IN THE COURT OF APPEALS OF NORTH CAROLINA
No. COA17-164
Filed: 2 January 2018
Mecklenburg County, No. 14-CVD-2267
ANDREA KIRBY CROWELL, Plaintiff,
v.
WILLIAM WORRELL CROWELL, Defendant.
Appeal by plaintiff from judgment entered 15 August 2016 by Judge Christy
T. Mann in Mecklenburg County District Court. Heard in the Court of Appeals 3
October 2017.
Law Office of Thomas D. Bumgardner, PLLC, by Thomas D. Bumgardner, for
plaintiff-appellant.
Hamilton Stephens Steele + Martin, PLLC, by Amy E. Simpson, for defendantappellee.
BRYANT, Judge.
Where the trial court had jurisdiction to order plaintiff to sell her separate
property to satisfy a distributive award, order that the transfer of a deed from
plaintiff to a third-party relative be avoided, and distribute marital debts owed by the
parties and where the trial court made sufficient findings of fact to justify its
distributive award, we affirm. However, where the trial court’s award included an
alternative money judgment against a non-party, we vacate that portion of the
judgment.
CROWELL V. CROWELL
Opinion of the Court
Plaintiff Andrea Crowell and defendant William Crowell were married on 11
July 1998. They were legally separated on 3 September 2013 and divorced in April
2015. No children were born of the marriage.
Prior to the parties’ marriage, defendant was president and shareholder of
several corporations: Inwood Properties, Inc. (“Inwood Properties”); Inwood Land
LLC (“Inwood Land”); Inwood Homes; Inwood Realty Corp.; St. Vrain Valley
Associates LP (“St. Vrain”); Owl’s Head Ranch, LLC; and WWC Valley. In March
2011, Elizabeth Temple, defendant’s daughter from a previous marriage, was named
president of the companies. At the time of trial, the companies were owned and
controlled by defendant, Temple, and defendant’s sons (also from a previous
marriage), with Temple and defendant’s sons holding “the same amount of shares.”1
After the parties married, they developed a pattern of living beyond their
means. As a result, defendant began to take salaries from his various companies
which were not justified by their revenues, plaintiff and defendant began liquidating
defendant’s separate property, and plaintiff and defendant took out loans against
both parties’ separate property.
At the time of separation, the marital debt which had been incurred to fund
the parties’ marital lifestyle was significant. Plaintiff and defendant owed money to
almost every company in which defendant maintained an ownership interest,
1 Defendant owned “a total of 25 percent [of Inwood Properties] between a trust and
individually[.]”
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Opinion of the Court
including (1) $422,368.00 to Inwood Properties; (2) $258,737.00 to Inwood Land; and
(3) $143,285.00 to St. Vrain. The primary marital asset, the marital residence, was
sold in 2014 after the parties’ separation for $1,075,000.00, which sale produced
$230,657.00 in net proceeds. From these proceeds, plaintiff received a total interim
distribution of $144,794.00 and defendant received $85,863.00.
At the time of separation, the trial court found that plaintiff’s separate
property included two pieces of real property—14212 Stewart’s Bend Lane and 14228
Stewart’s Bend Lane2—located in Charlotte, North Carolina. On or about 30 May or
1 June 2015, plaintiff transferred 14228 Stewart’s Bend Lane to her son, Gentry
Kirby. At that time, the property had an equity of $100,000.00, and Kirby assumed
the mortgage.
On 17 February 2014, plaintiff filed a complaint against defendant for
equitable distribution, alimony, and post-separation support. Defendant filed an
answer and included a counterclaim for equitable distribution. The case came on for
trial before the Honorable Christy T. Mann in Mecklenburg County District Court
from 6 to 8 July 2016. At the time of trial, defendant was seventy-six years old and
suffered from memory loss and dementia, and he had also been diagnosed with
Alzheimer’s disease. Defendant did not appear at trial, but his daughter, Temple,
2 The ownership of both properties is disputed on appeal. The trial court found that plaintiff
owned both properties as her separate property, but on appeal, plaintiff contends both properties were
acquired at some point by CKE, plaintiff’s corporation of which she is the sole owner/member.
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Opinion of the Court
who is her father’s power of attorney, testified about matters and facts related to
defendant’s assets, debts, income, and expenses. Plaintiff appeared pro se. On 15
August 2016, the trial court entered its equitable distribution judgment and alimony
order. Plaintiff appeals.
_________________________________________________________
On appeal, plaintiff contends that the trial court committed reversible error by
(I) entering a judgment affecting title to real property without joining all necessary
parties to the action; (II) entering monetary judgments against a third-party without
joining the third-party to the action; (III & IV) classifying and distributing the debts
of private corporations to a husband and wife without joining the corporations as
parties to the action; (V) creating a distributive award without finding that the
statutory presumption of an in-kind distribution has been rebutted; and (VI) ordering
the liquidation of separate property to satisfy a distributive award.
In equitable distribution cases, “the standard of review on appeal is whether
there was competent evidence to support the trial court’s findings of fact and whether
its conclusions of law were proper in light of such facts.” Lee v. Lee, 167 N.C. App.
250, 253,
605 S.E.2d 222, 224 (2004) (quoting Shear v. Stevens Bldg. Co.,
107 N.C.
App. 154, 160,
418 S.E.2d 841, 845 (1992)).
Equitable distribution is vested in the discretion of the trial
court and will not be disturbed absent a clear abuse of that
discretion. Only a finding that the judgment was
unsupported by reason and could not have been a result of
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Opinion of the Court
competent inquiry, or a finding that the trial judge failed
to comply with the statute, will establish an abuse of
discretion.
Wiencek-Adams v. Adams, 331 N.C. 688, 691,
417 S.E.2d 449, 451 (1992) (internal
citations omitted). “A trial court’s findings of fact in an equitable distribution case
are conclusive if supported by any competent evidence.” Fitzgerald v. Fitzgerald,
161
N.C. App. 414, 419,
588 S.E.2d 517, 521 (2003) (citing Mrozek v. Mrozek,
129 N.C.
App. 43, 48,
496 S.E.2d 836, 840 (1998)).
“[E]quitable distribution is a three-step process; the trial court must (1)
‘determine what is marital [and divisible] property’; (2) ‘find the net value of the
property’; and (3) ‘make an equitable distribution of that property.’ ” Robinson v.
