Power v. Power

NO. COA14-249
NORTH CAROLINA COURT OF APPEALS
Filed: 7 October 2014
ROSEMARY LYNN GROVE POWER,
Plaintiff,
v. Wake County
No. 12 CVD 9258
THOMAS ALFRED POWER,
Defendant.
Appeal by defendant from equitable distribution judgment
entered 28 August 2013 by Judge Christine Walczyk in Wake County
District Court. Heard in the Court of Appeals 26 August 2014.
Allen & Spence, PLLC, by Scott E. Allen, for plaintiff-
appellee.
Manning, Fulton & Skinner, P.A., by Michael S. Harrell, for
defendant-appellant.
BRYANT, Judge.
Where defendant failed to present evidence of potential tax
consequences before the close of evidence, the trial court was
not required to consider those potential tax consequences when
entering an equitable distribution judgment. Although the
Kelley Blue Book falls within Rule 803(17) as a hearsay
exception, defendant was not prejudiced by the omission of such
evidence where defendant was permitted to give opinion testimony
-2-
as to the value of the marital cars. Where defendant failed to
show that a monetary gift to the marital couple was not marital
property, the trial court properly considered that money as part
of the marital assets.
On 2 July 2012, plaintiff Rosemary Lynn Grove Parker filed
a complaint against defendant Thomas Alfred Power seeking
equitable distribution, divorce from bed and board, and a
temporary restraining order to prevent defendant from wasting
marital assets. Defendant answered and counterclaimed for
alimony and post-separation support, equitable distribution, and
expenses and attorneys’ fees.
On 21 May 2013, plaintiff and defendant filed a joint
dismissal in which plaintiff dismissed her claim for divorce
from bed and board and defendant dismissed his claim for alimony
and post-separation support.
A hearing on the parties’ competing equitable distribution
claims was held on 8 April 2013 in Wake County District Court,
the Honorable Christine Walczyk, Judge presiding. On 28 August,
the trial court entered a judgment for equitable distribution
between the parties. Defendant appeals.
_________________________
-3-
On appeal, defendant raises three issues as to whether the
trial court erred in: (I) not considering the tax consequences
arising from its equitable distribution judgment; (II) in
excluding defendant’s Kelley Blue Book values for the marital
cars; and (III) in not deducting from the marital estate
financial gifts made to plaintiff and defendant.
I.
Defendant argues that the trial court erred in not
considering the tax consequences arising from its equitable
distribution judgment. We disagree.
Our review of an equitable distribution
order is limited to determining whether the
trial court abused its discretion in
distributing the parties' marital property.
The distribution of marital property is
vested in the discretion of the trial courts
and the exercise of that discretion will not
be upset absent clear abuse. Accordingly,
the findings of fact are conclusive if they
are supported by any competent evidence from
the record.
Robinson v. Robinson, 210 N.C. App. 319, 322, 707 S.E.2d 785,
789 (2011) (citations, quotations, and parentheses omitted).
Defendant contends the trial court erred in not considering
the tax consequences of its equitable distribution judgment.
Specifically, defendant argues that pursuant to N.C. Gen. Stat.
-4-
§ 50-20(c), the trial court was required to consider tax
consequences prior to making its judgment.
North Carolina General Statutes, section 50-20, holds that:
There shall be an equal division by using
net value of marital property and net value
of divisible property unless the court
determines that an equal division is not
equitable. If the court determines that an
equal division is not equitable, the court
shall divide the marital property and
divisible property equitably. The court
shall consider all of the following factors
under this subsection:
. . .
(11) The tax consequences to each party . .
. . The trial court may, however, in its
discretion, consider whether or when such
tax consequences are reasonably likely to
occur in determining the equitable value
deemed appropriate for this factor.
N.C.G.S. § 50-20(c)(11) (2013). However, a trial court must
consider all of the distributional factors in N.C.G.S. § 50-
20(c) only when a party presents evidence that an equal
distribution would be inequitable. Embler v. Embler, 159 N.C.
App. 186, 189, 582 S.E.2d 628, 631 (2003) (emphasis added)
(citations and quotation omitted).
