Modification of Separation Agreement on Silent Issue

Morgan v. Morgan
2010-Ohio-1685
Montgomery County Court of Appeals
-Modification of Separation Agreement

David and Connie Morgan had their marriage terminated by Decree of Dissolution on October 11, 2002. The Decree incorporated the parties’ Amended Separation Agreement in which they divided their joint business interests. The parties’ owned several businesses. Connie’s appeal is in regards to the assets of D.C. Investments, specifically 714 Albany Street.

The Decree of Dissolution stated the property at 714 Albany Street will go to wife and she shall be solely responsible for the mortgage on said property. The Decree also stated the parties shall equally divide all remaining assets and debts of this partnership.

Connie sold the 714 Albany property, paid the balance due on the first mortgage and paid the remaining balance of $46,215.16 due on the second mortgage. Connie contended that the parties’ wholly forgot about the second mortgage on the property and argued that David should be responsible for that obligation because the proceeds of the loan secured by the second mortgage had been used to benefit a company David was awarded.

Connie filed a 60(B) motion asking the court to order David to reimburse her the amount paid on the second mortgage. After a hearing, the court ordered David to reimburse Connie $46,215.16. David objected to the Magistrate’s decision and ultimately appealed.

The appellate court reversed the Trial Court on the grounds there were provisions in the Decree that resolved issues like the one presented and was, therefore, not ambiguous.

From the Opinion:

{¶ 14} R.C. 3105.171(B) requires a court that grants a decree of divorce to divide the parties’ marital property equitably between them. "Marital property" is any real or personal property or any interest therein that either or both spouses currently owns. R.C. 3105.171(A)(3)(a)(i), (ii). R.C. 3105.171 is silent with respect to debts. Generally, when an asset is awarded to one of
the spouses in a division of marital property, a debt obligation that encumbers the asset follows the property award. Therefore, as between the parties to a divorce action, the debt becomes an
obligation of the party who is awarded the asset, to the extent that the debt is secured by the asset. The decree may create an exception by ordering a distributive award requiring the other
party to pay some or all of the debt obligation.

{¶ 15} The Amended Separation Agreement incorporated into the final decree of dissolution provided that D.C. Investments would be dissolved, that Connie would be responsible for the mortgage to the National City Bank on the property at 714 Albany Street, and that the parties would equally divide the remaining debts of D.C. Investments. Connie asked the court to order David to reimburse her for the $46,215.16 balance remaining on the second mortgage obligation that Connie paid when she sold the property. The second mortgage on the property at 714 Albany Street was a debt on an asset of D.C. Investments which the court found was not specifically identified in the Amended Separation Agreement. The trial court relied on Civ.R. 60(B) to modify the provision of the Amended Separation Agreement regarding the debt obligation on the
mortgage to National City Bank, requiring David to be responsible for the entire debt obligation on the second mortgage. We believe the court erred in so doing.

{¶ 16} R.C. 3105.65(B) provides:
{¶ 17} "A decree of dissolution of marriage has the same effect upon the property rights of the parties, including rights of dower and inheritance, as a decree of divorce. The court has full power to enforce its decree and retains jurisdiction to modify all matters pertaining to the allocation of parental rights and responsibilities for the care of the children, to the designation
of a residential parent and legal custodian of the children, to child support, to parenting time of parents with the children, and to visitation for persons who are not the children’s parents. The court, only in accordance with division (E)(2) of section 3105.18 of the Revised Code, may modify the amount or terms of spousal support."

{¶ 18} R.C. 3105.65(B) impacts Connie’s request and the court’s order in two ways. First, the provision in that section stating that a court that grants a decree of dissolution "has full power
to enforce its decree" has been applied to permit the court to construe a term of a separation agreement which is ambiguous, when there is good faith confusion concerning its requirements. In re dissolution of Marriage of Seders (1987), 42 Ohio App.3d 155; Saeks v. Saeks (1985), 24 Ohio App.2d 67; Bond v. Bond (1990), 69 Ohio App.3d 225; Smith v. Smith, Darke App. No. 09CA06, 2010-Ohio-31.

