Court Opinion

ID: 4090191
Source: CourtListenerOpinion
Date Created: 2016-10-18 12:09:48.113213+00
Date Added: 2024-06-11T14:35:00.804187
License: Public Domain

IN THE COURT OF APPEALS OF NORTH CAROLINA

                                   No. COA15-1152

                                Filed: 18 October 2016

Guilford County, No. 09 CVD 7159

DENISE CHAFIN, Plaintiff,

             v.

STEPHEN CHAFIN, Defendant.

      Appeal by defendant from judgment and orders entered 6 November 2014 by

Judge Teresa H. Vincent in Guilford County District Court. Heard in the Court of

Appeals 10 August 2016.

      Woodruff Family Law Group, by Jessica S. Bullock and Adam D. Furr, for
      plaintiff-appellee.

      Barry Snyder for defendant-appellant.

      ELMORE, Judge.

      After five years of litigation involving six different attorneys and abounding

motions, the trial court ordered an equitable distribution of the parties’ marital and

divisible property.   Defendant appeals, challenging the distribution of former

company property and marital debt, his ability to pay a distributive award, and the

trial court’s order for sanctions. We affirm.

                                   I. Background
                                   CHAFIN V. CHAFIN

                                   Opinion of the Court

      Denise Chafin (plaintiff) and Stephen Chafin (defendant) were married on 20

December 1988 and separated on 12 June 2008. During the marriage, defendant

started a used car dealership, I Rush Auto Sales, LLC (Rush Auto), which sold mid-

to low-end used cars purchased through a wholesaler known as Manheim. The

Articles of Organization were filed 12 February 2007, naming defendant and his

business partner, Peter Ault, as organizers. Their venture was short-lived. Mr. Ault

was later removed as a member and replaced by defendant’s father, Robert Chafin.

The company continued to operate through the date of separation until it was

administratively dissolved on 8 August 2008.

      On 14 May 2009, plaintiff filed a complaint seeking, inter alia, an equitable

distribution of the marital and divisible property. Pursuant to a pretrial scheduling

order, plaintiff served her initial equitable distribution inventory affidavit on 29 July

2010, followed by a second inventory affidavit attached and incorporated into her

proposed pretrial order on 24 October 2011. In both affidavits, plaintiff listed the

business interest in Rush Auto, valued at $10,000.00, and its associated bank

accounts as marital property to be distributed to defendant. She filed an amended

preliminary equitable distribution affidavit on 7 March 2012, this time including an

itemized list of nine vehicles which plaintiff claimed were owned by Rush Auto on the

date of separation.

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                                   CHAFIN V. CHAFIN

                                   Opinion of the Court

      Upon additional discovery, plaintiff submitted her final inventory affidavit on

10 April 2013, listing the following in “Schedule C Business or Professional Interests”:

        C1      I Rush Auto Sales, LLC                       ...      [No Value]

              I Rush Auto Sales, LLC
        C1(a) Bank of America Checking Account               ...     $11,110.13
              Account Number ending in -3001

                I Rush Auto Sales, LLC
        C1(b)                                                ...     $50,825.00
                Inventory (Vehicles)

        ....

                I Rush Auto Sales, LLC
        C1(d)                                                ...       $4,218.16
                Cash on Hand

                I Rush Auto Sales, LLC
        C1(e)   SunTrust Checking Account                    ...       $1,782.56
                Account Number ending in -8407

                I Rush Auto Sales, LLC
        C1(f)   SunTrust Checking Account                    ...            TBD
                Account Number ending in -9050

Plaintiff alleged that each item was marital property, in possession of defendant, and

should be distributed to defendant.

      The trial court ordered defendant to serve his equitable distribution inventory

affidavit and to fill in his contentions on the pretrial order, but he failed to do so. He

did serve an “affidavit in response to the proposed pretrial order” on 30 May 2013,

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                                  CHAFIN V. CHAFIN

                                  Opinion of the Court

the day before the hearing on the pretrial order. As later described by the court,

however, defendant’s affidavit “utterly ignored the Guilford County Local Rules with

regard to equitable distribution” and “[did] not comply with pretrial order form

required by the Guilford County Local Rules.”

