Opinion
No. COA12–662.
2013-01-15
Linda Wall GOULD, Plaintiff v. James Philip GOULD, Defendant.
Wyrick Robbins Yates & Ponton LLP, by K. Edward Greene and Tobias S. Hampson, for plaintiff. Thomas and Farris, P.A., by Albert S. Thomas, Jr., for defendant.
Appeal by plaintiff and cross-appeal by defendant from orders entered 7 November 2011 and 1 December 2011 by Judge John Covolo in Nash County District Court. Heard in the Court of Appeals 24 October 2012. Wyrick Robbins Yates & Ponton LLP, by K. Edward Greene and Tobias S. Hampson, for plaintiff. Thomas and Farris, P.A., by Albert S. Thomas, Jr., for defendant.
HUNTER, ROBERT C., Judge.
Plaintiff appeals and defendant cross-appeals judgments entered 17 November 2011 and 1 December 2011 by Judge John Covolo in Nash County District Court. On appeal, plaintiff argues that the trial court erred by: (1) determining that one half of plaintiff's IRA was subject to equitable distribution; (2) classifying a Boston grand piano as marital property and, in the alternative, valuing it at $12,000; (3) valuing the Pinehurst Resort certificate at $500; (4) valuing the Benvenue Country Club membership at $2000; and (5) making a distributive award which continues for more than six years after the parties' marriage ended. Defendant argues in his cross-appeal that the trial court erred in valuing the E-trade joint account at $206,000 and by not classifying the diminution in value as divisible property. After careful review, we affirm in part and remand in part.
Background
The parties were married in 1978 and have two children. They separated on 25 December 2005 and divorced 25 September 2007. On 24 October 2008, the parties entered a memorandum of judgment/order, signed by both parties, with regard to alimony, postseparation support, and other maintenance issues (the “memorandum/order”). The trial court issued an order on 21 January 2009, nunc pro tunc 22 October 2008, memorializing the agreements in the memorandum/order (the “January order”). In addition to numerous other provisions regarding postseparation support and alimony, the January order also stated that “[t]he parties stipulate and agree that the [d]efendant shall release his one-half interest in the [p]laintiff's individual retirement, IRA, to the [p]laintiff as a property transfer without equitable distribution credit.”
On 8 February 2010, plaintiff filed a motion for declaratory judgment or clarification of the January order regarding the release of defendant's interest in plaintiff's IRA. Specifically, plaintiff requested the court issue a declaratory judgment or order stating that plaintiff's half of the IRA, not the half released by defendant, would not be subject to equitable distribution. Defendant contended that plaintiff's half of the IRA should be included in determining the marital estate with $115,075 being distributed to plaintiff.
On 17 August 2009, 21 September 2009, and 11 October 2011, the trial court held equitable distribution hearings. On 17 November 2011, the trial court issued an equitable distribution order (the “equitable distribution order”). The trial court concluded that an equal division was equitable and ordered defendant to pay plaintiff a cash distributive award of $78,738.65. The trial court issued another order on 1 December 2011 regarding the division of two investment accounts that the parties agreed would be addressed outside the equitable distribution proceeding. The division of those accounts in the later order are not at issue in this appeal.
Specific findings and conclusions in the equitable distribution order will be addressed as they relate to the parties' arguments.
Plaintiff's Arguments
A. Plaintiff's IRA
Plaintiff first argues that the trial court erred in interpreting the January order to mean that plaintiff's half of her IRA account would be subject to equitable distribution as part of the marital estate. Specifically, plaintiff contends that the interpretation of the January order, in effect, gave defendant an equitable distribution credit of $57,537.50 because the trial court classified plaintiff's half of the IRA as marital property and distributed it to plaintiff. Thus, plaintiff argues that the equitable distribution order contravened the intent of the January order because the January order specifically stated that defendant would receive no equitable distribution credit for his transfer of his half of the IRA.
Here, the issue is whether the trial court erred in finding that plaintiff's half of the IRA should be included in the marital estate and, thus, subject to equitable distribution. In the January order, the trial court, in an effort to memorialize the parties' agreement “as to all issues regarding alimony, post separation [sic] support, and any other maintenance claims and attorneys [sic] fees[,]” ordered that “ [d]efendant shall release his one-half interest in the [p]laintiff's individual retirement, IRA, to the [p]laintiff as a property transfer without equitable distribution credit.” In the equitable distribution order, the trial court interpreted these provisions of the January order and made the following, pertinent, findings of fact with regard to the parties' agreement regarding plaintiff's IRA:
12. On October 22, 2008, the parties entered into a Memorandum and Order of Judgment which was signed by the parties and entered by the Court on the issues of alimony, post separation and attorney's fees.... As part of that Order, the [d]efendant released his one-half interest in the [p]laintiff's Wachovia IRA as a property transfer without equitable distribution credit to the [d]efendant. The value of [d]efendant's interest in the IRA account was $115,075.00. The [p]laintiff's one-half interest in the Wachovia IRA account is $115,075.00 and her interest in this marital asset remained in the marital estate for the purposes of equitable distribution.