Robinson, 210 N.C. App. 319, 322,
707 S.E.2d 785, 789 (2011) (second alteration in
original) (quoting Beightol v. Beightol,
90 N.C. App. 58, 63,
367 S.E.2d 347, 350
(1988)).
I
Plaintiff first argues that the trial court erred in entering a judgment affecting
title to real property—14212 Stewart’s Bend Lane—without joining all necessary
parties to the action. Plaintiff contends that because CKE Properties, Inc. was the
lawful owner of 14212 Stewart’s Bend Lane on the date of separation (“DOS”), the
Mecklenburg County District Court lacked jurisdiction to enter its order affecting
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Opinion of the Court
said property, and therefore, its valuation and distribution constitutes reversible
error. We disagree.
In an equitable distribution action, the trial court has authority to distribute
“presently owned” real and personal property acquired during the marriage and
before the date of separation. N.C. Gen. Stat. § 50-20(b)(1) (2015).
“[W]hen a third party holds legal title to property which is claimed to be
marital property, that third party is a necessary party to the equitable distribution
proceeding, with their participation limited to the issue of the ownership of that
property.” Upchurch v. Upchurch, 122 N.C. App. 172, 176,
468 S.E.2d 61, 63–64
(1996) (emphasis added) (citations omitted). Separate property, on the other hand, is
to be considered by the trial court in making its distribution of marital property. See
Young v. Gum,
185 N.C. App. 642, 648,
649 S.E.2d 469, 474 (2007) (citation omitted)
(noting that the trial court is required to “consider the separate property in making
a distribution of the marital property”).
In the instant case, the trial court found as fact that this property was
plaintiff’s separate property: “On the DOS, Plaintiff/Wife owned a house and lot
located at 14212 Stewart’s Bend Lane, Charlotte, NC 28277 (“14212 Stewart’s Bend”).
14212 Stewart’s Bend is Wife’s separate property, as stipulated by the parties on the
FPTO [(Final Pretrial Order)]. (FPTO Property Item 11).” In the distribution
portion of its order, the trial court ordered plaintiff to do as follows:
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Opinion of the Court
b) . . . 14212 Stewart’s Bend: Within thirty (30) days of
the date of the execution of this Judgment/Order
Plaintiff/Wife shall sign a listing agreement with a realtor
selected by Defendant/Husband and will take all efforts to
sell 14212 Stewart’s Bend for fair market value.
Plaintiff/Wife will cooperate with price reductions and
repair requests recommended by the real estate agent and
will accept any unconditional offer made within 2% of the
then asking price. All of the net proceeds shall be paid to
Defendant/Husband.
Plaintiff contends that the trial court did not have jurisdiction to enter a
judgment affecting 14212 Stewart’s Bend Lane because it was not owned by her, but
by another legal entity, CKE. In so doing, plaintiff relies on this Court’s opinion in
Nicks v. Nicks, 241 N.C. App. 487,
774 S.E.2d 365, (2015).
In Nicks, a husband and wife, prior to their separation, implemented an estate
plan consisting of a trust and three LLCs, which eventually became a single-member
LLC, “Entrust.” Id. at 491,
774 S.E.2d at 370. The husband and wife were the only
beneficiaries of the trust, and the husband managed the LLC and had the right to
decide whether to make distributions of profits and assets from the trust.
Id. at 491–
92,
774 S.E.2d at 370. In the trial court’s findings of fact, it determined that Entrust
was marital property and ordered that its assets be distributed to the husband, but
that the husband pay the wife a distributive award.
Id. at 493–94,
774 S.E.2d at 371.
On appeal, the husband argued the trial court erred in distributing Entrust to him
because neither Entrust, the LLC, nor the trust itself were owned by either of the
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Opinion of the Court
parties on the date of separation; rather, the trust, not the husband, owned a 100%
interest in Entrust. Id. at 494–95,
774 S.E.2d at 372.
This Court agreed with the husband’s argument, concluding as follows:
[T]he Trust—which holds legal title to Entrust—was never
named as a party to this action. We therefore hold that the
trial court lacked jurisdiction to order equitable
distribution of Entrust. See, e.g., Upchurch, 122 N.C. App.
at 176,
468 S.E.2d at 64 (“Otherwise the trial court would
not have jurisdiction to enter an order affecting the title to
that property.”) (citation omitted).
Id. at 496, 774 S.E.2d at 373 (emphasis added). In other words, because the party—
the Trust—which held legal title to the LLC—Entrust—was not named as a party to
the action in Nicks, the trial court lacked jurisdiction to distribute that property
which an unnamed party held legal title to. Id.; see also Dechkovskaia v.
Dechkhovskaia,
232 N.C. App. 350, 352–54,
754 S.E.2d 831, 834–35 (2014) (holding
the trial court had no authority to classify and distribute houses which were titled in
the name of the parties’ minor child without joining the minor child as a party to the
action).
Plaintiff’s argument in reliance on Nicks ignores the fact that the trial court
did not classify 14212 Stewart’s Bend Lane as marital property and distribute it as
such. See Upchurch, 122 N.C. App. at 176, 468 S.E.2d at 63–64 (“[W]hen a third party
holds legal title to property which is claimed to be marital property, that third party
is a necessary party to the equitable distribution proceeding, with their participation
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CROWELL V. CROWELL
Opinion of the Court
limited to the issue of the ownership of that property.” (emphasis added) (citations
omitted)). Rather, it considered the separate property of plaintiff—CKE and its
assets, including 14212 Stewart’s Bend Lane—in making its distribution of the
marital property, namely, in ordering plaintiff to pay a distributive award to
defendant. See Young, 185 N.C. App. at 648,
649 S.E.2d at 474 (noting that the trial
court is required to “consider the separate property in making a distribution of the
marital property”).
