Court Opinion

ID: 4020640
Source: CourtListenerOpinion
Date Created: 2016-08-02 12:06:46.289906+00
Date Added: 2024-06-11T07:44:59.259417
License: Public Domain

IN THE COURT OF APPEALS OF NORTH CAROLINA

                                      No. COA15-792

                                   Filed: 2 August 2016

Johnston County, No. 13 CVD 000525

JEREMY KYLE TANNER, Plaintiff,

               v.

MARY MARGARET TANNER and SARA N. TANNER, Defendant.

        Appeal by defendant from order entered 12 January 2015 by Judge Addie H.

Rawls in District Court, Johnston County. Heard in the Court of Appeals 3 December

2015.

        No brief filed on behalf of plaintiff-appellee.

        The Williams Law Group, PC, by Teresa Y. Davis, for defendant-appellee.

        Mary McCullers Reece, for defendant-appellant.

        STROUD, Judge.

        Appellant Sara Tanner appeals from an order, entered 12 January 2015,

imposing a constructive trust upon her funds for the benefit of the marital estate of

plaintiff and defendant Mary Margaret Tanner. All parties to the appeal agree that

Appellant was properly joined as a necessary party, but because Appellant had not

been joined as a party prior to the hearing and order which determined her

substantive rights, the trial court did not have personal jurisdiction over her and we
                                  TANNER V. TANNER

                                  Opinion of the Court

must vacate the order to the extent that it addresses any issue other than joinder of

Appellant as a necessary party.

                                        I.      Facts

      Plaintiff (“Husband”) and defendant Mary Tanner (“Wife”) were married in

2004 and separated on 15 February 2013. On 15 February 2013, Husband filed a

complaint for custody and equitable distribution, including “interim distribution” and

“unequal division injunctive relief[.]” (Original in all caps.) On 22 March 2013, Wife

filed her answer and counterclaimed for child custody, child support, equitable

distribution, post-separation support and alimony, and attorney fees.

      On 14 April 2014, Wife filed a “MOTION IN THE CAUSE” in which she

requested joinder of Appellant Sara Tanner as a party, imposition of a constructive

trust, and a restraining order because she had learned during discovery “that

between October and December of 2012 [Husband] removed funds from his business

in the approximate amount of $335,569.60 and gave them to his mother Sara N.

Tanner.” Wife further alleged that Husband had “clearly anticipated his separation”

and was attempting to avoid having funds “distributed as marital property.” Wife

contended that “Sara N. Tanner is a necessary party and should be joined to the

equitable distribution action pursuant to Rule 21 of the N.C. Rules of Civil Procedure

for further determination of the ownership interest in the funds transferred to her by

Plaintiff.” Wife also requested imposition of “a restraining order to prohibit the use,

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                                   Opinion of the Court

movement, depletion, waste, conversion or disappearance of the funds that are the

subject of the constructive trust pending further hearings[.]”

      On 4 and 6 November 2014, the trial court held a hearing regarding the Wife’s

motion for joinder, imposition of a constructive trust, and issuance of a restraining

order. Husband and Wife each appeared at this hearing with their respective counsel.

Appellant was present because she was subpoenaed by Wife to appear and testify,

but she was not yet a party to the action and was not represented by counsel. From

our record, no summons was ever issued to Appellant nor was she ever served with

any other pleadings, motions, or notices.       After the hearing, on 6 January 2015,

counsel for Appellant filed a notice of appearance.

      On 7 January 2015, the case “came on for hearing regarding entry of the order”

from the November 2014 hearing. Counsel for Husband had accepted the draft of the

order as proposed by Wife’s counsel, but Appellant’s counsel, who had just made her

first appearance in the case the prior day, objected to entry of the order. Over the

objection, the trial court entered the order.

