Wall v. Wall

• Decision Date: 17 October 2000
• Docket Number: No. COA99-732.,COA99-732.
• Citation: 536 S.E.2d 647,140 NC App. 303
• Parties: Carol S. WALL, Plaintiff, v. Carroll C. WALL, III, Defendant.
• Court: North Carolina Court of Appeals

536 S.E.2d 647

140 NC App. 303

Carol S. WALL, Plaintiff, v. Carroll C. WALL, III, Defendant.

No. COA99-732.

Court of Appeals of North Carolina.

October 17, 2000.

Michelle D. Reingold, Clemmons, for defendant appellant.

No brief filed, for plaintiff.

HORTON, Judge.

Carol S. Wall (plaintiff) and Carroll C. Wall, III (defendant), were married on 19 December 1971. They separated on 5 May 1988 and were divorced by judgment entered 31 October 1994. Plaintiff's claim for equitable distribution was heard during September, October, and November 1996. The trial court took the matter under advisement and entered a written order on 26 June 1998, purporting to be "nunc pro tunc" 6 January 1998. The trial court concluded that an equal division would effect an equitable distribution of the marital property and debt, and defendant appealed.

Defendant contends that (I) the trial court erred in failing to properly value and distribute the marital home; (II) the trial court erred in failing to find a date-of-separation net value for the husband's profit-sharing plan, and also erred in dividing the post-separation appreciation of the plan assets. Defendant further contends (III) that the trial court erred in failing to consider his health condition as a distributional factor, (IV) failed to consider the tax consequences of the division to the parties, and (V) did not give him credit for payments on marital debt. Finally, (VI) defendant argues that the 19-month delay in entry of the equitable distribution order deprived him of due process.

I. The Marital Residence

In North Carolina equitable distribution actions, trial judges are required "to first determine what constitutes marital property, to then determine the net market value of that property, and finally, to distribute it based on the equitable goals of the statute and the specific statutory factors." Little v. Little, 74 N.C.App. 12, 16, 327 S.E.2d 283, 287 (1985). The trial court is permitted to distribute only marital property in an equitable distribution proceeding. N.C.Gen.Stat. § 50-20(c) (1999); Truesdale v. Truesdale, 89 N.C.App. 445, 448, 366 S.E.2d 512, 514 (1988). The net market value of the marital property is calculated as of the date of the parties' separation. N.C.Gen. Stat. § 50-20(c); N.C.Gen.Stat. § 50-21(b) (1999). See also Alexander v. Alexander, 68 N.C.App. 548, 551, 315 S.E.2d 772, 775 (1984)

(defining net value as "market value, if any, less the amount of any encumbrance serving to offset or reduce market value").

Here, the defendant argues that the trial court did not find the net fair market value of the marital home on the date of separation, as it was required to do. There was considerable disagreement between the plaintiff and defendant as to valuation, classification, and distribution of various items of property and debts. In an effort to define and narrow the issues, the parties entered into a detailed pretrial order on 14 May 1996. Based on their extensive pretrial discovery, the parties created fifteen schedules (identified as A through O) on which they listed all property, both marital and separate, and attempted to classify and value the property and debts. The schedules were attached to the pretrial order and incorporated therein by reference. The pretrial order was signed by the court, the parties, and their counsel on 14 May 1996.

As to the marital home, identified as the Country Club Drive residence, the parties were unable to agree as to either its net value or its distribution. On Schedule D of the pretrial order, plaintiff contended that the residence had a net value of $43,106.34 and defendant calculated the net value at $57,106.35. Both parties requested that they be awarded the marital home in the distribution of property. The parties also stipulated in the pretrial order that there were encumbrances on the marital residence on the date of separation, consisting of a mortgage to BB & T of $132,136.71 and an equity line of $10,756.95, also to BB & T. Subsequent to the trial of this case, the parties entered into a written stipulation on 24 November 1997 that the "current gross fair market value of the Country Club Drive residence is $221,250.00."

Based on these stipulations and evidence presented at trial, the trial court found that the residence was valued at $186,000.00 on the date of separation and $221,250.00 on the date of trial. The trial court provided for disposition of the marital home by sale, with the proceeds to be used, in part, to pay off the costs of sale and the encumbrances on the home. The court also found that the mortgage on the date of separation was $132,136.71 and the equity line debt on the date of separation was $17,753.20.