      At the hearing, the parties agreed to entry of the pretrial order with the

understanding that plaintiff would amend the inventory schedules to reflect

defendant’s contentions.      In his affidavit, defendant objected to plaintiff’s

classification of the business interests on the following grounds:

             Schedule C: Business or Professional Interests

             C1 Husband valued I Rush Auto Sales, LLC at -0- dollars.

             C1(a) Although bank account for Rush Auto may indicate
             deposits totaling $11,110.13 the debt service would at least
             equal this amount.

             C1(b) The inventory of vehicles amount [sic] does not take
             into account the value less any loans against the vehicles,
             that is, $50,825.00 does not represent the equity in the
             vehicles.

             ....

             C1(d) The amount of “cash on hand” represents the amount
             of money for which, at the point calculated, debts of the
             business had not been paid or taken into account.

             C1(e) The amount of funds in the Rush Auto banking
             account 8407 of $1,782.56 was owned by Pete Ault and is
             not part of the funds of Husband.

             C2(f) The amount of funds in the Rush Auto banking

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                                 CHAFIN V. CHAFIN

                                  Opinion of the Court

             account 9050 which is “TBD” is not known nor recognized
             by Husband.

Defendant also agreed that “if anything new comes up at [plaintiff’s] deposition,”

scheduled for June 2013, then “it will just be added onto whatever that file [sic]

pretrial order may be.”

      After several continuances, the trial was peremptorily set for 9 and 10 January

2014. On 13 January 2014, after the trial had begun, defendant filed a series of

motions, including a motion to amend the pretrial order, a motion to preserve the

record with excluded evidence and testimony, a motion to continue the trial, and three

months later, a motion to set aside the pretrial order.       The trial court denied

defendant’s motions, but did eventually allow his motion to preserve the record in

which defendant offered evidence to show that not all vehicles listed in the pretrial

order were on the Rush Auto lot on the date of separation.

      On 6 November 2014, the trial court entered its equitable distribution order,

in which it made the following findings and conclusions relevant to defendant’s

appeal:

             8. With regard to the items on Schedule C, the Court finds
             and orders the following:

             a. Item Cl, I Rush Auto Sales, LLC, is a marital asset
             distributed to the Defendant, but due to insufficient
             evidence, the Court cannot make a determination as to
             value.

             b. Item CI(a), I Rush Auto Sales, LLC Bank of America

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                     CHAFIN V. CHAFIN

                     Opinion of the Court

Checking Account, account number ending in -3001, is a
marital asset distributed to the Defendant at a value of
$11,110.13. Defendant failed to provide sufficient proof
that the funds in the account were encumbered.

c. Item C1(b), I Rush Auto Sales, LLC Inventory (Vehicles),
is a marital asset distributed to the Defendant at a value
of $36,350.00. This amount reflects the price Defendant
paid for the vehicles that were on the car lot on the date of
separation.     Plaintiff completed an inventory of the
vehicles on the car lot on the date of separation.
Defendant’s Manheim registry, which is a list of the
vehicles purchased via the Manheim Finance Company,
dated on or about the date of separation, is consistent with
the models described by Plaintiff. However, there was
insufficient evidence that Defendant was able to sell the
vehicles for a profit. In fact, Defendant’s business was
unprofitable and therefore closed down.

....

e. Item CI(d), I Rush Auto Sales, LLC Cash on Hand, is a
marital asset distributed to the Defendant at a value of
$4,218.16.

f. Item Cl(e), I Rush Auto Sales, LLC SunTrust Checking
Account, account number ending in -8407, had a date of
separation value of $1,782.56, but when the Defendant and
his partner dissolved the business, Defendant left the
funds in the account and Defendant’s partner took
possession of the funds.

....

14. With regard to the items on Schedule H, the Court finds
and orders the following:

h. Item H8, HFC Judgment (formerly Household Realty),
is a marital debt distributed to the Plaintiff at a value of
($19,419.92). This amount represented a civil judgment

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                                  CHAFIN V. CHAFIN

                                  Opinion of the Court

             that appeared as a lien on the marital home and had to be
             paid at closing in order to sell the marital home. Although,
             this debt is associated with the mortgage and the Court
             would normally distribute it to the same party being
             distributed the marital home, the parties stipulated that it
             would be distributed to Plaintiff.

