by defendant from order entered 19 June 2018 by Judge Jena P.
Culler in Mecklenburg County No. 16 CVD 11052 District Court.
Heard in the Court of Appeals 19 September 2019.
Rosenwood, Rose & Litwak, PLLC, by Nancy S. Litwak, Erik
M. Rosenwood, and Meredith R. Hiller, for plaintiff.
Plumides, Romano, Johnson & Cacheris, P.C., by Richard B.
Johnson and John Cacheris, for defendant.
Crago ("defendant") appeals from an equitable
distribution and alimony Order awarding her ex-husband,
Dieter Crago ("plaintiff"), $120, 000.00, and
challenges the denial of alimony and attorney's fees. For
the following reasons, we affirm.
Plaintiff and defendant were married on 23 June 2007.
Plaintiff and defendant both worked as engineers until 2010,
when they were laid off. In order to support themselves
through unemployment, plaintiff and defendant liquidated
their 401(k) accounts and pension plans. Plaintiff later
obtained work again and became the sole wage earner for the
remainder of the marriage, while defendant enrolled in school
to pursue various areas of study. In 2013, plaintiff and
defendant opened a joint bank account, from which defendant
would sometimes withdraw funds to transfer to her separate
account. Defendant would also deposit checks written to her
by plaintiff into her separate account. The parties had no
children together, but defendant had two children from a
previous marriage to Michael Heintz.
September 2004, defendant and Mr. Heintz took out a $1, 000,
000.00 life insurance policy on Mr. Heintz's life and
named defendant as the beneficiary. During her marriage to
plaintiff, defendant paid the insurance premiums partly with
funds she received from plaintiff. In October 2015, following
Mr. Heintz's death in September, defendant received the
payout from the life insurance policy. On 16 January 2016,
plaintiff and defendant separated. On 24 June 2016, plaintiff
filed a "Complaint" for equitable distribution of
the parties' assets. On 20 October 2016, defendant filed
a counterclaim for equitable distribution, alimony, and
trial was held on 15 March 2018, and the trial court issued
an "Order for Equitable Distribution and Alimony"
("Order") in which it determined the life insurance
policy to be marital property, and distributed the property
80% to defendant and 20% to plaintiff. Plaintiff was awarded
$120, 000.00 in proceeds from the life insurance policy, and
was assigned all of the parties' tax debt.
Defendant's claims for alimony and attorney's fees
were denied. Defendant subsequently appealed.
appeal, defendant assigns as error the trial court's: (1)
classification of life insurance proceeds, 2012 GMC Sierra,
BB&T Trust Account, and certain tax debt as marital
property; (2) distribution to plaintiff in the amount of
$120, 000.00; and (3) denial of defendant's claims for
alimony and attorney's fees.
the trial court sits without a jury, this Court reviews a
trial court's equitable distribution order for
"whether there was competent evidence to support the
trial court's findings of fact and whether those findings
of fact supported its conclusions of law." Casella
v. Alden, 200 N.C.App. 24, 28, 682 S.E.2d 455, 459
(2009) (citing Oakley v. Oakley, 165 N.C.App. 859,
861, 599 S.E.2d 925, 927 (2004)). "The division of
property in an equitable distribution 'is a matter within
the sound discretion of the trial court.'"
Cunningham v. Cunningham, 171 N.C.App. 550, 555, 615
S.E.2d 675, 680 (2005) (quoting Gagnon v. Gagnon,
149 N.C.App. 194, 197, 560 S.E.2d 229, 231 (2002)). "A
trial court may be reversed for abuse of discretion only upon
a showing that its actions are manifestly unsupported by
reason." White v. White, 312 N.C. 770, 777, 324
S.E.2d 829, 833 (1985).
Classification of the Life Insurance Proceeds
The Mechanistic Approach Was Proper
first argues the trial court abused its discretion when it
rejected the analytic approach when determining that the life
insurance proceeds were marital property in its equitable
distribution Order. We disagree.
to N.C. Gen. Stat. § 50-20 [(2017)], equitable
distribution is a three-step process requiring the trial
court to '(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.'"
Petty v. Petty, 199 N.C.App. 192, 197, 680 S.E.2d
894, 898 (2009) (quoting Cunningham, 171 N.C.App. at
555, 615 S.E.2d at 680)). Under North Carolina law, marital
property is "all real and personal property acquired by
either spouse or both spouses during the course of the
marriage and before the date of the separation of the
parties, and presently owned, except property determined to
be separate property or divisible property[.]" N.C. Gen.