In its pre-trial order, the trial court noted that both
parties had raised contentions, including tax consequences, as
to why an equal division of marital assets would not be
-5-
equitable. However, during the equitable distribution hearing,
neither party presented any evidence regarding potential tax
consequences caused by an equal distribution. In fact, the
record shows that defendant only raised the issue of tax
consequences as to a single marital account, a Scottrade
account, at the end of the hearing:
[DEFENDANT]: Does Your Honor also consider
that Scottrade account? I shouldn't be
penalized with all the tax burden on that if
you're weighing the cash-out values.
THE COURT: I'm going to consider -- I mean,
you guys didn't put on any evidence about
tax consequences, but I'm going to consider
the liquid or nonliquid nature of assets
when I do the division.
[DEFENDANT]: Okay.
As defendant failed to present evidence during the hearing
regarding potential tax consequences caused by an equal
distribution, the trial court did not err in failing to consider
tax consequences in awarding an equitable distribution. See id.
Defendant further argues that the trial court erred in not
considering the potential tax consequences of its equitable
distribution judgment because defendant sent to the trial court,
after the equitable distribution hearing, an email challenging
plaintiff’s proposed equitable distribution order. In his
email, defendant asked the trial court to address “a few
-6-
discrepancies” and to “consider[] the tax consequences on the
Defendant’s behalf.” Plaintiff immediately objected to
defendant’s email, and the trial court did not respond to either
party. In its equitable distribution judgment, the trial court
did not make any findings of fact as to tax consequences created
by an equal distribution and concluded as a matter of law that
“[a]n equal distribution of marital and divisible property is
equitable.”
Defendant’s argument that he offered evidence concerning
potential tax consequences to the trial court is without merit,
as defendant’s email was sent after the close of evidence. See
Wall v. Wall, 140 N.C. App. 303, 312, 536 S.E.2d 647, 653 (2000)
(“The trial court is not required to consider tax consequences
unless the parties offer evidence about them. Defendant may not
now ascribe error to the trial court's failure to make such
findings without demonstrating that such evidence was brought to
the trial court's attention before the close of evidence.
Defendant has the burden of showing that the tax consequences of
the distribution were not properly considered, and he has failed
to carry that burden.”). Accordingly, the trial court acted
within its discretion in ordering an equitable distribution
-7-
judgment that did not address tax consequences. Defendant’s
argument is overruled.
II.
Defendant next argues that the trial court erred in
excluding defendant’s Kelley Blue Book values for the marital
cars.
During the equitable distribution hearing, the trial court
permitted plaintiff to testify as to the value of the two
marital cars. Plaintiff testified that she believed the value
of her car to be about $3,500.00, based on existing mechanical
and cosmetic issues with the car and based on an appraisal of
the car by Carmax. Plaintiff then testified that she believed
the value of defendant’s car to be somewhere between $2,673.00
and $2,773.00, based on the Kelley Blue Book. Defendant did not
object to plaintiff’s testimony.
When defendant testified as to the value of the marital
cars, he sought to admit into evidence copies of the Kelley Blue
Book values of the cars. The trial court sustained plaintiff’s
objection to this evidence, stating it was “hearsay information”
and that defendant could “tell me what your opinion is about the
value of the car, but you can’t show me the Blue Book value.”
Defendant then gave his opinion that plaintiff’s car was worth
-8-
$7,197.00 and his own car $3,001.00, based on the Kelley Blue
Book values.
Defendant contends the trial court erred in refusing to
admit his evidence of the cars’ Kelley Blue Book values and that
this “preclusion of [defendant’s] opinion evidence substantially
prejudiced [him].” This Court has previously held that the
Kelley Blue Book falls within Rule 803(17) as a hearsay
exception for market reports. See State v. Dallas, 205 N.C.
App. 216, 220, 695 S.E.2d 474, 477 (2010) (“Rule 803(17) of the
Rules of Evidence provides that [m]arket quotations,
tabulations, lists, directories, or other published
compilations, generally used and relied upon by the public or by
persons in particular occupations are not excluded by the
hearsay rule. We hold that both the Kelley Blue Book and the
NADA pricing guide fall within the Rule 803(17) hearsay
exception.”). As such, the trial court erred in refusing to
admit defendant’s Kelley Blue Book values as evidence.
