Brackney v. Brackney

Decision Date01 September 2009
Docket NumberNo. COA08-1044.,COA08-1044.
Citation682 S.E.2d 401
CourtNorth Carolina Court of Appeals
PartiesDouglas Gordon BRACKNEY, Plaintiff, v. Robin Mason BRACKNEY, Defendant.

Tash & Kurtz, PLLC, by Jon B. Kurtz, Winston-Salem, for plaintiff-appellant.

Robinson & Lawing, LLP, by Kevin L. Miller, Winston-Salem, for defendant-appellee.

GEER, Judge.

Plaintiff Douglas Gordon Brackney appeals from the trial court's equitable distribution judgment providing for an equal distribution of property between plaintiff and defendant Robin Mason Brackney. Plaintiff's primary contention on appeal is that the trial court erred in its classification of a home and its appreciation in value that the parties, prior to separation, had only contracted to purchase, but that plaintiff, following the separation, had purchased using marital funds and a mortgage he obtained in his own name. We hold that the trial court properly determined, under the "source of funds" rule, that the house was marital property because plaintiff used only marital funds to purchase the home. The fact that he also obtained a mortgage in his own name to pay for the house does not grant him any separate equity interest in the home and, under controlling authority, does not transform any portion of the house into separate property. Further, as stipulated by plaintiff, the house appreciated in value due solely to passive market forces, and, therefore, the trial court correctly classified the home's appreciation as divisible property rather than plaintiff's separate property. Because we also find plaintiff's remaining arguments unpersuasive, we affirm.

Facts

Plaintiff and defendant were married on 19 June 1999. Their daughter, who was born on 12 November 2002, suffered from a congenital central nervous system disorder. To accommodate their daughter's special needs, the parties entered into a contract ("the Ballincourt contract") with Keith Rogers Homes, Inc. on 8 August 2003 to build a single-level home on Ballincourt Lane in Winston-Salem, North Carolina ("the Ballincourt house"). The total price for the Ballincourt house was $434,000.00, with the contract requiring a 10% down payment of $43,400.00 at the time of execution of the contract followed by payment of the balance of the purchase price — $390,600.00 — at closing.

The parties took out an equity line of credit on the house in which they were living at the time, located on Century Oaks Lane, also in Winston-Salem ("the Century Oaks house"). They drew $43,400.00 on that line of credit to use as the down payment on the Ballincourt house. Plaintiff had purchased the Century Oaks house prior to the marriage, but after refinancing the home in February 2002, the property was held as a tenancy by the entirety.

The parties' daughter died on 25 August 2003. The parties sold the Century Oaks house on 23 September 2003, netting approximately $95,000.00. From these funds, they used $43,400.00 to pay off the equity line of credit, with the remaining funds (approximately $51,600.00) being deposited in plaintiff's banking account. After the sale of the Century Oaks house, the parties moved into an apartment.

Plaintiff and defendant separated on 6 February 2004. At the time of their separation, the Ballincourt house was not completed, and they had not closed on the house. Plaintiff filed a complaint on 14 April 2004, requesting equitable distribution of the parties' marital and divisible property. In his complaint, plaintiff also moved for an interim allocation of the Ballincourt "residence and all rights and liabilities under the [Ballincourt contract]." The Ballincourt contract included a provision that the $43,400.00 down payment would be forfeited to Keith Rogers Homes if the parties failed to close on the house by a specified date.

The trial court entered an Order for Interim Allocation on 14 May 2004, in which the court found that "in order to preserve the marital estate, it is necessary that the Court make an interim allocation of [the Ballincourt house] and all rights and liabilities under the [Ballincourt contract]. . . ." (Emphasis added.) The trial court then allocated to plaintiff the Ballincourt house and the rights to the Ballincourt contract, providing:

That said down payment and funds used to acquire equity in the [Ballincourt house] are subject to Defendant's rights to an equitable distribution of property, both as marital and divisible property notwithstanding any documents required by the Defendant in order that the Plaintiff purchase said residence, Defendant's rights and claims to said property are preserved until an equitable distribution of marital and divisible property and this Order shall be taken into consideration at an equitable distribution trial and proper credit given to the parties.

