1. Divorce--equitable distribution--classification--sale of house and lot
The trial court erred in an equitable distribution action by classifying the proceeds of the
sale of the pertinent house and lot as entirely marital property, because: (1) defendant acquired
the house before the parties' marriage and it was his separate property; and (2) 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.
2. Divorce--equitable distribution_-unequal division of marital assets
The trial court did not abuse its discretion in an equitable distribution action by
determining that an unequal division of the marital assets in favor of plaintiff wife was equitable
based on: (1) substantial separate property owned by defendant husband; (2) post-separation use
of the marital residence by defendant; (3) the income and liability of the parties; and (4) the
duration of the marriage.
The McGougan Law Firm, by Paul J. Ekster and Dennis T. Worley,
for plaintiff appellee.
Soles, Phipps, Ray and Prince, by Sherry Dew Prince, for
defendant appellant.
TIMMONS-GOODSON, Judge.
David B. Goldston, Jr. (“defendant”) appeals from an order and
judgment of equitable distribution by the trial court. For the
reasons set forth herein, we reverse in part the order and judgment
of the trial court.
The pertinent facts of the instant appeal are as follows: On
24 April 2001, Debra B. Goldston (“plaintiff”) filed a complaintagainst defendant in Columbus County District Court seeking, in
pertinent part, equitable distribution of the marital estate. The
matter came before the trial court on 15 November 2001. Upon
consideration of the evidence, the trial court made the following
findings of fact:
13. That prior to the marriage, the Defendant
owned a house situated on the lot at 302
Lakeshore Drive in Lake Waccamaw, North
Carolina.
14. That the lot was deeded by the Defendant
to the Plaintiff and Defendant as tenants by
the entirety on January 9, 1996 by deed
recorded in deed book 497 at page 239.
15. That before the lot at 302 Lakeshore
Drive in Lake Waccamaw, North Carolina was
deeded to the parties as tenants by entirety,
the Defendant moved the house located at 302
Lakeshore Drive to Waccamaw Shores.
16. That a lot at Waccamaw Shores was deeded
to the Plaintiff and Defendant as tenants by
entirety by Plaintiff's parents prior to the
house being moved onto the lot.
17. That prior to the separation of the
parties, the parties sold the house and lot in
Waccamaw Shores to the Defendant's son for
$74,013.12.
18. That the Defendant has had possession of
the money from the sale of the lot since the
date of separation and has invested the same
in an interest bearing account having a
balance on the date of hearing of $79,191.97.
Based on the above-stated findings of fact, the trial court
concluded that “the Defendant moved his separate property, the home
[originally located at 302 Lakeshore Drive] onto the lot [at
Waccamaw Shores] thereby transforming the same to marital
property.” The trial court therefore classified the proceeds ofthe sale of the house and lot at Waccamaw Shores as marital
property. The trial court further concluded that an unequal
division of the marital property in favor of plaintiff was
equitable and entered judgment accordingly. From the judgment of
the trial court, defendant appeals.
___________________________________________________
Defendant argues that the trial court erred by (1) classifying
the proceeds of the sale of the house and lot at Waccamaw Shores as
marital property and (2) determining that an unequal division of
the marital assets in favor of plaintiff was equitable. For the
reasons set forth herein, we reverse in part the judgment of the
trial court.
[1] Defendant argues that the trial court erred in classifying
the proceeds from the sale of the real property located at Waccamaw
Shores as entirely marital rather than part marital and part
separate. In an equitable distribution action, the trial court
must first classify all property owned by the parties as marital or
separate, as defined by the statute. See N.C. Gen. Stat. §
50-20(a) (2001); McLean v. McLean, 323 N.C. 543, 545, 374 S.E.2d
376, 378 (1988). Marital property includes “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[.]” N.C. Gen. Stat. § 50-20(b)(1) (2001). Separate
property is
all real and personal property acquired by a
spouse before marriage or acquired by a spouse
by bequest, devise, descent, or gift during
the course of the marriage. However, property
acquired by gift from the other spouse during
the course of the marriage shall be consideredseparate property only if such an intention is
stated in the conveyance. Property acquired
in exchange for separate property shall remain
separate property regardless of whether the
title is in the name of the husband or wife or
both and shall not be considered to be marital
property unless a contrary intention is
expressly stated in the conveyance. The
increase in value of separate property and the
income derived from separate property shall be
considered separate property.
N.C. Gen. Stat. § 50-20(b)(2) (2001). “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. rev. 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; see also McLeod v.
McLeod, 74 N.C. App. 144, 154, 327 S.E.2d 910, 916, cert. denied,
314 N.C. 331, 333 S.E.2d 488 (1985).
In the instant case, the property at issue is $74,013.12, the
proceeds of the sale of the house (originally located at 302
Lakeshore Drive) and lot at Waccamaw Shores. Defendant acquired
the house and lot located at 302 Lakeshore Drive prior to his
marriage to plaintiff. The house and lot were therefore clearly
defendant's separate property unless transformed to marital
property by defendant. “Property acquired in exchange for separateproperty shall remain separate property regardless of whether the
title is in the name of the husband or wife or both and shall not
be considered to be marital property unless a contrary intention is
expressly stated in the conveyance.” N.C. Gen. Stat. § 50-
20(b)(2). The lot located at 302 Lakeshore Drive became marital
property when, on 9 January 1996, defendant deeded the lot to
plaintiff and defendant as tenants by the entirety. Prior to
deeding the lot, however, defendant removed the house located
thereon, and moved it to the Waccamaw Shores lot, which was titled
to defendant and plaintiff as tenants by the entirety. The trial
court concluded that, by removing the house and placing it on a lot
titled to plaintiff and defendant as tenants by the entirety,
defendant transformed the house to marital property. We disagree.
