Burch v. Burch

• Decision Date: 01 December 2011
• Docket Number: No. 27060.,27060.
• Citation: 717 S.E.2d 757,395 S.C. 318
• Court: South Carolina Supreme Court
• Parties: Cheryl Ann BURCH, Appellant, v. Thomas Andrew BURCH, Respondent.

395 S.C. 318

717 S.E.2d 757

Cheryl Ann BURCH, Appellant,

v.Thomas Andrew BURCH, Respondent.

No. 27060.

Supreme Court of South Carolina.

Heard Sept. 20, 2011.Decided Oct. 31, 2011.Rehearing Denied Dec. 1, 2011.

A. Camden Lewis and Ariail E. King, of Lewis & Babcock, and John D. Elliott, all of Columbia, for Appellant.

James T. McLaren and C. Dixon Lee, both of McLaren & Lee, of Columbia, for Respondent.

Chief Justice TOAL.

In this action for divorce and equitable division, Appellant Cheryl Burch (Wife) appealed (1) the family court's valuation of certain real properties at the filing date for divorce rather than the date the properties were actually sold; (2) the denial of a request for contribution from Respondent Thomas Burch (Husband) to their child's private school education; (3) the denial of reimbursement for delinquent interest payment advanced by Wife; (4) the amount of Husband's child support obligation; and (5) the assessment of attorney's fees against Wife for her delay and noncooperation. We affirm in part and reverse in part.

Facts/Procedural History

Wife and Husband married on October 18, 1992, and filed for divorce on January 28, 2005. One child (Son) was born of the marriage.

At the time of filing, Wife earned $10,418.16 per month while Husband estimated that he made $6,792 per month.¹ The couple sent Son to Heathwood Hall Episcopal School (Heathwood Hall), a private school in Columbia, from 5–K kindergarten through the 6th grade at a cost of $12,000 annually, split between the parties. After Wife filed for divorce, Husband refused to contribute to Son's education claiming financial hardship, heavy debts, and a desire for Son to have a “fresh start” at a public school.²

During the marriage, Husband worked primarily as a real estate developer. Around the time of the marriage, Husband met Robert S. Small, Jr. who owns Avtex Commercial Property, Inc. (Avtex), a real estate development company. Husband and Small agreed to share ownership with each other in deals that Husband brought to Avtex and also decided that each development project would be structured under a separate limited liability company (LLC) designated Avtex Partners I, Avtex Partners II, and so forth.

This appeal concerns two of those entities, Avtex Partners VI, LLC (“Avtex VI”) and Avtex Partners VI I, LLC (“Avtex VII”). Husband owned a 25% interest in Avtex VI and Avtex VII, while Small retained a 65% interest, and a third investor, Tom Fox, shared a 10% interest in the companies.

Avtex VI I's sole asset consisted of a development located in Charleston County known as the Market at Oakland (Oakland). Husband's largest contribution to the project was setting up the initial meeting between Small and the owner of the property, which led to an agreement in February 2003 to develop Oakland. Small financed 100% of the deal by taking out a personal loan, and he testified that Husband's role in the Avtex VII project was limited:

I have got to tell you I didn't want [Husband] working on it.... Mount Pleasant is a very difficult place to develop. And you can't have more than one voice out there.... The politics down there are incredible. So I asked him, you work on the others, I will work on this.

At the time of the divorce filing, Avtex VII had yet to be developed, no lease had been signed, and Husband claimed the property had zero equity value. After the divorce filing, Husband's participation in Avtex VII amounted to attending two trade shows in Charlotte, North Carolina and Las Vegas, Nevada in March and May 2005, respectively. At both shows, Husband failed to attract any lessees for the project.

In contrast, Small secured the participation of Wal–Mart to anchor Oakland for Avtex VII, and in September 2005, a lease agreement was entered into by the parties. When asked what role Husband played in the development of Avtex VI I between January 2005 and September 2005, Small stated, “I think his was more of a passive role.” Around the same time, Husband and Small parted ways and Small bought Husband's interest in Avtex VII for $1,591,500.

The Avtex VI development project was a shopping center located on Forest Drive in Richland County. At the time of the divorce filing, a lease for Bonefish Grill, a restaurant chain, was already in place. After filing, Casual Living, a retail store, signed a lease with Avtex VI.³ Subsequently, while the divorce was pending, Small also bought Husband's interest in Avtex VI.

With respect to Avtex VI, the family court allocated $254,920.35 as non-marital assets and $194,730.82 as marital assets. The family court also awarded the marital home to Wife and directed Husband to make payments on the mortgage in the amount of $3,982.80. Husband did not tender the money in violation of the court's order. Instead, Wife advanced the payment and then sought reimbursement, which the family court denied on equitable grounds, finding Wife received a $54,279.66 windfall from refinancing the marital home.

