An unpublished opinion of the North Carolina Court of Appeals does not constitute controlling legal authority. Citation is disfavored, but may be permitted in accordance with the provisions of Rule 30(e)(3) of the North Carolina Rules of Appellate Proced ure.

NO. COA02-594

NORTH CAROLINA COURT OF APPEALS

Filed: 4 November 2003

WARREN REED ALLEY,
        Plaintiff,

v .                         Wake County
                            No. 97 CVD 09763
BRENDA KAY ALLEY,
        Defendant.

    Appeal by plaintiff from order entered 28 November 2000 by Judge Fred M. Morelock in Wake County District Court. Heard in the Court of Appeals 13 February 2003.

    Donald B. Hunt, for plaintiff-appellant.

    Carter G. Mackie, for defendant-appellee.

    HUDSON, Judge.

    Plaintiff appeals an interim allocation order entered 19 November 1999 and an equitable distribution judgment entered 28 November 2000. Plaintiff contends that the trial court erred in: (1) its valuation of the parties' closely held business; (2) its classification, valuation, and distribution of certain debts; (3) failing to classify, value, and distribute Defendant's individual retirement account (IRA); (4) failing to classify, value and distribute a debt owed to Plaintiff; and (5) entering an equitable distribution judgment based on incomplete and invalid findings of fact and conclusions of law. For the following reasons, we agree in part, and remand for further proceedings.

    Plaintiff and Defendant were married 4 November 1967. On 14 November 1997, the parties were granted an absolute divorce. During their thirty-year marriage, Plaintiff and Defendant incurred numerous debts, both individually and as a couple. These included two promissory notes from Plaintiff to his mother, a promissory note from Plaintiff and Defendant to Plaintiff's parents, and credit card debt. Plaintiff and Defendant also accumulated assets, including a closely held corporation, Alley Enterprises, Inc. (AEI), which existed primarily to operate The Mailbox Plus (“Mailbox”), a postal and shipping service center. The parties also owned a 1993 Ford Explorer, Defendant's Individual Retirement Account, and a promissory note from the business to Plaintiff.
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    First, Plaintiff argues that the trial court erred in making its equitable distribution judgment without taking into consideration the interim allocation order that classified a note from Plaintiff to his mother as marital debt and distributed it entirely to him. We agree that this was error.
    In connection with this issue, Plaintiff challenges the following paragraphs from the interim allocation order:
        3. At the outset, both parties through their attorneys, stipulated in open Court and for the record that this Court's determination as to a certain note of the classification and distribution of it would be complete and binding as to Equitable Distribution and would be “taken out” of the later complete determination of all Equitable Distribution issues.
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        1. That the note of November 21, 1996, is hereby classified as martial [sic] propertyand is marital debt.

        2. That this note is distributed to the Plaintiff in its entirety with no offsets to be considered in the final Equitable Distribution determination. This classification and distribution is final as to the Note and is binding on any final Equitable Distribution determination.

The court found as fact that the note “had a balance of $162,649.83 at time of the date of separation,” and that the creditor (Plaintiff's mother) was eighty-eight years old at the time of the hearing, but did not place a value on the note.
    Plaintiff argues that paragraph two of the decretal portion is inconsistent with mandatory language contained in G.S. . 50-20(i1), which reads as follows:
        (i1) Unless good cause is shown that there should not be an interim distribution, the court may, at any time after an action for equitable distribution has been filed and prior to the final judgment of equitable distribution, enter orders declaring what is separate property and may also enter orders dividing part of the marital property, divisible property or debt, or marital debt between the parties. The partial distribution may provide for a distributive award and may also provide for a distribution of marital property, marital debt, divisible property, or divisible debt. Any such orders entered shall be taken into consideration at trial and proper credit given.