Stat. § 50-20(b)(1) (2017). Separate property is that
acquired by a spouse before marriage, or acquired by devise,
descent, or gift during the marriage. N.C. Gen. Stat. §
50-20(b)(2). Generally, divisible property refers to certain
property received after the date of separation but prior to
distribution. N.C. Gen. Stat. § 50-20(b)(4).
Carolina courts have adopted two different approaches for
determining what is marital and separate property: the
"mechanistic" approach and the "analytic"
approach. In Johnson v. Johnson, our Supreme Court
described the mechanistic approach as:
literal and looks to the general statutory definitions of
marital and separate property and concludes that since the
award was acquired during the marriage and does not fall into
the definition of separate property or into any enumerated
exception to the definition of marital property, it must be
317 N.C. 437, 446, 346 S.E.2d 430, 435 (1986). In contrast,
"[t]he analytic approach asks what the award was
intended to replace," focusing on the purpose of the
compensation rather than its statutory definition.
support of her argument the trial court erred by not applying
the analytic approach, defendant cites several cases
concerning classification of personal injury settlements and
disability benefits. See Johnson, 317 N.C. 437, 346
S.E.2d 430 (1986); Cooper v. Cooper, 143 N.C.App.
322, 545 S.E.2d 775 (2001); Finkel v. Finkel, 162
N.C.App. 344, 590 S.E.2d 472 (2004). However, defendant also
acknowledges North Carolina courts have never applied this
approach in the context of life insurance proceeds. See
Foster v. Foster, 90 N.C.App. 265, 368 S.E.2d 26 (1988).
Nevertheless, she urges us to adopt the analytic approach in
this case, based on "important public policy
considerations" surrounding whether life insurance
proceeds intended to benefit a spouse's children from
another marriage should be considered marital property.
Furthermore, she argues Foster is distinguishable
from the present case and therefore should not be binding on
Foster, the husband and wife had purchased a life
insurance policy on their children during their marriage. 90
N.C.App. at 265, 368 S.E.2d at 26. After the parties
separated, the husband alone paid the premiums for the
policy. During the separation period, one of the children
passed away and the life insurance proceeds were paid and
placed in a trust account. Id. at 265, 368 S.E.2d at
27. In divorce proceedings, the wife claimed the life
insurance proceeds were a marital asset because some of the
policy premiums had been paid for with marital funds.
Id. at 266, 368 S.E.2d at 27. We disagreed, holding
that because the claim for death benefits did not arise until
after separation, when their son passed away, the policy
proceeds were the husband's separate property.
Id. at 268, 368 S.E.2d at 28. In making our ruling,
we noted that, pursuant to N.C. Gen. Stat. § 50-20,
"in order for property to be considered marital property
it must be 'acquired' before the date of separation
and must be 'owned' at the date of separation."
Id. at 267, 368 S.E.2d at 27.
argues the present case is distinguishable from
Foster because that case concerned a life insurance
policy on the lives of the parties' own children, whereas
the policy in dispute here covered the life of her ex-husband
and was intended to be used to care for her children from her
prior marriage. However, the relevant fact under the
mechanistic approach we applied in Foster was
whether the property was acquired before the date of
separation, not who the policy covered or what its intended
purpose was. See id.
defendant executed the life insurance policy on her
ex-husband prior to her marriage to plaintiff. However,
evidence showed defendant paid the insurance premiums in part
with money she received from plaintiff. Thus, the insurance
premiums were paid in part with marital funds. In addition,
the claim for death benefits arose prior to the parties'
separation, upon Mr. Heintz's death in September 2015.
The proceeds were also paid to defendant prior to her
separation from plaintiff in January 2016. In keeping with
our holding in Foster, whether the property was
acquired prior to the parties' separation controls
whether it is considered marital or separate property.
Accordingly, because defendant received the proceeds before
separating from plaintiff, the trial court did not err in
concluding the proceeds were marital property. The trial
court also did not abuse its discretion in applying the
mechanistic approach, which this Court has applied in the
insurance context, instead of the analytic approach advocated
Source of Funds
alternative, defendant contends the trial court abused its
discretion in its ...