Thomas C. Vadakin v. Joyce L. Vadakin

• Decision Date: 11 June 1997
• Docket Number: 97-LW-2119,95CA49
• Parties: THOMAS C. VADAKIN, Plaintiff-Appellee v. JOYCE L. VADAKIN, et al., Defendants-Appellants Case
• Court: Ohio Court of Appeals

THOMAS C. VADAKIN, Plaintiff-Appellee v. JOYCE L. VADAKIN, et al Defendants-Appellants

No. 95CA49.

97-LW-2119 (4th)

Court of Appeals of Ohio, Fourth District Washington

June 11, 1997

Friedman & Babbitt Co., L.P.A., William S. Friedman and Gary S Wellbaum, Columbus, Ohio, for Appellant, Joyce L. Vadakin.

Ronald L. Solove, Columbus, Ohio, for Appellee.

DECISION

Stephenson P.J.

This is an appeal from a judgment entered by the Court of Common Pleas of Washington County, Ohio, granting a divorce to Thomas C. Vadakin, plaintiff below and appellee herein, and Joyce L. Vadakin, defendant below and appellant herein. The following errors have been assigned for our review:

I.

"THE TRIAL COURT ABUSED ITS DISCRETION IN VALUING APPELLEE'S OWNERSHIP INTEREST IN VADAKIN, INC. AT THE CORPORATION'S BOOK VALUE FOR PURPOSES OF APPLYING THE TERMS OF THE PARTIES" ANTENUPTIAL AGREEMENT."

II.

"THE TRIAL COURT ABUSED ITS DISCRETION AND ERRED AS A MATTER OF LAW IN CONSIDERING THE POTENTIAL TAX LIABILITIES THAT WOULD OCCUR FROM A SALE OF APPELLEE'S SHARES IN VADAKIN, INC. WHEN THE EVIDENCE AT TRIAL ESTABLISHED THAT BOTH THE POTENTIAL SALE OF SUCH SHARES AND THE POTENTIAL TAX LIABILITY ASSOCIATED WITH SAME WERE SPECULATIVE AND WHEN THE ANTENUPTIAL AGREEMENT MADE NO PROVISION FOR THE CONSIDERATION OF SUCH POTENTIAL LIABILITY."

III.

"THE TRIAL COURT ABUSED ITS DISCRETION AND ERRED AS A MATTER OF LAW IN HOLDING THAT THE ANTENUPTIAL AGREEMENT PROHIBITTED [SIC] THE AWARD OF TEMPORARY AND/OR PERMANENT SPOUSAL SUPPORT TO APPELLANT."

IV.

"THE TRIAL COURT ABUSED ITS DISCRETION, ERRED AS A MATTER OF LAW, AND IMPROPERLY INTERPRETED THE TERMS OF THE PARTIES' ANTENUPTIAL AGREEMENT IN AWARDING APPELLEE THE TWO SHARES OF STOCK IN VADAKIN, INC. WHICH APPELLEE GIFTED TO APPELLANT DURING THE TERN OF THE PARTIES' MARRIAGE."

V.

EVEN ASSUMING THE TRIAL COURT PROPERLY VALUED APPELLEE'S INTEREST IN VADAKIN, INC. AND PROPERLY DISCOUNTED SUCH VALUE FOR POTENTIAL TAX LIABILITIES UPON A POTENTIAL SALE, THE TRIAL COURT ABUSED ITS DISCRETION AND ERRED AS A MATTER OF LAW IN CALCULATING THE AFTER-TAX VALUE FOR VADAKIN, INC. FOR PURPOSES OF APPLYING THE TERMS OF THE PARTIES' ANTENUPTIAL AGREEMENT."

The record reveals the following facts pertinent to this appeal. The parties herein were married on December 14, 1979, in White Sulfur Springs, West Virginia. No children were ever born as issue of their marriage. It would appear that each of the parties had previously been married and that both of them brought a considerable amount of assets into the new union. Appellant was a widow whose assets included an estate in Washington County, Ohio, known as "The Hollow," an equitable interest in a living revocable trust and a substantial amount of stock in "The Peoples Banking &amp Trust Company." Her net worth at the end of 1979 was calculated to be in excess of $407,000. Appellee had previously been married and divorced. His assets included inter alia sole ownership (250 shares) of Vadakin, Inc., a company which specializes in cleaning industrial boilers. This stock, as well as other assets, gave appellee an estimated net worth at the end of 1979 in excess of $961,000. On the day before their marriage, the parties executed an antenuptial agreement which provided in pertinent part as follows:

"It is further agreed that in the event of divorce or dissolution, assets up to the sum of $1,000,000.00 after liabilities (net worth) shall be free of any claim by Joyce L. Williams, and Joyce L. Williams shall be entitled to receive one-half of all assets in excess of $1,000,000.00 after liabilities (net worth) in full and complete settlement of all claims by her arising out of such marriage and subsequent divorce or dissolution."

