Opinion
No. COA11–1371.
2012-05-1
William J. SCHWEIZER, Plaintiff, v. Donna Maria PATTERSON a/k/a, Donna Owen, Defendant.
Donald H. Barton, P.C., by Donald H. Barton, for plaintiff appellant. No brief filed for appellee.
Appeal by plaintiff from order entered 18 May 2011 by Judge Athena F. Brooks in Transylvania County District Court. Heard in the Court of Appeals 6 March 2012. Donald H. Barton, P.C., by Donald H. Barton, for plaintiff appellant. No brief filed for appellee.
McCULLOUGH, Judge.
William J. Schweizer (“plaintiff”) appeals from the trial court's order of equitable distribution (the “Order”) in which he received a distributive award of $7,121.10. Plaintiff takes issue with multiple aspects of Finding of Fact 2 within the Order in arguing that the trial court erred in calculating its distributive award. We agree and as a result reverse and remand for further proceedings consistent with this opinion.
I. Background
Plaintiff married Donna Maria Patterson (“defendant”) on 22 February 2002 and the parties were subsequently separated on 10 July 2006. The parties maintained a primary residence in Lake Toxaway, Transylvania County, North Carolina, throughout the marriage. Defendant purchased the residence in 1994 and was the record owner of it and the corresponding real property prior to the marriage. During the marriage, the parties made certain improvements to the home, including completing the basement area of the residence and adding a two-story garage.
Plaintiff claims that during the marriage, he contributed separate funds towards the improvement of the house, specifically, in the form of lump sum payments of $50,000.00 and $11,916.00. These payments were made to defendant to satisfy principal payments of the mortgage covering the residence and improvements. On 29 October 2008, the residence was appraised at $215,000.00, with the improvements having added approximately $21,700.00 to its value.
On 10 October 2006, plaintiff filed a complaint for equitable distribution in which he requested an unequal distribution in his favor. Defendant failed to file an answer and the trial court entered an Entry of Default on 19 December 2006. Defendant filed a Motion to Set Aside Entry of Default on 1 March 2007, which the trial court subsequently granted, by order, on 22 March 2007. Defendant then filed her answer and counterclaim for an unequal distribution in her favor on 15 June 2007. The trial court entered an Equitable Distribution Pretrial Order (“Pre-trial Order”) on 19 March 2010, in which the parties provided stipulated schedules covering the status and value of various pieces of property. A hearing was held before Judge Athena Brooks in Transylvania County District Court on 18 and 31 March and 21 May 2010. The trial court ultimately entered its Order on 18 May 2011, awarding plaintiff a distributive award of $7,121.10. Plaintiff filed his Notice of Appeal on 17 June 2011.
II. Analysis
On appeal, plaintiff takes issue with various aspects of Finding of Fact 2 within the Order. As previously mentioned, the parties entered into an agreement in which they agreed to certain facts, issues, and property, as laid out in Schedules A through M, which the trial court incorporated into its Pre-trial Order. The agreement is binding on the parties pursuant to N.C. Gen.Stat. § 50–20(d) (2011), but the parties left a few issues for the trial court to determine. Nevertheless, the trial court may deviate from the provisions of a pretrial stipulation. Despathy v. Despathy, 149 N.C.App. 660, 662–63, 562 S.E.2d 289, 291 (2002). The trial court followed the format of the schedules as provided in the Pre-trial Order when drafting its Order and included all of its findings of fact regarding the schedules in Finding of Fact 2. The trial court did not address Schedules D, F, G, I, and J, in the Order, per the Pre-trial Order and stipulation of the parties. We will discuss each schedule in order as the trial court did and in doing so address any issues associated with that schedule. Due to certain discrepancies between Finding of Fact 2 and the pretrial stipulated schedules, otherwise not supported by competent evidence, we must reverse and remand for further findings of fact.
