Opinion
No. 07-483.
Filed February 5, 2008.
Transylvania County No. 04 CVD 338.
Appeal by plaintiff and defendant from judgment entered 25 August 2006 by Judge Robert S. Cilley in Transylvania County District Court. Heard in the Court of Appeals 26 November 2007.
Adams, Hendon, Carson, Crow Saenger, P.A., by Joy McIver and Matthew S. Roberson, for plaintiff-appellee. Donald H. Barton, P.C., by Donald H. Barton, for defendant-appellant.
Plaintiff Beverly McNeely ("wife") and defendant Boyd R. McNeely ("husband") were married 20 October 2001, separated 7 June 2003, and have since divorced. Husband and wife had previously married each other in August 1988 and divorced in August 1991. The distribution of the marital estate from the parties' second marriage to each other is the subject of this appeal. This matter was heard in Transylvania County District Court on 27-28 April 2006. Both parties appealed from the equitable distribution judgment entered by the trial court on 25 August 2006. The trial court found that the marital estate was "heavily concentrated in large, non-liquid assets" and found that an in-kind distribution was "practical." After considering the distributional factors, the trial court found that a distribution in the proportion of 60.43% of the marital estate to wife and remainder to husband was equitable, and divided the assets accordingly.
Husband assigns error to the trial court's Findings of Fact 5, 6, 7, and 10, Conclusions of Law 6 and 10, and its award of those assets to wife. The issues before this Court are the following: (I) whether the trial court erred by finding as fact that the net value of the Country Club property on the date of separation was $76,900.00; (II) whether the trial court erred by finding as fact and concluding as a matter of law that the properties at 103 Clement Road and 3 Breedlove Road were marital properties subject to distribution; (III) whether the trial court erred by finding as fact and concluding as a matter of law that the Flat Creek Valley Road property was marital property subject to distribution; (IV) whether the trial court erred by awarding to wife the properties at 103 Clement Road, 3 Breedlove Road, and Flat Creek Valley Road; and (V) whether the trial court erred by awarding to wife the proceeds held in escrow from the sale of husband's separately-owned Trailer Park property.
I.
Husband first contends that the trial court erred by finding that the net value of the 8.627 acre tract of land on Country Club Road ("the Country Club property") as of the parties' date of separation was $76,900.00. We remand this matter to the trial court for further proceedings.
"In appellate review of a bench equitable distribution trial, the findings of fact regarding value are conclusive if there is evidence to support them, even if there is also evidence supporting a finding otherwise." Crutchfield v. Crutchfield, 132 N.C. App. 193, 197, 511 S.E.2d 31, 34 (1999). "The trial court has discretion in distributing marital property, and the exercise of that discretion will not be disturbed in the absence of clear abuse." Id. (internal quotation marks omitted).
Pursuant to N.C.G.S. § 50-21(b), in an equitable distribution proceeding, "marital property shall be valued as of the date of the separation of the parties, and evidence of preseparation and postseparation occurrences or values is competent as corroborative evidence of the value of marital property as of the date of the separation." N.C. Gen. Stat. § 50-21(b) (2007). "Prior to ordering an equitable distribution of marital property, the trial judge is required to calculate the net fair market value of the property." Carlson v. Carlson, 127 N.C. App. 87, 91, 487 S.E.2d 784, 786, disc. review denied, 347 N.C. 396, 494 S.E.2d 407 (1997). "The trial court calculates the net fair market value, by reducing the fair market value of the property by the value of any debts that are attached to the asset." Id.; see also Alexander v. Alexander, 68 N.C. App. 548, 550_51, 315 S.E.2d 772, 775 (1984) ("[This Court has defined net value as] market value, if any, less the amount of any encumbrance serving to offset or reduce market value.").
In the present case, the parties acquired the Country Club property (Deed 159/835) during the course of their marriage for $76,900.00 in April 2003, less than two months prior to their date of separation. The property was deeded to both parties and was said to be wholly financed by RBC Centura Bank with a mortgage signed by husband and wife, although a copy of the mortgage is not included in the record on appeal. The trial court found that, in addition to the marital Country Club property, the RBC Centura Bank mortgage ("the mortgage") encumbered three parcels of husband's separately-owned property. These separately-owned properties are identified as Deeds 232/118 ("Trailer Park property"), 389/717 ("#10 property"), and 402/196 ("#11 property"). Husband testified that $76,900.00 of the mortgage was used to purchase the Country Club property, while the remainder was used to refinance and consolidate other mortgages for each of husband's three separately-owned properties. According to wife's Amended Equitable Distribution Affidavit, the amount owed on the mortgage at the date of separation was $191,602.00. According to husband's Equitable Distribution Affidavit, the net values for the Country Club, Trailer Park, #10, and #11 properties at the date of separation were $76,000.00, $115,160.00, $56,490.00, and $74,490.00, respectively.