In Wade, the plaintiff-husband owned a lot prior to marriage.
During the marriage, the parties constructed a residence upon the
lot, thereby substantially improving the property. The defendant-
wife urged that the Court “adopt the theory of 'transmutation
through commingling' and find that the improved real property [was]
entirely marital property. Under that theory, affirmative acts of
augmenting separate property by commingling it with marital
resources is viewed as indicative of an intent to transmute, or
transform, the separate property to marital property.” Id. at 381,
325 S.E.2d at 269. The Court expressly rejected the defendant's
argument, noting the “clear legislative intent that separate
property brought into the marriage or acquired by a spouse during
the marriage be returned to that spouse, if possible, upon
dissolution of the marriage.” Id. Instead, the Court concludedthat the house and lot were of dual nature and, applying the source
of funds approach, concluded that “that part of the real property
consisting of the unimproved land owned by plaintiff prior to the
marriage should be considered separate in character and that part
of the property consisting of the house which was constructed
during the marriage with marital funds should be considered marital
in character.” Id. at 382, 325 S.E.2d at 269.
Here, the house originally located at 302 Lakeshore Drive and
moved to Waccamaw Shores was acquired by defendant prior to the
marriage and was clearly his separate property. The trial court
made no findings evincing an intent by defendant to transfer the
house to the marital estate. Citing Walter v. Walter, 149 N.C.
App. 723, 561 S.E.2d 571 (2002), plaintiff argues that, by moving
the house to the Waccamaw Shores lot titled to both plaintiff and
defendant as tenants by the entireties, defendant made a gift to
the marital estate, and that it was defendant's burden to overcome
this gift presumption. We disagree.
The Court in Walter held that a house acquired by the parties
during the marriage was not of dual nature but entirely marital,
even though the defendant-husband contributed separate monies to
the purchase price of the house. Because the house was acquired
during the marriage, there was a rebuttable presumption of donative
intent by the defendant-husband of the separate monies under the
“interspousal gift provision” of section 50-20(b)(2). See id; N.C.
Gen. Stat. § 50-20(b)(2) (“property acquired by gift from the other
spouse during the course of the marriage shall be considered
separate property only if such an intention is stated in theconveyance”). As the defendant-husband offered no clear and
convincing evidence to rebut the presumption of donative intent,
the property was entirely marital. See id. In contrast to Walter,
defendant here acquired the house before marriage, and thus there
was no presumption of donative intent under section 50-20(b)(2).
Rather, it was plaintiff's burden to prove that defendant intended
the house to be a gift to the marriage. See Caudill v. Caudill,
131 N.C. App. 854, 857, 509 S.E.2d 246, 248-49 (1998). 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.” N.C. Gen. Stat. § 50-
20(b)(2). 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. See Walter, 149
N.C. App. at 729, 561 S.E.2d at 570; see also Cable v. Cable, 76
N.C. App. 134, 137, 331 S.E.2d 765, 767 (concluding that, by
treating the house and lot as separate property solely because the
house built with marital funds was built on land acquired by the
defendant prior to the marriage, the trial court erred in
classifying the property), disc. review denied, 315 N.C. 182, 337
S.E.2d 856 (1985); Lawrence v. Lawrence, 75 N.C. App. 592, 595, 331
S.E.2d 186, 188 (concluding that “[t]hat 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 theproperty consisting of the additions, alterations and repairs
provided during marriage should be considered marital in nature” ),
disc. review denied, 314 N.C. 541, 335 S.E.2d 18 (1985).
[2] Defendant further argues that the trial court erred in
concluding that an unequal division of the marital estate was
equitable. We discern no abuse of discretion by the trial court.
See Wiencek-Adams v. Adams, 331 N.C. 688, 691, 417 S.E.2d 449, 451
(1992) (noting the general rule that only when the evidence fails
to show any rational basis for the distribution ordered by the
court will its determination be upset on appeal). The trial court
found that in light of, inter alia, substantial separate property
owned by defendant, the post-separation use of the marital
residence by defendant, the income and liability of the parties,
and the duration of the marriage, an unequal division was
equitable. Defendant has advanced no compelling grounds to disturb
the trial court's ruling in that respect, nor do we discern such.
We overrule this assignment of error.
In conclusion, we hold that the trial court erred in
classifying the monies received for the sale of the lot and house
at Waccamaw Shores as entirely marital. We therefore reverse the
judgment of the trial court in part and remand this case for
reclassification of the proceeds of the sale of the house and lot
at Waccamaw Shores and for reevaluation of the equitable
distribution award. We otherwise affirm the judgment of the trial
court.
Affirmed in part, reversed in part and remanded.
Judges HUDSON and STEELMAN concur.
*** Converted from WordPerfect ***