             ....

             23. In order to effectuate the equitable distribution of the
             marital estate ordered herein, the Defendant shall pay a
             distributive award to the Plaintiff in the amount of
             $89,385.44 at the rate of $550.00 per month beginning
             November 1, 2014 and continuing on the first of each
             month thereafter until the balance is paid in full. The
             above distributive award is related to the cessation of the
             marriage.

             24. The Court finds that Defendant is presently employed
             and has adequate assets and income from said employment
             such that Defendant has the ability to pay the distributive
             award as set forth herein.

      The trial court also allowed plaintiff’s motion for sanctions pursuant to Rule

11 and N.C. Gen. Stat. § 50-21(e). The court ordered defendant to pay $10,000.00 in

attorney’s fees based on its conclusions that defendant and his counsel unreasonably

delayed the proceedings through “defendant’s numerous and frivolous motions,

defendant’s discovery ‘tactics,’ and most recently defendant’s abuse of the pretrial

order process.”     Defendant filed notice of appeal on 5 December 2014 from the

judgment and order of equitable distribution and the order for sanctions.

                                   II. Discussion

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                                 CHAFIN V. CHAFIN

                                  Opinion of the Court

      Our review is governed by the following principles of equitable distribution:

            Upon application of a party for an equitable distribution,
            the trial court “shall determine what is the marital
            property and shall provide for an equitable distribution of
            the marital property . . . in accordance with the provisions
            of [N.C. Gen. Stat. § 50-20].” In so doing, the court must
            conduct a three-step analysis. First, the court must
            identify and classify all property as marital or separate
            based upon the evidence presented regarding the nature of
            the asset. Second, the court must determine the net value
            of the marital property as of the date of the parties’
            separation, with net value being market value, if any, less
            the amount of any encumbrances. Third, the court must
            distribute the marital property in an equitable manner.

Smith v. Smith, 111 N.C. App. 460, 470, 433 S.E.2d 196, 202–03 (1993) (citations

omitted) (quoting N.C. Gen. Stat. § 50-20), rev’d in part on other grounds, 336 N.C.

575, 444 S.E.2d 420 (1994).

            Equitable distribution is vested in the discretion of the trial
            court and will not be disturbed absent a clear abuse of that
            discretion.   Only a finding that the judgment was
            unsupported by reason and could not have been a result of
            competent inquiry, or a finding that the trial judge failed
            to comply with the statute, will establish an abuse of
            discretion.

Wiencek-Adams v. Adams, 331 N.C. 688, 691, 417 S.E.2d 449, 451 (1992) (citations

omitted).

A. Distribution of Checking Account, Vehicles, and Cash on Hand

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                                  CHAFIN V. CHAFIN

                                   Opinion of the Court

      Defendant first argues that the trial court lacked jurisdiction to distribute the

Bank of America checking account, vehicles, and cash on hand, because Rush Auto

held legal title to these assets and was not joined as a party to the action.

      Defendant raises this argument for the first time on appeal and without

evidentiary support.    At no point during this action did he object to plaintiff’s

classification of these items as marital property: In his responsive affidavit, he

contests only the value of each of these items. In his motions to amend and to

preserve the record, he challenges plaintiff’s evidence as to which vehicles were on

the Rush Auto lot on the date of separation. And in his motion to set aside the pretrial

order, he actually concedes that any vehicle on the Rush Auto lot on the date of

separation would be marital property. Defendant has therefore failed to preserve this

argument for appellate review. See Quesinberry v. Quesinberry, 210 N.C. App. 578,

581–83, 709 S.E.2d 367, 371–72 (2011) (rejecting husband’s argument that the trial

court lacked jurisdiction to distribute assets he claimed belonged to business where

he made no prior objection and stipulated that assets were marital property); see also

Weil v. Herring, 207 N.C. 6, 10, 175 S.E. 836, 838 (1934) (“[T]he law does not permit

parties to swap horses between courts in order to get a better mount . . . .”); N.C. R.