On 2 August 2005, more than two years after the parties' date of separation, husband sold his separately-owned Trailer Park property for $203,000.00 and used that money to satisfy the mortgage. At the closing for the Trailer Park property, the payoff amount of the mortgage was $174,332.35. Husband speculated that the amount of proceeds from the sale of his separate Trailer Park property that went to pay off the Country Club property under the mortgage was "the purchase value, approximately $76,000." However, the trial court did not make a finding of fact as to how much of husband's separate proceeds went towards satisfying the specific portion of the mortgage which encumbered the marital Country Club property.
Regarding the value of the Country Club property, the trial court found the following:
Wife contends for a [date of separation] net value of $76,900, because nothing had happened in [the] two months [of ownership prior to the parties' separation] to diminish its worth, whereas Husband contends for a [date of separation] net value of zero, because of the existence of the [mortgage] debt on [date of separation].
In spite of the mortgage encumbering the property on the date of separation, the court found that the net value of the Country Club property was $76,900. Again, we have held that the trial court must determine the net value of marital property by "reducing the fair market value of the property by the value of any debts that are attached to the asset." Carlson, 127 N.C. App. at 91, 487 S.E.2d at 786. In this case, the mortgage encumbering the Country Club property and husband's separately-owned properties was said to be worth $191,602.00 at the date of separation, while the marital and separate properties encumbered by that mortgage were said to be valued at over $320,000.00. Without copies of the mortgage documents in the record on appeal from April 2003 (when the mortgage was taken out by the parties) or August 2005 (when the mortgage was satisfied by husband), this Court cannot contradict the trial court's finding with respect to the value of the Country Club property, rather than reduced in net value to zero on the date of separation, as husband contends. In the absence of clear abuse of discretion, we must find as conclusive the trial court's findings of fact regarding the value of the marital Country Club property, "even if there is also evidence supporting a finding otherwise." Crutchfield, 132 N.C. App. at 197, 511 S.E.2d at 34.
However, the trial court found that husband made loan payments on the mortgage after the date of separation, although "how much he paid, and how much was interest, [wa]s not in evidence." Since husband made postseparation payments on the mortgage encumbering the Country Club property and ultimately satisfied that mortgage prior to the equitable distribution judgment, "it would appear that [husband] should be credited with at least the amount by which he decreased the principal owed on the marital [Country Club property]." Hunt v. Hunt, 85 N.C. App. 484, 491, 355 S.E.2d 519, 523 (1987); see also McLean v. McLean, 88 N.C. App. 285, 293, 363 S.E.2d 95, 100 (1987) ("[T]he [trial] court . . . [must] credit a former spouse with at least the amount by which he decreased the principal owed on marital debt by using his separate funds.") (internal quotation marks omitted), aff'd, 323 N.C. 543, 374 S.E.2d 376 (1988). Therefore, we must remand this matter to the trial court for a determination of the amount to be credited to husband in the equitable distribution of the parties' marital estate for reduction of debt on marital property and for an entry of a new judgment consistent with that determination.
II.
Husband next contends that the trial court erred by finding as fact and concluding as a matter of law that the properties at 103 Clement Road (Deed 163/79) and 3 Breedlove Road (Deed 163/82) were marital properties subject to distribution. We disagree.
N.C.G.S. § 50-20(b)(1) provides, in part:
"Marital property" means all real and personal property acquired by either spouse or both spouses during the course of the marriage and before the date of the separation of the parties, and presently owned, except property determined to be separate property or divisible property in accordance with subdivision (2) or (4) of this subsection. . . . It is presumed that all property acquired after the date of marriage and before the date of separation is marital property except property which is separate property under subdivision (2) of this subsection. This presumption may be rebutted by the greater weight of the evidence.