G.S. . 50-20(i1) (1999) (emphasis added).
    We uphold the trial court's findings of fact as long as they are supported by competent evidence. Gum v. Gum, 107 N.C. App. 734, 738, 421 S.E.2d 788, 791 (1992). Generally, we give deference to a trial court's conclusions in equitable distribution cases when supported by appropriate findings, and upset them only if they areso arbitrary that they could not have been the result of a reasoned decision. Lawing v. Lawing, 81 N.C. App. 159, 162, 344 S.E.2d 100, 104 (1986). However, we must reverse the trial court's equitable distribution order if it fails to comply with the requirements of the statute. Wieneck-Adams v. Adams, 104 N.C. App. 621, 623, 410 S.E.2d 525, 526 (1991), affirmed, 331 N.C. 688, 417 S.E.2d 449 (1992).
    Defendant argues, without citing authority, that we should not require the trial court to take the note into account in the final equitable distribution order because such a holding would be “slavish to literal interpretation of [statutory] language.” We conclude, however, that the trial court's interim allocation order and the final distribution violate the statutory requirement that any interim order shall be taken into consideration, and proper credit given. We note that, at the relevant time, G.S. . 50- 20(b)(4) provided the following with respect to the treatment of post-separation payment of marital debt:
        (4) “Divisible property” means all real and personal property as set forth below:

        (a) All appreciation and diminution in value of marital property and divisible property of the parties occurring after the date of separation and prior to the date of distribution, except that appreciation or diminution in value which is the result of postseparation actions or activities of a spouse shall not be treated as divisible property.

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        (d) Increases in marital debt and financing charges and interest related to marital debt.
G.S. . 50-20(b)(4)(d) (1999)   (See footnote 1)  . In Hay v. Hay, 148 N.C. App. 649, 559 S.E.2d 268 (2002), this Court held that post-separation debt payments were not divisible property, and stated the following:
        It is not clear from the plain language of N.C. Gen. Stat. . 50-20(b)(4) how the legislature intends for trial courts to treat property falling within the subsection (a) “actions or activities of a spouse” exception. . . .What is clear, however, is that the law affords trial courts wide discretion in determining how to treat post-separation mortgage payments by one spouse. As discussed above, a trial court may treat such payments as a distributional factor. A trial court may also give the payor a dollar for dollar credit in the division of the property, or require that the non-payor spouse reimburse the payor for an appropriate amount.

Id. at 655, 559 S.E.2d at 272-73 (internal citations omitted). Here, the court made no findings or conclusions indicating whether any such payments were made, or whether there were any increases in the debt or related interest or finance charges, as a result of which we are unable to review whether it properly exercised its discretion in its treatment of this marital debt in the final distribution order. Therefore, we vacate finding of fact 3 and decretal paragraph 2 of the interim allocation order, as well as the final equitable distribution order. We remand for the trial court to take into consideration the interim allocation of the note, to determine whether it is properly treated as divisible property or otherwise, pursuant to Hay, to assign it a value, and to give proper credit in the final distribution, as required byG.S. . 50-20(i1).
    Although we must vacate and remand the final distribution order for the failure to comply with G.S. . 50-20(i1), we also address plaintiff's other issues that are likely to arise on remand. Plaintiff argues that the trial court's valuation of the Mailbox business is erroneous because its finding of fact merely lists two factors, earnings capacity and earnings history, as the basis for its valuation. We agree that this was error.
    For equitable distribution purposes, a business is valued based on net value, which is defined as the fair market value minus any debts or liens that diminish the business' value. Talent v. Talent, 76 N.C. App. 545, 556, 334 S.E.2d 256, 263 (1985). When the trial court values a closely held corporation for equitable distribution purposes, it must make specific findings of fact. Patton v. Patton, 318 N.C. 404, 406, 348 S.E.2d 593, 595 (1986). “The purpose for the requirement of specific findings of fact that support the court's conclusion of law is to permit the appellate court on review to determine from the record whether the judgment - and the legal conclusions that underlie it - represent a correct application of the law.” Id. (quotation marks and citations omitted). Further, “[a] mere recitation of the factors the trial court considered in its valuation of the corporation is not sufficient; the trial court must also indicate the value it attaches to each of the enumerated factors.” Locklear v. Locklear, 92 N.C. App. 299, 302, 374 S.E.2d 406, 407-08 (1988).
    Here, the trial court made only one finding of fact regardingthe Mailbox's valuation:
    7.    The Court specifically finds that the business known, generally, as The Mailbox Plus, had and has zero value. The opinion of the expert witness offered by the Plaintiff was not persuasive and the Court could not find any value to assess to this enterprise from his testimony and, thus, assigns it a zero value. In addition, the documents introduced by Defendant clearly reveal that this business would have little or no value based upon it's (sic) earning capacity or earnings history.