Even if it is true that there is evidence in the record to indicate that as of the
DOS, CKE was the legal owner of 14212 Stewart’s Bend Lane,3 the trial court’s
classification of this property as plaintiff’s separate property does not constitute
reversible error where it was not distributing the property as part of the marital
estate. See Upchurch, 122 N.C. App. at 176, 468 S.E.2d at 63–64. Cf. Geoghagan v.
Geoghagan, ___ N.C. App. ___, ___,
803 S.E.2d 172, 175–76 (2017) (vacating an
equitable distribution order where the trial court ordered third-party LLCs “to refrain
from taking certain actions without joining them as necessary parties to the
proceedings”). Rather, the trial court was considering plaintiff’s separate property in
distributing the marital estate, specifically considering plaintiff’s ability to pay a
distributive award to defendant. As the “100% Owner” of CKE, which was formed in
3 The supplement to the record purports to show that on 25 September 2003, 14212 Stewart’s
Bend Lane was transferred from CKE to plaintiff for “zero amount,” and on 12 November 2003, the
property was granted from plaintiff back to CKE.
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CROWELL V. CROWELL
Opinion of the Court
2002 and whose “[o]nly purpose . . . is to own the real estate she purchased through
a 1031 exchange using her separate funds,” the trial court was allowed to consider
CKE’s assets, including 14212 Stewart’s Bend Lane, in ordering plaintiff to sell the
property in order to pay the distributive award. Defendant’s argument is overruled.
II
Next, plaintiff contends the trial court erred by entering monetary judgments
against a third-party, namely, plaintiff’s son, Gentry Kirby, without joining him to
the action. Plaintiff contends that because Kirby was the lawful owner of 14228
Stewart’s Bend Lane on the DOS, the trial court lacked jurisdiction to enter a
judgment affecting title to 14228 Stewart’s Bend Lane or to enter an alternative
money judgment against Kirby because defendant did not assert a claim against him
in this action. We agree that the trial court erred in entering an alternative money
judgment against Kirby.
Defendant contends that although the trial judge did not expressly state in her
ruling that she was applying the factors to be considered in analyzing a transfer
contended to be voidable under the Uniform Fraudulent Transfer Act, N.C. Gen. Stat.
§§ 39-23.1 (2013) et seq.,4 it is nonetheless clear that the facts in this case fall within
4 Plaintiff transferred 14228 Stewart’s Bend Lane to Kirby on or about 30 May or 1 June 2015.
The version of the Uniform Fraudulent Transfer Act which is currently in effect—the Uniform
Voidable Transfer Act—did not become effective until 1 October 2015. See N.C. Sess. Laws 2015-23, §
1, eff. Oct. 1, 2015. Since then, N.C.G.S. §§ 39-23.1 et seq. have been amended again. See N.C. Sess.
Laws 2017-204, § 3.3(a)–(b), eff. Aug. 3, 2017.
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Opinion of the Court
the statute and the result is that plaintiff’s transfer was fraudulent and thus,
voidable. Defendant also argues that Kirby was not required to be made a party to
this action in order for the trial court’s remedies to be applied because Kirby did not
take the property in good faith or for a reasonably equivalent value. Cf. N.C.G.S. §
39-23.8(a) (2013) (“A transfer or obligation is not voidable under G.S. 39-23.4(a)(1)
against a person that took in good faith and for a reasonably equivalent value or
against any subsequent transferee or obligee.”).
The Uniform Fraudulent Transfer Act was designed to prevent fraudulent
transfers and allow a creditor to cancel a transfer even after it has been made. See
generally id. §§ 39-23.1 et seq. Specifically, N.C. Gen. Stat. § 39-23.4(a)(1) establishes
as fraudulent any transfer of property that is made with the intent to hinder, delay,
or defraud a creditor.
Id. § 39-23.4(a)(1). A “creditor” is defined broadly as “a person
who has a claim.” N.C.G.S. § 39-23.1(4); see Note, Benjamin M. Ellis, Protecting the
Right to Marital Property: Ensuring a Full Equitable Distribution Award with
Fraudulent Conveyance Law,
30 Cardozo L. Rev. 1709, 1712 (2009) (proposing that
“a spouse should be considered a creditor—and thus have recourse to fraudulent
conveyance law—for the limited purpose of setting aside conveyances that would
otherwise prevent the spouse from receiving a full equitable distribution award”).
The remedies available to a creditor include “[a]voidance of the transfer or obligation
to the extent necessary to satisfy the creditor’s claim;” “[a]n attachment . . . against
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Opinion of the Court
the asset transferred”; or “[a]ny other relief the circumstances may require.” N.C.G.S.
§ 39-23.7(1), (2), (3)c.
A conveyance will be deemed fraudulent and thus void in either of the following
instances:
If the conveyance is voluntary and made with the actual
intent upon the part of the grantor to defraud creditors, it
is void, although this fraudulent intent is not participated
in by the grantee . . . .
....
. . . If the conveyance is upon a valuable consideration, but
made with the actual intent to defraud creditors on the
part of the grantor, participated in by the grantee or of
which he he [sic] has notice, it is void.
Norman Owen Trucking, Inc. v. Morkoski, 131 N.C. App. 168, 173,
506 S.E.2d 267,
271 (1998) (citation omitted) (quoting Aman v. Walker,
165 N.C. 224, 227,
81 S.E.
162, 164 (1914)).
In determining intent [of the grantor] under subdivision
(a)(1) of this section, consideration may be given, among
other factors, to whether:
(1) The transfer or obligation was to an insider[5];
....
(3) The transfer or obligation was disclosed or concealed;
(4) Before the transfer was made or obligation was
incurred, the debtor had been sued or threatened with suit;
5“ ‘Insider’ includes: a. If the debtor is an individual, 1. A relative of the debtor . . . .” N.C.G.S.
§ 39-23.1(7)a. (emphasis added).
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Opinion of the Court
....
(12) The debtor made the transfer or incurred the
obligation without receiving a reasonable equivalent value
in exchange for the transfer or obligation . . . .
N.C.G.S. § 39-23.4(b).
