Court Opinion

ID: 3007340
Source: CourtListenerOpinion
Date Created: 2015-10-06 13:07:14.873686+00
Date Added: 2024-06-11T09:33:00.415991
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An unpublished opinion of the North Carolina Court of Appeals does not constitute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.

              IN THE COURT OF APPEALS OF NORTH CAROLINA

                                    No. COA14-1124

                                 Filed: 6 October 2015

Cumberland County, No. 12 CVD 7133

DEANNE HARDIN, Plaintiff,

              v.

KENNETH HARDIN, Defendant.

       Appeal by defendant from order entered 23 May 2014 by Judge Robert J.

Stiehl, III, in Cumberland County District Court. Heard in the Court of Appeals 18

March 2015.

       No brief filed on behalf of plaintiff-appellee.

       Wyrick Robbins Yates & Ponton LLP, by Tobias S. Hampson and K. Edward
       Greene, for defendant-appellant.

       GEER, Judge.

       Defendant Kenneth Hardin appeals from an equitable distribution order

awarding the entire marital estate to plaintiff Deanne Hardin. On appeal, defendant

challenges the sufficiency of the evidence to support the trial court’s classification and

valuation of certain property included in the marital estate and argues that the

findings are insufficient to support an unequal division of the marital property. We

hold that the trial court’s findings of fact, which show that defendant has a significant
                                  HARDIN V. HARDIN

                                   Opinion of the Court

amount of property in his separate estate and earns a substantially higher income

than plaintiff, are sufficient to support the trial court’s decision to make an unequal

division of property in plaintiff’s favor. However, because the evidence is insufficient

to support the trial court’s classification and valuation of the parties’ BMW and the

amount of marital funds expended on defendant’s lake house, we reverse and remand

for further findings of fact.

                                         Facts

       Plaintiff and defendant were married on 28 May 2011 and separated

approximately seven months later on 5 January 2012. On 13 August 2012, plaintiff

filed a complaint seeking post-separation support, alimony, and equitable

distribution. On 8 January 2013, the trial court entered an order requiring defendant

to pay plaintiff $200.00 a month in post-separation support. A hearing was held on

18 November 2013 on plaintiff’s claims for alimony and equitable distribution, and,

on 23 May 2014, the trial court entered an order in which it found the following facts.

       Prior to marriage, the parties entered a premarital agreement providing that

the parties’ separate property would remain separate during the marriage and would

be retained by each party upon separation. Plaintiff’s income would remain her

separate property, but the income derived from defendant’s businesses -- Painting by

Bill, AAA Hauling of North Carolina, and A and T Storage Trailers -- would be marital

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                                  Opinion of the Court

property. Debt incurred during the marriage would not be considered a joint debt

unless both parties signed and executed the obligation for the debt jointly.

      The trial court found that defendant’s separate property included several

pieces of real estate, including the marital home located on East Park Drive and a

vacation home at Lake Gaston, a Harley Davidson, a 1999 Dodge truck, a boat, an

airplane, stocks, and a savings account. Defendant had purchased the land for the

lake house in 2010, contributed $20,000.00 of his separate funds as a cash down

payment, and another $40,800.00 to begin construction on the house. Plaintiff did

not contribute any of her separate property towards the land purchase or the

construction. On 8 April 2011, defendant signed off on a $325,000.00 construction

loan for the lake house and, as of 23 July 2011, there was a total loan of $335,000.00

on the lake house. On the date of separation, the indebtedness on the loan totaled

$330,463.00.

      The trial court found that the marital estate consisted of $8,060.46 in marital

funds contributed to pay the mortgage on the East Park Drive home, $22,500.96 in

marital funds contributed to pay the mortgage on the Lake Gaston home, $5,615.00

of marital funds contributed towards payments on the BMW, and $12,588.15 in wage

contributions that were deposited and existing in defendant’s checking account on the

date of separation. The trial court concluded that an equal distribution of the marital

estate would be inequitable and awarded plaintiff $45,249.57 and the BMW. The

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                                   Opinion of the Court

trial court additionally concluded that plaintiff is not a dependent spouse and denied

alimony. Defendant timely appealed the order to this Court.

                                      Discussion

      Equitable distribution is governed by N.C. Gen. Stat. § 50-20 (2013), which

requires the trial court to conduct a three-step process: (1) classify property as being

marital, divisible, or separate property; (2) calculate the net value of the marital and

divisible property; and (3) distribute equitably the marital and divisible property.

Cunningham v. Cunningham, 171 N.C. App. 550, 555, 615 S.E.2d 675, 680 (2005).

