Court Opinion

ID: 2756398
Source: CourtListenerOpinion
Date Created: 2014-12-02 14:04:36.905427+00
Date Added: 2024-06-11T11:26:51.781033
License: Public Domain

An unpublished opinion of the North Carolina Court of Appeals does not constitute
controlling legal authority. Citation is disfavored, but may be permitted in accordance
with the provisions of Rule 30(e)(3) of the North Carolina Rules of Appellate Procedure.

                                NO. COA14-227
                       NORTH CAROLINA COURT OF APPEALS

                             Filed:      2 December 2014

DENISE S. UPCHURCH,
     Plaintiff

       v.                                       Alamance County
                                                No. 10 CVD 2185
CHARLES D. UPCHURCH,
     Defendant

       Appeal by defendant from order entered 8 October 2013 by

Judge   James    K.   Roberson      in    Alamance    County    District    Court.

Heard in the Court of Appeals 13 August 2014.

       No brief filed on behalf of plaintiff-appellee.

       The Vernon Law Firm, P.A., by Benjamin D. Overby and Wiley
       P. Wooten, for defendant-appellant.

       DAVIS, Judge.

       Charles D. Upchurch (“Defendant”) appeals from the trial

court’s 8 October 2013 alimony order.                 On appeal, he contends

that    the   trial    court      erred    by   (1)   improperly       considering

Defendant’s     earning    capacity       for   purposes   of   determining      his

alimony     obligation;     and    (2)    awarding    alimony     to    Denise    S.

Upchurch (“Plaintiff”).            Specifically, Defendant contends that
                                         -2-
the trial court’s conclusion that he suppressed his income in

bad faith was unsupported by competent evidence.                     After careful

review, we vacate and remand for further proceedings.

                                Factual Background

    Plaintiff and Defendant were married on 15 September 2002,

separated     on    1    June   2010,    and     subsequently     divorced.        No

children were born from the parties’ marriage.

    On   29    July        2010,    Plaintiff    filed     a   complaint    against

Defendant          seeking         postseparation         support,       equitable

distribution,       and     alimony.         Defendant    filed   an   answer     and

counterclaim, seeking equitable distribution and requesting that

Plaintiff’s spousal support claims be denied.                     On 10 January

2011, the trial court entered an order requiring Defendant to

pay postseparation support to Plaintiff of $1,000.00 per month

for 15 months beginning 1 August 2010.

    Prior     to     and     during    the    marriage,    Defendant     owned    and

operated a lawn care business, Upchurch Lawn Care.                         Defendant

was employed by Upchurch Lawn Care, participated in the actual

landscaping work, and received monthly income from the business

throughout the course of the marriage.                   Defendant’s son, Wesley

Upchurch,   was      a    regular     employee   of   Upchurch    Lawn     Care   for

approximately 13 years.             During the marriage, Plaintiff handled
                                            -3-
bookkeeping         for    Upchurch      Lawn      Care        but    did     not    receive

compensation for doing so.               Upchurch Lawn Care paid for numerous

personal expenses of the parties, including expenses related to

dining out and vacations as well as personal household bills.

During the marriage, Plaintiff was employed by Mobile Lift of

Burlington, a construction equipment company, until she was laid

off in August 2009.               After being laid off, Plaintiff worked

several waitressing jobs until she found part-time work with

Dougherty Equipment Company on 3 May 2011.                             Since 1 November

2011,    Plaintiff        has   worked     full-time      for        Dougherty      Equipment

Company.          In April 2012, Defendant sold Upchurch Lawn Care to

his     son       for   $130,000.00      and      began    receiving          payments     of

$1,500.00         per   month   in   May    2012.         In    June    2012,       Defendant

applied for and began receiving Social Security benefits.

      On      7    September    2012,    the    trial     court       heard    Plaintiff’s

claim for alimony.1             On 8 October 2013, the trial court entered

an order in which it concluded that Defendant “exercised bad

faith in selling his lawn care business, stopping his employment

in the lawn care business, and choosing to live off of his

inheritance when considered in light of his potential obligation

1
  Prior to the hearing, the parties settled their equitable
distribution claims in a consent judgment entered 7 September
2012.
                                           -4-
to    provide   support    for    Plaintiff.”            The    trial   court     also

determined that (1) based on Defendant’s earning capacity, he is

a supporting spouse; (2) Plaintiff is a dependent spouse; and

(3)     awarding   alimony       to        Plaintiff     was     equitable       after

considering all relevant factors.                  The trial court imputed an

annual    income   of   $75,000.00         to    Defendant     and   concluded    that

Plaintiff was entitled to $1,000.00 per month in alimony from

Defendant for a period of 21 months.                      Defendant gave timely

notice of appeal to this Court.