App. P. 10(a)(1) (2016) (“In order to preserve an issue for appellate review, a party

must have presented to the trial court a timely request, objection, or motion . . . .”).

And as discussed in Part B, infra, the evidence ultimately supports the trial court’s

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                                   CHAFIN V. CHAFIN

                                   Opinion of the Court

findings that the business interest, checking account, vehicles, and cash on hand, are

marital property.

B. Business Interest in Rush Auto

      In the alternative, defendant argues that if the trial court had jurisdiction, it

nevertheless erred in distributing Rush Auto to defendant without assigning a value

to the business interest.

      “In an equitable distribution proceeding, the trial court is to determine the net

fair market value of the property based on the evidence offered by the parties.” Walter

v. Walter, 149 N.C. App. 723, 733, 561 S.E.2d 571, 577 (2002) (footnote and citations

omitted); see also N.C. Gen. Stat. § 50-20(c) (2015) (“There shall be an equal division

by using net value of marital property and net value of divisible property . . . .”). “In

valuing a marital interest in a business, the task of the trial court is to arrive at a

date of separation value which ‘reasonably approximates’ the net value of the

business interest.” Offerman v. Offerman, 137 N.C. App. 289, 292, 527 S.E.2d 684,

686 (2000) (quoting Poore v. Poore, 75 N.C. App. 414, 422, 331 S.E.2d 266, 272 (1985)).

      Rush Auto was organized during the marriage and still operating on the date

of separation, making any business interest in the company marital property—as

found by the trial court. See N.C. Gen. Stat. § 50-20(b)(1) (2015); see also N.C. Gen.

Stat. § 57D-5-01 (2015) (“An ownership interest is personal property.”); Hill v. Hill,

229 N.C. App. 511, 518, 748 S.E.2d 352, 358 (2013) (“If the corporation was created

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                                      CHAFIN V. CHAFIN

                                       Opinion of the Court

during the marriage, and it was owned and operated by the parties, it is a marital

asset regardless of the stock ownership.” (citation omitted)). Specific assets of an

LLC, on the other hand, are owned by the entity and are not the property of the

interest owners. See N.C. Gen. Stat. § 57D-2-01(a) (2015) (“An LLC is an entity

distinct from its interest owners”); see also N.C. Gen. Stat. §§ 57D-4-01, -5-05, -6-

04(c)(1), -6-08 (2015). Although Rush Auto was dissolved after the date of separation,

defendant correctly notes that dissolution alone does not transfer title to the

company’s assets. N.C. Gen. Stat. § 57D-6-07(e) (2015).

       By virtue of the business interest, however, defendant was entitled to a

distribution of the remaining assets after dissolution and during the winding up of

the company’s affairs. See N.C. Gen. Stat. § 57D-4-03 (2015) (describing manner of

“[d]istributions to interest owners before the dissolution and winding up of the LLC

or, as provided in G.S. 57D-6-08(2), after the dissolution of the LLC”); N.C. Gen.

Stat. § 57D-6-08 (“During the winding up of an LLC, the LLC’s assets are to be applied

. . . [f]irst to creditors, . . . [t]he balance to interest owners as distributions . . . .”); see

also Hill, 229 N.C. App. at 518–19, 748 S.E.2d at 358 (holding that to the extent

corporation was marital asset, post-separation distributions were marital property).

This much is reflected in the trial court’s equitable distribution order: In particular,

the court found that the Bank of America checking account, vehicles, and cash on

hand, were marital property; Rush Auto was unprofitable and therefore closed down;

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                                    CHAFIN V. CHAFIN

                                    Opinion of the Court

after dissolving the company, defendant’s business partner took possession of the

funds in the SunTrust account; and defendant failed to prove that the Bank of

America checking account was encumbered.

       While the trial court distributed Rush Auto without explicitly valuing the

company, the findings ultimately reflect a reasonable estimate of the parties’ interest.