This Court reviews an equitable distribution order to determine whether there is

competent evidence in the record to support the findings of fact and whether the

findings support the conclusions of law. Stovall v. Stovall, 205 N.C. App. 405, 407,

698 S.E.2d 680, 683 (2010). With respect to the actual distribution awarded, we

review for abuse of discretion. Id. Thus, in entering the equitable distribution order,

“the court must be specific and detailed enough to enable a reviewing court to

determine what was done and its correctness.” Carr v. Carr, 92 N.C. App. 378, 379,

374 S.E.2d 426, 427 (1988).

      On appeal, defendant challenges the evidence to support the trial court’s

classification, valuation, and distribution of each asset included in the marital estate.

We address each in turn.

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                                         Opinion of the Court

        Defendant makes several arguments with respect to the trial court’s award of

the BMW to plaintiff. Defendant contends that it is unclear whether the trial court

classified the BMW as marital or separate property because the findings of fact are

internally inconsistent and are insufficient to determine the BMW’s classification or

value. We agree.

        The trial court specifically addresses the BMW in finding of fact XVII:

                [T]he Court took the evidence that a BMW was purchased
                before the marriage, approximately May 2010; that it was
                titled jointly, the payments on that vehicle were
                approximately $350.00 per month; that there were
                $2,800.00 in payments made during the marriage; that the
                fair market value as of the date of separation was
                $19,300.001 with an indebtedness owing of $13,416.00; that
                the remaining balance was paid by the Plaintiff post-date
                of separation; that there is a net value which is separate
                property of $5,615.00.

        Defendant points out that the portion of this finding of fact stating that “there

were $2,800.00 in payments made during the marriage” is inconsistent with finding

of fact XXX, where the court found that “$5,615.00 of marital funds was expended

towards the BMW purchased before the marriage.” Defendant asserts, and we agree,

that in finding of fact XXX, the trial court mistakenly quoted the net value of the

vehicle on the date of separation -- $5,615.00 -- rather than the portion of the vehicle

        1This appears to be a clerical error. Both parties agreed in the final pre-trial order that the
fair market value of the BMW on the date of separation was $19,030.00. Although the trial court
transposed the “3” and “0” in finding XVII, it appears that it used the correct value -- $19,030.00 -- to
calculate the net value of the property.

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                                   Opinion of the Court

that was paid for with marital funds, which was found to be $2,800.00. In any event,

it is unclear from the trial court’s findings whether the trial court classified the

$5,615.00 net value of the car as marital property, as indicated in finding of fact XXX,

or as separate property, as indicated in finding of fact XVII. Additionally, finding of

fact XVII does not specifically identify whether the BMW is the separate property of

defendant or of plaintiff.

      Defendant asserts that pursuant to the source of funds theory, a portion of the

BMW should be considered his separate property because he contributed his separate

funds for the down payment prior to the marriage. We agree. “Under [the source of

funds] theory, when both the marital and separate estates contribute assets towards

the acquisition of property, each estate is entitled to an interest in the property in the

ratio its contribution bears to the total investment in the property.” Wade v. Wade,

72 N.C. App. 372, 382, 325 S.E.2d 260, 269 (1985). In this case, the trial court failed

to make any findings regarding the amount of defendant’s contribution or plaintiff’s

contribution of separate funds to the purchase of the BMW. We, therefore, remand

for further findings of fact, and instruct the trial court to apportion to defendant his

pro rata share of the BMW. See Tiryakian v. Tiryakian, 91 N.C. App. 128, 136-37,

370 S.E.2d 852, 857 (1988) (holding it was error for trial court to include in marital

estate vehicle purchased prior to marriage and titled jointly and remanding “for

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                                  Opinion of the Court

further findings of fact with instructions that each estate (husband’s separate, wife’s

separate, and marital) be apportioned its pro rata share”).

      Defendant next argues that the trial court erred in classifying as marital the

$12,588.15 in his checking account on the date of separation. Defendant does not

dispute that pursuant to the premarital agreement, the income received from

defendant’s businesses during the marriage was marital property.           He argues,

however, that plaintiff failed to meet her burden of showing that the funds in his

checking account could be traced to income received during the marriage. He points

to his premarital financial disclosure that shows a checking account balance of

$12,500.00 and asserts that this evidence shows that during the seven month

marriage, his checking account remained static, and, therefore, the funds in the

account were not earned during the marriage. We disagree.

