Kesler v. Kesler

2018 Ohio 5059

• Court: Ohio Court of Appeals
• Decided: December 17, 2018
• Docket: 11-18-04
• Status: Published

Opinion

[Cite as Kesler v. Kesler, 2018-Ohio-5059.]

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

PATRICIA KESLER, CASE NO. 11-18-04 PLAINTIFF-APPELLANT,

v.

DAVID KESLER, OPINION

DEFENDANT-APPELLEE.

Appeal from Paulding County Common Pleas Court Trial Court No. DIV-16-150

Judgment Affirmed

Date of Decision: December 17, 2018

APPEARANCES:

Timothy C. Holtsberry for Appellant

Glenn H. Troth for Appellee Case No. 11-18-04

WILLAMOWSKI, P.J.

{¶1} Defendant-appellant Patricia J. Kesler (“Patricia”) appeals the

judgment of the Paulding County Court of Common Pleas, alleging that the trial

court did not properly classify the marital residence as marital property. For the

reasons set forth below, the judgment of the trial court is affirmed.

Facts and Procedural History

{¶2} Patricia and David G. Kesler (“David”) were married on January 7,

2001. Tr. 7. In 2010, David’s father, John Kesler (“John”) died. Tr. 59. Ex. 2. In

1991, John put his assets into an inter vivos trust. Ex. 1. Prior to his death, John

had operated Kesler Farms, employing David and three of David’s siblings in this

farming business. Tr. 25, 41. All four of John’s children were beneficiaries of his

inter vivos trust. Ex. 2. Several months before John died, he entered into an

agreement with David’s two brothers to transfer an interest in Kesler Farms to their

limited liability company in exchange for payments from the limited liability

company. This gave David’s two brothers control over the operations of Kesler

Farms. Tr. 85. David’s employment at the farm was terminated shortly after John’s

death. Tr. 38.

{¶3} Subsequently, a dispute between David and his two brothers arose over

assets in John’s inter vivos trust. Tr. 46-47. In the end, David entered into an

agreement settling the distribution of the estate of John Kesler and the inter vivos

trust (“settlement agreement”). Ex. 2. This settlement agreement was signed by all

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those with claims under the trust and against John’s estate as well as by the trustee

of the trust and the fiduciary of the estate. Ex. 2. Under the settlement agreement,

David was to “receive a distribution of twenty-five percent of the Trust assets.” Ex.

2. David’s brothers borrowed money to pay David the $519,120.00 that he was

owed under the settlement agreement. Tr. 41. Ex. 2. David received this sum in

the form of a cashier’s check that was payable only to him. Tr. 70, 88. He kept this

cashier’s check in a safe and never deposited the full amount of this check into a

bank account. Tr. 88, 70. Rather, when he wanted to make a purchase, he would

present this cashier’s check to his bank, have the amount he wanted to spend

deposited into his account, and then have a new cashier’s check issued to him for

the reduced remaining balance. Tr. 69-70.

{¶4} On May 18, 2011, Patricia and David purchased a house for

$171,000.00. Doc. 37. Tr. 10. Ex. B. To pay for the house, David presented his

cashier’s check from First Federal Bank and had $172,000.00 deposited into his

joint checking account. Tr. 68-69. Ex. A. These funds were then transferred to

Huntington Bank to pay for the house in full. Tr. 68. Ex. B, G. Patricia’s name

was included on the deed to the house. Tr. 57. On May 8, 2014, David took out a

$30,725.00 loan on the marital residence in both of their names. Ex. C. On January

9, 2017, the marital residence was sold for $176,000.00. Tr. 52. Ex. E. After the

loan and the closing costs were paid off, the proceeds of the sale were $136,574.58.

Tr. 9.

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{¶5} On October 20, 2016, Patricia filed for a divorce. Doc. 1. At the

divorce hearing, the primary issue was whether the proceeds from the sale of the

marital residence were marital or separate property. Doc. 43. David argued that

these funds were proceeds from his father’s estate and were part of his inheritance

from his father. Doc. 40. Patricia asserted that the funds used to purchase the

marital residence were not proceeds from an inheritance. Doc. 42. Rather, she

stated that these funds should be characterized as the proceeds of the sale of David’s

share in his father’s company. Tr. 41.

{¶6} The trial court found that the evidence in the record did not support

Patricia’s assertion and found that the funds used to purchase the marital residence

were the proceeds of David’s inheritance from his father. Doc. 43.1 The trial court

then found that David had carried the burden of tracing the funds used to purchase

the marital residence back to his inheritance and awarded the disputed proceeds

from the sale of the marital residence to David as his separate property. Doc. 43.

Patricia filed her notice of appeal on April 16, 2018. Doc. 44. On appeal, Patricia

raises the following assignments of error:

First Assignment of Error

The trial court erred in not following the requirements of R.C. 3105.171 in determining that the marital home was not marital property.

1 After the divorce hearing, the parties mutually agreed that David should receive one-half of the proceeds of the sale of the marital residence, which amounted to $68,287.29. Doc. 43. Thus, the judgment entry only addressed the half of the proceeds from the sale that remained in controversy. Doc. 43.

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Second Assignment of Error

The finding of the trial court in determining the marital home separate property is against the manifest weight of the evidence.

We will address both of these assignments of error in one analysis.

First and Second Assignments of Error

{¶7} Patricia argues that David did not carry the burden of establishing that

the marital residence was separate property and that the trial court’s classification

of the marital residence as David’s separate property was against the manifest

weight of the evidence. If this Court determines that the marital residence was

purchased with the traceable proceeds of David’s inheritance and that the marital

residence was, therefore, David’s separate property, Patricia alternatively argues

that her efforts to improve the marital residence contributed to a $5,000.00 increase

in the value of the house. Patricia asserts that this sum is marital property.