N.C. Gen. Stat. § 50-20(b)(1) (2007). N.C.G.S. § 50-20(b)(2) defines "separate property" as "all real and personal property acquired by a spouse before marriage or acquired by a spouse by bequest, devise, descent, or gift during the course of the marriage." N.C. Gen. Stat. § 50-20(b)(2) (emphasis added). This Court has noted that, "[b]ecause our statute [N.C.G.S. § 50-20(b)(2)] provides that gifts to `a' spouse during the course of the marriage [are] the separate property of that spouse, it follows that gifts to ` both spouses jointly are not within the definition of separate property,' but instead are marital property." Burnett v. Burnett, 122 N.C. App. 712, 714 n. 1, 471 S.E.2d 649, 651 n. 1 (1996) (citation omitted) (emphasis added).
When considering whether a transfer of property is a gift, "evidence relevant to donative intent includes . . . documents surrounding the transaction, whether a gift tax return was filed, and whether an excise tax was paid." Id. at 715, 471 S.E.2d at 651. "When property subject to classification [in an equitable distribution proceeding] is titled as a tenancy by the entirety, . . . the marital gift presumption controls the initial determination of whether a gift has been made." McLean v. McLean, 323 N.C. 543, 552, 374 S.E.2d 376, 382 (1988).
N.C.G.S. § 39-13.6(b) provides, in part:
A conveyance of real property, or any interest therein, to a husband and wife vests title in them as tenants by the entirety when the conveyance is to:
(1) A named man "and wife," or
. . . .
(3) Two named persons, whether or not identified in the conveyance as husband and wife, if at the time of conveyance they are legally married; unless a contrary intention is expressed in the conveyance.
N.C. Gen. Stat. § 39-13.6(b)(1), (3) (2007); see also Edwards v. Batts, 245 N.C. 693, 696, 97 S.E.2d 101, 104 (1957) ("A deed to husband and wife, nothing else appearing, vests the title in them as tenants by entirety."). A tenancy by the entirety is "a unique form of holding title to real property, available only to married persons[, which] . . . takes its origin from the common law when husband and wife were regarded as one person." McLean, 323 N.C. at 551, 374 S.E.2d at 381 (internal quotation marks omitted). Therefore, "[t]he very nature of th[is] estate strongly suggests that titling property in this manner evidences an intention to make a gift [to the marriage]." Id. "[W]hether [the moving party] succeed[s] in rebutting the presumption of gift to the marital estate by clear, cogent, and convincing evidence is a matter left to the trial court's discretion, for it is the trial court that must find the evidence convincing." Id. at 555, 374 S.E.2d at 383 (citation omitted) (internal quotation marks omitted).
In the present case, the properties at 103 Clement Road and 3 Breedlove Road were deeded on 22 April 2003 and recorded on 12 May 2003, less than one month prior to the parties' date of separation. The court found that the deeds for both properties bore "no notation of any excise tax paid." However, husband's mother, grantor Mae W. McNeely, deeded both properties to grantees "Boyd Robert McNeely and wife, Beverly McNeely." This language satisfies two of the three ways in which a conveyance can vest title in husband and wife as tenants by the entirety: (1) by naming husband and including the provision "and wife," and (2) by naming both parties, since husband and wife were legally married at the time of both conveyances.
Additionally, the trial court found: "Husband appears to have been in a position to designate who his mother named as grantee(s) on th[e] deed [for the 103 Clement Road property], and [husband] testified that [w]ife's name was included `on advice of' counsel, which the court presumes to be advice of [h]usband." The trial court also found: "The same attorney drew th[e] deed [for the 3 Breedlove Road property], at the same time, as the deed for the Clement Road property." These findings indicate that husband was in a position to direct the titling of these properties from his mother to him alone, rather than to both parties, but failed to do so. By advising his mother to deed the properties to both parties as tenants by the entirety, husband may not claim these properties were separate gifts to him pursuant to N.C.G.S. § 50-20(b)(2). See N.C. Gen. Stat. § 50-20(b)(2) ("[Separate property includes] all real . . . property . . . acquired by a spouse by . . . gift during the course of the marriage."). Instead, our Supreme Court has found that, "[b]y titling . . . property by the entireties, the conveyance itself indicates the contrary intention to preserving separate property required by [N.C.G.S. § 50-20(b)(2)] . . . [and] thus is presumed to . . . intend[] a gift to the marital estate." McLean, 323 N.C. at 555, 374 S.E.2d at 383 (citation omitted) (internal quotation marks omitted).