However, even though the trial court erred in not admitting
this evidence, defendant has failed to show how this error
“substantially prejudiced” him. The record indicates that
plaintiff and defendant each gave opinion testimony as to the
value of the two marital cars, including each party noting that
-9-
they consulted the Kelley Blue Book in determining the cars’
values. Defendant did not offer additional testimony regarding
the condition of the cars, other than the Kelley Blue Book
values, nor did defendant contest plaintiff’s evidence
concerning the cars’ conditions and values. As such, defendant
was not prejudiced because the trial court heard and weighed the
testimony of both parties as to the value of the cars before
making its determination that each party should keep its
respective car as part of the equitable distribution judgment.
See id. at 220—21, 695 S.E.2d at 477 (noting that the defendant
failed to demonstrate prejudice where the testimony of the
witnesses as to the value of several cars was given, considered,
and weighed, even though the testimony varied as to the cars’
values). Accordingly, the trial court’s error about which
defendant argues was not prejudicial to defendant.
III.
Finally, defendant argues that the trial court erred in not
deducting from the marital estate financial gifts made to
plaintiff and defendant. We disagree.
Pursuant to N.C. Gen. Stat. § 50-20, marital property
includes all property “acquired by either spouse or both spouses
during the course of the marriage and before the date of the
-10-
separation of the parties, and presently owned, except property
determined to be separate property[,]” while separate property
includes all property “acquired by a spouse by bequest, devise,
descent, or gift during the course of the marriage.” N.C.G.S. §
50-20(b)(1),(2) (2013). “The party claiming a certain
classification has the burden of showing, by the preponderance
of the evidence, that the property is within the claimed
classification.” Burnett v. Burnett, 122 N.C. App. 712, 714,
471 S.E.2d 649, 651 (1996) (citation omitted).
During the hearing, defendant argued that the trial court
should not consider $51,000.00 as part of the marital estate
because that money was given to defendant by defendant’s father
as a series of gifts. Plaintiff testified that defendant’s
father had gifted $51,000.00 to her and defendant over a period
of time for the purpose of depleting defendant’s father’s
financial interests so he could receive assisted-living care
through the government, if needed. When questioned by defendant
as to where this money was currently located, plaintiff
responded that she did not know where the money was specifically
located, other than “[i]t was just all in the funds. . . . I
don’t know where it’s at.” Plaintiff also agreed with
defendant’s assertion that defendant had deposited the funds
-11-
“into our joint account.” Defendant did not offer any evidence
as to where the money was located, such as in a separate ear-
marked account; rather, defendant only asserted that the funds
were a gift to him from his father.
The trial court, in its equal distribution order, noted
that: “During the marriage, the parties received regular gifts
from the Defendant’s father. The [defendant]1 failed to establish
that there were any funds left from these gifts on the date of
separation that were separate and apart from the accounts
already distributed hereunder.”
Even assuming that the $51,000.00 was given as a gift
solely to defendant and not as a joint gift to both parties, the
evidence showed that these funds were commingled with the
parties’ marital funds in their joint account. Thus, defendant
had the burden of proof “to trace the initial deposit into its
form at the date of separation.” Fountain v. Fountain, 148 N.C.
App. 329, 333, 559 S.E.2d 25, 29 (2002) (citation omitted).
Commingling of separate property with
1
We note that the trial court made a typographical error in this
finding by stating in its second sentence that “The Plaintiff
failed to establish . . . .” A review of the hearing transcript
indicates that defendant, not plaintiff, raised the issue of
whether the $51,000.00 was in fact marital property. As
defendant failed to establish that this money was not marital
property, we therefore correct the trial court’s finding as
presented above.
-12-
marital property, occurring during the
marriage and before the date of separation,
does not necessarily transmute separate
property into marital property.
Transmutation would occur, however, if the
party claiming the property to be his
separate property is unable to trace the
initial deposit into its form at the date of
separation.
Id. (citations omitted).
Here, defendant failed to present any evidence tracing the
gift of $51,000.00 from his father to show where these funds
were located as of the date of separation. Therefore, as
defendant failed to prove that the aggregate sum of $51,000.00
was not marital property, the trial court did not err in
refusing to classify these funds as defendant’s separate
property. Accordingly, defendant’s argument is overruled.
Affirmed.
Judges McGEE and STROUD concur.