Binder v. Binder

731 S.E.2d 275

Delores Kay Garner BINDER, Plaintiff,

v.Rudolph Ludwig BINDER, Jr., Defendant.

No. COA11–1502.

Court of Appeals of North Carolina.

Aug. 21, 2012.

Appeal by Defendant and cross-appeal by Plaintiff from Amended Judgment and Order of Equitable Distribution filed 24 March 2011 by Judge Wendy Enochs in Guilford County District Court. Heard in the Court of Appeals 8 May 2012.

Schiller & Schiller, PLLC, by Kathryn H. Schiller and David G. Schiller, for Plaintiff.

Vandeventer Black LLP, by Kevin A. Rust, and Benson, Brown & Faucher, PLLC, by Robert A. Benson and Drew Brown, and William L. Daisy, for Defendant.

STEPHENS, Judge.

This appeal arises from disputes about the classification, valuation, and distribution of various items of marital property in an equitable distribution proceeding. On 11 March 2004, Plaintiff Delores Kay Garner Binder filed a complaint against Defendant Rudolph Ludwig Binder, Jr., for divorce from bed and board, rescission for breach of contract, postseparation support, alimony, and equitable distribution, and motions for interim allocation, family financial mediation, temporary restraining order, and attorney fees. On 29 September 2004, Plaintiff filed an amended complaint including substantially similar claims and motions. The parties were divorced by judgment entered on 24 February 2005. Following hearings in March and September 2010,¹ the trial court entered a judgment and order of equitable distribution on 20 December 2010. Plaintiff subsequently moved for correction of clerical mistakes in that judgment and order, and the court entered an order granting Plaintiff's motion along with an amended judgment and order of equitable distribution on 24 March 2011, retaining jurisdiction of the matter in order to enforce compliance with the terms of the order. The trial court certified the matter for immediate appeal pursuant to Rule 54(b) of the North Carolina Rules of Civil Procedure on 20 April 2011.²

The parties were married on 8 October 1983, lived in North Carolina throughout their marriage, and separated on 24 November 2003. Defendant holds an ownership interest in a number of commercial real estate properties which he acquired during the marriage. The parties stipulated that these ownership interests are marital property and thus subject to equitable distribution. The issues raised in this appeal concern four of those properties: Hicone Properties, LLC (“Hicone”); Brookhollow Plaza Shopping Center (“Brookhollow Plaza”); Brookhollow Associates, LLC (“Food Lion Plaza”); and Piney Grove Associates, LLC (“Piney Grove”). Further facts regarding these properties and their classification by the trial court will be discussed herein as relevant to resolution of the parties' issues on appeal. In its amended judgment and order of equitable distribution, the court determined that an equal distribution would be equitable and ordered that Defendant pay Plaintiff a distributive award of $3,248,120.49. From the 24 March 2011 equitable distribution order, Defendant appeals and Plaintiff cross-appeals.

Discussion

Defendant brings forward three arguments in his appeal: that the trial court erred in failing (1) to consider the tax implications of Defendant's liquidation of assets to pay the distributive award; (2) to find sufficient liquid assets from which Defendant could pay the distributive award; and (3) to apply the presumption of an in-kind distribution. As discussed below, we reject each of Defendant's arguments.

Plaintiff brings forward four arguments on cross-appeal: that the trial court erred in (1) classifying, valuing, and distributing as separate property the profits and cash Defendant withdrew from marital assets during the postseparation period; (2) finding that the postseparation increase in value of marital business assets was due to Defendant's continued management role and thus not divisible; (3) classifying, valuing, and distributing as divisible property the diminution of value of Hicone; and (4) deducting from the total equitable distribution award the amount of the interim award where the interim award was paid from a marital asset classified as divisible property. Because they are closely related, Plaintiff's arguments (1) and (3) are discussed together below. We agree in part with Plaintiff, and for the reasons discussed below, vacate certain of the trial court's conclusions of law and remand for further proceedings.

