Shope v. Pennington

NO. COA13-525
NORTH CAROLINA COURT OF APPEALS
Filed: 7 January 2014
DOLORES MARIE SHOPE,
Plaintiff,
v. Lee County
No. 09 CVD 933
RICHARD WAYNE PENNINGTON,
Defendant.
Appeal by plaintiff from order entered 14 January 2013 by
Judge Jacquelyn L. Lee in Lee County District Court. Heard in the
Court of Appeals 23 October 2013.
Wyrick Robbins Yates & Ponton LLP, by K. Edward Greene and
Tobias S. Hampson, for plaintiff-appellant.
Doster, Post, Silverman, Foushee & Post, P.A., by Jonathan
Silverman, for defendant-appellee.
HUNTER, Robert C., Judge.
Plaintiff Dolores Shope appeals from an amended equitable
distribution order. On appeal, plaintiff argues that the trial
court erred by failing to properly distribute the payments
defendant made toward the marital debt associated with Pennington
Farms and by awarding an unequal distribution in favor of
defendant. After careful review, pursuant to Bodie v. Bodie, __
N.C. App. __, __, 727 S.E.2d 11, 15 (2012), we reverse the trial
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court’s amended equitable distribution order and remand for
additional findings.
Background
Plaintiff and defendant married on 21 November 2002,
separated 28 May 2009, and subsequently divorced. At the time of
trial, plaintiff was 71 years old, and defendant was 72. Plaintiff
worked as a manager at McDonald’s in Spring Lake, North Carolina
and earned approximately $10.00 per hour. In addition, she
received $1,419.40 each month in social security benefits and
$282.95 per month from her pension. Defendant operated Pennington
Farms, a poultry business located in Carthage, North Carolina.
His approximate average monthly gross income was $1,977.00—
$1,275.00 earned from the operation of Pennington Farms and $702.00
in social security benefits. It is uncontroverted that the
Pennington Farms’s business, assets, and liabilities were marital
property with the exception of the real property on which the
business is located. The real property is defendant’s separate
property.
On 3 November 2011, the parties entered into an amended
pretrial order that identified all the property and debts subject
to equitable distribution. In regards to marital debt, the parties
agreed that plaintiff had made payments of $11,841.84 towards
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marital debt associated with a vehicle. Defendant had paid
$511,522.69 toward marital debt associated with Pennington Farms
after the date of separation from funds “generated from Pennington
Farms.”
On 10 and 17 November 2011, the trial court held a hearing on
the issue of equitable distribution. On 10 May 2012, the trial
court entered an equitable distribution order, ultimately
determining that an unequal distribution in favor of plaintiff was
equitable. In that order, the trial court made the following,
pertinent, conclusion:
33. That neither party presented evidence as
to divisible property and therefore no
divisible property is identified, classified,
valued or distributed. Plaintiff solely paid
the debt for her vehicle (Item 103) after date
of separation; however, the decrease in this
debt is due to the postseparation actions of
[p]laintiff and is not treated as divisible
property or debt. Defendant solely paid the
marital debts listed in 30B above after date
of separation; however the decrease in these
debts is due to the postseparation actions of
[d]efendant and is not treated as divisible
property or debt.
With regard to the parties’ acts to preserve the marital property,
the trial court noted that “[d]efendant has paid $506,903.69
toward marital debts associated with Pennington Farms after
separation and before the date of trial.”
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On 24 May 2012, plaintiff filed a Rule 59(e) motion requesting
the trial court amend its equitable distribution order or, in the
alternative, grant a new trial for three basic reasons. First,
plaintiff argued that the trial court erred in failing to classify
the decrease in the marital debt associated with Pennington Farms
as divisible property pursuant to N.C. Gen. Stat. § 50-20(b)(4)(d).
Second, plaintiff contended that defendant actually paid a total
of $511,522.69 toward the marital debt, not $506,903.69 as the
trial court found. Finally, plaintiff argued that the trial court
failed to properly value Pennington Farms.
On 14 January 2013, the trial court entered an order partially
granting and partially denying plaintiff’s Rule 59 motion. The
trial court issued an amended equitable distribution order that
reclassified the payments defendant made towards the marital debt
associated with Pennington Farms as divisible property, revalued
those payments to $511,522.69, and distributed all those payments
to defendant. The trial court denied plaintiff’s request to
revalue Pennington Farms. Finally, the trial court considered the
factors listed in N.C. Gen. Stat. § 50-20(c) and concluded that an
unequal distribution in favor of defendant was equitable.
Plaintiff timely appealed the amended order.
Arguments
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Plaintiff first argues that the trial court erred by
distributing all of defendant’s payments toward the marital debt
associated with Pennington Farms to defendant without making the
proper findings. Specifically, plaintiff contends that the trial
court found that the funds for those payments were “generated” by
Pennington Farms, a marital asset. However, plaintiff alleges
that the trial court erred by failing to make any findings as to
the source of those funds and by refusing to give her any
consideration for defendant’s use of marital property. Pursuant
to Bodie, we agree and remand the matter back to the trial court
for the making of additional findings of fact identifying the
source of the funds defendant used to make those payments and amend
its distribution of those payments in accordance with this opinion.
Our standard of review of a trial court’s equitable
distribution order is well-established:
Equitable distribution is vested in the
discretion of the trial court and will not be
disturbed absent a clear abuse of that
discretion. Only a finding that the judgment
was unsupported by reason and could not have
been a result of competent inquiry or a
finding that the trial judge failed to comply
with the statute, will establish an abuse of
discretion.
Wiencek-Adams v. Adams, 331 N.C. 688, 691, 417 S.E.2d 449, 451
(1992) (internal citations omitted).
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According to N.C. Gen. Stat. § 50–20(b)(4)(d) (2011),
divisible property includes “[i]ncreases and decreases in marital
debt and financing charges and interest related to marital debt.”
