Lelak v. Lelak , 2019 Ohio 4807 ( 2019 )

[Cite as Lelak v. Lelak, 2019-Ohio-4807.]
IN THE COURT OF APPEALS OF OHIO
SECOND APPELLATE DISTRICT
MONTGOMERY COUNTY
M. ANGELA LELAK (aka SIDDALL) :
:
Plaintiff-Appellant : Appellate Case No. 28243
:
v. : Trial Court Case No. 1982-DR-1530
:
JOHN W. LELAK, JR. : (Appeal from Common Pleas Court –
: Domestic Relations Division)
Defendant-Appellee :
:
...........
OPINION
Rendered on the 22nd day of November, 2019.
...........
JAMES R. KIRKLAND, Atty. Reg. No. 0009731, 10532 Success Lane, Dayton, Ohio
45409
Attorney for Plaintiff-Appellant
DALMA C. GRANDJEAN, Atty. Reg. No. 0024841, One South Main Street, Suite 1590,
Dayton, Ohio 45402
Attorney for Defendant-Appellee
.............
TUCKER, J.
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{¶ 1} Angela Lelak (nka Siddall) appeals from a judgment of the Montgomery
County Court of Common Pleas, Domestic Relations Division, which held that John
Lelak’s obligation to pay Siddall retirements benefits was discharged in bankruptcy, that
he was not in contempt for failing to give Siddall a 10-day notice prior to withdrawing funds
from his retirement account, and that Siddall was not entitled to attorney fees. For the
reasons that follow, we reverse and remand for further proceedings.
I. Facts and Procedural History
{¶ 2} In 1983, Lelak and Siddall divorced after 15 years of marriage. Of relevance
hereto, the “final decree and judgment of divorce”, issued on January 31, 1983, stated:
As to the retirement benefits of the parties, the court is mindful that they
cannot be withdrawn by either party at the present time so long as the
parties are employed. The court finds that the total retirement of both
parties is Twenty Thousand Nine Hundred Thirty-Nine Dollars ($20,939.00)
which, for simplicity’s sake, is rounded off to $20,900. Plaintiff shall keep
the $87.00 in her retirement account and shall be entitled to receive from
the Defendant the sum of Ten Thousand Three Hundred Sixty-Three
Dollars ($10,363.00). The Defendant shall retain the balance. The
Defendant shall pay the sum of $10,363.00 to the Plaintiff commencing with
the first payday after the closing of the house in the amount of Fifty Dollars
($50.00) per week, unless Plaintiff has been paid in full by that time.
***
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IT IS FURTHER ORDERED that the Defendant is not allowed to withdraw
any retirement benefits from either account without ten days written notice
to the Plaintiff.
Dkt. No. 2.
{¶ 3} An amended final decree and judgment of divorce was entered on February
3, 1983 which, in pertinent part, amended the last paragraph to read:
It is further ordered that the Defendant is not allowed to withdraw any
retirement benefits from either account without ten days written notice to the
Plaintiff at any time prior to the full payment due to the Plaintiff.
Dkt. No. 4.
{¶ 4} In June 1983, Lelak filed a voluntary petition for relief under Chapter 7 of the
Bankruptcy Code. See In re Lelak, 36 B.R. 164 (Bankr.S.D.Ohio 1984). In his petition,
Lelak “named [Siddall] as an unsecured creditor for ‘non-alimony obligations arising from
the divorce judgment and decree, incl. retirement & Citicorp’ in the amount of $18,050.”
Id. at 166. Siddall filed a complaint in the bankruptcy court for a determination of “the
dischargeability of her claim for $10,363 in ‘retirement benefits’ against [Lelak] arising out
of their divorce Judgment and Decree.” Id. at 165.
