Filed 7 October 2008
Appeal by plaintiff from judgment entered 5 March 2007 by Judge Paul Quinn in Carteret County District Court. Heard in the Court of Appeals 4 March 2008.
Ludwig, Willis Lashley, by Constance M. Ludwig, for plaintiff appellant. Judith K. Guibert for defendant appellee.
This is a family law dispute involving equitable distribution, postseparation support, and the award of attorney's fees. Kenneth E. Ross ("plaintiff-husband") and Linda O. Ross ("defendant-wife") were married on 29 September 1990, separated on 23 January 2002, and were divorced on 16 May 2003. No children were born of the marriage.
The facts and procedural history relevant to this appeal are as follows: On 9 May 2002, plaintiff-husband initiated an action for divorce from bed and board and equitable distribution. On 14 June 2002, defendant-wife filed an answer and counterclaimed for divorce from bed and board, postseparation support and alimony, equitable distribution, and attorney's fees.
On 1 October 2003, defendant-wife's counsel served the first notice of hearing for a pretrial conference on equitable distribution. Between October 2003 and October 2005, two of plaintiff-husband's attorneys were permitted to withdraw based at least in part on plaintiff-husband's failure to provide his counsel with requested documents, and the matter was continued numerous times.
On 17 January 2006, the trial court entered an order setting all matters for the week of 8 May 2006. On 14 April 2006, plaintiff-husband wrote a letter to the trial court administrator stating, in part:
I have made several unsuccessful attempts to acquire and [sic] attorney to represent me as Plaintiff, in the above pending divorce case and hearing. I am still pursuing and [sic] attorney to represent me, but due to the time remaining,
I present to you and the Carteret County Court, the following:
1. I do not wish to represent myself, pro se.
2. I request a 60 day deferred extension in time, before any court hearing is scheduled in this case.
On 24 April 2006, the trial court ordered that a pretrial order for equitable distribution would be completed at a hearing on 2 May 2006. Thereafter, on 1 May 2006, plaintiff-husband faxed another letter to the court, stating in part: I am presently without attorney representation (pro se). . . . Presently, I am recovering in Florida from previous surgery and have continuing medical test and examinations at the South District VA Hospital in the area. A minimum 30 day notice is essential.
Obviously, I will not be able to appear in court tomorrow, 02 May 2006 and no pretrial hearing regarding "equitable distribution" should take place in my absence, without adequate notification.
At the call of the calendar on 2 May 2006, plaintiff-husband was not present. The issues of postseparation support, alimony, equitable distribution, and attorney's fees were set for hearing on 8 May 2006. At the 8 May 2007 hearing, plaintiff-husband, again, was not present and presented no evidence. Defendant-wife's evidence tended to show the following:
Prior to the parties' marriage, on 13 April 1987, plaintiff-husband purchased a lot in Emerald Isle ("Emerald Isle property"). The lot was undeveloped and was titled in plaintiff-husband's name alone. Sometime between the date of marriage and November of 1992, the parties constructed a house on the lot. On 6 November 1992, the parties both executed a Deed of Trust to this property with First Financial Savings Bank ("First Financial") to secure a loan in the amount of $60,000.00. On 18 September 1998, the parties executed another Deed of Trust to the Emerald Isle property with Branch Banking and Trust ("BB T") to secure a $50,000.00 equity line of credit. The parties made payments on this loan until 26 July 1999, when both parties executed a final Deed of Trust to this property with BB T to secure a loan in the amount of $92,000.00. On 27 July1999, the outstanding balance on the First Financial loan was paid in full. The parties continued to make payments on the BB T debts for the duration of their marriage. By the date of separation, the parties had paid $9,143.00 of the principal balance of the BB T mortgage.
Prior to the parties' 4 January 2002 separation, the parties had been living at a home that they owned in Summerfield, Florida ("Florida residence"), but after separation, plaintiff-husband resided at the Emerald Isle property and continued to make mortgage payments with respect to the Emerald Isle property. On 5 June 2003, plaintiff-husband, in his name alone, executed a Deed of Trust to the Emerald Isle property with RBC Centura Bank, to secure an equity line of credit in the amount of $110,000.00.
