Upchurch v. Upchurch ( 2014 )

An unpublished opinion of the North Carolina Court of Appeals does not constitute
controlling legal authority. Citation is disfavored, but may be permitted in accordance
with the provisions of Rule 30(e)(3) of the North Carolina Rules of Appellate Procedure.
NO. COA14-227
NORTH CAROLINA COURT OF APPEALS
Filed: 2 December 2014
DENISE S. UPCHURCH,
Plaintiff
v. Alamance County
No. 10 CVD 2185
CHARLES D. UPCHURCH,
Defendant
Appeal by defendant from order entered 8 October 2013 by
Judge James K. Roberson in Alamance County District Court.
Heard in the Court of Appeals 13 August 2014.
No brief filed on behalf of plaintiff-appellee.
The Vernon Law Firm, P.A., by Benjamin D. Overby and Wiley
P. Wooten, for defendant-appellant.
DAVIS, Judge.
Charles D. Upchurch (“Defendant”) appeals from the trial
court’s 8 October 2013 alimony order. On appeal, he contends
that the trial court erred by (1) improperly considering
Defendant’s earning capacity for purposes of determining his
alimony obligation; and (2) awarding alimony to Denise S.
Upchurch (“Plaintiff”). Specifically, Defendant contends that
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the trial court’s conclusion that he suppressed his income in
bad faith was unsupported by competent evidence. After careful
review, we vacate and remand for further proceedings.
Factual Background
Plaintiff and Defendant were married on 15 September 2002,
separated on 1 June 2010, and subsequently divorced. No
children were born from the parties’ marriage.
On 29 July 2010, Plaintiff filed a complaint against
Defendant seeking postseparation support, equitable
distribution, and alimony. Defendant filed an answer and
counterclaim, seeking equitable distribution and requesting that
Plaintiff’s spousal support claims be denied. On 10 January
2011, the trial court entered an order requiring Defendant to
pay postseparation support to Plaintiff of $1,000.00 per month
for 15 months beginning 1 August 2010.
Prior to and during the marriage, Defendant owned and
operated a lawn care business, Upchurch Lawn Care. Defendant
was employed by Upchurch Lawn Care, participated in the actual
landscaping work, and received monthly income from the business
throughout the course of the marriage. Defendant’s son, Wesley
Upchurch, was a regular employee of Upchurch Lawn Care for
approximately 13 years. During the marriage, Plaintiff handled
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bookkeeping for Upchurch Lawn Care but did not receive
compensation for doing so. Upchurch Lawn Care paid for numerous
personal expenses of the parties, including expenses related to
dining out and vacations as well as personal household bills.
During the marriage, Plaintiff was employed by Mobile Lift of
Burlington, a construction equipment company, until she was laid
off in August 2009. After being laid off, Plaintiff worked
several waitressing jobs until she found part-time work with
Dougherty Equipment Company on 3 May 2011. Since 1 November
2011, Plaintiff has worked full-time for Dougherty Equipment
Company. In April 2012, Defendant sold Upchurch Lawn Care to
his son for $130,000.00 and began receiving payments of
$1,500.00 per month in May 2012. In June 2012, Defendant
applied for and began receiving Social Security benefits.
On 7 September 2012, the trial court heard Plaintiff’s
claim for alimony.1 On 8 October 2013, the trial court entered
an order in which it concluded that Defendant “exercised bad
faith in selling his lawn care business, stopping his employment
in the lawn care business, and choosing to live off of his
inheritance when considered in light of his potential obligation
1
Prior to the hearing, the parties settled their equitable
distribution claims in a consent judgment entered 7 September
2012.
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to provide support for Plaintiff.” The trial court also
determined that (1) based on Defendant’s earning capacity, he is
a supporting spouse; (2) Plaintiff is a dependent spouse; and
(3) awarding alimony to Plaintiff was equitable after
considering all relevant factors. The trial court imputed an
annual income of $75,000.00 to Defendant and concluded that
Plaintiff was entitled to $1,000.00 per month in alimony from
Defendant for a period of 21 months. Defendant gave timely
notice of appeal to this Court.