Plaintiff closed on the Ballincourt house on 25 May 2004 for a total purchase price of $434,000.00. Plaintiff obtained a loan from Coastal Mortgage Services, Inc. to cover $345,000.00 of the purchase price. Of the $89,000.00 difference, $43,400.00 had already been paid by the parties as a down payment on the house, and plaintiff used the proceeds of the sale of the Century Oaks house for the remaining $45,600.00. Plaintiff later obtained a second loan on the Ballincourt house in February 2005.

Defendant filed an answer with counterclaims on 22 June 2004. Defendant sought an equitable distribution in her favor and an interim allocation to support herself. She also asserted counterclaims for post-separation support, alimony, and attorneys' fees, as well as a counterclaim alleging assault by plaintiff. On 6 August 2004, plaintiff filed a reply and motion to dismiss defendant's counterclaims. The parties ultimately divorced on 16 May 2005.

The Ballincourt house was appraised on 10 May 2005 at a fair market value of $480,000.00. In preparation for trial, the house was re-appraised on 11 September 2007 at a fair market value of $615,000.00. The parties stipulated that the house had appreciated in value by $181,000.00.

The trial court held equitable distribution hearings on 23 and 30 October 2007. The trial court indicated in its ultimate order that "[t]he issues for determination at trial were: (1) what is the marital interest in the Ballincourt House, if any; (2) what is Plaintiff's separate interest in the Ballincourt House, if any; (3) what portion of the $181,000.00 appreciation in value of the Ballincourt House is divisible property, if any; and (4) how should the marital and divisible property interests in the Ballincourt House, if any, be distributed."

In a Judgment of Equitable Distribution and Order entered 10 January 2008, the trial court answered these questions by finding, first, that the Ballincourt house was marital property because it had been purchased with funds from the sale of the Century Oaks house, which was wholly marital property. The trial court further found that plaintiff had not acquired any separate property interest in the Ballincourt house as the plaintiff's procurement of the $345,000.00 mortgage loan did not "constitute[] a contribution of his separate funds to the Ballincourt House."

As for the post-separation appreciation in the value of the Ballincourt house, the trial court found that the $181,000.00 was entirely divisible property: "While Plaintiff's closing on the Ballincourt House may have preserved the marital estate's down payment of $43,400, the post-separation appreciation was not caused by or the `result of' the closing within the meaning of N.C.G.S. § 50-20(b)(4) a. Rather, the post-separation appreciation in the value of the Ballincourt House was the result of market forces alone, as stipulated by the Parties."

As for the distribution of the marital and divisible property, the trial court noted, in its order, that

the Court specifically asked each Party and his or her counsel whether they had any evidence to present or argument to be made concerning each of the distributional factors set forth in N.C.G.S. § 50-20(c). After reviewing each of the distributional factors with each of the Parties and his or her counsel, the Parties and their counsel stated to the Court that they only wanted to present evidence concerning distributional factors (c)(1), (3), (5), (6), (7), 11(a) [sic] and (12).

The trial court then made findings of fact as to all the factors in the statute, including identifying those factors on which evidence was presented (even if not argued by the parties) and noting the factors on which no evidence had been presented.

The trial court further stated in its order that in determining how to distribute the parties' marital and divisible property, it "weigh[ed] [the statutory factors] in order of importance from most to least important as follows":

a. Plaintiff's income of $150,000-$200,000 per year;

b. Plaintiff's assets of $143,000.00;

c. Defendant's income of $0;

d. Defendant's negative net worth of-$85,000;

d. Plaintiff's contribution of a substantial amount of separate property to the marital estate;

e. Defendant's age of 38 years and poor mental health, and fair physical health;

f. Plaintiff's age of 49 years and excellent physical and mental health g. Plaintiff's expectation of stock options and retirement benefits at Liberty Hardware;

i. Plaintiff's preservation of the marital assets by closing on the Ballincourt House, not withdrawing the equity in the Ballincourt House, and not permitting the foreclosure of the Ballincourt House;

j. The length of the marriage in the amount of 4 and 2/3rds years;

k. Defendant's wasting of marital and separate assets since separation, including the use of some such assets to purchase illicit drugs, and Defendant's use of illicit drugs as recently as ten (10) weeks prior to trial;

l. The fact that the $181,000 of post-separation...

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