With respect to the Emerald Isle property, the trial court found as follows:
vii. Pursuant to a court order, the Defendant hired a certified home appraiser, Mr. Bern F. Bullard, to appraise the Emerald Isle residence, and on 3/2/03, Mr. Bullard appraised the value of this property as $336,000.00 as of 1/23/02.
viii. The Defendant helped construct the house and landscape the lot.
ix. The Plaintiff was not present at this hearing and did not present any evidence as to the value of the lot at the time that he purchased the lot and the value of the lot and the house at the date of marriage, at the date of separation or presently and as to whether this property was separate or marital property or a combination of both.
x. This property is marital property and had a net value of $252,137.00 as of the date of separation. This value was calculated as follows:
$336,000.00-appraised date of separation value
— 82,857.00-[balance of BB T mortgage] as of date of separation
— 1,006.00 — equity line as of date of separation
$252,137.00-net value as of date of separation
[xi.] The Defendant shall have sole title to this property as her separate property with a net value of $252,137.00 as her part of her share of marital assets.
The trial court awarded plaintiff-husband a credit for payments of $20,339.00 on the BB T mortgage made by plaintiff-husband from the date of separation until 31 May 2006 and ordered plaintiff-husband to pay the outstanding equity line on the Emerald Isle property in full and vacate the property.
Next, during the duration of the marriage, defendant-wife was employed by GlaxoSmithKline ("Glaxo"). In October 2001, upon Glaxo's merger and at plaintiff-husband's request, defendant-wife retired early from her position so that she could spend more time with her husband. Defendant-wife received a lump sum severance from her employer in the amount of $28,386.00. At such date, plaintiff-husband was also retired from his prior employment, but he continued to operate his own contracting business. He received a pension and social security payments in addition to interest income and income from his contracting business. The trial court found that plaintiff-husband had $2,701.00 per month of disposable income.
Defendant-wife introduced evidence that from the date of separation, 23 January 2002, until 1 March 2004, she was unemployed, with no income, and had monthly living expenses of $2,251.02 plus $450.00 in income tax liability. The trial court concluded that such expenses were reasonable and necessary and that for the 25 months between the date of separation and the date that defendant-wife obtained permanent employment, defendant-wife was eligible for $67,525.00 in postseparation support and $6,839.00 in attorney's fees that she had incurred with respect to her claim for postseparation support.
The trial court, in its discretion, distributed the marital estate unevenly, with an additional $35,000.00 to be distributed in favor of defendant-wife; however, the trial court concluded that the in-kind distribution to plaintiff-husband was insufficient to award plaintiff-husband his share of the marital estate and ordered defendant-wife to pay the sum of $74,364.18 to plaintiff-husband. The court then concluded that the $74,364.18 distributive award owed to plaintiff-husband was fully offset by the $67,525.00 in postseparation support and $6,839.00 in attorney's fees owed by plaintiff-husband to defendant-wife.
On appeal, plaintiff-husband contends that the trial court erred by: (1) failing to consider and formally rule upon plaintiff-husband's motion for a continuance; (2) classifying the Emerald Isle property as marital property and failing to properly value plaintiff-husband's separate contributions to the Emerald Isle property; (3) improperly awarding defendant-wife postseparation support; and (4) improperly awarding defendant-wife attorney's fees.
By his first assignment of error, plaintiff-husband contends that the trial court erred by proceeding to trial without granting plaintiff-husband's request for a continuance. Rule 40 of the North Carolina Rules of Civil Procedure provides "[a] continuance may be granted only for good cause shown and upon such terms and conditions as justice may require." N.C. Gen. Stat. § 1A-1, Rule 40(b) (2007).
The standard of review for denial of a motion to continue is generally whether the trial court abused its discretion. "The chief consideration to be weighed in passing upon the application is whether the grant or denial of a continuance will be in furtherance of substantial justice." The moving party has the burden of proof of showing sufficient grounds to justify a continuance.