Further, the trial court found that wife "had paid the grantor $10,000 by check on [3 December 2001], which [w]ife contends was in anticipation of the deed transfer [for the 103 Clement Road property], but the check says nothing on its memo line." Husband contends that "no consideration [was] paid for the purchase of the [103 Clement Road] property from his [m]other." Since a deed of gift, "duly signed and delivered" and recorded within two years after its making, " is valid, as between the parties and their heirs, without consideration, good or valuable," Edwards, 245 N.C. at 698, 97 S.E.2d at 105 (emphasis added), and the properties were deeded to the parties from husband's mother as tenancies by the entirety for no consideration, we find the court properly concluded that the 103 Clement Road and 3 Breedlove Road properties were marital property subject to distribution.
III.
Husband next contends the trial court erred by finding as fact and concluding as a matter of law that the property at Flat Creek Valley Road (Deed 109/726) was marital property subject to distribution. We disagree.
The "interspousal gift" provision of N.C.G.S. § 50-20(b)(2) provides: "[P]roperty acquired by gift from the other spouse during the course of the marriage shall be considered separate property only if such an intention is stated in the conveyance." N.C. Gen. Stat. § 50-20(b)(2). "If a spouse uses separate funds to acquire property titled by the entireties, the presumption is that a gift of those separate funds was made, and the . . . interspousal gift provision [of N.C.G.S. § 50-20(b)(2)] applies." McLean, 323 N.C. at 552, 374 S.E.2d at 382. Additionally, this Court has stated that the marital gift presumption applies "when, because of a purchase, third parties convey to the spouses in the entireties." Warren v. Warren, 175 N.C. App. 509, 513, 623 S.E.2d 800, 803 (2006) (quoting 3 Suzanne Reynolds, Lee's North Carolina Family Law § 12.33, at 12-100 (5th ed. 2002)). In the present case, the property at Flat Creek Valley Road was deeded on 8 July 2002 and recorded the next day, almost one year prior to the parties' date of separation. The court found that the property was acquired by deed from husband's ex-wife Teresa June McNeely for $26,000, as "reflected in the $52 of excise tax on the deed." The court also found that the "$26,000 for the purchase of th[e] property came from an account that [w]ife brought into the marriage." Further, husband's ex-wife conveyed the Flat Creek Valley Road property to "Boyd Robert McNeely and wife, Beverly McNeely." Since the language of this conveyance vested title in husband and wife as tenants by the entirety pursuant to N.C.G.S. § 39-13.6(b)(1) and (3), and since wife's separate funds were used to purchase the property conveyed by the third party as a tenancy by the entirety, the trial court properly concluded that the Flat Creek Valley Road property was marital property subject to distribution.
IV.
Husband also contends that the trial court erred by awarding to wife the properties at 103 Clement Road, 3 Breedlove Road, and Flat Creek Valley Road. Husband does not argue that the court's division of these assets was not equitable, but merely argues that these properties should have been classified as separate rather than marital. Since we have already concluded that these properties were each properly classified as marital subject to distribution, we find no error.
V.
Finally, husband contends that the trial court erred by awarding to wife the proceeds held in escrow from the sale of husband's separately-owned Trailer Park property. We agree.
In the present case, as described in Section I above, husband sold his separately-owned Trailer Park property postseparation for $203,000.00. At the closing for the sale of the Trailer Park property, husband used a portion of that money to satisfy the payoff amount of the parties' RBC Centura Bank mortgage, which was $174,332.35. The trial court found that, after the RBC Centura Bank mortgage was paid and closing costs and commissions were deducted, $11,084.48 remained and was put into an escrow account pending the trial court's judgment. The trial court concluded that the funds held in escrow were marital property and awarded those funds to wife. However, based on the trial court's Finding of Fact 5, these funds appear to be the proceeds of a postseparation sale of husband's separately-owned property. Since marital property includes real and personal property which is not "determined to be separate property or divisible property," see N.C. Gen. Stat. § 50-20(b)(1), and "[o]nly marital property and debt is subject to equitable distribution," Crowder v. Crowder, 147 N.C. App. 677, 681, 556 S.E.2d 639, 642 (2001), disc. review denied, 357 N.C. 504, 587 S.E.2d 664 (2003), we must vacate that portion of the award concluding the escrow funds identified in the court's Finding of Fact 5 are marital property and remand to the trial court for a reassessment of the distribution of the remaining assets of the parties' marital estate and for an entry of a new judgment consistent with that reassessment.
Affirmed in part, vacated in part, and remanded.
Judges McGEE and STEPHENS concur.
Report per Rule 30(e).