Stapleton v. Stapleton

2022 Ohio 3018
Ohio Court of Appeals·Decided August 31, 2022·No. C-210329·Published·Cited by 2 cases

Opinion

IN THE COURT OF APPEALS

FIRST APPELLATE DISTRICT OF OHIO HAMILTON COUNTY, OHIO

KRISSANN STAPLETON, : APPEAL NO. C-210329 TRIAL NO. DR-1901257

Plaintiff-Appellant, :

VS. : O P I N I O N. SCOTT STAPLETON, :

Defendant-Appellee. :

Appeal From: Hamilton County Court of Common Pleas, Domestic Relations Division Judgment Appealed From Is: Affirmed Date of Judgment Entry on Appeal: August 31, 2022

Roetzel & Andress, LPA, Stephen W. Funk and Emily K. Anglewicz, for Plaintiff- Appellant,

Barbara J. Howard Co., L.P.A., Barbara J. Howard and Rachel H. Myers, for Defendant-Appellee.

WINKLER, Judge.

{¶1} Plaintiff-appellant Krissann Stapleton appeals a divorce decree entered by the Hamilton County Court of Common Pleas, Domestic Relations Division. She advances two assignments of error for our review that challenge the trial court’s decision on property and spousal support. For the reasons set forth below, we affirm the trial court’s judgment.

I. Procedural and Factual History

{¶2} Krissann and defendant-appellee Scott Stapleton married in 1987 and had three children, all of whom are now emancipated. Over the course of the approximately 34-year marriage, the parties owned and operated three related businesses: Miami Athletic Club, Inc., (“MAC”) a fitness center; Fitness Xpress, LLC, (“Fitness Express”) a CrossFit gym operated out of MAC; and NTM Enterprises, LLC, (“NTM”) a company that owns the real estate where MAC and Fitness Express are located. We collectively refer to as these entities as the “marital businesses” or the “health club.” The main source of income for the parties during much of the marriage was the operation of the health club that afforded them a “high standard of living.”

{¶3} In 2019, Krissann filed for divorce and sought spousal support. Scott counterclaimed. The trial court issued various temporary orders, including support orders and orders that became necessary for operating the health club due to the parties’ antagonistic relationship.

{¶4} Although the parties agreed that they should be granted a divorce on grounds of incompatibility, they could not agree on an equitable property division or spousal support. The parties had substantial assets in addition to the health club that the trial court needed to divide and value, such as the marital home in Cincinnati, cars,

a boat and related equipment, bank accounts, insurance policies, and retirement accounts. The parties also had mortgages and loans related to the health club.

{¶5} During their negotiations to resolve the property issues, the parties contemplated selling the health club. To inform their decision, they hired business consultant Robert Caro to evaluate and value the health club. Caro had been involved in the industry for 47 years, and he had valued over 400 health clubs.

{¶6} The purpose of Caro’s study was to determine the fair market value for the combined assets of the real estate (land and building), furniture/fixtures/equipment, and business. Caro issued a comprehensive 97-page report concerning a valuation date of June 20, 2020, under an income approach. He used a net stabilized income value that took into consideration the health club’s financials for the preceding 12 months, along with other relevant data, including the impact of the COVID-19 pandemic, and assigned a capitalization rate of four. Notably, Caro concluded that the fair market value of the health club after considering liabilities was zero. And he advised the parties that it was a very bad time to sell, with a “minimal” “likelihood of a near-term viable transaction.”

{¶7} As the divorce case proceeded in the domestic relations court, hearings occurred on seven dates between September 28, 2020, and February 24, 2021. Part of the extensive evidence presented included Caro’s testimony and report.

{¶8} During Caro’s December 15, 2020 testimony, he opined, in accordance with his report, that MAC, Express Fitness, and NTM had to be valued as one “package” due to limitations of the real estate. Moreover, he maintained the only appropriate approach for valuation was the income approach, and that approach demonstrated there was no net equity in the health club. Caro indicated that his

analysis considered the actual financials of the health club and property-specific issues such as much-needed-but-deferred maintenance. His simplified analysis was that there were “too many liabilities and not enough assets,” resulting in “shareholder equity of zero,” at best. He added that more recent data on the “real fragility” of the health club industry due to COVID-19 supported an even lower fair market value than he had calculated in his report. He expected approximately one quarter of all fitness clubs to be closed by the end of 2020. Further, he told the court that, “in his view, it would be a long time before a proper third-party sale can occur.”

{¶9} Caro additionally said his assessment showed the health club could not afford to pay two owner salaries, and he suggested one party take on running the business. He warned that running the health club would be a “challenge,” requiring an owner “who’s willing to be on-site, focused, [and] put all their efforts in.” Even with those parameters, Caro could not say with confidence that the health club would survive.

{¶10} Although Scott presented Caro as his expert, Krissann stipulated to Caro’s qualifications as an expert, told the court she “did not dispute his zero-value conclusion,” and did not present a competing expert. Her counsel cross-examined Caro on various aspects of his assumptions and calculations, including his inclusion of a shareholder loan as a long-term liability without knowing the terms and conditions of repayment. Caro later confirmed that nothing brought out during his cross- examination changed his opinions.

{¶11} While Krissann was consistent in her position that the marital businesses should be sold and the net profits, if any, split equally, she was inconsistent in her position with respect to whether the marital businesses had to be sold as a

package and the timing for the sale. She seemed to agree that an immediate sale of the marital businesses was not economically feasible because it would result in a loss. She testified, however, to having a broker ready to list MAC and Fitness Express, but not NTM, for almost $800,000. She did not support this representation with any documentation or details. She also cited 2018 valuation information for NTM, which was mortgaged for approximately $650,000, but not a valuation reflecting the current market condition. Krissann clearly articulated, however, that no matter when the marital businesses were sold, in the interim she sought equal ownership and decision- making authority, and equal compensation from the money streaming through the health club.

{¶12} Other evidence presented for the trial court’s consideration on the issues of property and support showed that for much of the marriage, Krissann was physically present and heavily involved in operating the health club, developing marketable experience in the management and ownership of a successful, modern business. Her role and time commitment diminished significantly when she moved to Florida in May 2018 to reside in a condominium owned by the parties but sold during the divorce proceedings. Krissann maintained responsibility at the health club for items such as payroll, updating social media sites, and swim lessons, responsibilities performed remotely a few hours a week. Despite her physical absence from the health club facility, Krissann continued to draw her full salary from the health club and did not seek employment elsewhere.

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Stapleton v. Stapleton, 2022 Ohio 3018 (Ohio Ct. App. 2022).

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