{¶ 19} Second, because per R.C. 3105.65(B) a decree of dissolution has the same effect on the property rights of the parties as a decree of divorce, the decree of dissolution is likewise subject to the limitation regarding property divisions in divorce actions that appears in R.C. 3105.171(I), which states: "A division or disbursement of property or a distributive award made under this section is not subject to future modification by the courts."

{¶ 20} There may be good faith confusion in this instance: the parties had extensive and intertwining financial interests which they made a good faith effort to divide between them. However, the Amended Separation Agreement, to the extent that it expressly dealt with any mortgage to National City Bank, imposed no obligation on David. The only obligation in that regard was imposed on Connie. Therefore, the court did not construe a term of its decree that was ambiguous. Indeed, the catch-all provision of the Amended Separation Agreement unambiguously requires the parties to equally divide debt obligations not specifically identified. Rather than following that course, the court modified the decree to impose an obligation on David that the Amended Separation Agreement did not. In doing so, the court ordered a distributive award requiring David to reimburse Connie, and thereby modified a property division order, relief which is specifically prohibited by R.C. 3105.171(I).

{¶ 21} Though a property division award may not be modified, a decree in which the award is made may be vacated pursuant to Civ.R. 60(B). Ordinarily, granting Civ.R. 60(B) relief requires that the entire judgment be vacated. However, the Supreme Court has held that a single provision of a decree of dissolution may be vacated pursuant to Civ.R. 60(B) when the incorporated separation agreement provides for future modifications by the court. In re Whitman (1998), 81 Ohio St.3d 239.

{¶ 22} "While the General Assembly has given courts continuing jurisdiction to modify those sections of a separation agreement that pertain to parental rights and responsibilities, R.C. 3105.63 and 3105.65 do not create continuing jurisdiction for a trial court to modify property divisions in separation agreements. However, nothing in the statutes suggest that parties are precluded from voluntarily including a provision for continuing jurisdiction in their separation agreement. . . .

{¶ 23} "Therefore, in a dissolution proceeding, if the parties have incorporated into the separation agreement a clause that allows the court to modify the agreement by court order, and the court has approved this agreement and incorporated it into the decree of dissolution, the court has continuing jurisdiction to enforce this clause. If the parties both consent to a modification of the agreement or actually incorporate a means for modification into their settlement agreement, the element of mutual consent has not been lost, and there is no reason to require vacation of the entire decree in order to grant relief under a Civ.R. 60(B) motion. Consequently, a trial court may grant relief from judgment under Civ.R. 60(B)(1), (2), or (3) as to the property division in the separation agreement without vacating the decree of dissolution where the parties to a dissolution have expressly agreed in a separation agreement that the agreement may be modified by court order and the agreement has been incorporated into the decree." Id. at 244.

{¶ 24} The trial court relied on Civ.R. 60(B)(5). The court could not rely on Civ.R. 60(B)(1), (2) or (3) because more than one year had passed since the decree of dissolution was granted. Civ.R. 60(B)(5), if it applies, permits relief on broader equitable grounds. Nevertheless, we believe its application is subject to the same constraint announced in Whitman regarding modifications of property division provisions in a separation agreement incorporated in a decree of dissolution.

{¶ 25} Article X of the Amended Separation Agreement is entitled "MODIFICATION BY PARTIES," and states: "Except as herein otherwise provided, this agreement shall not be altered, or modified unless it be done in writing signed by both parties." This provision does not allow the court to modify the terms of the Amended Separation Agreement. Rather, only through a subsequent agreement of the parties may the court modify the terms of the Amended Separation Agreement. Clearly, these parties never came to an agreement on an acceptable modification. Therefore, the trial court erred when it relied on Civ.R. 60(B) to modify the terms of the Amended Separation Agreement. In re Whitman.