...
14. On February 4, 2010, the [p]laintiff filed a Motion for Declaratory Judgment or Clarification of Order regarding the January 21, 2009 Order as it related to the crediting of the [p]laintiff's receipt of [d]efendant's share of Wachovia IRA and argued that the [p]laintiff was entitled to receive her remaining one-half interest in the Wachovia IRA outside the equitable distribution case. The [p]laintiff argued the entire Wachovia IRA, valued at $230,150.00 should pass to her outside the equitable distribution case under the terms of the January 21, 2009 order. The [d]efendant filed a Response to the Motion on February 16, 2010 and argued that the January 21, 2009 [order] clearly states that the [d]efendant's one-half interest in the Wachovia IRA passed to the [p]laintiff outside the equitable distribution, however, the [p]laintiff's remaining one-half interest remained in the marital estate for division. The Court reviewed the January 21, 2009 order and based upon the pleadings and argument of counsel, the Court ordered that the [p]laintiff should receive the [d]efendant's share outside of the equitable distribution case and that the [p]laintiff's remaining one-half interest in the Wachovia IRA remained in the marital estate for division in the equitable distribution proceeding at the value of $115,075.00 being distributed to the [p]laintiff.
Plaintiff's argument on appeal questions the validity of the trial court's interpretation of the terms of their agreement regarding postseparation support. Thus, even though the parties' agreement regarding the IRA was incorporated into a court order, the trial court is still required to apply the general rules of contract interpretation to clarify or construe the terms of the January order. See Holden v. Holden, ––– N.C.App. ––––, ––––, 715 S.E.2d 201, 208 (2011) (“[T]he trial court, in clarifying the terms of what is deemed its own order, must apply the rules of contract interpretation, for a document that has ceased to be a contract, including, if necessary, determining the intent of the parties. The trial court is, therefore, not authorized to simply state what the terms of ‘its' order actually mean.”). Thus, because the issue is a question of law, our standard of review is de novo. Harris v. Ray Johnson Const. Co., Inc., 139 N.C.App. 827, 829, 534 S.E.2d 653, 654 (2000).
“Th[is] court is to interpret a contract according to the intent of the parties to the contract, unless such intent is contrary to law. If the plain language of a contract is clear, the intention of the parties is inferred from the words of the contract.” Bueltel v. Lumber Mut. Ins. Co., 134 N.C.App. 626, 631, 518 S.E.2d 205, 209 (internal citations and quotation marks omitted), disc. review denied, 351 N.C. 186, 541 S.E.2d 709 (1999). If possible, this Court should “construe the contract as to carry into effect the reasonable intent of the parties, if it can be ascertained. In order to avoid destruction of contracts, courts should attempt to determine the intent of the parties from the language used, construed with reference to the circumstances surrounding the making of the contract.” Welsh v. N. Telecom, Inc., 85 N.C.App. 281, 290, 354 S.E.2d 746, 751 (internal quotation marks and citations omitted), disc. review denied, 320 N.C. 638, 360 S.E.2d 107 (1987).
Here, we conclude that the trial court properly interpreted the provisions of the parties' agreement memorialized in the January order. The purpose of the agreement was to address postseparation support, alimony, and other maintenance issues using marital property. While the parties clearly indicated their intent that defendant not receive any equitable distribution credit for releasing his half of the IRA, the parties were silent as to how the remaining half, i.e. plaintiff's half, would be treated. By not addressing plaintiff's half, there is a valid presumption that it was still to be treated as marital property for equitable distribution purposes. Had the parties intended that plaintiff's half not remain in the marital estate, they would have made provisions in their agreement to ensure that intent, particularly since they were aware of how defendant's “release” of his half could negatively affect plaintiff when dividing the marital property. Thus, we affirm the trial court's conclusion that plaintiff's half of the IRA remained in the marital estate for equitable distribution purposes.
B. The Boston Grand Piano
Next, plaintiff argues the trial court erred by failing to classify the Boston Grand piano (the “piano”) as separate property because it was a gift from her parents. In the event that this Court concludes the piano was marital property, plaintiff asserts that the trial court erred by valuing it at $12,000. We agree that the evidence was insufficient to support the trial court's classification of the piano as marital property.
