O'BRIEN v. O'BRIEN

• Decision Date: 01 December 1998
• Docket Number: No. COA97-1484.,COA97-1484.
• Citation: 508 S.E.2d 300,131 NC App. 411
• Parties: Richard J. O'BRIEN, Plaintiff, v. Mabel D. O'BRIEN, Defendant.
• Court: North Carolina Court of Appeals

508 S.E.2d 300

131 NC App. 411

Richard J. O'BRIEN, Plaintiff, v. Mabel D. O'BRIEN, Defendant.

No. COA97-1484.

Court of Appeals of North Carolina.

December 1, 1998.

Manning, Fulton & Skinner, P.A. by Michael S. Harrell and Cary E. Close, Raleigh, for plaintiff-appellant.

Jeffrey L. Miller, Greenville, for defendant-appellee.

HORTON, Judge.

Plaintiff-husband and defendant-wife were married on 24 May 1975, separated on 7 August 1995, and divorced on 24 September 1996. No children were born of the marriage. Following their separation, plaintiff instituted this equitable distribution action on 28 December 1995 in which he requested the trial court award him more than an equal share of the marital property and less than an equal share of the marital debt. Defendant answered and counterclaimed, requesting the trial court award an equitable distribution of the martial property and marital debt and determine the parties' separate property. Following a non-jury trial, the trial court entered an Order and Judgment of Equitable Distribution on 2 April 1997 in which it awarded an equal distribution of the marital property and designated certain items to be separate property not subject to distribution. Plaintiff filed a motion on 11 April 1997 to amend the findings, make additional findings and amend the judgment pursuant to N.C. Gen.Stat. § 1A-1, Rule 52(b), which was denied by the trial court on 16 April 1997. Plaintiff filed notice of appeal from both the 2 April 1997 order and the 16 April 1997 order. Thereafter, pursuant to the Order and Judgment of Equitable Distribution, a Qualified Domestic Relations Order was entered on 22 October 1997, but is not a subject of appeal in this case.

The evidence before the trial court tends to show that in 1986, after receiving an inheritance from her father of approximately $163,000.00, defendant opened an investment account with Wheat First Securities. She deposited about $158,000.00 of her inheritance, as well as a $10,000.00 gift from her Aunt Mabel Dozier Stone (Aunt Mabel), into this investment account. On the advice of her broker, defendant had the investment account listed in the joint names of the parties, with a right of survivorship. From November 1986 until July 1989, the parties deposited a total of $4,550.00 of marital funds into this investment account, and withdrew $38,658.00 from the investment account for marital purposes. This investment account remained with Wheat First Securities until July 1989, at which time it was transferred to Interstate Johnson Lane when the parties' investment broker changed firms. At the time of the transfer, the investment account was valued at $138,161.00, or nearly $30,000.00 less than the amount of the initial deposit.

The investment account remained at Interstate Johnson Lane until January 1991, when it again followed the investment broker to his new position at Shearson Lehman. At the time of the transfer to Shearson Lehman, the investment account had depreciated as a result of market forces, and was valued at $119,714.00. Also, during this time Aunt Mabel was in poor health and was attempting to deplete her estate by distributing portions to her intended beneficiaries in order to avoid estate tax consequences. Therefore, Aunt Mabel made gifts to plaintiff and defendant in December 1992 and January 1993 for $10,000.00 each, for a total of $40,000.00. Along with each gift Aunt Mabel included a note describing the purpose of her gifts. The 28 December 1992 note to plaintiff read, in pertinent part, as follows:

Dear Dick:

I have enclosed a check for $10,000 which is part of the inheritance I am leaving Mabel. Since the law allows only $10,000 per family member, I am sending this gift for her in your name to remove assets from my estate that would otherwise be taxed at a very high rate if left in the estate. Please deposit upon receipt.

....

Mabel D. Stone

Aunt Mabel's 15 January 1993 note contained similar language, stating that she had "enclosed a check for $10,000 which is part of the inheritance that I am leaving to Mabel." Of this $40,000.00 in gifts from Aunt Mabel, $24,990.00 was deposited into the investment account at Shearson Lehman, and $9,970.00 was used to purchase a 1993 Volvo 850 automobile for defendant.