This Court has previously found that a party's failure to "make a formal motion" for continuance supports a trial court's denial of a motion to continue. See Jennings Glass Co. v. Brummer, 88 N.C. App. 44, 49, 362 S.E.2d 578, 582 (1987), disc. review denied, 321 N.C. 473, 364 S.E.2d 921 (1988) ("Although defendant claimed serious illness, the trial court noted in response to defendant's absence at the hearing that defendant had only a little more than a week earlier appeared before the court which served to undermine the credibility of his claim. Moreover, defendant's failure to make a formal motion lent support to the trial court's ruling."). Furthermore, our Supreme Court has held that "an attorney's withdrawal on the eve of the trial of a civil case is not ipso facto grounds for a continuance." Shankle v. Shankle, 289 N.C. 473, 484, 223 S.E.2d 380, 387 (1976). As long as the attorney has given sufficient notice of his intent to withdraw, such a decision is within the trial court's discretion. Id.
Here, instead of filing a motion to continue, plaintiff-husband merely faxed letters to the court requesting that the trial be continued. He did not calendar either of his two letters for hearing nor did he serve defendant-wife's counsel with a copy of either letter. Plaintiff-husband's failure to file a formal motion lends support to the trial court's ruling. Likewise, there is evidence that plaintiff-husband had sufficient opportunity to obtain new representation, as the order allowing plaintiff-husband's trial counsel to withdraw was entered 24 October 2005, nearly six months prior to the 8 May 2006 date of the trial. Finally, in denying plaintiff-husband's request for a continuance, the trial court noted the numerous delays and continuances that had occurred throughout the proceedings and stated that the case was "one of the ugliest cases that we've seen come into this Court as far as not being able to, to move forward." Accordingly, we hold that the trial court did not abuse its discretion by denying plaintiff-husband's request for a continuance. This assignment of error is overruled.
II. Equitable Distribution
Plaintiff-husband next challenges the trial court's classification of the Emerald Isle property as marital property and argues that the trial court erred by failing to properly value plaintiff-husband's separate contributions to such property. We agree.
a. Classification of Emerald Isle Property
The North Carolina equitable distribution statute, N.C. Gen. Stat. § 50-20 (2007), requires the trial judge to follow a three-step procedure in deciding equitable distribution matters: (1) all property must be classified as marital or separate, and when property has dual character, the component interests of the marital and separate estates must be identified; (2) the net value of marital property must be determined; and (3) marital property must then be distributed equally or, if equal division would be inequitable, distributed according to the equitable factors set out in N.C. Gen. Stat. § 50-20(c). See generally, Cable v. Cable, 76 N.C. App. 134, 137, 331 S.E.2d 765, 767 (1985), disc. review denied, 315 N.C. 182, 337 S.E.2d 856 (1985).
A "party claiming that property is marital has the burden of proving beyond a preponderance of the evidence" that the property was acquired by either or both spouses, during the marriage, before the date of separation, and is presently owned. Lilly v. Lilly, 107 N.C. App. 484, 486, 420 S.E.2d 492, 493 (1992). "If the party meets this burden, then `the burden shifts to the party claiming the property to be separate to show by a preponderance of the evidence that the property meets the definition of separate property.'" Id. (citation omitted). If both parties meet their burdens, the property is considered separate property. Ciobanu v. Ciobanu, 104 N.C. App. 461, 466, 409 S.E.2d 749, 752 (1991).
"Property can have a dual nature, and can be classified as part separate and part marital." Nix v. Nix, 80 N.C. App. 110, 113, 341 S.E.2d 116, 118 (1986). Where property is dual in nature, the trial court applies a "source of funds" approach to distinguish between marital and separate contributions to the property. See Wade v. Wade, 72 N.C. App. 372, 381-82, 325 S.E.2d 260, 269, disc. review denied, 313 N.C. 612, 330 S.E.2d 616 (1985). Under this approach, "when both the marital and separate estates contribute assets towards the acquisition of property, each estate is entitled to an interest in the property in the ratio its contribution bears to the total investment in the property." Id. at 382, 325 S.E.2d at 269.