At trial, plaintiff, who appeared pro se,6 argued as follows:
May 30, 2015 I gifted [14228 Stewart’s Bend Lane]
to [Kirby]. I was going to give it to him anyway. . . . I had
discussed gifting it earlier. But I gifted it now because it
was the time to do it, and they will tell you it was because
I did not want to sell it and split the money. I couldn’t have
ever sold this this fast, nor did I feel the necessity to kick
my family out.
Evidence in the record also suggests that defendant was not made privy to this
transfer until after it was accomplished.
The trial court found as follows regarding the transfer of 14228 Stewart’s Bend
Lane to Kirby:
74. In 2015, Defendant/Husband asked Plaintiff/Wife to
sell 14228 Stewart’s Bend so as to eliminate the marital
debt and distribute the net proceeds between them.
Plaintiff/Wife refused.
75. Shortly thereafter, Plaintiff/Wife “gifted” the home to
her son Gentry Kirby (“Mr. Kirby”), who was well aware of
this divorce proceedings [sic] and the contentions of the
parties about the distribution and payment of real property
and debts. At the time of the gift, 14228 Stewarts Bend [sic]
was worth $390,000 resulting in a $100,000 “gift” of equity
6 Plaintiff was represented from 2013 through June 2015. She paid her attorney $227,993.00
for his representation in this case, but her attorney withdrew in June 2015.
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Opinion of the Court
to Mr. Kirby.
76. The Court finds that this transfer/gift of valuable real
property by Plaintiff/Wife to Mr. Kirby constitutes a
fraudulent transfer to defraud creditors, that Mr. Kirby
was not a good faith purchaser for value (in an arms’ length
transaction) and that the home and/or the equity contained
therein is within this Court to consider in determining the
equitable distribution of the property and/or the
distributive award that Plaintiff/Wife may be required to
pay. Nytco Leasing, Inc. v. Southern Motels, Inc., 40
N.C.App. 120,
252 S.E.2d 826 (1979); McCanless v.
Flinchum, 89 N.C. 373 (1883) (when property is sold to a
family member for less than reasonable value and the
grantor is unable to pay his debts, the close family
relationship is strong evidence of fraudulent intent). Mr.
Kirby does not need to be a party to this lawsuit in order
for this Court to consider this property and the disposition
thereof as part of this litigation.
The trial court ordered plaintiff as follows:
198. . . . The Court finds [plaintiff] has the ability to pay
the distributive award only as follows:
....
c) 14228 Stewart’s Bend: Plaintiff/Wife can obtain
a deed to this house back from Mr. Kirby, sell the
property and distribute the net proceeds to
Defendant/Husband or she can have Mr. Kirby pay
to Defendant/Husband $90,000 which represents
the majority of equity he gained during the
fraudulent “gift/transfer” to him of this property.
....
6. . . . . Plaintiff/Wife shall pay Defendant/Husband as
follows:
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Opinion of the Court
....
c) 14228 Stewart’s Bend: Within sixty (60) days of
the date of the execution of this Judgment/Order
Plaintiff/Wife shall sign a listing agreement with a
realtor selected by Defendant/Husband and will
take all efforts to sell this home for fair market
value; OR Mr. Kirby will pay to Defendant/Husband
$90,000 which represents the majority of the equity
he gained during the fraudulent “gift/transfer” to
him of this property.
(Emphasis added).
In the instant case, the record indicates evidence of the following statutory
factors in the transaction between plaintiff and Kirby: (1) the transfer of property to
an insider, her son, see id. § 39-23.4(b)(1); (2) the transfer was concealed from
defendant, see id. § 39-23.4(b)(3); (3) the property was gifted to Kirby on 30 May 2015,
after 17 February 2014, when plaintiff filed her complaint, and also after 29 April
2014, when defendant filed his answer and counterclaim for equitable distribution,
see id. § 39-23.4(4); and (4) plaintiff made the transfer without receiving a reasonable
equivalent value in exchange—the transfer to her son was a “gift,” see id. § 39-
23.4(12). Accordingly, the trial court correctly concluded that the transfer from
plaintiff to Kirby “constitute[d] a fraudulent transfer to defraud creditors, [and] that
Mr. Kirby was not a good faith purchaser for value . . . .” Thus, the trial court also
had jurisdiction to order that the transfer of the deed from plaintiff to Kirby be
avoided.
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Opinion of the Court
However, with regard to the trial court’s alternative order that “Mr. Kirby pay
to Defendant/Husband $90,000 which represents the majority of equity he gained
during the fraudulent ‘gift/transfer’ to him of th[e] [14228 Stewart’s Bend]
property[,]”we agree with plaintiff that the trial court lacked jurisdiction to enter
such an order against Kirby, a non-party to this action.
“Pursuant to the Equitable Distribution Act, the trial court is only permitted
to distribute marital and divisible property.” Mugno v. Mugno, 205 N.C. App. 273,
277,
695 S.E.2d 495, 498 (2010) (citations omitted). “An equitable distribution order
is not the proper means to hold . . . a third party[] responsible for a debt owed . . . .”
Id. (holding that the trial court erred by ordering the husband’s corporation, a third
party, to pay funds to the wife in an equitable distribution action where the
corporation was determined to be separate property). Accordingly, we hold the trial
court erred by ordering, even in the alternative, Kirby, a third party, to pay funds to
defendant. Therefore, we vacate in part paragraph 6 of the equitable distribution
order so that it reads as follows:
6. . . . Plaintiff/Wife shall pay Defendant/Husband as
follows:
....
c) 14228 Stewart’s Bend: Within sixty (60) days of the
date of the execution of this Judgment/Order Plaintiff/Wife
shall sign a listing agreement with a realtor selected by
Defendant/Husband and will take all efforts to sell this
home for fair market value; OR Mr. Kirby will pay to
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Opinion of the Court
Defendant/Husband $90,000 which represents the
majority of equity he gained during the fraudulent
“gift/transfer” to him of this property.
III & IV
Plaintiff next argues the trial court erred by distributing the debts of private
corporations to a husband and wife without joining the corporations as parties to the
action. Specifically, plaintiff claims the trial court could not enter a judgment in favor
of Temple, Inwood Properties, Inwood Land, or St. Vrain because these entities were
not parties to this case. We disagree.