A. Improper Division and Categorization of the Order
As a preliminary matter, we note that the trial court failed to follow certain standards in preparing its Order and otherwise offer guidance in addressing the issues on remand. The trial court is left to determine the issues in an equitable distribution claim, but N.C. Gen.Stat. § 1A–1, Rule 52(a)(1) (2011), governs what to include in the order. See Quick v. Quick, 305 N.C. 446, 450, 290 S.E.2d 653, 657 (1982). Rule 52(a)(1) requires the trial court “find the facts specially and state separately conclusions of law thereon and direct the entry of the appropriate judgment.” N.C. Gen.Stat. § 1A–1, Rule 52(a)(1). Generally, the classification of property in an equitable distribution proceeding is considered a conclusion of law based on the application of necessary legal principles. Hunt v. Hunt, 112 N.C.App. 722, 729, 436 S.E.2d 856, 861 (1993). “The conclusion that property is either marital, separate or non-marital, must be supported by written findings of fact.” Id. (citation omitted). “Appropriate findings of fact include, but are not limited to, (1) the date the property was acquired, (2) who acquired the property, (3) the date of the marriage, (4) the date of separation, and (5) how the property was acquired (i.e., by gift, bequest, or purchase).” Id.
In the Order, the trial court discusses the status of property and its value within the section designated “Findings of Fact,” however, these issues are more appropriately categorized as “Conclusions of Law.” The trial court correctly mentions the dates of marriage and separation in Finding of Fact 1, as well as noting that various assets were acquired during the marriage. The trial court most likely did not have a need to include information regarding the acquisition of property since the parties already stipulated to a majority of this information in the Pre-trial Order. However, the trial court's calculations and discussions of whether property is marital, separate, or non-marital are more appropriately included in the “Conclusions of Law” section. Nonetheless, we believe we can properly review the Order by considering Finding of Fact 2 as a Conclusion of Law and use the stipulated schedules from the Pre-trial Order as Findings of Fact.
When reviewing awards of equitable distribution
[i]t is well established that where matters are left to the discretion of the trial court, appellate review is limited to a determination of whether there was a clear abuse of discretion. A trial court may be reversed for abuse of discretion only upon a showing that its actions are manifestly unsupported by reason. A ruling committed to a trial court's discretion is to be accorded great deference and 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) (citations omitted).
In conducting an equitable distribution hearing, the trial court is to go through a three-step process. Dalgewicz v. Dalgewicz, 167 N.C.App. 412, 421, 606 S.E.2d 164, 170 (2004). “ ‘These steps are: (1) to determine which property is marital property, (2) to calculate the net value of the property, fair market value less encumbrances, and (3) to distribute the property in an equitable manner.’ “ Id. (quoting Beightol v. Beightol, 90 N.C.App. 58, 63, 367 S.E.2d 347, 350 (1988)).
“Marital assets, distributed thereafter, are valued as of that date.” Id. In determining the value of the property, the trial court must consider the property's market value, if any, less the amount of any encumbrance serving to offset or reduce the market value. Alexander v. Alexander, 68 N.C.App. 548, 550–51, 315 S.E.2d 772, 775 (1984). The trial court is required to make specific findings regarding the net value of each item, determining the net market value as of the date the parties separated for each item distributed. SeeN.C. Gen.Stat. § 50–20(c), (j) (2003).
....
As discussed above, to enter a proper equitable distribution judgment, prior to distributing the assets the trial court must classify and value all property owned by the parties at the date of separation. “And in doing all these things the court must be specific and detailed enough to enable a reviewing court to determine what was done and its correctness.” Carr v. Carr, 92 N.C.App. 378, 379, 374 S.E.2d 426, 427 (1988).
Id. at 421–23, 606 S.E.2d at 170–71 (2004). In other words, “[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.” Coble v. Coble, 300 N.C. 708, 714, 268 S.E.2d 185, 190 (1980). Additionally,
[i]n 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. See Chandler, 108 N.C.App. at 73, 422 S.E.2d at 592. 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.” Lawing v. Lawing, 81 N.C.App. 159, 162, 344 S.E.2d 100, 104 (1986). “This Court is not here to second-guess values of marital and separate property where there is evidence to support the trial court's figures.” Mishler v. Mishler, 90 N.C.App. 72, 74, 367 S.E.2d 385, 386,rev. denied,323 N.C. 174, 373 S.E.2d 111 (1988).