Here, although the deed to the Emerald Isle property reflects that the Emerald Isle land was titled in plaintiff-husband's name in 1987, prior to the marriage, defendant-wife introduced evidence that a house was constructed on the lot during the marriage in 1991, the parties mortgaged the property in 1992 and again in 1999, and that payments on such loans were made during the marriage. Thus, defendant-wife met her burden of showing that a portion of the Emerald Isle property was acquired during the marriage and was therefore marital. Plaintiff-husband introduced no evidence to rebut this showing. Thus, the evidence before the trial court showed that a portion of the Emerald Isle property was marital property.
Although there is evidence that plaintiff-husband was uncooperative during discovery and failed to introduce evidence as to the purchase price of the property in 1987 or its value as of the date of marriage, conduct during litigation may not be considered when determining the distribution of marital property. Shoffner v. Shoffner, 91 N.C. App. 399, 401-02, 371 S.E.2d 749, 751 (1988). The deed to the Emerald Isle property reflects that the property was acquired prior to the date of marriage, in plaintiff-husband's name alone. Defendant-wife produced no evidence of donative intent to establish that the portion of the Emerald Isle property acquired prior to the date of marriage was marital property. As such, the trial court's failure to classify the portion of the Emerald Isle property acquired prior to the marriage as separate property is reversible error. See Goldston v. Goldston, 159 N.C. App. 180, 185, 582 S.E.2d 685, 687-88 (2003) ("We conclude that the act of physically transferring the location of the house onto the lot owned by the parties as tenants by the entireties, unaccompanied by any other evidence of donative intent by defendant, was insufficient to rebut the statutory mandate that separate property remain separate `unless a contrary intention is expressly stated in the conveyance.' The proceeds of the sale of the lot and house are therefore dual in nature, and the trial court's order classifying the entire property as marital must be reversed."). Id. (citations omitted); Lawrence v. Lawrence, 75 N.C. App. 592, 331 S.E.2d 186, disc. review denied, 314 N.C. 541, 335 S.E.2d 18 (1985) (concluding that "that part of the real property consisting of the unimproved property owned by defendant prior to marriage should be characterized as separate and that part of the property consisting of the additions, alterations and repairs provided during marriage should be considered marital in nature"). Id. at 595, 331 S.E.2d at 188.
That part of the real property consisting of the unimproved property owned by plaintiff-husband prior to marriage should be characterized as separate and that part of the property consisting of the additions and equity acquired during marriage should be considered marital in nature. As the marital estate is entitled to a return of its investment, plaintiff-husband, because of his contribution of separate property, is entitled to a return of, or reimbursement or credit for, that contribution. We remand to the trial court for an appropriate reclassification and valuation of this property.
III. Postseparation Support
By his next assignment of error, plaintiff-husband contends that the trial court erred in awarding retroactive postseparation support and attorney's fees to defendant-wife because defendant-wife did not introduce evidence of her income during the marriage or of the standard of living of the parties for any period prior to the date of separation. We disagree. Postseparation support is spousal support to be paid until the earlier of either the date specified in the order of postseparation support, or an order awarding or denying alimony. N.C. Gen. Stat. § 50-16.1A(4)(2007). A dependent spouse is entitled to postseparation support if the court finds "the resources of the dependent spouse are not adequate to meet his or her reasonable needs and the supporting spouse has the ability to pay." N.C. Gen. Stat. § 50-16.2A(c) (2007). "[G]iven the `relative brevity' of the factors guiding [postseparation support] awards, see N.C.G.S. § 50-16.2A, compared with the extensive list of [sixteen] factors governing the amount of an alimony award, see N.C.G.S. § 50-16.3A(b) , it is apparent that postseparation support contemplates a rather truncated examination of the parties' needs and assets." Wells v. Wells, 132 N.C. App. 401, 411, 512 S.E.2d 468, 474, disc. review denied, 350 N.C. 599, 537 S.E.2d 495 (1999). Because postseparation support involves a relatively brief examination of the parties' needs and assets, "the court may base its award on a verified pleading, affidavit, or other competent evidence." Id. at 410, 512 S.E.2d at 474.
