court’s determination of his total compensation. First, he argued that the trial court

should have used the $400,000 in compensation determined by the valuation experts as

his “reasonable market-rate compensation.” We noted the lack of evidence that Douglas

ever received annual compensation in the amount calculated by the experts. We found

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the trial court’s determination of Douglas’s future income based on an actual

compensation was appropriate. Sullinger I at ¶ 100.

{¶ 23} As to K-1 earnings, Douglas failed to assert a calculation error in his prior

appeal, and otherwise failed to support a challenge to the trial court’s K-1 income

determination of $763,333. At most, in pursuing other legal theories in challenging the

award of spousal support, Douglas appeared to concede that—if the trial court’s

consideration of his K-1 earnings was proper—his average income for 2014-2016 would

have been $835,201 per year, and not $970,000 per year as determined by the trial court.

While Douglas could have asserted a challenge to the trial court’s calculation of his K-1

earnings as error in the initial appeal, he chose to challenge the award of spousal support

based on other legal theories. Furthermore, we found Douglas’s assertion regarding his

actual K-1 earnings calculation purely speculative, as he did not “explain how he arrives

at this figure.” Sullinger I at ¶ 101.

{¶ 24} Finally, in the prior appeal, we did note the control Douglas exerted over

his salary and distributions, and that “Douglas maintains a practice of running personal

expenses through the business, thereby deflating distributions and profit income[.]” We

also indicated the trial court “did not purport to impute any additional income to Douglas

for this perceived malfeasance.” Sullinger I at ¶ 96. With no challenge to the trial

court’s average K-1 earnings determination, however, we requested no clarification from

the trial court regarding its calculation of K-1 distributions averaging $763,333 in

remanding the matter.

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 {¶ 25} Upon remand, the trial court clarified the wage/salary determination,

pursuant to its mandate. The trial court indicated it used Douglas’s stated salary of

$200,000, plus the average K-1 of $763,333, plus the average interest income of $6,086,

in determining a future income of approximately $970,000. Douglas now challenges the

trial court’s math in calculating his average K-1 income as $763,333, despite failing to

assert such a challenge in the first appeal.

{¶ 26} Douglas argues that there is “no breakdown of a calculation or even an

identification of the yearly amounts for the K-1s” and his tax returns provide no support

for an average K-1 income of $763,333. Douglas’s new theory is that the 2014-2016 tax

returns support a three-year average of $528,984.67 in K-1 income, bringing Douglas’s

annual earnings to just over $735,000, after adding interest and salary earnings.

{¶ 27} We did not remand for a redetermination of the spousal support award.

Our mandate to the trial court was to “either explain why it added Douglas’s 2017 salary

or correct this aspect of its calculation and any effect it may have had on its spousal-

support award.” Upon remand, the trial court considered no new evidence, and held no

new hearing on the issue, but instead, issued its judgment clarifying its wage/salary

determination. The trial court indicated it used only the 2017 salary for the wage/salary

component of earnings, and indicated the clarification required no adjustment to the

amount awarded as spousal support.

{¶ 28} While Douglas seeks, through this appeal, to reopen his appeal by renewing

his challenge to the use of K-1 earnings in determining spousal support, asserting new

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theories in support, the law of the case doctrine precludes renewed litigation of the issues.

While the law of the case rule is “a rule of practice rather than a binding rule of

substantive law,” it is nevertheless necessary “to ensure consistency of results in a case,

to avoid endless litigation by settling the issues, and to preserve the structure of superior

and inferior courts as designed by the Ohio Constitution.” Nolan, 11 Ohio St.3d at 3, 462

N.E.2d 410.

{¶ 29} Upon due consideration of Douglas’s challenge to the use of K-1

distributions as earnings, therefore, we find the issues raised were either raised or capable

of being addressed in the prior appeal, and exceed the scope of the issues remanded to the

trial court. Accordingly, we find Douglas’s first assignment of error not well-taken.

B. Determination of salary based on four-year average

{¶ 30} In his second assignment of error, Douglas agues the trial court erred in

failing to determine his salary/wage earnings based on a four-year average. In response,

Carol argues that Douglas relies on authority relative to child-support determinations, and

the trial court’s use of a single year of earnings was proper.

{¶ 31} The statute governing child support provides for “income averaging” in

appropriate cases. See R.C. 3119.05(H). Even so, courts interpreting this provision

acknowledge that the decision to average income is within the trial court’s discretion.

Coors v. MacEachen, 1st Dist. Hamilton No. C-100013, 2010-Ohio-4470, ¶ 15. “[N]o

similar statute applies to spousal support.” Coors at ¶ 16.

13.
 {¶ 32} Here, Douglas argues the trial court should have considered his average

salary, based on his reporting in annual tax returns. The trial court, however, noted

Douglas’s lack of credibility, and the fact he controlled his salary and distributions,

minimizing wages and maximizing distributions to avoid paying higher taxes. Finally,

the trial court noted that Douglas ran his “personal expenses through the business,” with

an effect on reported income from distributions. Accordingly, we find no abuse of

discretion by the trial court in adopting the salary for 2017, rather than an average

reported by Douglas in his tax filings, as Douglas’s annual wages. We find his second

assignment of error not well-taken.

C. Sanctions

{¶ 33} Finally, we address Carol’s request for sanctions, pursuant to App.R. 23,

which provides:

If a court of appeals shall determine that an appeal is frivolous, it

may require the appellant to pay reasonable expenses of the appellee

including attorney fees and costs.

“A frivolous appeal under App.R. 23 is essentially one which presents no reasonable

question for review.” Talbott v. Fountas, 16 Ohio App.3d 226, 475 N.E.2d 187 (10th

Dist.1984), paragraph one of the syllabus.

{¶ 34} While Douglas attempted to challenge settled issues related to his

distribution income, we otherwise find that there were reasonable grounds for this appeal.

Therefore, we find Carol’s motion for sanctions not well-taken.

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 IV. Conclusion

{¶ 35} Having addressed the issue remanded for clarification, we hereby affirm

the judgment of the Lucas County Court of Common Pleas, Domestic Relations Division.

We, furthermore, deny the motion for sanctions pursuant to App.R. 23. Appellant is

assessed the costs of this appeal, pursuant to App.R. 24.

Judgment affirmed.

A certified copy of this entry shall constitute the mandate pursuant to App.R. 27.
See also 6th Dist.Loc.App.R. 4.

Thomas J. Osowik, J. _______________________________
JUDGE
Christine E. Mayle, J.
_______________________________
Gene A. Zmuda, P.J. JUDGE
CONCUR.
_______________________________
JUDGE

This decision is subject to further editing by the Supreme Court of
Ohio’s Reporter of Decisions. Parties interested in viewing the final reported
version are advised to visit the Ohio Supreme Court’s web site at:
http://www.supremecourt.ohio.gov/ROD/docs/.

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