“A spouse is entitled to some consideration, in an equitable
distribution proceeding, for any post-separation payments made by
that spouse (from non-marital or separate funds) for the benefit
of the marital estate.” Bodie, __ N.C. App. at __, 727 S.E.2d at
15 (emphasis added). Our Courts have recognized that a credit may
be used as a means to take into consideration a party’s
postseparation payments on marital debt. See Wiencek-Adams, 331
N.C. at 694, 417 S.E.2d at 453. However, “a spouse is entitled to
some consideration for any post-separation use of marital property
by the other spouse.” Walter v. Walter, 149 N.C. App. 723, 731,
561 S.E.2d 571, 576-77 (2002). In other words, if a spouse uses
marital property to pay down marital debt, the other spouse is
entitled to some consideration for that use.
We find guidance from this Court’s recent decision in Bodie.
In Bodie, the trial court found that the plaintiff paid $216,000.00
toward the marital debts. Id. at __, 727 S.E.2d at 15. However,
the trial court failed to properly classify these payments as
divisible property or make any findings regarding the source of
those funds. Id. The Court noted that:
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Plaintiff has not cited any cases, and we know
of none, holding that a spouse is entitled to
a “credit” for post-separation payments made
using marital funds. As a result, in order to
properly evaluate the trial court’s treatment
of post-separation marital debt payments, the
source of the funds used to make the payments
should be identified.
Id. In other words, pursuant to Bodie, defendant would not be
entitled to full credit for those payments toward marital debt if
those payments were made using marital funds. Thus, in order for
us to determine whether the trial court properly distributed those
payments to defendant, the source of funds for defendant’s payments
must be identified.
In its amended equitable distribution order, the trial court
found that:
The [d]efendant has paid $511,522.69 toward
marital debts associated with Pennington Farms
after the date of separation and before the
date of trial as stipulated to in Schedule M
of the pretrial order. The funds for these
payments came from the [d]efendant by virtue
of his effort in operating Pennington Farms
after the date of separation which generated
income to pay these debts. The Court will
consider this divisible property, as defined
in G.S. 50-20(b)(4) and (d) in its final
judgment. This divisible property is assigned
to the [d]efendant.
(Emphasis added). Here, unlike Bodie, the trial court properly
classified the defendant’s payment of debts associated with
Pennington Farms as divisible property in its amended equitable
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distribution order. However, the trial court distributed all of
those payments, $511,522.69, to defendant without making specific
findings as to the source of those funds. While a trial court may
distribute payments unequally, see Stovall v. Stovall, 205 N.C.
App. 405, 413, 698 S.E.2d 680, 686 (2010), plaintiff would be
entitled to some consideration of those payments if the source of
those funds was marital property. See Bodie, __ N.C. App. at __,
727 S.E.2d at 15. Here, the trial court’s identification of the
source of those funds is ambiguous. However, given that the
average monthly gross income defendant earned from the operation
of Pennington Farms was $1,275.00, it seems unlikely that defendant
was able to generate over half of a million dollars in debt
payments solely on income he earned from his work on the farm. In
other words, the numbers do not add up. Consequently, the trial
court erred in not making clear findings as to the source of these
funds and, if the source included defendant’s use of the marital
property to generate income, in not giving plaintiff any
consideration for that use. Therefore, we remand this matter back
to the trial court to make additional findings of fact which
identify the source of the funds used to pay down the marital debt
associated with Pennington Farms and redistribute those payments
if necessary.
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Next, plaintiff argues that the trial court abused its
discretion by entering an amended equitable distribution award in
favor of defendant based on exactly the same distributional factors
it relied on in its original equitable distribution order which
favored plaintiff. Because defendant may not be entitled to a
full credit for the payments he made toward the marital debt
associated with Pennington Farms, which would factor in the trial
court’s determination of whether an unequal distribution was
equitable pursuant to N.C. Gen. Stat. § 50-20(c), we remand.
Pursuant to N.C. Gen. Stat. § 50–20(c), an equal division of
marital property is equitable. “However, a trial court may
consider all the factors listed in § 50–20(c) and find that an
equal division of marital property would not be equitable under
the circumstances.” Petty v. Petty, 199 N.C. App. 192, 199, 680
S.E.2d 894, 899 (2009).
One of the statutory factors a trial court must consider is
the “[a]cts of either party to maintain, preserve, develop, or
expand; or to waste, neglect, devalue or convert the marital
property or divisible property, or both, during the period after
separation of the parties and before the time of distribution.”
N.C. Gen. Stat. § 50-20(c)(11a). In the amended equitable
distribution order, when the trial court addressed this factor, it
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found that it favored defendant because he had paid $506,903.69
toward marital debts. Initially, we note that this figure is not
consistent with the trial court’s findings. Specifically, the
trial court found that defendant paid $511,522.69. Additionally,
given that defendant may not be entitled to a full credit for these
payments, see Bodie, __ N.C. App. at __, 727 S.E.2d at 16, it may
be necessary for the trial court to reconsider this factor and
determine whether an unequal division in favor of defendant is
still justified. Thus, we must reverse and remand the amended
equitable distribution order back to the trial court for findings
consistent with this opinion.
Conclusion
Because the trial court failed to make findings regarding the
source of the funds defendant used to pay the marital debt and
refused to give plaintiff any consideration for those payments
even though the source of those funds may have come from marital
property, we reverse and remand the matter back to the trial court
to make findings and redistribute those payments if necessary. In
addition, we remand the matter back to the trial court to make
findings as to whether an unequal distribution in favor of
defendant is still equitable in light of our opinion.
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REVERSED AND REMANDED.
Judges CALABRIA and ROBERT N. HUNTER, JR. concur.