Murray v. Murray, CA98-08-097.

• Decision Date: 08 February 1999
• Docket Number: No. CA98-08-097.,CA98-08-097.
• Citation: 128 Ohio App.3d 662,716 NE 2d 288
• Parties: MURRAY, Appellant, v. MURRAY, Appellee.
• Court: Ohio Court of Appeals

128 Ohio App.3d 662

716 NE 2d 288

MURRAY, Appellant, v. MURRAY, Appellee.^*

No. CA98-08-097.

Court of Appeals of Ohio, Twelfth District, Warren County.

Decided February 8, 1999.

COPYRIGHT MATERIAL OMITTED

Frost & Jacobs and Laurie K. Ahlers, for appellant.

Katz, Teller, Brant & Hild and Jerome S. Teller, for appellee.

POWELL, Judge.

Plaintiff-appellant, Graeme Murray, appeals the decision of the Warren County Court of Common Pleas, Domestic Relations Division, granting the motion of defendant-appellee Susan Murray to modify child support and increasing appellant's child support obligation. We affirm in part, reverse in part, and remand for proceedings consistent with this opinion.

Appellant and appellee were divorced in 1994. The parties entered into a separation agreement, which was incorporated into the final decree filed on May 16, 1994. Appellee was granted custody of their son, Iain, and appellant was to pay child support in the amount of $1,810 per month. The marital property was divided between the parties, including unexercised stock options appellant had received as an executive employee at Proctor & Gamble Company ("P&G").

Appellant's child support obligation was based upon his income at the time, which was $212,702 in salary and average bonuses. Then-existing unexercised stock options were not considered in determining child support because they were dealt with in the property division. Since the divorce, appellant has remained at P&G, and his income has increased substantially.

On May 18, 1997, appellee filed a motion to modify child support, asserting that there had been a significant change in appellant's income warranting a recalculation of child support. Appellant stipulated his income had increased to $325,743 per year. This amount was composed of his base salary, average annual bonuses, dividends and interest, and taxable employee benefits, but not the stock options he had received in the years after the divorce. Appellant offered to pay $2,754 per month in child support based upon his stipulated income.

On January 29, 1998, a magistrate held a hearing on appellee's motion. The primary issues were whether appellant's unexercised P&G stock options should be included in his "gross income" for purposes of determining child support, and, if so, how to value the stock options. On May 18, 1998, the magistrate filed his decision, finding that the value of the P&G stock options should be imputed to appellant and included in "gross income" pursuant to R.C. 3113.215. Appellant's child support obligation was increased to $7,494.10 per month.

Appellant filed objections to the magistrate's decision. On July 23, 1998, the trial court overruled the objections and adopted the magistrate's decision. Appellant filed a motion to reconsider, arguing that the magistrate had erred in his calculations. On August 17, 1998, the trial court granted the motion, and ruled that the magistrate had incorrectly included the value of one option which the parties had included in appellant's stipulated income. The trial court reduced the imputed income to $481,109.60, which, in turn, reduced appellant's child support obligation to $6,821.27 per month, plus a processing fee.

Appellant appeals the July 23, 1998 decision, raising three assignments of error.

"Assignment of Error No. 1:

"The trial court erred to the prejudice of plaintiff-appellant by including imputed income attributable to unexercised employee stock options in gross income for the purpose of modifying plaintiff-appellant's child support obligation."

In his first assignment of error, appellant argues that the unexercised P&G stock options do not constitute "potential cash flow" and are not included in "gross income" as defined in R.C. 3113.215(A)(2). He asserts that the stock options are only marital property subject to division under R.C. 3105.171. Appellee responds that the stock options are deferred compensation and a source of "potential cash flow" included in "gross income."

The issue presented is one of first impression. This court has found no cases addressing the issue of whether unexercised stock options should be considered when determining the obligor's income for purposes of child support.

The trial court possesses considerable discretion in child support matters. The decision of the trial court will be reversed only if it is the product of an abuse of discretion. Pauly v. Pauly (1997), 80 Ohio St.3d 386, 390, 686 N.E.2d 1108, 1111. "Abuse of discretion" is described as "more than an error of law or judgment, it implies that the court's attitude is unreasonable, arbitrary or unconscionable." Blakemore v. Blakemore (1983), 5 Ohio St.3d 217, 219, 5 OBR 481, 482, 450 N.E.2d 1140, 1142.