                                      Analysis

       On appeal, Defendant argues that the trial court erred in

concluding that he acted in bad faith by selling his business.

Consequently, he contends that the trial court could not impute

income to him under the earning capacity rule and, therefore,

erred    in   concluding   that       he    was    the   supporting     spouse    for

purposes of alimony.

       “The decision to award alimony is a matter within the trial

court’s sound discretion and is not reviewable on appeal absent

a manifest abuse of discretion.”                 Megremis v. Megremis, 179 N.C.

App. 174, 181, 633 S.E.2d 117, 122 (2006) (citation, quotation

marks,    and   brackets   omitted).             “An   abuse   of    discretion   has

occurred if the decision is manifestly unsupported by reason or
                                   -5-
one so arbitrary that it could not have been the result of a

reasoned decision.”      Kelly v. Kelly, ___ N.C. App. ___, ___, 747
S.E.2d 268,   272-73    (2013)   (citation   and   quotation   marks

omitted).

    It is well settled that

            [e]ffective appellate review of an order
            entered by a trial court sitting without a
            jury   is   largely    dependent   upon   the
            specificity by which the order’s rationale
            is articulated.      Evidence must support
            findings; findings must support conclusions;
            conclusions must support the judgment. Each
            step of the progression must be taken by the
            trial judge, in logical sequence; each link
            in the chain of reasoning must appear in the
            order itself.    Where there is a gap, it
            cannot be determined on appeal whether the
            trial court correctly exercised its function
            to find the facts and apply the law thereto.

Coble v. Coble, 300 N.C. 708, 714, 268 S.E.2d 185, 190 (1980);

see also Spicer v. Spicer, 168 N.C. App. 283, 287, 607 S.E.2d
678, 682 (2005) (“The trial court must . . . make sufficient

findings of fact and conclusions of law to allow the reviewing

court to determine whether a judgment, and the legal conclusions

that underlie it, represent a correct application of the law.”).

    Alimony is ordinarily based upon a party’s actual income at

the time of the hearing.       Kowalick v. Kowalick, 129 N.C. App.
781, 787, 501 S.E.2d 671, 675 (1998).      However, the trial court

may impute income based on the party’s earning capacity if the
                                                -6-
trial court determines that the party suppressed his income in

bad faith.        Id.; see also Megremis, 179 N.C. App. at 182, 663

S.E.2d at 123 (“It is well established that a trial court may

consider a party’s earning capacity only if the trial court

finds the party acted in bad faith.”).                                 Bad faith within the

context of alimony means “that the spouse is not living up to

income potential          in order to avoid or frustrate the support

obligation.”        Works v. Works, 217 N.C. App. 345, 347, 719 S.E.2d
218,   219     (2011)      (citation           and    quotation          marks    omitted       and

emphasis added).

       Bad faith may be found “from evidence that a spouse has

refused   to      seek    or    to       accept       gainful          employment;    willfully

refused   to      secure       or    take      a     job;    deliberately         not    applied

himself      or     herself         to     a       business        or      employment;      [or]

intentionally        depressed        income         to     an    artificial      low.”         Id.

(citation      and       quotation        marks        omitted).             As   such,     when

determining       whether      the       imputation         of    income     to   a     party    is

appropriate,        “[t]he     dispositive            issue       is    whether   a     party   is

motivated      by     a    desire         to       avoid         his     reasonable      support

obligations.”        Wolf v. Wolf, 151 N.C. App. 523, 527, 566 S.E.2d
516, 519 (2002).
                                            -7-
    Intent        is   a   mental     attitude     which    “must    ordinarily      be

proven, if proven at all, by circumstantial evidence, that is,

by proving facts from which the fact sought to be proven may be

inferred.”       Roberts v. McAllister, 174 N.C. App. 369, 378, 621
S.E.2d 191, 198 (2005) (citation and quotation marks omitted),

appeal dismissed, 360 N.C. 364, 629 S.E.2d 608 (2006).                         Thus, to

support its conclusion that a party suppressed his income in bad

faith,     the    trial     court’s    findings      must       reflect   facts     and

circumstances from which bad faith may be inferred.                            See id.

(explaining       that     “[i]n    order    to    base    an    award    on    earning

capacity    the    finder     of    fact    must   have    before    it   sufficient

evidence of the proscribed intent” (citation and quotation marks

omitted)).