We note that:
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), rev'd in part on other grounds, 336 N.C. 575, 444 S.E.2d 420 (1994). “Our standard of review as to these issues is well-settled: [w]hen the trial court sits without a jury, the standard of review on appeal is whether there was competent evidence to support the trial court's findings of fact and whether its conclusions of law were proper in light of such facts.” Romulus v. Romulus, ––– N.C.App. ––––, ––––, 715 S.E.2d 308, 311 (2011) (internal quotation marks omitted). “[C]onclusions of law are reviewable de novo.” Lee v. Lee, 167 N.C.App. 250, 253, 605 S.E.2d 222, 224 (2004).
Separate property includes “all real and personal property acquired by a spouse before marriage or acquired by a spouse by devise, descent, or gift during the course of the marriage.” N.C. Gen.Stat. § 50–20(b)(2) (2011). If “property was acquired during the marriage by a spouse from his or her parent(s), a rebuttable presumption arises that the transfer is a gift to that spouse.” Burnett v. Burnett, 122 N.C.App. 712, 714, 471 S.E.2d 649, 651 (1996). “In this event, the burden shifts to the spouse resisting the separate property classification to show lack of donative intent .” Id.
In finding no. 34, the trial court noted that “[t]he [piano] is distributed to the [p]laintiff valued at $12,000.00 based upon the [d]efendant's submissions of cancelled checks indicating repayment to his parents for the purchase of the piano along with a note thanking his parents for assisting in its acquisition.” Since the classification of the property as marital property constitutes a conclusion of law, the Court reviews it de novo even though the trial court includes the classification in its findings of fact. See Zimmerman v. Appalachian State Uni., 149 N.C.App. 121, 131, 560 S.E.2d 374, 380 (2002); Carpenter v. Brooks, 139 N.C.App. 745, 752, 534 S.E.2d 641, 646,disc. review denied, 353 N.C. 261, 546 S.E.2d 91 (2000).
Initially, we note that the only evidence that the trial court cited in support of its classification was cancelled checks that were not included in the record on appeal. Thus, we are unable to determine whether the trial court properly classified the piano as marital property in light of evidence not included in the record. Moreover, we note that our own review of the evidence does not support the classification of the piano as marital property. Plaintiff testified that the piano was a gift to her from her parents. While she did state that her parents allowed her to charge the piano to a credit card so that she could get travel points, plaintiff contended that her father reimbursed her with a check. In contrast, although defendant also testified that the piano was a gift from plaintiff's parents, he claimed that the piano was a gift to the family because it was given to replace another piano that had been destroyed by a flood.
Because the piano was acquired by plaintiff from her parents, the rebuttable presumption arises that the piano is separate property. Thus, the burden is on defendant to rebut the presumption. However, the trial court did not provide any rationale for its determination that the piano was marital property. In other words, the equitable distribution order did not address the rebuttable presumption even though the evidence was uncontroverted that the piano was a gift to plaintiff from her parents. Moreover, the only evidence cited by the trial court in making its determination that the piano was marital property, specifically the cancelled checks, is not included in the record. Thus, we must remand this matter back to the trial court to determine whether defendant met his burden to rebut the presumption that the piano was separate property since it was a gift to plaintiff from her parents.
In addition to challenging the classification of the piano as marital property, plaintiff also challenged the valuation of the piano at $12,000. If the trial court on remand determines that defendant met his burden of overcoming the presumption that the piano is separate property, we will address this argument on appeal because the issue is likely to recur on remand. We conclude that this finding is supported by competent evidence.
The Court's review is limited to determining whether there was any competent evidence in the record to support this valuation. “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). The piano was originally purchased for $16,900. In the exhibits to the record on appeal, an email from Tom Grace, vice president of retail stores at Jordan Kitts Music, to plaintiff stated that the piano had a retail resale value of $12,000 and a resale value of $8500 if she were to try and sell it herself. Thus, there was competent evidence in the record to support the finding that the value of the piano is $12,000 based on the estimated retail resale value.
C. Pinehurst resort certificate
Next, plaintiff argues that the trial court erred in valuing the Pinehurst resort certificate (the “certificate”) at $500 in finding of fact no. 54. In contrast, plaintiff asserts the value of the certificate is $3100 or $4500. We disagree.