As a threshold matter, the trial court did not “enter a money judgment in favor
of Elizabeth Temple”; rather, it distributed certain marital debts to defendant, see
infra, and provided for a mechanism to ensure those marital debts would get paid:
38. In the event there is any cost or expense associated
with the sale [of the Constitution Lot, a lot located in Ajiic,
Mexico and classified as marital property], Plaintiff/Wife
shall be responsible for the cost or expense. In the event
that there are any net proceeds from the sale, the entirety
of the net proceeds will be distributed to
Defendant/Husband which funds will first be paid to Ms.
Temple to satisfy Defendant/ Husband’s debt to Ms. Temple
if it has not yet been paid. If the debt to Ms. Temple has
already been satisfied, or there are additional net proceeds
from the sale above the amount needed to satisfy the debt
to Ms. Temple, the remaining net proceeds shall be paid
directly to any company to which Defendant/Husband still
owns [sic] a liability (as provided hereinafter).
Notably, plaintiff’s argument ignores the trial court’s previous two findings of
fact, which indicate that Temple, as defendant’s power of attorney, testified at trial
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Opinion of the Court
that she would “take on [the] task” of selling the Constitution Lot (a marital property
located in Mexico and distributed to defendant for the purpose of selling it) on behalf
of defendant. The Court further ordered that Temple was authorized “to contract
with real estate agents, notaries, and the like in Mexico to accomplish the sale of the
Constitution Lot at fair market value,” and it is these administrative costs which the
trial court was presumably contemplating in Finding of Fact No. 38 when it referred
to any debts defendant might need to repay to Temple. Plaintiff’s argument on this
point is overruled.
Plaintiff also challenges distributions to defendant’s various companies.
Plaintiff argues that the trial court was without jurisdiction to enter a judgment in
favor of the various companies and/or that the trial court was without authority to
classify and distribute debt as marital debt, when plaintiff claims defendant alone
misappropriated those funds. We disagree.
“[F]or the purpose of an equitable distribution, a marital debt is defined as a
debt incurred during the marriage for the joint benefit of the parties.” Geer v. Geer,
84 N.C. App. 471, 475,
353 S.E.2d 427, 429 (1987) (emphasis added) (citation
omitted).
With regard to these debts—which plaintiff contends are not marital or
divisible property—the trial court found as fact the following:
13. After Ms. Temple took over as President of Inwood
Properties and the remaining Companies, she . . . reviewed
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Opinion of the Court
the books of the companies and determined that
Defendant/Husband and Plaintiff/Wife were borrowing
money from the Companies to the detriment of the
Companies themselves and to the other shareholders. After
realizing that the Companies could no longer afford to pay
Defendant/Husband the distributions and salary he was
enjoying or keep loaning Defendant/Husband and
Plaintiff/Wife money to afford their personal expenses they
arranged for the parties to pay the Companies back the
debts that had been accumulated for their own personal
benefit.
14. The Companies continued to loan money to the parties
in the short run, but it is clear that the intent was for these
loans to be repaid and the steady stream of money to be
paid to the parties or for their personal expenses was to be
cut off.
15. The loan amounts are outlined infra, but each of these
loans were made during the parties’ marriage and most of
the money can be traced through deposits directly into the
parties’ personal joint bank account, to pay off personal
credit cards, to purchase real estate in their personal name,
and to expenses that had to be theirs personally.
16. Plaintiff/Wife argued that this was not the case and if
it was she wasn’t aware of the loans or that the money was
being paid to Defendant/Husband (and her) in the form of
a loan that was to be paid back.
17. The Court does not believe Plaintiff/Wife’s position is
credible. This position of doubt is fostered by the fact that
Plaintiff/Wife participated in securing loans in her
individual names [sic] and in Defendant/Husband’s name
(secured by her real property).
....
19. The Court’s concerns about Plaintiff/Wife’s credibility
impacts [sic] all remaining issues in this case.
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Opinion of the Court
(Emphasis added).
“As fact finder, the trial court is the judge of the credibility of the witnesses
who testify. The trial court determines what weight shall be given to the testimony
and the reasonable inferences to be drawn therefrom.” Cornelius v. Helms, 120 N.C.
App. 172, 175,
461 S.E.2d 338, 340 (1995) (citing Gen. Specialties Co., Inc. v. Nello L.
Teer Co.,
41 N.C. App. 273, 275,
254 S.E.2d 658, 660 (1979)). Accordingly, where this
Court defers to the trial court’s finding that plaintiff’s testimony was not credible,
and where competent evidence in the record supports the trial court’s classification
of these debts as marital property, see Miller v. Miller,
97 N.C. App. 77, 81,
387 S.E.2d
181, 184–85 (1990) (citation omitted) (noting that findings are binding on appellate
courts when supported by competent evidence in equitable distribution proceedings),
the trial court did not err in distributing the marital debt. The following evidence in
the record supports the trial court’s classifications of these debts, secured by the
following properties and/or companies, as marital property.
1. The Strand Debt ($376,900.00).
At trial, Temple testified as follows: “December 2006, a line of credit was taken
out in [plaintiff’s] name on a company asset called 1300 The Strand. The loan amount
was $377,000. The proceeds -- the total proceeds are deposited into Inwood’s account,
and then $109,990 is deposited into the marital account in a loan form . . . .”
(Emphasis added).
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CROWELL V. CROWELL
Opinion of the Court
2. The Ranch Debts ($82,919.00, $92,927.00, $70,026.00, and $198,768.00).
Temple testified as follows regarding the loans secured by The Ranch property:
(1) “[I]n 2002 [defendant] . . . gets a loan against [the] ranch, which was previously
completely debt free, for $205,000. And as you can see, $79,290.46 of those proceeds
are directly transferred to the marital account.” (Emphasis added). (2) “Another loan
is taken out against the ranch for [$]250,000, and of these -- and pretty much the
entire proceeds are deposited directly into Inwood’s account. And then shortly after,
two deposits totaling [$]151,080 are deposited into the marital account.” (Emphasis
added). (3) “In May 2005 another loan is taken against [the] . . . ranch for $200,000,
and it’s actually an equity maximizer account, so it can be drawn on whenever they
want, and it’s drawn up to -- $130,000 of draws occurred in 2005.” (Emphasis added).