    Here, the trial court made the following relevant findings

of fact regarding Defendant’s income and earning capacity:

            11. Defendant sold his lawn care business to
            his son, Wesley Upchurch, on or about April
            2, 2012.     The total purchase price was
            $130,000.00[,] which represented the Fair
            Market Value of any equipment plus the
            goodwill and other intangible property of
            the lawn care business.

            12. On or about April 2, 2012, Wesley
            Upchurch signed a Promissory Note in favor
            of   Defendant,   Charles   Upchurch,   for
            $130,000.00, at zero percent interest, with
            payments of $1,500.00 per month beginning
            May 2012.    The payout extends until June
                     -8-
2019.

13. Defendant indicated that his reason for
selling his business to his son in May 2012
was because of his (Defendant’s health). He
indicated that he cannot “do it anymore.”
Particularly he stated that he “can’t get
out   in   95    degree   weather    anymore.”
Plaintiff acknowledged in her testimony that
Defendant went out to the sites of his
customers and did the landscaping work. His
son was generally a regular employee of the
landscaping business, and that he would
sometimes pick up a part-time employee from
time to time if it were a particularly busy
time.      This    testimony   by    Plaintiff
corroborates that Defendant’s involvement in
the landscaping business was not in a less
physically   taxing   position   such   as   a
supervisor, but he was in fact actively
engaged in the landscaping work itself.

14. Defendant did not have the business
appraised, but set the price based upon the
advice of an accountant to average three
years of receipts to determine the purchase
price.

15. According to the property settlement of
the parties, the lawn care business was
allocated to Defendant as his separate
property and was his to sell.

. . . .

18.   Defendant   applied   for   and  began
receiving Social Security Benefits in June,
2012 for May 2012.     He receives a monthly
benefit of $1,424.00 on or about the second
Wednesday of each calendar month. Defendant
obtained   information    from   the  Social
Security Office that his benefit at age 66,
if he retired at that age, would be
$1,677.00, as compared to the $1,424.00 he
                                     -9-
           would receive as a monthly benefit at age
           62.

           . . . .

           21.   Defendant’s  mother  passed  away   in
           February 2010.    He inherited approximately
           $500,000.00 from his mother’s estate as his
           separate property.

    The trial court then concluded that

           Defendant exercised bad faith in selling his
           lawn care business, stopping his employment
           in the lawn care business, and choosing to
           live off of his inheritance when considered
           in light of his potential obligation to
           provide support for Plaintiff.     The court
           imputes an income to Defendant in the amount
           of at least $75,000.00 per year gross.

    We recognize that a determination of bad faith resulting in

the application of the earning capacity rule “is best made on a

case by case analysis by the trial court.”                Pataky v. Pataky,

160 N.C. App. 289, 307, 585 S.E.2d 404, 416 (2003), aff'd per

curiam, 359 N.C. 65, 602 S.E.2d 360 (2004).              Here, however, the

trial   court’s   determination      of    bad   faith   is   not   adequately

supported by its findings of fact.               While the court concluded

that Defendant’s sale of his business was in bad faith “when

considered   in   light   of   his   potential      obligation      to   provide

support for Plaintiff,” the trial court failed to make adequate

findings to support that ultimate determination.               Specifically,

the trial court’s findings fail to demonstrate that Defendant
                                             -10-
sold his business, thereby reducing his income, “in order to

avoid    or     frustrate         [his]    support       obligation”        to    Plaintiff.

Works, 217 N.C. App. at 347, 719 S.E.2d at 219 (citation and

quotation marks omitted).

        “[A] voluntary reduction in income is insufficient, without

more, to support a finding of deliberate income depression or

bad faith.”          Pataky, 160 N.C. App. at 307, 585 S.E.2d at 416.

We therefore remand to the trial court so that it may make

further       findings      of     fact     to     support     its        conclusion       that

Defendant suppressed his income in bad faith.                                If the trial

court ultimately determines that the evidence is insufficient to

show bad faith, it must utilize Defendant’s actual income when

considering Plaintiff’s alimony claim.                       See Quick v. Quick, 305
N.C. 446,    453,       290 S.E.2d 653,    658   (1982)        (“Unless      the

supporting spouse is deliberately depressing his or her income .

.   .   the   ability       of    the     supporting     spouse      to    pay    is   .   .    .

determined      by    his    or     her    income       at   the   time     the    award       is

made.”).

                                          Conclusion

        For the reasons stated above, we vacate the trial court’s

alimony order and remand for further proceedings consistent with

this opinion.
                         -11-
VACATED AND REMANDED.

Judges HUNTER, Robert C., and DILLON concur.

Report per Rule 30(e).