Analysis
On appeal, Defendant argues that the trial court erred in
concluding that he acted in bad faith by selling his business.
Consequently, he contends that the trial court could not impute
income to him under the earning capacity rule and, therefore,
erred in concluding that he was the supporting spouse for
purposes of alimony.
“The decision to award alimony is a matter within the trial
court’s sound discretion and is not reviewable on appeal absent
a manifest abuse of discretion.” Megremis v. Megremis, 179 N.C.
App. 174, 181, 633 S.E.2d 117, 122 (2006) (citation, quotation
marks, and brackets omitted). “An abuse of discretion has
occurred if the decision is manifestly unsupported by reason or
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one so arbitrary that it could not have been the result of a
reasoned decision.” Kelly v. Kelly, ___ N.C. App. ___, ___, 747
S.E.2d 268, 272-73 (2013) (citation and quotation marks
omitted).
It is well settled that
[e]ffective appellate review of an order
entered by a trial court sitting without a
jury is largely dependent upon the
specificity by which the order’s rationale
is articulated. Evidence must support
findings; findings must support conclusions;
conclusions must support the judgment. Each
step of the progression must be taken by the
trial judge, in logical sequence; each link
in the chain of reasoning must appear in the
order itself. Where there is a gap, it
cannot be determined on appeal whether the
trial court correctly exercised its function
to find the facts and apply the law thereto.
Coble v. Coble, 300 N.C. 708, 714, 268 S.E.2d 185, 190 (1980);
see also Spicer v. Spicer, 168 N.C. App. 283, 287, 607 S.E.2d
678, 682 (2005) (“The trial court must . . . make sufficient
findings of fact and conclusions of law to allow the reviewing
court to determine whether a judgment, and the legal conclusions
that underlie it, represent a correct application of the law.”).
Alimony is ordinarily based upon a party’s actual income at
the time of the hearing. Kowalick v. Kowalick, 129 N.C. App.
781, 787, 501 S.E.2d 671, 675 (1998). However, the trial court
may impute income based on the party’s earning capacity if the
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trial court determines that the party suppressed his income in
bad faith. Id.; see also Megremis, 179 N.C. App. at 182, 663
S.E.2d at 123 (“It is well established that a trial court may
consider a party’s earning capacity only if the trial court
finds the party acted in bad faith.”). Bad faith within the
context of alimony means “that the spouse is not living up to
income potential in order to avoid or frustrate the support
obligation.” Works v. Works, 217 N.C. App. 345, 347, 719 S.E.2d
218, 219 (2011) (citation and quotation marks omitted and
emphasis added).
Bad faith may be found “from evidence that a spouse has
refused to seek or to accept gainful employment; willfully
refused to secure or take a job; deliberately not applied
himself or herself to a business or employment; [or]
intentionally depressed income to an artificial low.” Id.
(citation and quotation marks omitted). As such, when
determining whether the imputation of income to a party is
appropriate, “[t]he dispositive issue is whether a party is
motivated by a desire to avoid his reasonable support
obligations.” Wolf v. Wolf, 151 N.C. App. 523, 527, 566 S.E.2d
516, 519 (2002).
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Intent is a mental attitude which “must ordinarily be
proven, if proven at all, by circumstantial evidence, that is,
by proving facts from which the fact sought to be proven may be
inferred.” Roberts v. McAllister, 174 N.C. App. 369, 378, 621
S.E.2d 191, 198 (2005) (citation and quotation marks omitted),
appeal dismissed, 360 N.C. 364, 629 S.E.2d 608 (2006). Thus, to
support its conclusion that a party suppressed his income in bad
faith, the trial court’s findings must reflect facts and
circumstances from which bad faith may be inferred. See id.
(explaining that “[i]n order to base an award on earning
capacity the finder of fact must have before it sufficient
evidence of the proscribed intent” (citation and quotation marks
omitted)).
Here, the trial court made the following relevant findings
of fact regarding Defendant’s income and earning capacity:
11. Defendant sold his lawn care business to
his son, Wesley Upchurch, on or about April
2, 2012. The total purchase price was
$130,000.00[,] which represented the Fair
Market Value of any equipment plus the
goodwill and other intangible property of
the lawn care business.