(4) “[L]ater in 2012 a part of the loan that was taken out on the ranch property back
in 2005 was classified as [defendant’s], as loan -- money loaned to [defendant] and
[plaintiff] because that amount from those loans was actually deposited into their
marital account.” (Emphasis added).
3. Inwood Properties Debt ($422,368.00).
Temple read defendant’s contentions into the record regarding the Inwood
Property loan as follows:
A. (Reads.) “Throughout the marriage husband and wife
borrowed money from Inwood Properties for their personal
expenses. This was money husband was not entitled to as
the officer or shareholder of the company, and as of the date
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CROWELL V. CROWELL
Opinion of the Court
of separation this was the total. After the date of separation
husband sold his stock in Inwood Properties to satisfy this
debt in part and will have to pay the tax consequences of
approximately $80,000 due to the stock repurchase.
Q. And what is the amount that husband contends is due
as of September 3, 2013?
....
A. . . . $422,368.
(Emphasis added).
4. Inwood Land Debt ($258,737.00).
Temple testified about the Inwood Land Debt as follows:
Q. . . . And what did Inwood Land do and how was it that
[defendant] was able to draw money from the Inwood Land
accounts?
A. Inwood Land is our operating company in Charlotte. It
was created as a North Carolina LLC so that we could
operate our office.
Q. Okay.
A. . . . [M]oney is deposited monthly into Inwood Land’s
account and then we run the operating expenses for the
Charlotte office out of that, and if there was excess money
it, was borrowed. [Defendant] later borrowed it from
Inwood Land and deposited it directly into the marital
account.
Q. Okay. And according to the QuickBooks records that
amount was -- well, read that into the record.
A. That amount at date of separate [sic] is $258,737.
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CROWELL V. CROWELL
Opinion of the Court
(Emphasis added).
5. St. Vrain Debt ($143,285.00).
Temple also testified as follows regarding the debt secured by the St. Vrain
company:
Q. . . . [D]id [defendant] also borrow money from [St. Vrain]
throughout the years?
A. Yes. . . . [I]t starts in 2003 with a direct transfer to
[plaintiff’s] personal account for $3500. And then this
continues in various forms. And then it’s sometimes paid
back, but it carries a significant balance until December
2011 . . . .
....
Q. . . . And what was the amount that was owed to St. Vrain
on date of separation?
A. $143,285.
Lastly, with regard to all of the debts accrued by plaintiff and defendant and
secured against various separately-owned companies and properties, Temple testified
as follows:
Q. . . . In 2011, when you started having discussions with
[plaintiff] and [defendant] did you explain to her, . . . that
[defendant] was borrowing from this company to this
company to this company to this company to pay their
living expenses?
A. Yes, I believe we all talked about it in terms of robbing
Peter to pay Paul.
Q. And was there -- did she ever dispute or say well, at that
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CROWELL V. CROWELL
Opinion of the Court
point well, when did that -- he’s a shareholder, he can take
what he wants to take, that’s his business, not mine?
A. No.
As the foregoing testimony and other examples from the record demonstrate,
the trial court was not, as plaintiff contends, “classif[ying] and distribut[ing] the debts
of private corporations.” Rather, competent evidence in the record shows that the
trial court was properly classifying and distributing marital debt: the trial court
found that defendant took advantage of his position as a stockholder in various
companies to borrow money which was used for the purpose of funding his and
plaintiff’s extravagant lifestyle. Indeed, most of the loan proceeds can be traced to
deposits made directly into the parties’ personal bank accounts. Accordingly, the trial
court had authority and jurisdiction to distribute to the parties the debts owed to the
companies as marital debt. Plaintiff’s argument is overruled.
V
Plaintiff argues the trial court erred by creating a distributive award without
finding that the statutory presumption of an in-kind distribution had been rebutted.
Specifically, plaintiff contends that it failed to make findings of fact to justify a
distributive award. We disagree.
“[I]t shall be presumed in every action that an in-kind distribution of marital
or divisible property is equitable.” N.C.G.S. § 50-20(e). “This presumption may be
rebutted by the greater weight of the evidence, or by evidence that the property is a
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CROWELL V. CROWELL
Opinion of the Court
closely held business entity or is otherwise not susceptible of division in-kind.” Id.
Therefore, “in equitable distribution cases, if the trial court determines that the
presumption of an in-kind distribution has been rebutted, it must make findings of
fact and conclusions of law in support of that determination.” Urciolo v. Urciolo, 166
N.C. App. 504, 507,
601 S.E.2d 905, 908 (2004) (citing Heath v. Heath,
132 N.C. App.
36, 38,
509 S.E.2d 804, 805 (1999)). “In order to rebut the presumption of an in-kind
distribution, the equitable distribution judgment must contain a finding, supported
by evidence in the record, that an in-kind distribution would be impractical.” Wirth
v. Wirth,
193 N.C. App. 657, 669,
668 S.E.2d 603, 611 (2008) (emphasis added)
(citations omitted).
In the instant case, the trial court concluded that “[i]n order to accomplish the
equitable distribution Plaintiff/Wife is required to pay a distributive award of Eight
Hundred Twenty Four Thousand Two Hundred Ninety Four Dollars and no/100
($824,294).” This conclusion was preceded by extensive findings of fact regarding
distributional factors required to be considered per N.C. Gen. Stat. § 50-20(c), which
indicate and detail the reasoning behind the trial court’s conclusion—albeit an
inferred one—that an in-kind distribution would be “impractical”:
(1) The income, property, and liabilities of each party at the
time the division of property is to become effective. Neither
party is employed. Plaintiff/Wife receives social security, a
pension, and she lives with her daughter (who could and
should assist in the sharing of her living expenses).
Defendant/Husband receives social security, a salary of
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CROWELL V. CROWELL
Opinion of the Court
$60,000 (as compensation for his service as Chairman of
the Board), income from one trust, and one oil royalty. As
a result of this equitable distribution Defendant/Husband
will have more debt than property and Plaintiff/Wife will
have to liquidate her property to pay the distributive award.