The trial court valued the certificate at $500 and distributed it to defendant. While the parties refer to it as a certificate, it is actually a letter. In 2003, a Pinehurst resort sent defendant a letter apologizing for the “unfortunate encounters [defendant] experienced” during his last trip to the resort and inviting defendant and his family to come to Pinehurst “later [that] year” for two nights including meals and golf. Plaintiff testified that she called the resort and was informed that the same package in 2006 would be worth $3100 and worth $4500 in 2009. However, the letter states that the invitation is open until “sometime later this year” which would indicate that the certificate has little or no value post–2003. Since the parties separated and distributed the certificate after 2003, plaintiff's argument that it should have been valued at $3100 or $4500 is without merit.
D. Country Club membership
Next, plaintiff argues the trial court erred in valuing the Benvenue Country Club membership (“country club membership”) at $2000. We disagree.
In finding of fact no. 30, the trial court found that the membership distributed to defendant had a value of $2000 based on testimony regarding the original membership cost and “one-half the value of the date of separation costs of joining the club.” Plaintiff testified that when they originally joined 17 years ago, the cost of the membership was $6000. She called the country club in 2007, two years after the date of separation, and the cost to join was $4000 due to the economic downturn. Defendant testified that the membership has zero value because once the “initiation value is paid, [ ] there is no value attached to your membership at that point.” In support of his contention, defendant submitted a letter from the general manager of the country club indicating that the membership had no “ ‘cash’ value.” Moreover, the letter stated that for a divorced spouse to join the country club, it would cost half of the membership amount, or $2000 using the 2007 cost to join. Here, there was competent evidence in the record to support the trial court's valuation of the membership at $2000 since that is the amount it would cost plaintiff to rejoin the country club post-divorce. Therefore, plaintiff's argument is overruled.
E. Distributive Award
Finally, plaintiff argues that the trial court erred in making a distributive award which continues for more than six years after the date the parties divorced. We agree and remand the matter to the trial court to enter findings.
Our standard of review regarding a trial court's award of equitable distribution is well-established:
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). Our Court has held that N.C. Gen.Stat. § 50–20(b)(3) authorizes the trial court to make distributive awards for periods not more than six years after the date the marriage ceases “except upon a showing by the payor spouse that legal or business impediments, or some overriding social policy, prevent completion of the distribution within the six-year period.” Becker v. Becker, 127 N.C.App. 409, 413, 489 S.E.2d 909, 912 (1997) (internal quotation marks omitted); see also Lawing v. Lawing, 81 N.C.App. 159, 184, 344 S.E.2d 100, 116 (1986). If the trial court makes a distributive award that extends for a period more than six years after the date the marriage ceases, it is required to make findings; failure to do so requires that this Court vacate that part of the award and remand to the trial court to make requisite findings. Harris v. Harris, 84 N.C.App. 353, 364, 352 S.E.2d 869, 876 (1987).
Here, the parties were divorced on 25 September 2007. The trial court ordered defendant to pay plaintiff a cash distributive award of $78,738.65 based on monthly $1,312.31 payments beginning 5 November 2011 and continuing until 5 October 2016. Since this award extends more than six years after the date of divorce, specifically, past 25 September 2013, the trial court was required to make findings. In the equitable distribution order, the trial court acknowledged the fact that plaintiff requested that the distributive award be paid within six years after the date of cessation. Noting that it took into account “the income, liabilities, liquidity of the assets of the parties, the separate estates, as well as the income and gift tax implications for both parties[,]” the trial court found that “ [d]efendant is capable of paying to the [p]laintiff the sum of $1312.31 per month for a period of 60 consecutive months, beginning November 5, 2011, and continuing in like monthly payments until October 5, 2016.”
Here, the trial court failed to make the requisite findings supporting its decision to make a distributive award that extends more than six years after the date the parties' marriage ended. While the equitable distribution order seems to hint that it considered the ability of defendant to pay the award within the six year period, we are unable to conclude whether the trial court abused its discretion based on the insufficiency of the findings. Therefore, in accordance with Harris, we vacate that portion of the distributive award and remand the matter to the trial court to make the requisite findings supporting its decision to allow defendant to pay off the distributive award more than six years after the date the parties' marriage ended.
Defendant's Argument
Defendant's sole argument on appeal is that the trial court erred in valuing the E-trade joint account at $206,000 and that the decrease in value should not be distributed to him. We agree and remand the matter to the trial court to enter findings of fact.