      On 12 January 2015, the trial court entered the order for “JOINDER &

CONSTRUCTIVE TRUST[.]”           The order contained detailed findings of fact and

conclusions of law regarding Husband’s transfer of funds to Appellant and ultimately

determined that a constructive trust should be imposed. The order decreed:

             1.     Sara N. Tanner is hereby joined as a party to the
                    pending claims for equitable distribution in this

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                                  Opinion of the Court

                   case.

             2.    Sara N. Tanner shall serve as trustee of the
                   remainder of the funds distributed to her by the
                   Plaintiff for the benefit of the Plaintiff and
                   Defendant’s marital estate. Those funds are
                   currently in an account managed by UBS. She shall
                   abide by and distribute those funds in accordance
                   with any subsequent Order of this Court equitably
                   distributing the parties’ marital estate.

             3.    Sara N. Tanner is hereby restrained from taking any
                   action depleting, wasting, moving or otherwise
                   causing the disappearance of the remainder of the
                   funds distributed to her by the Plaintiff. If Sara N.
                   Tanner is advised by the manager of the UBS
                   account in which the funds are located that some
                   action needs to be taken, then she shall immediately
                   advise counsel for both Plaintiff and Defendant. She
                   shall authorize the funds manager to speak with
                   counsel for both Plaintiff and Defendant. No action
                   shall be taken regarding the funds without prior
                   notice, input and agreement of all parties to the
                   equitable distribution claim.

The 12 January 2015 order was the first and only order to join Appellant as a party

to the case as a defendant. On 11 February 2015, Appellant gave notice of appeal

from the order.

                                II.    Interlocutory Appeal

      Appellant acknowledges that her appeal is interlocutory, but argues that we

should hear her appeal because “an order determining ownership and control of a

substantial amount of money affects a substantial right.” Appellant contends that

“[t]he order at issue here went well beyond preserving the status quo: the imposition

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                                   Opinion of the Court

of the constructive trust and the determination that the monies in Sara’s account

belonged to the marital estate made a final determination as to Sara’s rights.” We

agree.

         In Estate of Redden v. Redden, “the trial court entered partial summary

judgment in favor of plaintiff[, decedent’s estate,] and ordered defendant[, decedent’s

wife,] to pay plaintiff the sum of $150,000.00 plus costs.” 179 N.C. App. 113, 115, 632
S.E.2d 794, 797 (2006), disc. review allowed in part and remanded on other issues,

361 N.C. 352, 649 S.E.2d 638 (2007). This Court stated:

                     In determining whether a substantial right is
              affected a two-part test has developed—the right itself
              must be substantial and the deprivation of that substantial
              right must potentially work injury to appellant if not
              corrected before appeal from final judgment. A substantial
              right is a legal right affecting or involving a matter of
              substance as distinguished from matters of form: a right
              materially affecting those interests which a man is entitled
              to have preserved and protected by law: a material right.
                     Here, defendant asserts in her statement of grounds
              for appellate review that:
                     This appeal is taken from the Order, entered
                     June 27, 2005, granting the Plaintiff partial
                     summary judgment and ordering Defendant
                     Barbara Redden to pay to the Estate of
                     MONROE M. REDDEN, JR., deceased, the
                     sum of one hundred fifty thousand dollars
                     ($150,000.00) and costs. The Order appealed
                     affects a substantial right of Defendant
                     Barbara Redden by ordering her to make
                     immediate payment of a significant amount of
                     money; therefore, this Court has jurisdiction
                     over the Defendant’s appeal pursuant to N.C.
                     Gen. Stat. § 1–277 and N.C. Gen. Stat. § 7A–

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                    27(d).

Id. at 116-17, 632 S.E.2d at 797-98 (citations, quotation marks, and brackets omitted).

In accord with the reasoning in Estate of Redden, we consider Appellant’s appeal. See

id.