....
(3) The duration of the marriage and the age and physical
and mental health of both parties. The parties were
married for 15 years and were in their fifties when they
married. Defendant/Husband is in his mid-seventies[,] has
suffered a serious heart attack[,] and now suffers from
Alzheimer’s disease. He will not be in a condition to seek
outside employment again in his life and the likelihood of
his needing increased medical attention in the coming
years is good. Plaintiff/Wife is in her mid-seventies and in
good health. She is not working now but that is by choice.
She is taking classes to become a Guardian Ad Litem.
....
(5) The expectation of pension, retirement, or other
deferred compensation rights that are not marital
property. Plaintiff/Wife has a small separate retirement
plan. Defendant/Husband may receive distributions as a
result of his shared ownership in a number of Companies.
....
(8) Any direct contribution to an increase in value of
separate property which occurs during the course of the
marriage. Defendant/Husband contributed time, money
and resources to Plaintiff/Wife’s separately owned real
estate.
(9) The liquid or nonliquid character of all marital property
and divisible property. Neither party has any liquid
marital property left. Plaintiff/Wife spent her liquid assets
on her attorney in this case.
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CROWELL V. CROWELL
Opinion of the Court
....
(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. Defendant/Husband is going to owe substantial
taxes as a result of the stock he sold to pay down marital
debt. Plaintiff/Wife paid taxes as a result of investment
assets she liquidated after the date of separation.
(12) Any other factor which the court finds to be just and
proper. There was no choice but to distribute all debts to
Defendant/Husband in [t]his case which results in a heavy
burden he may never be able to pay before his death and a
distributive award owed by Plaintiff/Wife that she may
never be able to pay before her death.
(Emphasis added).
While the trial court did not specifically make a finding which stated that an
equitable distribution of the marital property in-kind would be impractical, see id.,
the trial court’s many findings of fact, especially those regarding the non-liquid
character of the parties’ assets, are sufficient to permit appropriate appellate review
of this issue, see Plummer v. Plummer,
198 N.C. App. 538, 543,
680 S.E.2d 746, 750
(2009) (“[T]he degree of specificity required in a court order pertaining to equitable
distribution cannot be established with scientific precision. However, the court’s
findings of fact must be ‘sufficiently specific to allow appellate review.’ ” (alteration
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CROWELL V. CROWELL
Opinion of the Court
in original) (internal citation omitted) (quoting Rosario v. Rosario, 139 N.C. App. 258,
267,
533 S.E.2d 274, 279 (2000)). Because the trial court’s findings of fact are
“sufficiently specific to allow appellate review,” see Rosario,
139 N.C. App. at 267,
533
S.E.2d at 279 (citation omitted), we conclude that they support its distributive award,
and the trial court did not abuse its discretion in ordering plaintiff to pay a
distributive award of $824,294.00. Plaintiff’s argument is overruled.
VI
Lastly, plaintiff argues the trial court erred in ordering the liquidation of
separate property to satisfy the court’s distributive award. Specifically, plaintiff
argues the “trial court has no authority to distribute separate property[.]” As this is
a mischaracterization of what the trial court did, we disagree.
Generally, “[f]ollowing classification, property classified as marital is
distributed by the trial court, while separate property remains unaffected.” McLean
v. McLean, 323 N.C. 543, 545,
374 S.E.2d 376, 378 (1988) (emphasis added) (citing
Hagler v. Hagler,
319 N.C. 287, 289,
354 S.E.2d 228, 232 (1987)). As stated in Section
I, supra, in ordering the liquidation of plaintiff’s separate property, it was not
distributing that property, but rather “considering” it in making its other
distributions, particularly the distribution of the majority of the marital debt to
defendant and ordering plaintiff to pay a distributive award. See Young, 185 N.C.
- 28 -
CROWELL V. CROWELL
Opinion of the Court
App. at 648, 649 S.E.2d at 474 (noting that the trial court is required to “consider the
separate property in making a distribution of the marital property”).
“The trial court is required to make findings as to whether the defendant has
sufficient liquid assets from which he can make the distributive award payment.”
Urciolo, 166 N.C. App. at 507,
601 S.E.2d at 908 (citing Embler v. Embler,
159 N.C.
App. 186, 188–89,
582 S.E.2d 628, 630 (2003)). In the instant case the trial court did
just that, and in concluding that plaintiff is “required to pay a distributive award of
[$824,294.00]” to defendant, the trial court found as follows:
[Plaintiff] [does not have] the means and ability to pay this
amount in full. The Court finds that she has the ability to
pay the distributive award only as follows:
....
b) 14512 Myer’s Mill & 14212 Stewart’s Bend:
Plaintiff/Wife shall be entitled to keep 14512 Myer’s Mill so
that she may continue to reside there. Plaintiff/Wife will
sell 14212 Stewart’s Bend and pay the net proceeds to
Defendant/Husband.
c) 14228 Stewart’s Bend: Plaintiff/Wife can obtain a deed
to this house back from Mr. Kirby, sell the property and
distribute the net proceeds to Defendant/Husband or she
can have Mr. Kirby pay to Defendant/Husband $90,000
which represents the majority of equity he gained during
the fraudulent “gift/transfer” to him of this property.
(Emphasis added).
Accordingly, where the trial court was properly considering—not
distributing—plaintiff’s separate property in distributing the marital estate,
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CROWELL V. CROWELL
Opinion of the Court
specifically considering plaintiff’s ability to pay a distributive award to defendant, the
trial court did not abuse its discretion in ordering plaintiff to liquidate separate
property in order to pay the distributive award. Defendant’s argument is overruled.
The equitable distribution judgment and order is
AFFIRMED IN PART; VACATED IN PART.
Judge ARROWOOD concurs.
Judge MURPHY concurs in part and dissents in part in a separate opinion.
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No. COA17-164 – Crowell v. Crowell
MURPHY, Judge, concurring in part and dissenting in part.