Legal Standard

{¶8} In a divorce proceeding, trial courts classify the assets of the parties as

marital or separate. Brandon v. Brandon, 3d Dist. Mercer No. 10-08-13, 2009-

Ohio-3818, ¶ 11. The separate property is retained by the party who obtained that

particular asset regardless of whether the separate property was acquired before or

during the marriage. R.C. 3105.171(D). Separate property includes “an inheritance

by one spouse by bequest, devise, or descent during the course of the marriage.”

R.C. 3105.171(A)(6)(a)(i). If separate property is commingled with marital

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property, the separate property does not become marital property unless “the

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

{¶9} Generally, “the party seeking to establish an asset as separate property

* * * has the burden of proof, by a preponderance of the evidence, to trace the asset

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

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

Ohio-2815, ¶ 25. “A ‘preponderance of the evidence means the greater weight of

the evidence that is necessary to destroy the equilibrium.’” Golan-Elliot v. Elliot,

3d Dist. Union No. 14-17-01, 2017-Ohio-8524, ¶ 53, quoting Reed v. Reed, 3rd Dist.

Allen No. 1-09-63, 2010-Ohio-4550, ¶ 10. “[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). “Appellate courts ‘[review] the trial court’s classification of property

as marital or separate property under a manifest weight of the evidence standard.’”

Worden v. Worden, 3d Dist. Marion No. 9-16-54, 2017-Ohio-8019, ¶ 17, quoting

Neville v. Neville, 3d Dist. Marion No. 9-08-37, 2009-Ohio-3817, ¶ 9.

Legal Analysis

{¶10} In this case, the trial court found that the $519,120.00 cashier’s check

was comprised of the proceeds of David’s inheritance from his father. Doc. 43. The

record shows that this check came pursuant to the 2011 settlement agreement that

governed the distribution of John’s estate and inter vivos trust assets. Tr. 26. Ex.

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2. This settlement agreement was entered into for the purpose of resolving a dispute

over the disposition of John’s assets and represented the value of one quarter of the

assets in John’s inter vivos trust. Ex. 2. Deborah testified at the hearing that these

funds came from John’s estate. Tr. 60. Ex. 2.

{¶11} On appeal, Patricia characterizes the settlement agreement as a

“buyout” of David’s share of the family farm. Thus, Patricia argues that the funds

dispersed under the settlement agreement were income and were, therefore, not an

inheritance. However, the fact that funds at issue were dispersed pursuant to a

settlement agreement does not mean that the funds were not an inheritance. The

trial court found that Patricia’s assertion that this check was a “buyout” of David’s

interest in the family farm was not substantiated by other evidence.2 Tr. 41. Doc.

43. We find that the trial court’s analysis was sufficient to support its determination

that the funds in the cashier’s check were David’s inheritance and, therefore, his

separate property.

{¶12} As to the traceability of the funds, David testified that he presented a

First Federal Bank cashier’s check to Huntington National Bank in order to pay for

the house in cash. Tr. 27. He testified that these funds were proceeds from the

cashier’s check he received under the settlement agreement of John’s estate and

inter vivos trust. Tr. 26-27. To substantiate his testimony, David introduced a copy

2 Even if the dispersal of these funds is properly characterized as a “buyout,” the fact remains that this was a purchase from David of his inheritance assets, which means these proceeds are still traceable to David’s inheritance.

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of this cashier’s check into evidence and a copy of the bank statement from First

Federal Bank, which showed the corresponding deposit and withdrawal of funds

from his checking account. Ex. A. Thus, the trial court’s classification was also not

against the manifest weight of the evidence as some competent, credible evidence

supports the finding that the funds used to purchase the marital residence were

traceable to David’s inheritance.

{¶13} Alternatively, Patricia points to the fact that the house was purchased

for roughly $171,000.00 and was sold for roughly $176,000.00.3 She argues that

this $5,000.00 increase was active appreciation and was, therefore, marital property.

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.” Worden, supra, at ¶ 24.

“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 v. Neville, 3d Dist. Marion No. 9-08-37,

3 In Patricia’s brief, she states that the house was purchased for $169,000.00 and sold for $176,000.00, marking an appreciation of $7,000.00. The facts in the record, however, indicate that the purchase price was roughly $171,000.00 and the sale price was roughly $176,000.00. Ex. B, E.

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2009-Ohio-3817, ¶ 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).

{¶14} At the divorce proceeding, Patricia testified that she mowed the yard,

painted, cleaned the house, and installed fixtures. Tr. 32. Patricia’s daughter also

testified that Patricia did work on the property, such as painting, cleaning, and

ordering appliances. Tr. 18. The trial court, however, found that the increase in the

marital residence’s value was passive appreciation because Patricia did not establish

that her work contributed to the $5,000.00 increase in value. Doc. 43. See Gibson

v. Gibson, 3d Dist. Marion No. 9-07-06, 2007-Ohio-6965, ¶ 38. After reviewing

the record, we find that the trial court’s classification of this $5,000.00 sum as

David’s separate property was supported by some competent, credible evidence.

For these reasons, Patricia’s first and second assignments of error are overruled.

Conclusion

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

assigned and argued, the judgment of the Paulding County Court of Common Pleas

is affirmed.

ZIMMERMAN and SHAW, J.J., concur.

/hls

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