Crutchfield v. Crutchfield, 132 N.C.App. 193, 197, 511 S.E.2d 31, 34–35 (1999). For our Court to properly review an equitable distribution order from the trial court, the
[e]vidence 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, 300 N.C. at 714, 268 S.E.2d at 190. The trial court does not need to refer to every evidentiary fact in making its findings of fact, but it must have sufficient ultimate findings to support the conclusions of law. Smith v. Smith, 336 N.C. 575, 579–80, 444 S.E.2d 420, 422–23 (1994).
Here, the trial court mainly relied on the Pre-trial Order in classifying assets as marital, separate, or non-marital, but for a few assets the trial court had to make its own determination as to the assets' status. Unfortunately, with a majority of the assets in which the trial court made its own determination, it did not provide our Court with enough information to properly inspect its calculations. We will discuss the questionable assets and calculations below.
B. Schedule A
Plaintiff first takes issue with the trial court's interpretation of Finding of Fact 2, Schedule A, in which the parties had already agreed to the status, valuation, possession, and distribution of certain assets. The sole issue left in Schedule A was for the trial court to determine the division of some credit card debt. The trial court correctly noted that the debt was marital; its value at date of separation was $6,662.00; and thus attributed $3,331.00 to each party. However, in reviewing the other property listed in Schedule A the trial court attributed net values of $14,050.00 to plaintiff and $2,565.00 to defendant. The trial court neglected to consider that the parties had already stipulated that a majority of the property in Schedule A was separate property, not to be considered, and that only $470.00 was categorized as marital property divisible between the parties. Consequently, the trial court erred in its interpretation of Schedule A, excluding the credit card debt, and should have attributed $235.00 to each party.
C. Schedule B
Plaintiff's next argument is that the trial court made improper calculations in considering Finding of Fact 2, Schedule B, where it found that contributions to plaintiff's TSP Retirement Account (the “Account”) during the marriage totaled $29,923.23, resulting in a total increase during the marriage of $71,078.90. We can neither agree, nor disagree, with plaintiff's argument because the trial court failed to adequately provide “each link in the chain of reasoning” for our Court to fully understand its determination regarding the Account. Coble, 300 N.C. at 714, 268 S.E.2d at 190. The parties agreed to the status, possession, and distribution of all items in Schedule B, but disagreed as to the value of each item. The trial court neglected to provide in the Order sufficient information regarding the determination of values for each item in Schedule B. Furthermore, when the values given to each item are summed, the amount we calculate differs from the total provided by the trial court.
Additionally, we note the trial court appears to improperly consider passive increases in the Account during the marriage. Our Court has clearly established that passive increases in separate property during the marriage remain separate property upon separation. Fountain v. Fountain, 148 N.C.App. 329, 333, 559 S .E.2d 25, 29 (2002). The trial court failed to sufficiently and separately account for plaintiff's contributions and any passive increases to the account for our Court to review the calculations. Consequently, we must reverse and remand for further findings of fact on this issue.
D. Schedule C
Plaintiff does not take issue with Finding of Fact 2, Schedule C, in which the only issue left for the trial court was determining each asset's status. It appears the trial court correctly determined the status of each item in Schedule C, but following the trial court's classifications and corresponding valuations does not result in the trial court's total amount allocated to each party. Schedule C allots $0.00 and separate property to plaintiff and $75.00 and separate property to defendant, but we cannot determine how the trial court arrived at these values. Thus, we must reverse and remand for further findings of fact because these values have an impact on the final distributive award.
E. Schedule E
In his next argument, plaintiff takes issue with Finding of Fact 2, Schedule E, where the trial court allocated marital property valuing $8,350.00 to plaintiff and $3,384.00 to defendant. Plaintiff contends the trial court erred by including a Daewoo Lanos vehicle as marital property when Schedule E categorizes it as plaintiff's separate property. We agree.