In plaintiff’s initial inventory affidavits, she assigned a $10,000.00 valuation to the

business based primarily on its inventory.          As additional assets were revealed

through discovery, she listed them separately under the Rush Auto business interest,

valuing each item individually and leaving blank the value of the company. The

record shows no other former company property at stake, leading further to the

conclusion that any interest in the dissolved company is represented by the aggregate

value of the checking account, inventory, cash on hand, accounts payable, and

accounts receivable—all of which were distributed to defendant. See Poore, 75 N.C.

App. at 419, 331 S.E.2d at 270 (instructing courts to consider the following

components in valuation of a business: “(a) its fixed assets including cash, furniture,

equipment, and other supplies; (b) its other assets including accounts receivable and

the value of work in progress; (c) its goodwill, if any; and (d) its liabilities”). If there

was an error in the distribution of Rush Auto, therefore, it was the trial court’s

decision to itemize the assets separately from the interest in the company. See 1

Brett R. Turner, Equitable Distribution of Property § 5:16, at 311 (3d ed. 2005) (“[T]he

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                                    CHAFIN V. CHAFIN

                                    Opinion of the Court

value of the corporate assets is included in the value of the corporation’s stock, and

any stock owned by the parties would of course be marital property.”). Accordingly,

we see no reason to remand and extend this action any longer.

C. Classification and Value of Vehicles

      Next, defendant challenges the trial court’s finding that the vehicles are

marital property worth $36,350.00. Specifically, defendant contends that there is no

competent evidence that the nine vehicles listed in plaintiff’s affidavit were “presently

owned” on the date of separation.

      “In appellate review of a bench equitable distribution trial, the findings of fact

regarding value are conclusive if there is evidence to support them.” Crutchfield v.

Crutchfield, 132 N.C. App. 193, 197, 511 S.E.2d 31, 34 (1999) (citing Chandler v.

Chandler, 108 N.C. App. 66, 73, 422 S.E.2d 587, 592 (1992)). “ ‘This Court is not here

to second-guess values of marital and separate property where there is evidence to

support the trial court’s figures.’ ” Id. (quoting Mishler v. Mishler, 90 N.C. App. 72,

74, 367 S.E.2d 385, 386 (1988)).

      In plaintiff’s amended preliminary equitable distribution affidavit, she listed

the make, model, year, and value for each of the nine vehicles claimed to be marital

property. Plaintiff testified during a deposition that she visited the Rush Auto lot

with defendant on the date of separation and took note of which vehicles had not been

sold. Upon comparison with Rush Auto’s vehicle registry, the vehicles listed by

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                                   CHAFIN V. CHAFIN

                                   Opinion of the Court

plaintiff are consistent with those purchased by the company from Manheim before

the date of separation.

      Plaintiff also testified that she valued each of the vehicles by consulting the

National Automobile Dealers Association. She arrived at a total date of separation

value of $52,825.00, as shown in the inventory affidavit submitted with her proposed

pretrial order and the schedules attached to the pretrial order. In the trial court’s

equitable distribution order, however, it valued the vehicles at $36,350.00 to reflect

the price paid by Rush Auto for the vehicles, evidenced by checks written to Manheim,

because “there was insufficient evidence that Defendant was able to sell the vehicles

for a profit.” Based on the foregoing, the trial court’s classification and valuation of

the vehicles are supported by competent evidence.

      Relatedly, defendant argues that the court improperly denied him the

opportunity to offer evidence of which vehicles were on the Rush Auto lot on the date

of separation. In defendant’s response to the pretrial order, he raised only one

objection to the vehicles: “The inventory of vehicles amount [sic] does not take into

account the value less any loans against the vehicles, that is, $50,825.00 does not

represent the equity in the vehicles.” Because defendant had an opportunity to

contest the accuracy of the inventory but failed to do so until after the trial had begun,

the court did not abuse its discretion in denying defendant’s request to offer evidence.

In any event, the record shows the trial court allowed defendant’s motion to preserve

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                                   CHAFIN V. CHAFIN

                                   Opinion of the Court

the record with excluded evidence and testimony, and that it ultimately considered

the evidence in its order for equitable distribution.