{¶ 5} In the portion of the bankruptcy opinion labeled “DECISION,” the court stated,
“[i]If the $50 payments from the retirement funds are considered alimony, maintenance,
or support as alleged by [Siddall], they are not dischargeable per Section 523(a)(5);
whereas if the payments are considered as a property settlement, as alleged by [Lelak],
they are dischargeable.” Id. The court ultimately concluded that “the state court Decree
as to the division of the retirement fund constitute[d] a division of property and not alimony
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and support.” Id. at 169. Thus, the court found that the weekly payments were
dischargeable in bankruptcy.
{¶ 6} The bankruptcy court opinion then went on to state:
Finding that the weekly advance payments applying to the retirement
benefits do not constitute alimony and support, however, should not be
construed as interference with the state court Decree as to the division of
the marital property in esse.1 For that reason, this court has specifically
iterated and emphasized above the state court prohibition, “that the
Defendant is not allowed to withdraw any retirement benefits from either
account without ten days written notice to the Plaintiff” [And Plaintiff herein].
The extent to which such funds are vested and the extent to which they may
be so encumbered under the Ohio law is not now an issue sub judice, and
is a question of state law properly to be determined by the state court. In
any event, the judgment by this court should not be deemed any alteration
of or interference in the implementation of the division of the retirement
benefits property as vested on the date of the state court Decree, when
payable.
THEREFORE, IT IS HEREBY ORDERED that the debt from the retirement
benefits is dischargeable in bankruptcy as to the advance payments which
the state court ordered be paid in weekly installments.
Id. at 169.
1
“In esse” is defined to mean “[a]ctually existing.” Black’s Law Dictionary 397 (5th Ed.
1983).
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{¶ 7} In 1998, Lelak, without notice to Siddall, withdrew the pre-tax sum of
$181,035.44 from his retirement account. In April 2016, Siddall filed a motion to show
cause in which she sought to have Lelak found in contempt for failing to provide her with
the 10-day notice required by the decree. Her motion also sought an order requiring
Lelak to pay her the monies owed under the decree as well as any growth thereon.
Finally, her motion requested an award of attorney fees and costs.
{¶ 8} Following discovery, hearings were conducted in April 2017, August 2017
and June 2018. Both parties presented testimony of attorneys engaged in the practice
of bankruptcy law who provided opinions as to the correct interpretation of the bankruptcy
court’s opinion. The parties also presented expert witnesses regarding the present day
value of Siddall’s share of the retirement account based upon the assumption that she
had been paid her portion thereof. Thereafter, the magistrate issued a decision finding
Lelak in contempt for failing to provide the required 10-day notice and for failing to pay
Siddall her share of the benefits after their withdrawal. The magistrate awarded Siddall
the sum of $90,053.64 as her portion of the retirement account, as well as $14,652 in
attorney fees.
{¶ 9} After Lelak filed objections, the trial court issued a judgment in which it stated
that the only mechanism in the divorce decree for payment of Siddall’s share of the
retirement benefits was the order that Lelak make weekly payments to her. The trial
court reasoned that, because the decree set forth no other method for payment, “[o]ne
could assume then, that the entire $10,636.00 owed by [Lelak] to [Siddall] was to be
discharged in $50.00 weekly installments until satisfied, about 4 years, unless he paid her
a lump sum to satisfy the obligation.” Dkt. No. 88. The trial court further stated that
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there was no dispute that those weekly payments had been discharged by the bankruptcy
court.
{¶ 10} The trial court went on to discuss the language used by the bankruptcy court
regarding its refusal to interfere with the state divorce court, as set forth in paragraph six
above, and stated:
After consideration, the court finds that [the bankruptcy judge] was being
precautionary in his syntax. He did not intend to make a determination as
to the viability of the debt owed by [Lelak] to [Siddall]. This court believes
that [the bankruptcy judge], by stating the above, made sure that his
Decision would not be interpreted as interfering with the divorce court’s
authority to determine the amount of [Siddall’s] share of the retirement
benefits, the method by which her share would be paid, and whether her
share was vested and/or encumbered. [The bankruptcy judge’s]
responsibility was to determine whether the state court’s order to pay
[Siddall] her share of the retirement benefits was intended as a property
division and not support or maintenance. [The bankruptcy judge]
ultimately discharged the debt “from the retirement benefits … as to the
advance payments which the stated court ordered.”
