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Crowell v. Crowell

Court of Appeals of North Carolina

January 2, 2018

ANDREA KIRBY CROWELL, Plaintiff,
v.
WILLIAM WORRELL CROWELL, Defendant.

          Heard in the Court of Appeals 3 October 2017.

         Appeal by plaintiff from judgment entered 15 August 2016 by Judge Christy T. Mann in Mecklenburg County No. 14-CVD-2267 District Court.

          Law Office of Thomas D. Bumgardner, PLLC, by Thomas D. Bumgardner, for plaintiff-appellant.

          Hamilton Stephens Steele Martin, PLLC, by Amy E. Simpson, for defendant-appellee.

          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.

         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, 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 Lane[2]-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, 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 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 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:

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 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 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 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 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 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;
. . . .
(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 ...


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