I concur in the portions of the Majority’s opinion concluding: (1) Gentry Kirby
(“Kirby”) was a necessary party for the alternate money judgment entered against
him; (2) the trial court properly distributed certain marital debts to Defendant; and
(3) the trial court made proper findings for a distributive award. However, I
respectfully dissent in regard to the Majority’s determination that neither CKE
Properties, Inc. (“CKE”) nor Kirby were otherwise necessary parties.7
“A ‘necessary party’ is a party that ‘is so vitally interested in the controversy
involved in the action that a valid judgment cannot be rendered in the action
completely and finally determining the controversy without its presence as a party.’ ”
Geoghagan v. Geoghagan, ___ N.C. App. ___, ____, 803 S.E.2d 172, ___ (2017) (quoting
Booker v. Everhart,
294 N.C. 146, 156,
240 S.E.2d 360, 365-66 (1978)). “This Court
has also described a necessary party as ‘one whose interest will be directly affected
by the outcome of the litigation.’”
Id. at ___,
803 S.E.2d at ___ (quoting Begley v.
Emp’t Sec. Comm.,
50 N.C. App. 432, 438,
274 S.E.2d 370, 375 (1981)).
We recently addressed necessary parties in an equitable distribution action in
Geoghagan. ___ N.C. App. ___, 803 S.E.2d 172. In that case, plaintiff and defendant
owned an incorporated business, which was the sole member of four limited liability
7 Although the Majority concluded Kirby was a necessary party in regard to the alternate
money judgment entered against him, the Majority concluded Kirby was not a necessary party in
regard to the transfer of deed for his property at 14228 Stewart’s Bend.
CROWELL V. CROWELL
MURPHY, J., concurring in part and dissenting in part.
companies (subsidiary LLCs). Id. at ___,
803 S.E.2d at ___. Plaintiff “acted as the
manager of each of the subsidiary LLCs of which [the corporation] was a member.”
Id. at ____,
803 S.E.2d at ___. The trial court distributed all of the shares of the
corporation to plaintiff and ordered plaintiff to pay a distributive award.
Id. at ___,
803 S.E.2d at ___. Additionally:
[a]s the court had distributed [the corporation] to
[p]laintiff, it ordered [p]laintiff to make “good faith efforts
to substitute himself for [defendant] as guarantor of all
debts and obligations of [the corporation],” and further
ordered [p]laintiff to “indemnify [defendant], and hold her
harmless, from all liability relating to” a bank loan made
to [the corporation], all [of the corporation’s] leases, all
agreements between [the corporation] and its various
vendors, and all other debts and liabilities of [the
corporation].
Id. at ___,
803 S.E.2d at ___. The trial court further ordered the corporation to not
pay plaintiff any salary, bonuses, or other compensation above a sum certain until
plaintiff paid the distributive award.
Id. at ___,
803 S.E.2d at ___.
On appeal, plaintiff argued the corporation and subsidiary LLCs were
necessary parties. Id. at ___,
803 S.E.2d at ___. This Court stated “[w]hile couched
in terms suggesting the equitable distribution order was directed at [p]laintiff, the
trial court clearly restricted the ability of [the corporation] and the subsidiary LLCs
to act.”
Id. at ___,
803 S.E.2d at ___. Accordingly, we held the corporation and
subsidiary LLCs were necessary parties and vacated and remanded the order.
Id. at
___,
803 S.E.2d at ___.
2
CROWELL V. CROWELL
MURPHY, J., concurring in part and dissenting in part.
The Majority concludes the trial court did not distribute the property at 14212
Stewart’s Bend and 14228 Stewart’s Bend as part of the marital estate and, instead,
merely considered the separate property in distributing the marital estate. I
disagree. Instead of considering the separate property, the trial court improperly
restricted the abilities and rights of CKE and Kirby. Pursuant to the equitable
distribution judgment and order, CKE must list the property at 14212 Stewart’s Bend
and pay proceeds to Defendant. Additionally, Kirby must transfer title of 14228
Stewart’s Bend to Plaintiff, although the trial court determined this property was
Plaintiff’s separate property. While, initially, the trial court seemingly only
considered the 14228 Stewart’s Bend property as part of the distributive award, the
trial court concluded by ordering Plaintiff to list the property and take all efforts to
sell the home for fair market value. Based on these orders, CKE’s and Kirby’s
“interest[s] will be directly affected by the outcome[.]” Begley, 50 N.C. App. at 438,
274 S.E.2d at 375 (citation omitted).
While I agree Nicks v. Nicks, 241 N.C. App. 487,
774 S.E.2d 365 (2015) and
Dechkovskaia v. Dechkovskaia,
232 N.C. App. 350,
754 S.E.2d 831 (2014) govern when
the trial court distributes property owned by a third party as marital property, and
that is not the distribution issue at hand here, nonetheless, the trial court entered an
equitable distribution judgment and order affecting the rights and interests of parties
not joined in the action.
3
CROWELL V. CROWELL
MURPHY, J., concurring in part and dissenting in part.
This error is exemplified by the Majority’s analysis of the transfers to CKE and
Kirby under Chapter 39, Article 3a of the North Carolina General Statutes, the
Uniform Fraudulent Transfer Act, (“UFTA”) (now the Uniform Voidable Transactions
Act). The Majority goes to great length to illustrate that the transfers fall within the
UFTA, and I agree with the analysis contained therein, but the Majority does not cite
a single case where a transfer was rescinded without the transferee being a party to
the litigation. By requiring non-parties to act and effectively rescind the transfers,
the trial court has permanently barred CKE and Kirby from raising any defenses or
protections they may have under N.C.G.S. §§ 39-23.8 (2015) or 39-23.9(3) (2015).
More troubling is the fact that if CKE or Kirby had been properly joined, they could
have exercised their rights to a jury trial in accordance with Article I, § 25 of the
North Carolina Constitution. N.C. Const. art. I, § 25.
CKE and Kirby are necessary parties to this action, and as in Geoghagan, the
trial court lacked the power to require their action or affect their rights without first
being joined as parties. The trial court’s error is compounded by the fact that it
prevents non-parties from raising defenses and protections under the UFTA or
exercising their constitutional rights to a jury trial. Accordingly, I would vacate and
remand the trial court’s order for further proceedings that do not require the actions
of or affect the rights of non-parties, or for joinder of the necessary parties.
4