(Emphasis in original.) Id.
{¶ 11} Based upon this reasoning, the trial court found as follows:
[The bankruptcy judge’s] intent was to discharge the state court’s order for
[Lelak] to pay the $10,636.00 in retirement benefits, payable in $50.00
installments. The same well-reasoned analysis of the support/property
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division extends to the state court order that [Lelak] pay [Siddall]
$10,363.00. There was no indication that the order to pay $10,363.00 was
intended as anything other than to provide [Siddall] with her share of the
parties’ property division. Thus, this court finds that [the bankruptcy
judge’s] order to discharge the weekly payments discharged the underlying
obligation to pay [Siddall] $10,363.00 as well.
(Emphasis in original.) Id.
{¶ 12} The trial court reversed the magistrate’s finding of contempt as well as the
award of $90,053.64 and attorney fees.
{¶ 13} Siddall appeals.
II. Analysis
{¶ 14} Siddall asserts the following three assignments of error on appeal:
THE TRIAL COURT ABUSED ITS DISCRETION WHEN IT
OVERRULED THE CONTEMPT ORDER AGAINST JOHN FOR THE
FAILURE TO PAY ANGELA HER SHARE OF HIS RETIREMENT
BENEFITS.
THE TRIAL COURT ABUSED ITS DISCRETION BY OVERRULING
THE MAGISTRATE’S DECISION AND FINDING JOHN LELAK IS NOT IN
CONTEMPT FOR FAILING TO PROVIDE ANGELA 10 DAYS NOTICE
PRIOR TO HIS WITHDRAWAL OF FUNDS FROM HIS RETIREMENT
ACCOUNTS.
THE TRIAL COURT ABUSED ITS DISCRETION BY OVERRULING
THE AWARD OF ATTORNEY FEES IN THE AMOUNT OF $14,654.00.
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{¶ 15} This case centers on the interpretation of the bankruptcy court decision in
the adversarial proceeding brought by Siddall in Lelak’s 1983 bankruptcy action. Siddall,
Lelak and the lower court agree that the bankruptcy court discharged the $50 recurring
weekly payments. However, the question at issue is whether the bankruptcy court’s
decision also acted to deprive Siddall of all claims to Lelak’s retirement account. As
noted, the magistrate concluded that the overall obligation was not discharged and held
Lelak in contempt. The trial court disagreed, concluding that the entire obligation was
discharged, and that Lelak thus was not in contempt. Therefore, we must determine
whether the trial court’s interpretation of the bankruptcy decision was correct.
{¶ 16} “While outcomes in bankruptcy cases largely depend on the provisions of
the Bankruptcy Code, many aspects of bankruptcy cases, frequently critical aspects,
depend on applicable state law.” In re Jeffers, 572 B.R. 681, 684-685 (Bankr.N.D.Ohio
2017). “Most fundamental among those is that property interests are created and
defined by state law and bankruptcy courts do not disturb them unless some federal
interest requires a different result.” Id., citing Butner v. United States, 440 U.S. 48, 55,
99 S. Ct. 914, 59 L. Ed. 2d 136 (1979).
{¶ 17} In Ohio, pension or retirement benefits accumulated during the course of a
marriage are marital assets subject to property division in a divorce action. Graham v.
Graham, 2d Dist. Greene No. 92-CA-114, 1993 WL 350038, *4, citing Holcomb v.
