Opinion
No. COA14–962.
02-17-2015
Michael C. PIRO, Plaintiff, v. Karen Shapiro PIRO (Now Karen Shapiro), Defendant.
Horack, Talley, Pharr & Lowndes, P.A., by Gena Graham Morris, for plaintiff-appellee. Karen Shapiro, pro se, for defendant-appellant.
Horack, Talley, Pharr & Lowndes, P.A., by Gena Graham Morris, for plaintiff-appellee.
Karen Shapiro, pro se, for defendant-appellant.
TYSON, Judge.
Defendant appeals from the district court's order awarding plaintiff's attorney's fees and denying defendant's motion for attorney's fees. We affirm in part, vacate in part, and remand.
I. Background
Plaintiff filed a complaint for custody of the parties' children, child support, equitable distribution, and an interim distribution of assets on 28 June 2006. By order dated 16 November 2007, the court awarded the parties joint legal and physical custody of the children. The parties reconciled in January of 2008 and separated again in April of 2011, after defendant accused plaintiff of molesting one of their sons. On 27 June 2011, the court awarded temporary sole custody of the three children to defendant and prohibited plaintiff from having any contact with any of them. Nearly a year later, on 11 June 2012, the court held a second temporary custody hearing. The court directed that its previous order remain in effect, which continued to prohibit plaintiff from having contact with his children.
The court held the permanent custody hearing for nine days in November of 2013. Plaintiff and defendant each sought custody of the three children. The majority of the testimony pertained to defendant's allegation that plaintiff had molested one of the children. The court made extensive findings of fact and concluded the allegations were false and that plaintiff “unequivocally did notsexually abuse [the child].” The court awarded joint legal and shared physical custody of the three children.
Plaintiff incurred significant attorney's fees in contesting defendant's allegations. Prior to the November 2013 permanent custody hearing, plaintiff paid $3,750.00 to attorney Susan V. Thomas. He withdrew $30,271.17 from funds in his 401(k) to pay the fees of Tom Bush Law Group in connection with the custody litigation. Plaintiff was represented by attorney Gena Graham Morris at the permanent custody hearing. She testified plaintiff had incurred $274,752.75 in fees with her firm in connection with the custody litigation, and requested the court to award attorney's fees in said amount to plaintiff.
Plaintiff paid Tom Bush's fee from funds withdrawn from his 401(k) account. He also paid Ms. Morris $188,756.75, also withdrawn from his 401(k) and incurred a penalty and tax liability of approximately $90,000.00. The court heard plaintiff's testimony regarding his income and financial obligations. Plaintiff receives net income from his employment of $3,700.00 every two weeks. The court ordered him to pay child support of $1,007.70 per month on the same day the court awarded attorney's fees.
Plaintiff lives in Florida and pays travel expenses of approximately $2,200.00 per month to visit with his three children. He testified that he has deposits of approximately $30,000.00 in bank accounts and $220,000.00 remaining in his 401(k) account. Plaintiff's only other asset is a rental property. The mortgage on the property is $1,300.00 per month and he receives rental income in the amount of $1,275.00 per month. He owed a remaining balance of $107,000.00 to Ms. Morris's firm.
Subsequent to entry of the permanent custody order, plaintiff filed a motion for an award of attorney's fees he incurred in connection with his child custody claims. The matter came before the court on 25 February 2014. The court also heard defendant's motion for attorney's fees in the amount of $110,000.00. The court ordered defendant to pay $165,000.00 of plaintiff's attorney's fees, with interest, and to make payments of $500.00 per month to Ms. Morris's law firm. The court denied defendant's motion for attorney's fees. Defendant appeals.
II. Issues
Defendant argues on appeal: (1) the court erred in concluding plaintiff has insufficient means to defray the expense of the litigation pursuant to N.C. Gen.Stat. § 50–13.6 ; (2) the award of attorney's fees is unreasonable; (3) the court erred in ordering her to pay interest on the award of attorney's fees; and (4) the court erred in denying her motion for attorney's fees.
III. Statutory Requirements
Defendant argues the award of attorney's fees is not based on the requirements set forth in N.C. Gen.Stat. § 50.13.6 and is punitive in nature. We disagree.
N.C. Gen.Stat. § 50–13.6 states “the court may in its discretion order payment of reasonable attorney's fees to an interested party acting in good faith who has insufficient means to defray the expense of the suit.” N.C. Gen.Stat. § 50–13.6 (2013). Before attorney's fees can be awarded, the court must find that the party seeking the award is: (1) an interested party acting in good faith; and, (2) has insufficient means to defray the expense of the suit. Taylor v. Taylor, 343 N.C. 50, 54, 468 S.E.2d 33, 35 (1996) (citation omitted).