Schedule E contains four pieces of property, consisting of a lump sum of $50,000.00 given to defendant by plaintiff for the mortgage encumbering the residence, a 2004 Ford Excursion, a sum of Iraqi Dinar, and the Daewoo Lanos. The trial court decided to address the lump sum of $50,000.00 in a later section involving the house distribution. It correctly addressed the Ford Excursion by categorizing it as marital property and giving it a net value of $4,000.00 allotted to plaintiff since he retained the value of the vehicle post-separation. The trial court also properly addressed the Iraqi Dinar in categorizing it as marital property, with a value of $3,384.00, and allotting it to defendant since it remains in her possession. However, the trial court improperly categorized the Daewoo Lanos. The parties only disagreed regarding the distribution and value of the items in Schedule E. They agreed that the Daewoo was plaintiff's separate property, yet the trial court allotted a value of $4,350.00 to plaintiff for consideration in the final distributive award. Although the trial court may deviate from the stipulated schedule, it failed to provide any rationale for its deviance in regard to the Daewoo and consequently we must assume the trial court made a mistake. See Despathy, 149 N.C.App. at 662–63, 562 S.E.2d at 291. This value and categorization is not based on competent evidence and must be reversed.
F. Schedule H
Plaintiff's final contention is that the trial court erred in Finding of Fact 2, Schedule H, in which it failed to return to plaintiff $11,916.00 of separate funds used to improve the residence and a $50,000.00 lump sum used to decrease the mortgage on the residence. Furthermore, plaintiff claims the trial court erred in neglecting to account for the $21,700.00 value of the improvements made to the residence during the marriage. As mentioned above, the trial court again failed to include specific information to allow our Court to determine whether the calculations regarding the residence were correct. See Dalgewicz, 167 N.C.App. at 422, 606 S.E.2d at 171.
The trial court appears to have considered the two payments and the increase in value to the residence attributable to plaintiff's payments, but it did not support its ultimate values with logical steps in reaching those amounts. The only thing we can decipher is that the trial court arbitrarily came up with an amount of $60,850.00, potentially made up of the two lump sums paid by plaintiff and the increased value to the residence; then it appears the trial court added this number to the appraised value of the improvements for a second time, to reach a value allotted to defendant in the amount of $82,550.00. However, that would involve double accounting for the increased value of the residence. The two lump sums had a total value of $61,916.00 and the increased value as a result of the improvements amounted to $21,700.00, resulting in a total of $83,616.00. As one can see, our calculations differ from those of the trial court using the numbers provided, which is why we must reverse and remand for further findings regarding the distribution of the marital residence.
G. Plaintiff's Remaining Arguments
The trial court also addressed Schedules K, L, and M, but made only a single monetary distribution from the included assets, which appears to be correct. Plaintiff does not take issue with these schedules and, as a result, we will not inspect them further. However, plaintiff argues the trial court erred in making its final distributional accounting in allocating $93,783.90 to plaintiff and $97,574.00 to defendant, with each party having marital debt of $3,331.00. This final accounting is based on the trial court's accountings under each schedule and due to our previous findings the trial court must make a new final accounting.
Plaintiff makes one final argument that the trial court erred in finding that an equal division of marital and divisible property and debts was equitable, with plaintiff receiving a $7,121.10 distributive award. Plaintiff contends that there should have been an unequal distribution in his favor based on the greater value of his contributions to the marriage. From our review of the Order, the trial court properly considered the statutory factors as specified in N.C. Gen.Stat. § 50–20(c) in determining that an equal distribution was equitable. However, we do note that this determination could change with any new findings of fact and calculations made on remand. Furthermore, the trial court properly found that a distributive award was equitable and gave its reasons for the determination, but as just mentioned, this decision could change based on new calculations made on remand.
III. Conclusion
In sum, the trial court failed to properly organize the Order, as well as explain its findings of fact and conclusions of law, in a way for our Court to conduct a meaningful review of the equitable distribution. We were able to decipher some of the evidence and offer the trial court some guidance, but we must ultimately reverse and remand for further proceedings consistent with this opinion. See Alexander v. Alexander, 68 N.C.App. 548, 553, 315 S.E.2d 772, 776 (1984).
Reversed and remanded. Judges McGEE and GEER concur.
Report per Rule 30(e).