On April 11, 1995, appellee filed for divorce alleging that he and his wife were incompatible and that she was guilty of gross neglect of duty. He asked for an equitable division of their assets and debts as well as any further relief to which he might be entitled at law. Contemporaneously, appellee filed a motion asking the court to determine the validity and enforceability of the aforementioned antenuptial agreement. Appellant filed an answer denying her husband's alleged grounds for divorce. She would later file her own counterclaim for divorce, (alleging gross neglect of duty) and ask for a distribution of assets pursuant to the terms that were outlined in the antenuptial agreement. As the case progressed, both sides eventually stipulated that the antenuptial agreement was valid and enforceable and that December 31, 1994, would be the "valuation date" for purposes of applying its terms.

The matter proceeded to trial on September 5th and 6th of 1995 at which time both parties admitted that they were incompatible. This left the valuation of Vadakin, Inc. (or, more precisely, the value of appellee's stock in Vadakin, Inc.) as the major issue to be determined. Both sides brought in a wide array of experts to give opinions as to the value of the company. Mr. Richard Ferguson, testifying on behalf of appellee, stated that the worth of Vadakin, Inc. had to be computed on the basis of "book value" because a fair market valuation of a closely held corporation such as this one involved too many arithmetical and psychological assumptions. The witness went on to testify that he had determined the "book value" of the company to be $2,259,000. This figure coincided with the "book" valuation given by appellee during his own testimony. By contrast, Mr. Ralph Dickson, testifying on behalf of appellant, stated that the "book value" of Vadakin, Inc. was not a meaningful way to measure the company's worth. He proposed that the corporation be evaluated using a "capitalization of earnings" approach to arrive at a fair market value. Using such an approach himself, Mr. Dickson opined that the fair market value of Vadakin, Inc. was $3,614,000.^[1] The matter was thereafter submitted to the court and both parties filed proposed findings of fact and conclusions of law as well as post-trial briefs.

On October 3, 1995, the trial court issued its own findings of fact and conclusions of law granting the parties a divorce. With respect to the issue of valuation, the court found that "book value" was the proper method by which to estimate the worth of Vadakin, Inc. It was determined that such "book value" of the company was $2,259,000. After subtracting out the cost basis of the shares as well as a thirty-three percent (33%) capital gains tax which could be incurred in a sale thereof, appellee's "present net worth" in the stock of his company was found to be $1,404,806. The court added to this figure the value of appellee's other assets ($1,050,000), subtracted out liabilities ($6,000), and arrived at a figure of $2,528,806 which was supposed to represent appellee's total net worth. Then, pursuant to the terms of the antenuptial agreement, the trial court allocated the first $1,000,000 to appellee. The remainder ($1,528,806) was divided by one-half (1/2) and this yielded a result of $764,403 which the trial court figured would be due appellant under the terms of the antenuptial agreement. Appellee was ordered to pay this sum to his ex-wife in quarterly installments of $38,069.97 together with ten percent (10%) interest per annum until the entire amount was paid. These and other findings were incorporated into a judgment entry which, after some disagreements between the parties as to form, was ultimately filed below on December 1, 1995. This appeal followed.^[2]

We begin our analysis of the cause sub judice with a review of some basic principles. This case will generally be governed by the terms of the antenuptial agreement executed by the parties on the day before their marriage in 1979. An "antenuptial agreement" is a contract entered into between a man and a woman in contemplation of their future marriage whereby the property rights and economic interests of either prospective spouse, or both, are determined and set forth. See generally Rowland v. Rowland (1991), 74 Ohio App.3d 415, 419; Sasarak v. Sasarak (1990), 66 Ohio App.3d 744, 747; McDole v. McDole (Jul. 7, 1990), Washington App. No. 89CA16, unreported. It is well settled law in Ohio that antenuptial agreements are enforceable so long as certain conditions are met. See Fletcher v. Fletcher (1994), 68 Ohio St.3d 464, 466; Kelm v. Kelm (1993), 68 Ohio St.3d 26, 28; Zimmie v. Zimmie (1984), 11 Ohio St.3d 94, 98.^[3] We need not be concerned with whether those conditions were met in the present case inasmuch as both parties have stipulated to the agreement's validity and enforceability. Rather, we must construe and apply the terms of that agreement to the facts and circumstances herein. The Ohio Supreme Court has ruled that antenuptial agreements are contracts and that the law of contract will generally apply to their application and interpretation. See Fletcher, supra, at 467. These are matters of law to be determined by the courts. See Davis v. Loopco Industries, Inc. (1993), 66 Ohio St.3d 64, 66; Latina v. Woodpath Development Co. (1991), 57 Ohio St.3d 212, 214; Alexander v. Buckeye Pipe Line Co. (1978), 53 Ohio St.2d 241 at paragraph one of the syllabus. A trial court's resolution of a legal issue is then reviewed de novo on appeal without any deference afforded to the result that was reached below. See Graham v. Dyrdock Coal Co. (1996), 76 Ohio St.3d 311, 313; Nationwide Mutual Fire Ins. Co. v. Guman Bros. Farm (1995), 73 Ohio St.3d 107, 108; Ohio Bell Telephone Co. v. Pub. Util. Comm. (1992), 64 Ohio St.3d 145, 147. With these principles in mind, we turn our attention to the construction and application of the antenuptial agreement at issue herein.

Appellant's first assignment of error challenges the trial court's decision to...