Defendant does not argue the trial court erred in finding that plaintiff was an interested party acting in good faith. Defendant argues the trial court erred in finding that plaintiff has insufficient means to defray the expense of the suit. Our Supreme Court in Taylorstated, “[a] party has insufficient means to defray the expense of the suit when he or she is unable to employ adequate counsel in order to proceed as litigant to meet the other spouse as litigant in the suit.” Id.(citation omitted). To support an order for attorney's fees, the facts required by N.C. Gen.Stat. § 50–13.6 must be alleged and proved. “Whether these statutory requirements have been met is a question of law, reviewable on appeal.” Hudson v. Hudson, 299 N.C. 465, 472, 263 S.E.2d 719, 724 (1980) (citation omitted).
Under the heading, “Plaintiff's Inability to Defray Legal Expenses,” the trial court found:
35. Plaintiff currently works for Facet Technologies earning $155,000.00 per year. Plaintiff receives net income of $3,700.00 every two (2) weeks in connection with that employment.
36. Plaintiff pays out of his monthly net income $1,007.70 in child support, plus other child-related and personal expenses.
37. Plaintiff has rental property in Cornelius, North Carolina for which the mortgage, insurance, and taxes total $1,300.00 per month. Plaintiff only receives $1,275.00 per month in rental income. He continues to maintain the rental property at a loss each month.
38. Plaintiff has one (1) checking account and one (1) savings account that collectively contain the sum of $30,000.00.
39. Plaintiff owns a 401(k) funded through his previous employment with Bayer. As of April 8, 2011, the value of that 401(k) was $335,000.00. After leaving Bayer, Plaintiff rolled the 401(k) funds into a Merrill Lynch account and the value of those funds is currently $220,000.00.
40. In order to defend against the false allegations, Plaintiff was forced to incur litigation-related expenses that resulted in a total attorneys' fees bill of $380,502.00. [sic]
41. Plaintiff has paid in full Susan Thomas and Tom Bush for their respective services in pursuing Plaintiff's custody claim.
42. Plaintiff owes Horack Talley an outstanding balance of $107,000.00.
43. Plaintiff has withdrawn at least $180,000.00 from his 401(k) to pay a portion of his attorneys' fees but he has not yet paid taxes on that withdrawal.
44. Plaintiff has no other assets with any value.
45. Plaintiff has insufficient means to defray the expense of this action.
Plaintiff incurred $308,773.92 in attorney's fees as a result of contesting defendant's allegations and seeking custody of his children, which exceeds the cash amount contained in his bank accounts and 401(k). This amount does not include the approximately $90,000.00 penalty and tax liability he incurred from withdrawing funds from his 401(k) to pay Ms. Morris. Payment of his attorney's fees would unreasonably deplete plaintiff's estate.
In her brief, defendant recites the evidence and compares her estate with plaintiff's estate. Defendant asserts plaintiff's estate is more substantial than her own and she has insufficient means to defray her expenses. Defendant argues that she should have been awarded attorney's fees or, at a minimum, the court should have ordered the parties to pay their own fees. Our Supreme Court has stated, “ ‘we do not believe that the determination of whether a party has sufficient means to defray the necessary expenses of the action requires a comparison of the relative estates of the parties' “ and “N.C.G.S. § 50–13.6 does not requirethe trial court to compare the relative estates of the parties [.]” Van Every v. McGuire, 348 N.C. 58, 59–60, 497 S.E.2d 689, 690 (1998) (quoting Taylor, 343 N.C. at 57, 468 S.E.2d at 37 ). We hold that the trial court found sufficient facts to support its conclusion that plaintiff has insufficient means to defray the expense of this action. N.C. Gen.Stat. § 50–13.6 (2013).
We are also not persuaded by defendant's argument that the award of attorney's fees in favor of plaintiff was punitive. Plaintiff points to Findings of Fact numbered 110, 111 and 112 and argues that those findings are intended to demonstrate fault. Those findings state the number of text messages shared between defendant and her paramour leading up to the allegation that plaintiff sexually abused one of the children. The record does not indicate the court entered the award of attorney's fees because defendant was “at fault” for requiring plaintiff to endure this litigation or as an attempt to punish defendant. Following the entry of the award, the court stated:
[I]n spite of what [defendant] said several times that fault is not an issue, I think fault is just the wrong word ... the results of the litigation is something that the court is to consider ... I don't have to place fault, I have to look at those things: complexity of the case, difficulty of the litigation-related issues and results obtained. And that's part of the 22–page [Permanent Custody Order], 131 Findings of Fact that ... this was not your run-of-the-mill custody case, that it was complex, it was difficult, long. And the results obtained were that [plaintiff] went from not seeing his children at all to basically having joint custody of his children. So, that was ... results-driven.