                                    III. Necessary Party

      Appellant argues that the trial court’s order imposing a constructive trust over

funds in her possession must be vacated because she was a necessary party to the

hearing. This case stands in a unique procedural posture since the trial court has

already agreed with Appellant’s contention that she is a necessary party. Conclusion

of law six of the order states, “Sara N. Tanner is a necessary party as contemplated

by Rule 19 of the N.C. Rules of Civil Procedure and the court cannot make a final

determination of equitable distribution without her being made a party to that

action.” Thus, Appellant is not arguing that she is a necessary party and should be

joined, since the trial court already determined that and ordered her joinder, but

rather she contends that the trial court had no authority to hear the merits of the

motion to impose a constructive trust on the funds in her possession as she was not a

party at the time that issue was being considered by the trial court.

      We note that the only parties who filed briefs on appeal are Appellant and

Wife. The trial court determined Appellant was a necessary party, but it did so in

the same order which also imposed a constructive trust on funds in her possession.

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                                   Opinion of the Court

Thus, at the time Appellant became a party, the issue of funds in her possession had

already been determined without her having any opportunity to be heard on the

matter as a party in the case. Wife essentially concedes that Appellant is a necessary

party, as she is the party who moved to join her in the first place.

       The trial court made many findings of fact, which we need not recite in detail,

since they are unnecessary for the issue on appeal. There is no dispute that Appellant

has “funds . . . in an account in her sole name managed by UBS” which the trial court

ordered she must hold as constructive trustee for the marital estate, although she

was never made a party until the order on appeal joining her and imposing the trust.

We have reviewed the entire transcript for some indication that Appellant appeared

before the trial court in any capacity other than a witness or that she consented to

proceed with hearing the substantive issue of the constructive trust, but she simply

did neither.

      It is true that counsel for Husband and Wife seemed to implicitly agree to try

the entire issue of whether a constructive trust should be imposed along with the

issue of joinder, but they did not obtain Appellant’s consent to try all of the

substantive issues. Perhaps a conversation occurred off of the record and all present,

including Appellant, understood and agreed to the intended scope of the hearing, but

the record before us does not in any way indicate this sort of agreement. The record

shows that Husband’s counsel appeared only as counsel for Husband, not as counsel

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                                  Opinion of the Court

for Appellant. Appellant had never been identified as a party in any pleading, but

only as a potential party in Wife’s motion for joinder. Appellant had not been issued

a summons, had not been served with a summons, was not served with any pleadings

or motions including the motion for joinder, and was not served with notice of any

proceedings before the trial court. Appellant did not on the record consent to be added

as a party or to proceed to hearing on an issue which would determine rights to funds

held in her bank account without service or representation; she appeared only as a

witness, under subpoena to appear and testify, and she was not represented by

counsel.

      Wife argues that the “facts and evidence regarding joinder, imposition of

constructive trust and ownership are closely intertwined [so] the requirement to have

separate hearings on those matters defeats judicial economy and underestimates the

ability of the trial court to understand the scope and purpose of evidence presented.”

Wife also contends that Appellant has failed to cite case law supporting “the

proposition that the lower court is required to hold a separate hearing determining

whether she is a necessary party and imposing a construct[ive] trust and a second

hearing determining ownership of the property in dispute.” But whether a separate

hearing is required is not the issue. Nor do we doubt in the least the trial court’s

ability “to understand the scope and purpose of the evidence presented” at a joint

hearing upon both the motion for joinder and the substantive issue of the constructive

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                                   Opinion of the Court

trust, but the trial court was also relying upon counsel for both parties -- Husband

and Wife -- to bring the case to the trial court with all of the necessary parties in

place, if they wished to proceed on both the issue of joinder as well as the substantive

issue raised by the motion to impose a constructive trust upon the funds Husband

transferred to Appellant.