In the equitable distribution order, the trial court found that:
41. The E-trade joint account had a value on the date of separation in the amount of $228,032.00 and currently has a value of $651.00. There was evidence that during the marriage the [d]efendant managed this account. After the date of separation, the [d]efendant continued to manage the account until January, 2008 when the [d]efendant was denied access to the account. The [p]laintiff testified that after January, 2008 she was prevented from having access to the account. The [d]efendant and [p]laintiff both submitted evidence, contentions and case law regarding the nature of the depreciation of the E-trade account which have become part of the court record in this matter. The [p]laintiff argues that the [d]efendant's actions caused the depreciation of the account and the [d]efendant argues that the losses in the account value were the result of the market conditions in 2007. Further the [d]efendant argued that after January, 2008 when he was prevented from having access to the account when it had a value of $82,076.61 that those losses are divisible property, were passive depreciation and the losses should be divided equally between the parties. The Court distributes the E-trade joint account to the [d]efendant at the $206,000.00.
Defendant contends that the valuation was not supported by competent evidence. Moreover, defendant alleges that the loss in value should be considered divisible property because it was not due to his neglect or intentional devaluation of the account.
At the time of separation, the E-trade account was valued at $228,032. However, by the time the parties had their equitable distribution hearing, the account had a value of $651. Plaintiff alleged she never knew about the account until after the separation and never managed it. Defendant claimed that plaintiff knew about the account but agreed that he was the primary custodian of it. However, he testified that he had no ability to make any trades in the account since January 2008, and that the decrease in value was not due to his mismanagement or ignorance but to market conditions.
Pursuant to N.C. Gen.Stat. § 50–20(b)(4)(a),
[a]ll appreciation and diminution in value of marital property and divisible property of the parties occurring after the date of separation and prior to the date of distribution, except that appreciation or diminution in value which is the result of postseparation actions or activities of a spouse shall not be treated as divisible property.
“Any appreciation or diminution due to a spouse's post-separation activities may be considered by the trial court as a distributional factor.” Allen v. Allen, 168 N.C.App. 368, 371–72, 607 S.E.2d 331, 334 (2005).
Here, it seems that the trial court, without explicitly stating it in its equitable distribution order, determined that the loss in value of the account was due to defendant's postseparation actions. After examining the record, we conclude that the trial court's findings are insufficient with regard to whether defendant's actions caused the loss in value of the E-trade joint account after the date of separation. “[T]he presumption is that such dimunition is divisible unless the trial court finds that the change in value is attributable to the postseparation actions of one spouse.” Cheek v. Cheek, ––– N.C.App. ––––, ––––, 712 S.E.2d 301, 303–04 (2011) (internal quotation marks omitted). Since the presumption is that the loss in value is divisible, the trial court is required to make findings rebutting this presumption. Without proper findings regarding whether the loss in value was due to defendant's actions, we must remand this matter back to the trial court for entry of findings of fact on this point. See Cheek, ––– N.C.App. at ––––, 712 S.E.2d at 304. On remand, the trial court must make findings of fact as to whether the decrease in value was due to the actions of defendant or passive market forces.
Moreover, the trial court fails to state how it valued the loss. Plaintiff argues that this valuation is supported by competent evidence because the account had a value of $206,102.30 as of 31 October 2007, the date defendant indicated a willingness to divide the E-trade account willingly prior to making substantial trades that resulted in large losses in value. However, again, the trial court failed to include any explanation in its findings as to how it reached this value. Thus, the findings are inadequate, and we must also remand this matter back to the trial court for entry of findings regarding the valuation of the loss. See Cheek, ––– N.C.App.at ––––, 712 S.E.2d at 304. If the trial court concludes that the loss was due to defendant's actions, it must indicate how it calculated the loss, including the values and corresponding dates used in determining that loss.
Conclusion
Because we conclude that the trial court properly interpreted the parties' agreement and the January order, we affirm the trial court's conclusion that plaintiff's half of the IRA remained in the marital estate for equitable distribution purposes. Based on the trial court's inadequate findings regarding the classification of the piano as marital property, we remand this matter back to the trial court for entry of findings consistent with this opinion. On remand, if the trial court determines that the piano is marital property, we affirm the trial court's valuation of the piano at $12,000 since that value is supported by competent evidence. We affirm the trial court's findings of fact regarding the valuation of the certificate and the country club membership since those findings are supported by competent evidence. In accordance with Harris, we vacate the portion of the distributive award allowing defendant to make payments for a period of more than six years after the parties' marriage ceased and remand the matter to the trial court to make the requisite findings. Finally, because the trial court made inadequate findings with regard to whether the loss in value of the E-trade joint account was due to defendant's actions and with regard to its valuation of the loss at $206,000, we remand for entry of findings of fact consistent with this opinion.
AFFIRMED IN PART, REVERSED AND REMANDED IN PART. Judges CALABRIA and HUNTER, JR., ROBERT N. concur.
Report per Rule 30(e).