We hold that detailed evidence supports the trial court's findings that plaintiff was an interested party acting in good faith with insufficient means to defray the expense of the suit. Id.Defendant's argument is overruled.
IV. Reasonableness of Award
A. Amount of Award
Defendant argues the court erred in finding the award of plaintiff's attorney's fees in the amount of $165,000.00 is reasonable. We disagree.
1. Standard of Review
When the statutory requirements are met, the amount of attorney's fees awarded rests within the sound discretion of the trial judge and will not be disturbed absent a showing of an abuse of discretion. Hudson, 299 N.C. at 472, 263 S.E.2d at 723–24 (1980). “Abuse of discretion results where the court's ruling is manifestly unsupported by reason or is so arbitrary that it could not have been the result of a reasoned decision.” State v. Hennis, 323 N.C. 279, 285, 372 S.E.2d 523, 527 (1988). To support the reasonableness of an award of attorney's fees, the trial court must make “findings regarding the nature and scope of the legal services rendered, the skill and time required, the attorney's hourly rate, and its reasonableness in comparison with that of other lawyers.” Cobb v. Cobb, 79 N.C.App. 592, 595, 339 S.E.2d 825, 828 (1986).
2. Findings of Fact
The sum of the attorney's fees incurred by plaintiff is nearly double the court's $165,000.00 award. The trial court made extensive findings regarding the complexity of the litigation. The court had ample opportunity to observe plaintiff's attorney at trial and found that Ms. Morris charges $450.00 per hour, and stated she is one of Mecklenburg County's “leading child custody attorneys.” These findings were “sufficient to determine the reasonableness of her fee in comparison to attorneys of comparable experience and skill.” Peters v. Pennington, 210 N.C.App. 1, 23, 707 S.E.2d 724, 740 (2011). Defendant failed to meet her burden to show the court abused its discretion in ordering her to pay a portion of plaintiff's attorney's fees in the amount of $165,00.00. Defendant's arguments are overruled.
B. Lump Sum Payments
Defendant argues that portions of the trial court's order, which requires her to submit to attorney Gena Morris documentation and pay any lump sum payment she receives towards her obligation, are vague and unreasonable. We disagree.
The court ordered:
1. Defendant shall pay directly to Horack, Talley, Pharr & Lowndes, P.A., attorneys for Plaintiff, the sum of One Hundred Sixty–Five Thousand Dollars ($165,000.00). Defendant shall pay those attorneys' fees as follows:
a. Beginning March 1, 2014 and continuing on the first of each month thereafter until Defendant's obligation to Horack Talley is paid in full, Defendant shall pay the sum of $500.00 per month.
b. In the event that Defendant can pay more than her minimum monthly obligation of $500.00 in any given month(s), Defendant shall pay such additional available funds toward her attorneys' fees obligation to Horack Talley. By way of example, in the event Defendant receives any state or federal income tax refund(s), 100% of such refunds shall be paid immediately upon receipt to Horack Talley as payment towards Defendant's attorneys' fees obligation.
c. [Defendant] shall submit to Gena Morris all documentation relating to Defendant's receipt of any lump sum payment that she receives over and above her annual salary from the Hanger Clinic and in connection with her occasional practice of law within 15 days of receiving such payment. “Lump sum payments” include but are not limited to bonuses and payments received upon sale of an asset, i.e., a residence. Upon receipt of any such lump sum payment, Defendant is on notice that the same may be ordered to satisfy her attorney's fees obligation to Horack Talley in conjunction with contempt proceedings or any other proceedings allowed by law.
These decretal portions of the order are unambiguous. In the event defendant is able to pay more than $500.00 per month towards her obligation, she is required to do so. If defendant receives a lump sum payment over and above her salary, she is to notify Ms. Morris and may be ordered to pay additional sums towards the obligation.
Defendant also argues that requiring her to use any additional funds she receives to make accelerated payments towards the obligation renders her a pauper because she is not able to save money or pay other debts. By paying only $500.00 per month, not including interest, it will take defendant 27.5 years to satisfy the order awarding plaintiff's attorney's fees. The order states that defendant is to pay above her monthly minimum obligation “[i]n the event that she canpay more [.]” We read this to mean that defendant is required to pay additional funds after meeting her reasonable personal monthly expenses and the expenses of her children. We are not persuaded by defendant's assertion that the payment terms of the order will render her a pauper. The portions of the order requiring defendant to pay additional funds towards plaintiff's attorney's fees are not manifestly unsupported by reason. Hennis, 323 N.C. at 285, 372 S.E.2d at 527. Defendants arguments are overruled.
V. Interest
Defendant argues that the court erred in ordering that she pay interest on the award of attorney's fees. We agree.