Issues

I. Whether the family court erred in valuing Husband's interests in Avtex VI and VII at the filing date rather than at a date occurring after the separation but before the divorce was final.

II. Whether the family court erred in declining to require Husband to contribute to the expenses of Son's private school education.

III. Whether the family court erred in denying Wife reimbursement for an interest payment advanced by her.

IV. Whether the family court abused its discretion in awarding $1,000 per month in child support.

V. Whether the family court properly assessed attorney's fees against Wife.

Standard of Review

On appeal from the family court, this Court has jurisdiction to find facts in accordance with its own view of the preponderance of the evidence. Dickert v. Dickert, 387 S.C. 1, 6, 691 S.E.2d 448, 450 (2010) (citation omitted). This broad scope of review does not require the Court to disregard the findings of the family court. Id. (citation omitted).

Analysis

I. Valuation of Avtex VII

Petitioner contends the family court erred in valuing Avtex VII at the time of filing rather than at a date occurring after a separation but before final divorce. We agree.

In South Carolina, marital property subject to equitable distribution is generally valued at the divorce filing date. Fuller v. Fuller, 370 S.C. 538, 545–48, 636 S.E.2d 636, 640 (Ct.App.2006); see also S.C.Code Ann. § 20–3–630 (Supp.2010) (“ ‘[M]arital Property’ as used in this article means all real and personal property which has been acquired by the parties during the marriage and which is owned as of the date of filing or commencement of marital litigation”). However, the parties may be entitled to share in any appreciation or depreciation in marital assets occurring after a separation but before divorce. McDavid v. McDavid, 333 S.C. 490, 497 n. 7, 511 S.E.2d 365, 369 n. 7 (1999); Fields v. Fields, 342 S.C. 182, 186, 536 S.E.2d 684, 686 (Ct.App.2000). “[G]iven the volume of cases handled by our family courts, there often is a substantial delay between the commencement of an action and its ultimate resolution. Thus, it is not unusual for the value of marital assets to change, sometimes substantially, between the time the action was commenced and its final resolution.” Dixon v. Dixon, 334 S.C. 222, 228, 512 S.E.2d 539, 542 (Ct.App.1999).

When determining the proper date of valuation, other states examine whether there has been “active” or “passive” appreciation or depreciation of the marital assets. See Mayhew v. Mayhew, 205 W.Va. 490, 519 S.E.2d 188 (W.Va.1999); Greenwald v. Greenwald, 164 A.D.2d 706, 565 N.Y.S.2d 494 (N.Y.A.D.1991); In re Marriage of Wagner, 208 Mont. 369, 679 P.2d 753 (Mont.1984); Brackney v. Brackney, 199 N.C.App. 375, 682 S.E.2d 401 (Ct.App.2009); Scavone v. Scavone, 243 N.J.Super. 134, 578 A.2d 1230 (N.J.Super.Ct.App.Div.1990); Diamond v. Diamond, 360 Pa.Super. 101, 519 A.2d 1012 (Pa.Super.Ct.1987). As one court explained:

“Passive appreciation” refers to enhancement of the value of property due solely to inflation, changing economic conditions, or market forces, or other such circumstances beyond the control of either spouse. O'Brien v. O'Brien, 131 N.C.App. 411, 420, 508 S.E.2d 365 [300, 306] (1999). See Lee's Family Law § 12.52(b)(i) (“[P]assive forces include interest, inflation, market forces, government action, [and] labor of third parties....”). “active appreciation,” on the other hand, refers to “financial or managerial contributions” of one of the spouses. O'Brien, 131 N.C.App. at 420, 508 S.E.2d at 306.

Brackney, 199 N.C.App. at 385–86, 682 S.E.2d at 408 (emphasis added).

Courts tend to value active appreciation or depreciation at the filing date to encourage the parties to engage in productive economic activity and discourage waste by allowing them to reap the reward of their labor and suffer the burden of their dissipation. See, e.g., McDavid, 333 S.C. at 496, 511 S.E.2d at 368; Bowman v. Bowman, 357 S.C. 146, 591 S.E.2d 654, 660 (Ct.App.2004). On the other hand, passive appreciation of marital property should be valued at a post-filing date when equity requires that both spouses share in the fruits of the marriage. See, e.g., Fuller, 370 S.C. at 546, 636 S.E.2d at 640. In making the public policy argument for the active and passive distinction it has been said:

It is fairer to value a passive asset at or near the time of the final hearing, because both parties are equally deserving to share in any increase or decrease.... [On the other hand,] active assets should be valued at the time of commencement [or filing] of the marital litigation, to enable the person who causes the change in value to receive the benefits of his or her labor and skills or, conversely, to prevent the person who controls the assets from manipulating the value downward during litigation.

Roy T. Stuckey, Marital Litigation in South Carolina 310 (3rd ed., 2001).

While this Court has never formally adopted the active and passive...