12. On or about April 2, 2012, Wesley
Upchurch signed a Promissory Note in favor
of Defendant, Charles Upchurch, for
$130,000.00, at zero percent interest, with
payments of $1,500.00 per month beginning
May 2012. The payout extends until June
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2019.
13. Defendant indicated that his reason for
selling his business to his son in May 2012
was because of his (Defendant’s health). He
indicated that he cannot “do it anymore.”
Particularly he stated that he “can’t get
out in 95 degree weather anymore.”
Plaintiff acknowledged in her testimony that
Defendant went out to the sites of his
customers and did the landscaping work. His
son was generally a regular employee of the
landscaping business, and that he would
sometimes pick up a part-time employee from
time to time if it were a particularly busy
time. This testimony by Plaintiff
corroborates that Defendant’s involvement in
the landscaping business was not in a less
physically taxing position such as a
supervisor, but he was in fact actively
engaged in the landscaping work itself.
14. Defendant did not have the business
appraised, but set the price based upon the
advice of an accountant to average three
years of receipts to determine the purchase
price.
15. According to the property settlement of
the parties, the lawn care business was
allocated to Defendant as his separate
property and was his to sell.
. . . .
18. Defendant applied for and began
receiving Social Security Benefits in June,
2012 for May 2012. He receives a monthly
benefit of $1,424.00 on or about the second
Wednesday of each calendar month. Defendant
obtained information from the Social
Security Office that his benefit at age 66,
if he retired at that age, would be
$1,677.00, as compared to the $1,424.00 he
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would receive as a monthly benefit at age
62.
. . . .
21. Defendant’s mother passed away in
February 2010. He inherited approximately
$500,000.00 from his mother’s estate as his
separate property.
The trial court then concluded that
Defendant exercised bad faith in selling his
lawn care business, stopping his employment
in the lawn care business, and choosing to
live off of his inheritance when considered
in light of his potential obligation to
provide support for Plaintiff. The court
imputes an income to Defendant in the amount
of at least $75,000.00 per year gross.
We recognize that a determination of bad faith resulting in
the application of the earning capacity rule “is best made on a
case by case analysis by the trial court.” Pataky v. Pataky,
160 N.C. App. 289, 307, 585 S.E.2d 404, 416 (2003), aff'd per
curiam, 359 N.C. 65, 602 S.E.2d 360 (2004). Here, however, the
trial court’s determination of bad faith is not adequately
supported by its findings of fact. While the court concluded
that Defendant’s sale of his business was in bad faith “when
considered in light of his potential obligation to provide
support for Plaintiff,” the trial court failed to make adequate
findings to support that ultimate determination. Specifically,
the trial court’s findings fail to demonstrate that Defendant
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sold his business, thereby reducing his income, “in order to
avoid or frustrate [his] support obligation” to Plaintiff.
Works, 217 N.C. App. at 347, 719 S.E.2d at 219 (citation and
quotation marks omitted).
“[A] voluntary reduction in income is insufficient, without
more, to support a finding of deliberate income depression or
bad faith.” Pataky, 160 N.C. App. at 307, 585 S.E.2d at 416.
We therefore remand to the trial court so that it may make
further findings of fact to support its conclusion that
Defendant suppressed his income in bad faith. If the trial
court ultimately determines that the evidence is insufficient to
show bad faith, it must utilize Defendant’s actual income when
considering Plaintiff’s alimony claim. See Quick v. Quick, 305
N.C. 446, 453, 290 S.E.2d 653, 658 (1982) (“Unless the
supporting spouse is deliberately depressing his or her income .
. . the ability of the supporting spouse to pay is . . .
determined by his or her income at the time the award is
made.”).
Conclusion
For the reasons stated above, we vacate the trial court’s
alimony order and remand for further proceedings consistent with
this opinion.
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VACATED AND REMANDED.
Judges HUNTER, Robert C., and DILLON concur.
Report per Rule 30(e).