Standard of Review

“On appeal, when reviewing an equitable distribution order, this Court will uphold the trial court's written findings of fact as long as they are supported by competent evidence.” Mugno v. Mugno, 205 N.C.App. 273, 276, 695 S.E.2d 495, 498 (2010) (citations and quotation marks omitted). “Further, it is well established that a trial court's conclusions of law must be supported by its findings of fact.” Squires v. Squires, 178 N.C.App. 251, 256, 631 S.E.2d 156, 159 (2006) (citation, quotation marks, and brackets omitted). Specifically, “[b]ecause the classification of property in an equitable distribution proceeding requires the application of legal principles, this determination is most appropriately considered a conclusion of law. The conclusion that property is either marital, separate[,] or non-marital must be supported by written findings of fact.” Hunt v. Hunt, 112 N.C.App. 722, 729, 436 S.E.2d 856, 861 (1993) (citations omitted) (emphasis added). “[T]he trial court's conclusions of law are reviewed de novo.” Mugno, 205 N.C.App. at 276, 695 S.E.2d at 498 (citations and quotation marks omitted).

However,

[t]he division of marital property is a matter within the sound discretion of the trial court, and the trial court's ruling will be disturbed only if it is so arbitrary that it could not have been the result of a reasoned decision. Nevertheless, under N.C. Gen.Stat. § 50–20(c) (2003), the trial court must consider certain factors and must make findings as to each factor for which evidence was presented.

Robertson v. Robertson, 167 N.C.App. 567, 570, 605 S.E.2d 667, 669 (2004) (citations, quotation marks, ellipsis, and brackets omitted) (emphasis added).

Defendant's Appeal

I. Findings of Fact about Tax Consequences of Award

Defendant first argues that the trial court erred in failing to consider the tax implications of the liquidation of assets required to pay the distributive award. We disagree.

Defendant contends that this alleged failure violated subsection c of N.C. Gen.Stat. § 50–20, which provides:

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, including those federal and State tax consequences that would have been incurred if the marital and divisible property had been sold or liquidated on the date of valuation. 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. Gen.Stat. § 50–20(c) (2011).

We begin by noting that the trial court did make an explicit finding of fact regarding tax consequences of the sale or liquidation of divisible property:

69. With regard to § 50–20(c)(11), the [c]ourt finds that:

a. No evidence was presented concerning tax consequences relating to sale or liquidation of marital or divisible property.

Thus, we reject Defendant's meritless argument that the trial court failed to consider this factor as required by the statute.

Defendant next contends that the finding of fact is erroneous because he submitted to the court a verified document (titled “Contentions Why Equal Is Not Equitable”) in which he stated that, “[i]n the event the [c]ourt makes a distributive award to [ ] Plaintiff, [D]efendant will be required to liquidate his interest in one or more of his real estate holdings, incurring substantial tax liability for so doing.” This bare statement that tax consequences would occur, without any details such as amounts, rates of tax, or the like, was plainly inadequate to permit the trial court to meaningfully evaluate the equitable value appropriate for this factor. Defendant here simply failed to meet his burden of proof in regard to this factor. See White v. White, 312 N.C. 770, 776, 324 S.E.2d 829, 832 (1985) (“[A] party desiring an unequal division of marital property bear[s] the burden of producing evidence concerning one or more of the twelve factors in the statute and the burden of proving by a preponderance of the evidence that an equal division would not be equitable.”).

Defendant nonetheless contends that he was prevented from producing evidence of tax consequences because he “would have been required to know that the trial court was intending to distribute non-liquid property to him, and that he would be required to pay a cash award without having been awarded sufficient liquid assets to comply with the order.” However, Defendant himself has helpfully drawn our attention to his verified submission to the trial court that, in the event of a distributive award to Plaintiff, he would “be required to liquidate his interest in one or more of his real estate holdings, incurring substantial tax liability[.]” Given his awareness of this possibility, Defendant had the opportunity to solicit opinions or estimates from tax professionals about the likely tax consequences of liquidating various real estate holdings, but, for reasons not reflected in the record before this Court, chose not to do so. This Court will hear no complaint from Defendant based upon his own failure to prepare and present the evidence he now claims was crucial for the trial court to...