      Plaintiff submitted into evidence the bank statement for the checking account

of “KENNETH W HARDIN DBA PAINTING BY BILL” and testified that defendant

used the account for the income he received from Painting by Bill. The trial court’s

unchallenged finding of fact XXIX states: “That with regard to the third business,

Painting by Bill, the Defendant testified that Painting by Bill ceased to do business

approximately October 2012 and that upon closing that business Defendant

represented he lost approximately $2,000.00 per month in income[.]” In other words,

the evidence shows that defendant received $2,000.00 per month in income from

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                                  Opinion of the Court

Painting by Bill until defendant closed that business in October 2012. Therefore,

during the approximately seven months of marriage from 28 May 2011 until 5

January 2012, defendant would have deposited approximately $14,000.00 in wage

contributions from Painting by Bill into his checking account. The trial court can

reasonably infer from this evidence that the funds in defendant’s checking account

on the date of separation were income from Painting by Bill that he earned during

the marriage. The fact that the checking account balance on the date of separation

is not much more than the balance prior to marriage does not preclude an inference

that funds in that account were earned during the marriage.

      Defendant next challenges the sufficiency of the evidence to support the trial

court’s finding that $22,500.96 of marital funds was spent during the marriage to pay

down debts associated with the Lake Gaston house, and was, therefore, marital

property. As evident from finding of fact XII, the trial court obtained this number

from defendant’s post-separation affidavit of support:

             [T]he Defendant represented on the three properties that
             carry indebtedness that he pays approximately $8,437.86
             total monthly; there’s no breakdown as to the individual
             mortgage indebtedness on each of the three properties for
             which he carried the debt load; that in examining the
             payments for the lake house, total debt load payments
             represented by the Defendant on a monthly basis divided
             by three multiplied by eight, which is the duration of the
             marriage, the Defendant expended $22,500.96 of marital
             assets to pay on his separate property by virtue of the
             premarital agreement.

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                                    HARDIN V. HARDIN

                                    Opinion of the Court

      As defendant points out, the trial court’s figure assumes that the mortgage

payments on all three properties were the same and that the payments remained

consistent for the duration of the marriage. However, the 8 April 2011 promissory

note for the construction loan on the lake house, which is a part of the record, states

that defendant will make “monthly payments of accrued interest calculated on the

amount of credit outstanding beginning on 05-01-2011, followed by 348 monthly

payments of $1,870.51 beginning 05-01-2012. This is a variable rate loan and the

payment amounts may change.” The original construction loan was rolled over into

a permanent loan in the amount of $335,000.00 and a second promissory note

executed 23 September 2011 states that defendant’s monthly payment would be

$2,394.86 beginning on 1 November 2011. This evidence suggests that defendant

would have made six interest-only payments from April to October 2011, and then

two payments of $2,394.86 in November and December 2011.

      Indeed, in finding of fact XIII, the trial court recognizes that “as of July 23,

2011 there was a total loan of $335,000.00 on the lake house; that specifically as of

January 9, 2012 the indebtedness at that stage approximated $330,463.00.” This

evidence and finding suggests that during the marriage, defendant used $4,537.00 of

marital funds to reduce the principal owed on the mortgage, plus whatever amount

defendant had to pay in interest.

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                                   Opinion of the Court

      Accordingly, we agree that the trial court’s findings of fact regarding the

amount of marital funds that defendant expended on the lake house during the

marriage are not supported by the evidence. We, therefore, must also reverse and

remand for further findings of fact as to the marital funds spent on the lake house

during the marriage.

      Next, defendant argues that the trial court failed to classify, value, or properly

distribute the furniture that plaintiff retained from the marriage. We agree. “[O]nly

those assets and debts that are classified as marital property and valued are subject

to distribution under the Equitable Distribution Act[.]” Grasty v. Grasty, 125 N.C.

App. 736, 740, 482 S.E.2d 752, 755 (1997). Although the trial court awarded each

party “the personal property that they have in their possessions[,]” it did not classify

the property as marital or value the parties’ furniture. On remand, the trial court

must make findings of fact as to the furniture’s classification and value.

      Defendant also argues that the trial court erred by awarding plaintiff a

distributive award that is greater than the total value of the marital property. It is

well settled that “[o]nly marital property is subject to equitable distribution.” Godley

v. Godley, 110 N.C. App. 99, 108, 429 S.E.2d 382, 388 (1993). In this case, the trial

court identified four assets that it classified as marital: a portion of the marital home,

a portion of the lake house, a portion of the BMW, and defendant’s checking account.

The trial court awarded the BMW to plaintiff and a distributive award of $45,249.57.

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                                   Opinion of the Court

However, excluding the BMW, the total value of the marital estate as found by the

trial court was only $43,149.57. Therefore, the distributive award is $2,100.00 more

than the total value of the marital estate.

      Defendant suggests that the $2,100.00 accounts for plaintiff’s engagement

ring. The trial court found that “the engagement ring was kept by the Defendant and

said ring was with the Plaintiff’s separate property; that the value of said ring was

$2,100.00.” This finding of fact is supported by evidence showing that defendant

retained the ring and turned it into a pendant for a necklace in the shape of an

airplane propeller.