R.C. 3113.215 is a comprehensive enactment governing the procedures for awarding and calculating child support. Its provisions are mandatory in nature and must be followed literally and technically in all material respects. This is because the overriding concern of R.C. 3113.215 is the best interest of the child for whom support is being awarded. Marker v. Grimm (1992), 65 Ohio St.3d 139, 141-142, 601 N.E.2d 496, 497-499. The calculation of support must be made in accordance with the basic child support schedule set forth in R.C. 3113.215(D) and the applicable model worksheet in R.C. 3113.215(E) or (F). R.C. 3113.215(B)(1). If the court makes the proper calculations based upon the schedule and applicable worksheet, the amount shown on the worksheet is "rebuttably presumed" to be the correct amount of child support due. R.C. 3113.215(B)(1); Rock v. Cabral (1993), 67 Ohio St.3d 108, 110, 616 N.E.2d 218, 220-221. Any deviation from the child support guidelines, worksheet, or basic child support schedule must be made in full and strict compliance with the requirements of R.C. 3113.215(B)(1)(a) and (b), and the deviation must be supported by the evidence and stated in the trial court's findings of fact. Marker, supra, at syllabus.

The amount of child support to be paid by the obligor is based upon the obligor's "income." R.C. 3113.215(A)(1) defines "income" as, "for a parent who is employed to full capacity, the gross income of the parent." R.C. 3113.215(A)(2) defines "gross income" as follows:

"Except as excluded in this division, the total of all earned and unearned income from all sources during the calendar year, whether or not the income is taxable, and includes, but is not limited to, income from salaries, wages, overtime pay and bonuses to the extent described in division (B)(5)(d) of this section, commissions, royalties, tips, rents, dividends, severance pay, pensions, interest, trust income, annuities, social security benefits, workers' compensation benefits, unemployment insurance benefits, disability insurance benefits, benefits received by and in the possession of the veteran who is the beneficiary for any service connected disability under a program or law administered by the United States department of veterans' affairs or veterans' administration, spousal support actually received from a person not a party to the support proceeding for which actual gross income is being determined, and all other sources of income; * * * self-generated income; and potential cash flow from any source."

The definition of "income" is intended to be both broad and flexible. See, e.g., Williams v. Williams (1991), 74 Ohio App.3d 838, 843, 600 N.E.2d 739, 742-743. An expansive definition is necessary "to ensure that the best interests of children, the intended beneficiaries of child support awards, are protected." McQuinn v. McQuinn (1996), 110 Ohio App.3d 296, 300-301, 673 N.E.2d 1384, 1387.

R.C. 3113.215(A) excludes a variety of income sources from "gross income" under R.C. 3113.215(A)(2). Among these exclusions is a "nonrecurring or unsustainable income or cash flow item." R.C. 3113.215(A)(2)(e). "Nonrecurring or unsustainable income or cash flow item" is defined in R.C. 3113.215(A)(11) as "any income or cash flow item that the parent receives in any year or for any number of years not to exceed three years and that the parent does not expect to continue to receive on a regular basis. `Nonrecurring or unsustainable income or cash flow item' does not include * * * any other item of income or cash flow that the parent receives or expects to receive for each year for a period of more than three years or that the parent receives and invests or otherwise utilizes to produce income or cash flow for a period of more than three years."

The question before this court is whether unexercised stock options, given by an employer as part of an executive compensation package, should be included in the recipient's "gross income." Appellant argues that the stock options at issue should not be included in his "gross income" because they have no present value to him. Instead, they are income only upon their exercise, which is the time that financial gain is realized. Appellee counters that the stock options are a form of deferred income given for present services and a potential source of cash flow. Appellee asserts that, even though appellant may not have exercised the options and realized income for tax purposes, both P & G and appellant consider the stock options package to be a primary component of his annual compensation.

Although no other court has addressed this issue, we are guided by decisions which have examined what may be included in "gross income." In Pelikan v. Pelikan (July 1, 1993), Cuyahoga App. No. 62962, unreported, 1993 WL 243076, the court held that the trial court properly included interest accruing on the obligor's public employee retirement plan. The court found that, even though annual increases in such funds are not taxable until actually distributed, they are to be included in the obligor's "gross income" pursuant to R.C. 3113.215(A)(2). Id. 1993 WL 243076, at 7. The decision in Pelikan was based upon the result in Parzynski v. Parzynski (1992), 85...