Defendant does not question the accuracy of the trial court's findings, but argues that the trial court did not make an explicit finding about the net value of the marital home on 5 May 1988, the date of separation. However, the trial court found a gross fair market value on the date of separation of $186,000.00, subject to encumbrances of $132,136.71 and $17,753.20. Subtracting the encumbrances from the gross value of the home leaves a net fair market value on the date of separation of $36,110.09. While it would have been better practice for the trial court to make a specific finding as to the net fair market value of the dwelling house on the date of separation, such value can be easily calculated from its findings. See King Bros. Shoe Co. v. Wiseman, 174 N.C. 716, 717, 94 S.E. 452, 453 (1917) (applying the maxim "`[t]hat is certain which can be made certain'" to ascertain the amount due on notes in a bankruptcy proceeding). Though the net fair market value of the Walls' residence was not explicitly set out, it can be made certain from the facts found by the trial court. We hold, therefore, there is no prejudicial error in this case in the failure of the trial court to set out its calculations with regard to the net value of the marital dwelling.

Nor do we find error in the trial court's disposition of the dwelling house. The defendant argues that the trial court must distribute the home to one of the parties, rather than ordering it sold. We disagree.

We first note that the trial court is vested with wide discretion in family law cases, including equitable distribution cases. 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). Thus, a trial court's ruling "will be upset only upon a showing that it was so arbitrary that it could not have been the result of a reasoned decision." White v. White, 312 N.C. 770, 777, 324 S.E.2d 829, 833 (1985).

Our prior decisions have allowed the trial court to order the sale of an asset and provide for the disposition of the net proceeds of the sale, provided that the trial court first value the asset. "Before the distribution... can be considered, the property must be properly classified and its net value properly determined." Cable v. Cable, 76 N.C.App. 134, 137, 331 S.E.2d 765, 767, disc. review denied, 315 N.C. 182, 337 S.E.2d 856 (1985). We continue to stress the importance of following the steps of first classifying, then valuing and distributing marital property. Each step is a prerequisite to the performance of the next, and failure to follow the prescribed order will result in a fatally flawed trial court disposition. "[O]nly those assets and debts that are classified as marital property and valued are subject to distribution under the Equitable Distribution Act (Act)...." Grasty v. Grasty, 125 N.C.App. 736, 740, 482 S.E.2d 752, 755, disc. review denied, 346 N.C. 278, 487 S.E.2d 545 (1997) (emphasis added). Here, there was no dispute over the classification of the marital home as marital property. Further, as we discussed above, the trial court properly valued the marital home prior to its distribution. Rather than distributing the home of one of the parties, the trial court ordered the parties to sell the property by 13 January 1998 and use the proceeds to pay off the costs of sale and the encumbrances on the home; any remaining funds from the sale were to be distributed to plaintiff-wife, with defendant-husband receiving a credit equal to one-half of these proceeds. The trial court classified and valued the Country Club Drive residence before distributing it, and we find no abuse of discretion in the trial court's order that the home be sold and proceeds divided between the parties.

II. The Pension Plan

In Becker v. Becker, 88 N.C.App. 606, 607, 364 S.E.2d 175, 176 (1988), this Court adopted a very restrictive reading of the Equitable Distribution Act, and held that the marital estate was "frozen" on the date of separation. Thus, any gains on marital property after that date were not—by definition—marital property, even when the gains represented passive income such as interest on a bank account. See N.C.Gen.Stat. § 50-20(b) (definitions of marital and separate property). Since such increases were also not classifiable as separate property, the term "non-marital property" was formulated to describe these types of gains. Chandler v. Chandler, 108 N.C.App. 66, 68, 422 S.E.2d 587, 589 (1992). In response to the problem of accounting for post-separation increases in value during the distribution stage of equitable distribution, this Court decided to treat such increases as distributional factors, thereby accounting for their existence but stopping short of "thawing" the marital estate to allow additions after the date of separation. In Truesdale, we definitively stated that "[t]he post-separation appreciation of marital property is itself neither marital nor separate property. Such appreciation must instead be treated as a distributional factor under Section 50-20(c)(11a) or (12)...." Truesdale, 89 N.C.App. at 448,366 S.E.2d at 514. In Mishler v. Mishler, 90 N.C.App. 72, 367 S.E.2d 385,disc. review denied, 323 N.C. 174, 373 S.E.2d 111 (1...