Holcomb, 44 Ohio St. 3d 128, 541 N.E.2d 597 (1990). Further, Ohio courts have held
that “[o]nce the division of property is fixed by the court, both spouses are legally entitled
to the share respectively allotted to them.” Zimmie v. Zimmie, 11 Ohio St. 3d 94, 97, 464
N.E.2d 142 (1984), citing Wolfe v. Wolfe, 46 Ohio St. 2d 399, 412-413, 350 N.E.2d 413-9-
(1976). See also Erb v. Erb, 75 Ohio St. 3d 18, 22, 661 N.E.2d 175 (1996) (divorce
decree found to have awarded wife a separate ownership interest in the husband’s
pension). Bankruptcy courts have also determined that an award to a wife of a portion
of the husband’s pension becomes the “wife's sole and separate property.” In re Wilson,
158 B.R. 709, 711 (Bnkr.S.D.Ohio 1993), citing Adamo v. Ledvinka, 144 B.R. 188, 192
(Bankr.M.D.Ga.1992), citing Bush v. Taylor, 912 F.2d 989, 993 (8th Cir.1990); In re
Benich, 811 F.2d 943, 945 (5th Cir.1987); In re Chandler, 805 F.2d 555 (5th Cir.1986); In
re Stolp, 116 B.R. 131 (Bankr.W.D.Wis.1990); In re Corrigan, 93 B.R. 81(Bankr.E.D.Va.1988); In re Mace, 82 B.R. 864, 868 (Bankr.S.D.Ohio 1987); In re
Manners, 62 B.R. 656 (Bankr.D.Mont.1986); In re Hall, 51 B.R. 1002 (S.D.Ga.1985).
{¶ 18} Under the terms of the parties’ divorce decree, the approximate $20,000 in
Lelak’s retirement account was appropriately designated as marital property, and Siddall
was awarded one-half of that amount. Therefore, before the bankruptcy petition was
filed, there existed a valid pre-petition judicial division of marital property which granted
Siddall an interest in the subject property. That interest vested ̶ that is, became fixed
̶ at the time the divorce decree was filed. However, at the time of the divorce, Lelak’s
retirement benefits with the State Teachers Retirement System (STRS) were not subject
to a qualified domestic relations order, nor could the benefits be withdrawn as Lelak had
not retired. Thus, the divorce court ordered Lelak to make advance payments in the sum
of $50 per week to Siddall to satisfy her portion of the account.
{¶ 19} The analysis set forth in the bankruptcy court’s opinion focused on whether
the $50 weekly payments were dischargeable under the provisions of 11 U.S.C.
523(a)(5), which provided, in pertinent part, that “[a] discharge * * * does not discharge
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an individual debtor from any debt * * * to a spouse, former spouse, or child of the debtor,
for alimony to, maintenance for, or support of both spouse or child, in connection with
* * *” a divorce action. The court found that the payments were not in the nature of
support, and were thus dischargeable.
{¶ 20} A reading of the bankruptcy court decision demonstrates that the
bankruptcy court recognized a distinction between the $50 weekly payments and Siddall’s
fixed property interest in the retirement account. The discharge of the $50 payments
made sense, because any advance payments made by Lelak prior to obtaining access to
the retirement funds necessarily had to be made from his separate property. In other
words, the requirement that Lelak pay Siddall out of his separate property created a
debtor-creditor relationship. Thus, as found by the bankruptcy court, such payments
were a dischargeable debt.
{¶ 21} The indicated distinction is set forth in that portion of the bankruptcy court
decision which states that the issues of whether the retirement funds were vested and
whether they could be encumbered were a matters of state law that were not before it.
The court also stated that its judgment did not interfere with, or alter, the implementation
of the division of the retirement funds. Again, such an interpretation makes sense
because a complete discharge of Siddall’s underlying right to her portion of the pension
would result in a windfall to Lelak as he would retain the entirety of the pension, which
had been deemed marital property to be divided between the parties.
{¶ 22} Based upon our interpretation of the bankruptcy decision, we conclude that
the trial court erred in finding that the bankruptcy court discharged Siddall’s interest in the
retirement account. The decree of divorce granted Siddall a property interest in the
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retirement account, and the bankruptcy court’s decision did not divest her of her judicially-
declared ownership interest.