Here, based on the pleadings, affidavits, and other evidence of record, the trial court found that defendant-wife retired from her job at plaintiff-husband's request; that at the time of the parties' separation, defendant-wife was unemployed with no income and reasonable expenses in the amount of $2,701.00 per month, including tax liability; that plaintiff-husband received $2,730.68 in monthly income in addition to interest income and business income; that plaintiff-husband refused to provide information concerning the amount of his monthly interest income and business income, but plaintiff-husband had disposable income of at least $2,701.00 per month. We hold that the evidence and findings support the trial court's conclusion that defendant-wife was a "dependent spouse" as defined by N.C. Gen. Stat. § 50-16.1A from the date of her retirement in 2001 until 1 March 2004; defendant-wife's resources were not adequate to meet her reasonable needs, and plaintiff-husband had the ability to pay. As such, defendant-wife was entitled to postseparation support pursuant to N.C. Gen. Stat. § 50-16.2A(c).
Where a lump-sum payment is made not based on the length of a spouse's employment, but is made, rather, in exchange for a spouse's waiver of certain rights, such payment is not included in a spouse's income for purposes of determining the amount and duration of an alimony award. See Glass v. Glass, 131 N.C. App. 784, 788-89, 509 S.E.2d 236, 238-39 (1998). Here, the trial court's conclusion that the lump sum payment was not income is supported by evidence that the early retirement payment was offered as part of a merger in consideration of defendant-wife's decision to retire early.
"`Dependent spouse' means a spouse, whether husband or wife, who is actually substantially dependent upon the other spouse for his or her maintenance and support or is substantially in need of maintenance and support from the other spouse." N.C. Gen. Stat. § 50-16.1A(2).
IV. Attorney's Fees
Plaintiff-husband argues the trial court erred by awarding attorney's fees to defendant-wife. We disagree. "A spouse is entitled to attorney's fees if that spouse is (1) the dependent spouse, (2) entitled to the underlying relief demanded (e.g., alimony and/or child support), and (3) without sufficient means to defray the costs of litigation." Barrett v. Barrett, 140 N.C. App. 369, 374, 536 S.E.2d 642, 646 (2000).
We review a trial court's determination regarding entitlement to attorney's fees de novo. Id. at 374, 536 S.E.2d at 646. Once it is determined that a dependent spouse is entitled to an award of attorney's fees, we next determine whether the amount of the award was proper. Barrett, 140 N.C. App. at 375, 536 S.E.2d at 647. "The amount awarded will not be overturned on appeal absent an abuse of discretion." Id.
In the present case, as previously discussed, the evidence and findings support the trial court's conclusion that defendant-wife was a dependent spouse, entitled to postseparation support pursuant to N.C. Gen. Stat. § 50-16.2A(c). Therefore, defendant-wife was entitled to attorney's fees if she was without sufficient means to defray the costs of litigation. In making this determination, a trial court should generally rely on the dependent spouse's disposable income and estate. Barrett, 140 N.C. App. at 374, 536 S.E.2d at 646.
In the present case, the trial court found that defendant-wife "had no earned income from February, 2002 until she began work in March, 2004." Defendant-wife introduced evidence that she had been living off severance pay, with only $1,900 remaining as of August of 2002. Accordingly, the trial court found that defendant-wife "did not have sufficient means to subsist during the prosecution of this action from 2/21/02 through 4/1/04. Further, defendant did not have the means to defray the necessary expenses of this suit[.]" Defendant-wife's attorney submitted an affidavit of attorney's fees and detailed records of the time expended on defendant-wife's case, and the trial court found that defendant-wife's attorney "spent approximately 40 hours for the defendant on the issue of postseparation support."
The trial court ordered plaintiff-husband to pay defendant-wife $6,839.00 in attorney's fees. We hold the trial court did not abuse its discretion by ordering such award.
For the foregoing reasons, we affirm in part and vacate and remand in part for the entry of a judgment not inconsistent with this opinion.
Affirmed in part; vacated and remanded in part.
Judges WYNN and BRYANT concur.
Report per Rule 30(e).