      Here, the trial court did not, however, specifically address, in its findings of

fact, whether it was including the value of the ring in its distribution of marital

assets. On remand, the trial court must make further findings of fact regarding the

amount of the distributive award.

      To the extent that the trial court did intend to include the value of plaintiff’s

ring as part of the distributional award to plaintiff, the trial court erred. In equitable

distribution proceedings, the trial court is entitled to order a spouse to return the

separate property of the other spouse. See McKissick v. McKissick, 129 N.C. App.

252, 255, 497 S.E.2d 711, 713 (1998) (holding trial court has jurisdiction to enter order

pursuant to N.C. Gen. Stat. § 50-20(i) requiring the return of separate property to

spouse); N.C. Gen. Stat. § 50-20(i) (“Upon filing an action . . . requesting an equitable

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                                   Opinion of the Court

distribution . . . a party may seek injunctive relief pursuant to G.S. 1A-1, Rule 65 and

Chapter 1, Article 37, to prevent the disappearance, waste or conversion of property

alleged to be marital property, divisible property, or separate property of the party

seeking relief.”). Furthermore, “[i]n an action to recover the possession of personal

property, judgment for the plaintiff may be for the possession, or for the recovery of

possession, or for the value thereof in case a delivery cannot be had, and damages for

the detention.” N.C. Gen. Stat. § 1-230 (2013) (emphasis added).

      Thus, plaintiff is entitled to recover the engagement ring, which is her separate

property, and it was error for the trial court to include the value of the ring as part of

the marital estate. On remand, plaintiff may move, pursuant to N.C. Gen. Stat. § 50-

20(i), for the return of the engagement ring.        The trial court may either order

defendant to return the ring, or, because it has been converted into other jewelry, it

may choose instead to award plaintiff the value of the ring.

      Finally, defendant argues that the trial court failed to make adequate findings

of fact to support its unequal distribution of the marital estate. “[I]n order to divide

a marital estate other than equally, the trial court must first find that an equal

division is not equitable and explain why. Then, the trial court must decide what is

equitable based on the factors set out in N.C. Gen. Stat. § 50-20(c)(1)-(12) after

balancing the evidence in light of the policy favoring equal division.” Lucas v. Lucas,

209 N.C. App. 492, 504, 706 S.E.2d 270, 278 (2011). “To insure that this evidence [on

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                                   Opinion of the Court

the distributional factors] has been considered by the trial court, there must be

findings reflecting their consideration.” Collins v. Collins, 125 N.C. App. 113, 117,

479 S.E.2d 240, 242 (1997).

      Here, the trial court made a finding that it had considered all of the

distributional factors upon which evidence was presented and “in particular the

following: 1. The income of the parties. 2. The property and liabilities of each party

at the time of division of the properties become [sic] effective. 3. Any obligation for

support arising out of a prior marriage. 4. The acts of either party to maintain,

preserve, develop or expand or waste, neglect the value convert such marital property

[sic] during and after the separation of the parties prior to the time of distribution.”

The trial court’s more specific findings of fact show that defendant had a substantial

amount of property and assets, that he earned up to $20,923.75 a month, and that he

has no out of pocket expenditures for his personal expenses because such expenses

were paid for by his businesses, over which he had full control. In contrast, plaintiff

earned only $3,304.00 a month post-separation and had reasonable expenses of

$2,200.00 per month. There were no findings that plaintiff had any separate property

that had a substantial value. Additionally, the trial court found that during the

marriage, defendant “utilized marital property to pay down debts associated with his

separate property.”

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                                   Opinion of the Court

      These findings of fact show that there exists a vast disparity in the value of the

parties’ estates and incomes, which this Court has found to be a sufficient ground to

justify an unequal distribution of marital property. See Mrozek v. Mrozek, 129 N.C.

App. 43, 51, 496 S.E.2d 836, 842 (1998) (parties’ disparate income and future earning

capacity provided one ground for unequal distribution of marital estate); Beightol v.

Beightol, 90 N.C. App. 58, 64, 367 S.E.2d 347, 351 (1988) (holding trial court did not

abuse its discretion in awarding unequal distribution based in part on disparity in

parties’ earning abilities, husband’s unvested pension fund, and wife’s lack thereof).

      Accordingly, we hold that the trial court did not abuse its discretion in

awarding an unequal distribution of property. However, because there is insufficient

evidence to support the trial court’s valuation of certain assets in the marital estate

and because, in any event, the distributive award is greater than the total value of

the marital estate, we must reverse the equitable distribution portion of the order

and remand for further findings of fact as set forth in this opinion.

      REVERSED AND REMANDED IN PART.

      Judges ELMORE and INMAN concur.

      Report per Rule 30(e).

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