In addition to the $24,990.00 in gift money invested in the investment account, the investment account increased in value by approximately $44,000.00 due to dividends, share reinvestment gains and market value gains. Further, approximately $6,500.00 in management fees were charged against the investment account, and $1,035.00 was withdrawn from the investment account. In May 1994, the Shearson Lehman investment account was valued at $181,452.00. The investment account remained at Shearson Lehman until May 1994, when it was transferred to Scott & Stringfellow. While the investment account was at Scott & Stringfellow, defendant received an inheritance from Aunt Mabel's estate totaling $62,841.00, of which she deposited $56,851.00 into the investment account. The investment account remained there until the parties' separation in August 1995.

After hearing all of the evidence, the trial court found that the $40,000.00 in gifts from Aunt Mabel were intended to be gifts to defendant in the total amount of $40,000.00, and not gifts to plaintiff. Further, the trial court determined that other than $4,550.00 of marital funds deposited in the investment account when it was with Wheat First Security, all of which was withdrawn and spent for marital purposes, no other marital property or earnings of the parties was ever deposited to or invested in the investment account. Consequently, the trial court determined the investment account to be the separate property of defendant and not subject to distribution. In sum, the trial court found $308,465.12 of the total estate to be the separate property of defendant and $277,578.57 to be marital property. After determining that an equal division of the marital property would be equitable, the trial court awarded plaintiff $158,677.28 of the marital estate, and awarded defendant $118,901.29 of the marital estate. In addition, the trial court ordered plaintiff to pay defendant a distributive award of $19,888.00 in order to equalize the distribution.

On appeal, plaintiff contends the trial court erred by (1) classifying the investment account and the gifts from Aunt Mabel as defendant's separate property rather than the marital property of the couple; (2) admitting hearsay testimony from Aunt Mabel's relatives about her intent in regard to the four gifts of $10,000.00 each to plaintiff and defendant in December 1992 and January 1993; (3) finding that plaintiff was an irrevocable one-third beneficiary of his mother's trust when the express terms of the trust dictate plaintiff's interest was revocable; and (4) failing to award plaintiff an unequal distribution of the marital property and debt.

I.

At the outset, we note that the distribution of marital property is within the sound discretion of the trial court and will not be overturned absent an abuse of discretion. Beightol v. Beightol, 90 N.C.App. 58, 60, 367 S.E.2d 347, 348, disc. review denied, 323 N.C. 171, 373 S.E.2d 104 (1988) (citation omitted). In order to show an abuse of discretion, a party must show "that the decision was unsupported by reason and could not have been the result of a competent inquiry." Id. As such, the findings of fact are conclusive on appeal if supported by any competent evidence. Id.

In an equitable distribution case filed before 1 October 1997, the trial court must undergo a three-step analysis: (1) identify what is marital property and what is separate property; (2) calculate the net value of the marital property; and (3) distribute the marital property in an equitable manner. Id. at 63, 367 S.E.2d at 350. In this case, we are concerned with the first step, the classification of the investment account as either marital property or separate property.

The main contention raised by plaintiff's appeal is that the trial court improperly classified the investment account as defendant's separate property. According to plaintiff, although the money used to begin the investment account was part of defendant's inheritance, the investment account should nevertheless be classified as marital property for the following reasons: (1) marital funds were commingled with the inherited funds, thus "transmuting" the investment account from separate property to marital property; (2) defendant has failed to "trace out" the $4,550.00 in marital funds which were deposited into the investment account; and (3) plaintiff actively participated with defendant in managing the investment account by making certain decisions which ultimately led to the increased value of the investment account. For purposes of clarity, we will address each of these points separately.

Before addressing plaintiff's contentions, we note that in order to determine the nature of certain property, it is helpful to consult the definitions of marital property and separate property provided in N.C. Gen. Stat. § 50-20(b), which defines the terms as follows:

(1) "Marital property" means all real and personal property acquired by either spouse or both spouses during the course of the marriage and before the date of the separation of the parties, and presently owned, except property determined to be separate property... in accordance with subdivision (2)... of this subsection.... It is presumed that all property acquired after the date of marriage and before the date of separation is marital property except property which is separate property under subdivision (2) of this subsection. This presumption may be rebutted by the greater weight of the evidence.

(2) "Separate property" means all real and personal property acquired by a spouse before marriage or acquired by a spouse by bequest, devise, descent, or gift during the course of the marriage....

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