D. Ability to Pay Distributive Award

      Next, defendant argues that the trial court abused its discretion by ordering a

distributive award without considering defendant’s ability to pay. In its equitable

distribution order, the trial court specifically found “that Defendant is presently

employed and has adequate assets and income from said employment such that

Defendant has the ability to pay the distributive award as set forth herein.” Because

this finding is also supported by competent evidence showing that defendant has

sufficient liquid assets to pay the award, we reject defendant’s argument. See Allen

v. Allen, 168 N.C. App. 368, 376–77, 607 S.E.2d 331, 336–37 (2005).

F. Stipulation as to HFC Judgment

      Next, defendant argues that there is no evidence to support the trial court’s

Finding of Fact No. 14(h), in which the court found that the parties stipulated to the

distribution of the HFC Judgment to plaintiff.

      Along with plaintiff’s contentions for an unequal division, the HFC Judgment

appears in plaintiff’s final equitable distribution inventory affidavit and the

schedules to the pretrial order. In defendant’s response to the proposed pretrial

order, he appears to contest plaintiff’s accusation that the $19,000.00 debt was

attributable to necessary repairs to the marital home after defendant allowed the

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                                   CHAFIN V. CHAFIN

                                   Opinion of the Court

home to deteriorate. But apart from shifting blame for the debt or vaguely objecting

to its value, defendant did not contest that the HFC Judgment was a marital debt

that should be distributed to plaintiff. In light of this evidence and defendant’s “abuse

of the pretrial order process,” we cannot accept defendant’s argument that the

stipulation resulted in an admission of a fact which clearly was intended to be

controverted. See Rickert v. Rickert, 282 N.C. 373, 380, 193 S.E.2d 79, 83 (1972)

(citations omitted). The evidence supports the trial court’s finding that the parties

stipulated to the distribution of the marital debt to plaintiff.

G. Rule 11 Sanctions

      Finally, defendant challenges the trial court’s order for Rule 11 sanctions. In

cursory fashion, defendant contends that “not every finding of fact and law can be

addressed in this brief but all are contested and denied.” Because he offers no reason

or argument to support his broad contentions, they are deemed abandoned. N.C. R.

App. P. 28(b)(6) (2016). In defendant’s only developed argument, he defends his

decision to file motions to amend and to set aside the pretrial order, which were a

fraction of the grounds supporting the trial court’s nine-page order for sanctions.

Defendant nevertheless maintains that these motions were filed in good faith and “to

prevent manifest injustice.”

      We review de novo the trial court’s decision to impose mandatory sanctions

pursuant to N.C. Gen. Stat. § 1A-1, Rule 11(a) (2015).

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                                  CHAFIN V. CHAFIN

                                  Opinion of the Court

             In the de novo review, the appellate court will determine
             (1) whether the trial court’s conclusions of law support its
             judgment or determination, (2) whether the trial court’s
             conclusions of law are supported by its findings of fact, and
             (3) whether the findings of fact are supported by a
             sufficiency of the evidence. If the appellate court makes
             these three determinations in the affirmative, it must
             uphold the trial court’s decision to impose or deny the
             imposition of mandatory sanctions under N.C.G.S. § 1A-1,
             Rule 11(a).

Turner v. Duke Univ., 325 N.C. 152, 165, 381 S.E.2d 706, 714 (1989).

      There is sufficient evidence in the record to support the trial court’s finding

that defendant filed the challenged motions in an attempt to delay the hearing of this

equitable distribution matter. Contrary to defendant’s assertion, he had more than

ample opportunity to refute plaintiff’s evidence concerning the inventory of the

vehicles. He failed to do so during the pretrial order process, at the pretrial order

hearing, or within a reasonable time after plaintiff’s deposition. Instead, defendant

elected to file his motions after the equitable distribution hearing had begun and

without prior notice to plaintiff. Because the sufficiency of the evidence supports the

findings, the findings the conclusions, and the conclusions the judgment, the trial

court properly ordered Rule 11 sanctions against defendant.

                                   III. Conclusion

      Based on the foregoing, we affirm the trial court’s judgment and order of

equitable distribution and its order for sanctions.

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                       CHAFIN V. CHAFIN

                       Opinion of the Court

AFFIRMED.

Judges DAVIS and DIETZ concur.

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