      Our case law plainly states that “[a] judgment which is determinative of a

claim arising in an action in which necessary parties have not been joined is null and

void.” Rice v. Randolph, 96 N.C. App. 112, 113, 384 S.E.2d 295, 297 (1989). Wife

seeks to rely upon Upchurch v. Upchurch, 122 N.C. App. 172, 468 S.E.2d 61 (1996) to

support her argument, stating, “[t]his case is slightly different from Upchurch in that

the third party in that case, the son of the spouses, was named as a defendant in

Wife’s original action for equitable distribution.”       This distinction is no “slight[]

differen[ce:]” it is the crucial difference. Had Appellant been named as a party when

the complaint was filed and she was served with process, this would be an entirely

different case. Appellant would have had notice of all proceedings in the trial court

as well as the opportunity to be represented by counsel and to present evidence

regarding the issue of the ownership of property in her possession.       Here, unlike in

Upchurch, contrast id., the third party holding the funds in dispute was not an

original party to the action nor had she been added as a party when the trial court

determined the ownership of the funds. Thus, the order “is null and void” as to

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                                   Opinion of the Court

imposition of the constructive trust. Rice, 96 N.C. App. at 113, 384 S.E.2d at 297. As

we are vacating the portion of the order imposing a constructive trust, we need not

consider Appellant’s other issue on appeal.

      The trial court’s order is void to the extent that it imposes a constructive trust

over the UBS account because Appellant is a necessary party, but she was not party

to the action at the time of the hearing. Yet the trial court was also hearing Wife’s

motion for joinder of Appellant as a party, and it was not necessary for Appellant to

be a party or to have notice or to participate in the determination of that motion. In

fact, where it appears to a trial court that a necessary party is absent, the trial court

may refuse to “deal with the merits of the action until the necessary party is brought

into the action” and may correct this ex mero motu:

                    The absence of parties who are necessary parties
             under Rule 19 of the Rules of Civil Procedure does not
             merit a dismissal. When the absence of a necessary party
             is disclosed, the trial court should refuse to deal with the
             merits of the action until the necessary party is brought
             into the action. Any such defect should be corrected by the
             trial court ex mero motu in the absence of a proper motion
             by a competent person.

White v. Pate, 308 N.C. 759, 764, 304 S.E.2d 199, 202-03 (1983) (citations and footnote

omitted).

      The trial court had both the power and the duty to enter an order for Appellant

to be joined as a necessary party, but it could not determine the substantive issues

raised by the motion for constructive trust until after she was joined as a party. See

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                                         Opinion of the Court

generally id. Appellant does not challenge the trial court’s determination that she is

a necessary party. Thus, the trial court had authority to enter its ruling upon the

Wife’s motion for joinder of Sara as a necessary party, which is expressed in

paragraph 1 of the decree: “Sara N. Tanner is hereby joined as a party to the pending

claims for equitable distribution in this case.” Beyond this, the order is void and must

be vacated.

       On remand, a summons should be issued to Appellant, to be served upon her

along with the pleadings and trial court’s order granting the motion for joinder.1 At

any future hearing in this matter, the trial court shall not rely upon the findings of

fact or conclusions of law in the order on appeal, which are vacated, as to the

substantive issue of imposition of a constructive trust, since this order is void as to

the determination of the substantive issue of imposition of a constructive trust over

the funds at issue.

                                            IV.     Conclusion

       For the foregoing reasons, we affirm the order to the extent that it orders the

joinder of Appellant as a necessary party and vacate the remainder of the trial court

order addressing the substantive issues and imposing a constructive trust.                         We

       1  A summons need not be issued if Appellant consents to jurisdiction on remand without
issuance of a summons and formal service. See Grimsley v. Nelson, 342 N.C. 542, 545, 467 S.E.2d 92,
94 (1996) (“Jurisdiction of the court over the person of a defendant is obtained by service of process,
voluntary appearance, or consent.”)

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remand for a further hearing to address the substantive issues, at which all parties

will have proper notice and opportunity to be heard.

      AFFIRMED IN PART, VACATED IN PART, and REMANDED.

      Judges DIETZ and TYSON concur.

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