The district court ordered that interest shall accrue on the attorney's fees award at the legal rate of eight percent (8%) per annum until the award is paid in full.
N.C. Gen.Stat. § 24–5 governs interest on judgments. Excluding compensatory damages, “[a]ny ... portion of a money judgment in an action other than contract, except the costs,bears interest from the date of entry of judgment under G.S. 1A–1, Rule 58, until the judgment is satisfied.” N.C. Gen.Stat. § 24–5(b) (2013) (emphasis supplied). Interest on an award in an action other than contract shall be at the legal rate, which is statutorily defined as eight percent (8%) per annum, for such time as interest may accrue. Id.,N.C. Gen.Stat. § 24–1 (2013).
The “costs” portion of a money judgment does not bear interest. N.C. Gen.Stat. § 24–5(b) (2013). Our legislature has defined attorney's fees as “costs” in Chapter 50 custody actions. N.C. Gen.Stat. § 6–21 states that costs in custody proceedings under Chapter 50A shall, in the discretion of the court, be taxed against either party or apportioned among the parties. N.G. Gen.Stat. § 6–21(11) (2013). The statute further provides, “[t]he word ‘costs' as the same appears and is used in this section shall be construed to include reasonable attorneys' fees in such amounts as the court shall in its discretion determine and allow[.]” N.C. Gen.Stat. § 6–21 (2013). Because our legislature has specifically defined attorney's fees as part of the costs of custody actions under Chapter 50A, the trial court erred in awarding interest on these costs. We vacate that portion of the trial court's order imposing interest on the award of attorney's fees and remand for entry of a corrected judgment.
VI. Denial of Defendant's Attorney's Fees
Defendant argues the trial court erred in denying her motion for attorney's fees. We disagree.
As discussed above, the court must find that the party seeking an award of attorney's fees is “an interested party acting in good faith.” Taylor, 343 N.C. at 54, 468 S.E.2d at 35. “The court's discretion in disallowing attorneys' fees is limited only by the abuse of discretion rule.” Puett v. Puett, 75 N.C.App. 554, 558–59, 331 S.E.2d 287, 291 (1985). The record is replete with findings of fact that defendant did not act in good faith. Plaintiff's attorney's fees were incurred from defending and countering defendant's claim that he had abused one of their children. The custody matter went to trial for nine days in November of 2013. The court made 131 findings of fact and concluded that plaintiff did not abuse the child and found there is evidence defendant “concocted the Allegations and implanted a false belief or false memory in [the child's] mind that he was sexually abused by [plaintiff] in order to crush [plaintiff's] hopes of obtaining custody of the Boys.” Defendant has failed to show that the court abused its discretion in denying her motion for attorney's fees. Defendant's argument is overruled.
VII. Clerical Error
In its order awarding attorney's fees, the court found that plaintiff's attorney's fees totaled “$380,502.00” in finding of fact numbered 40. The uncontested evidence shows plaintiff paid attorney's fees of $3,750.00 to Susan V. Thomas, P.C., and $30,271.17 to Tom Bush Law Group. Ms. Morris testified that plaintiff incurred $274,752.75 in fees with her firm in connection with the custody litigation. The evidence shows that the sum of the attorney's fees plaintiff incurred was $308,773.92. Plaintiff acknowledges in his brief that the attorney's fees he incurred were $308,000.00, not in excess of $380,000.00. It appears that numbers were transposed in the order. Whether plaintiff incurred $308,000.00 or $380,000.00 in attorney's fees has no bearing on our decision in this case. In recognizing the importance of complete and accurate court orders, the trial court should also correct this clerical error upon remand.
VIII. Conclusion
The trial court did not err in granting plaintiff's motion and attorney's fees. Defendant failed to show the court abused its discretion in ordering defendant to pay $165,000.00 to plaintiff's attorney by paying a monthly minimum of $500.00 per month and requiring defendant to pay additional funds she receives towards this obligation.
Defendant also failed to show the court abused its discretion in denying defendant's motion for attorney's fees. The portions of the order requiring defendant to pay plaintiff's attorney's fees, setting forth the manner of payment, and denying defendant's motion for attorney's fees are affirmed.
The trial court erred in ordering defendant to pay interest at the judgment rate on the award of attorney's fees. That portion of the trial court's order is vacated and remanded. The order also contains a clerical error stating the total amount of attorney's fees plaintiff incurred. The trial court should correct this error upon remand.
Affirmed in part, vacated in part, and remanded.
Judges ELMORE and DAVIS concur.
Report per Rule 30(e).
Opinion
Appeal by Defendant from order entered 31 March 2014 by Judge Christy T. Mann in Mecklenburg County District Court. Heard in the Court of Appeals 7 January 2015.