{¶ 23} With this determination in mind, we now turn to Siddall’s assignments of
error. As noted, her first two assignments of error relate to her claim that Lelak’s failure
to pay her the awarded pension and the failure to give her notice of the withdrawal of the
pension benefits constitute contempt. Her final assignment of error relates to the
attorney fees awarded by the magistrate in connection with its finding of contempt.
{¶ 24} Since the trial court’s assessment of the issues of contempt and attorney
fees was based upon an incorrect interpretation of the bankruptcy court’s decision and
judgment, we conclude that it necessarily erred in its review of the magistrate’s decision
and Lelak’s objections thereto. Thus, a reversal and remand is required. As issues of
contempt require findings of fact, we note that whether Lelak should be found in contempt
is a matter for the trial court to address in light of our decision. However, our decision
should not be construed as requiring a contempt finding, an award of attorney fees, or a
finding that Siddall is entitled to a particular monetary award.2
{¶ 25} Accordingly, Siddall’s assignments of error are sustained.
V. Conclusion
{¶ 26} Siddall’s assignments of error being sustained, the judgment of the trial
court is reversed and this matter is remanded to the trial court for further proceedings.
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2
A contempt finding in Lelak’s favor would conclude Siddall’s pending motion. But, since
Siddall’s interest in the STRS account was not discharged in bankruptcy, such a finding
would not resolve Lelak’s liability to Siddall for her interest in the now-depleted account.
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DONOVAN, J., concurs.
HALL, J., concurs:
{¶ 27} I agree with the analysis, conclusions and disposition in the lead opinion. I
write separately though to express what our opinion and decision does not include.
{¶ 28} Although we have determined that the trial court was incorrect in rejecting
the magistrate’s decision and in its conclusion that the 1984 bankruptcy court decision
discharged Siddall’s claim to any part of the STRS account, our reversal and remand do
not mean the trial court must adopt the magistrate’s decision. There are other aspects of
the magistrate’s decision, and the objections thereto, that the trial court, in its sound
discretion, might address on remand.
{¶ 29} For instance, the 1983 divorce decree does not provide any means for
distribution of Siddall’s interest other than the periodic payments which were eliminated
by the bankruptcy court. Defendant’s objections to the Magistrate’s Decision III and VI.
Therefore, there could be a question whether a motion for contempt is a proper manner
to modify the 1983 decree to provide distribution to Siddall, unless the motion were treated
in part as a motion for relief from judgment, because the decree itself did not provide for
any alternative distribution.
{¶ 30} The delay between the bankruptcy and the contempt motion may be
insufficient to deny Siddall an equitable portion of the funds to which Lelak had access
and use, because the motion was made 32 years after the bankruptcy which eliminated
the decree’s enforceable order for distribution and 18 years after Lelak apparently retired
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and gained access to the STRS account funds.3 But such a delay might be considered
in determining whether Lelak should be held in contempt for violating an order in the
divorce decree that was arguably vitiated by the 1984 bankruptcy decision, especially
when the contempt motion was not made until 18 years after withdrawal of the funds.
{¶ 31} Our decision does not require the trial court to adopt the magistrate’s
evaluation of the current-day value of Siddall’s share of the pension or whether that
amount could be paid with tax-deferred dollars. There are markedly different expert
opinions of the December 31, 2016 value of Siddall’s interest from $28,600.00 to
$90,053.64. Our decision does not limit the sound discretion of the trial court, upon
remand, from utilizing any of the provisions of Civ.R. 53 in proceeding upon its
independent evaluation of the magistrate’s decision and its ruling on the objections.
Copies sent to:
James R. Kirkland
Dalma C. Grandjean
Hon. Timothy D. Wood
3
“R.C. 3307.711 (now R.C. 3307.42) provides that the right to receive a retirement benefit
under the STRS vests at the time the benefit is actually granted, and not before” Smith v.
State Teachers Retirement Bd., 10th Dist. Franklin No. 97APE07-943, 1998 WL 54362,
*3 (Feb. 5, 1998).