The trial court did not err in rejecting the testimony of Plaintiff's expert since assessing the credibility of witnesses is within the sound discretion of the trial court. Grasty v. Grasty, 125 N.C. App. 736, 739, 482 S.E.2d 752, 754, disc. review denied, 346 N.C. 278, 487 S.E.2d 545 (1997). However, this finding indicates that Defendant's documents regarding earning capacity and earnings history were the basis for its valuation, but does not specify the value of those enumerated factors. Furthermore, we are unable to determine what valuation method, if any, the trial court used to arrive at a zero “value” for the Mailbox. For these reasons, we conclude that the trial court's finding of fact regarding its valuation of the Mailbox is insufficiently specific for effective appellate review. Therefore, on remand the court, in entering a new equitable distribution judgment, must make specific findings of fact regarding (1) the valuation method used by the court, (2) the factors, and their values, used to determine the fair market value and (3) the value of any debts or liens which reduce the fair market value of the corporation.
    Next, Plaintiff contends that the trial court erred in its treatment of marital and separate debts. We agree in part.    A marital debt is one incurred, during the marriage and before the date of separation, by either or both spouses for the joint benefit of the parties. Huguelet v. Huguelet, 113 N.C. App. 533, 536, 439 S.E.2d 208, 210, disc. review denied, 336 N.C. 605, 447 S.E.2d 392 (1994). The party who claims that any debt is marital bears the burden of proof on that issue and must show both the value of the debt on the date of separation and that it was incurred during the marriage for the joint benefit of the husband and wife. Riggs v. Riggs, 124 N.C. App. 647, 652, 478 S.E.2d 211, 214 (1996), disc. review denied, 345 N.C. 755, 485 S.E.2d 297 (1997). The trial court must then classify debt as either marital or separate and then, following classification, value debts of both types. Byrd v. Owens, 86 N.C. App. 418, 424, 358 S.E.2d 102, 106 (1987). As discussed above, if the debt is marital, the court must make findings sufficient to determine whether it is properly treated as divisible property or as a distributional factor, pursuant to G.S. . 50-20(b)(4) and Hay. Once the parties' debts are classified and valued, the separate debt cannot be distributed as part of the marital estate. Fox v. Fox, 114 N.C. App. 125, 134, 441 S.E.2d 613, 619 (2001). However, the trial court should consider such debt as a factor when dividing the marital property. Id.; see also N.C. Gen. Stat. . 50-20(c)(1).
    Plaintiff first takes issue with the trial court's failure to classify his credit card debt incurred during the marriage as marital. The pertinent finding reads as follows:
        13. The Court further finds that there will be no credit for any “debt” payments made ascontended by the Plaintiff and the Court does not characterize or classify such as marital debt nor is any current individual debt of Defendant's classified as marital debt.
We conclude that the court did not err in this classification.
    As indicated above, Plaintiff had the burden of proving that the debt was incurred for the joint benefit of the parties. Based on our review of the evidence and record, we conclude that the trial court did not err by declining to classify Plaintiff's credit card debt as marital, where the evidence showed that Plaintiff listed the debt as separate on his affidavit and where, among the documents in evidence is a memorandum indicating that the debt was incurred by Plaintiff alone.
    Plaintiff next contends that a debt owed by him to his mother to buy a 1993 Ford Explorer should have been classified as marital, and should have been entered into the calculation of the value of 1993 Ford Explorer. He argues that the trial court erred when it used the fair market value rather then the net value of 1993 Ford Explorer in its equitable distribution determination. We disagree. For equitable distribution purposes, net value is the appropriate valuation technique. “[T]he net value for marital property is ascertained by calculating the fair market value of each asset, and subtracting the value of any debt or encumbrance on the property.” Crowder v. Crowder, 147 N.C. App. 677, 681, 556 S.E.2d 639, 642 (2001). Plaintiff bore the burden of proving that the note in question was used to buy the 1993 Ford Explorer, and by implication, the trial court determined that he failed to carry that burden. Based on our review of the transcript, evidence, andrecord, we conclude the trial court did not err by finding no marital debt attached to the 1993 Ford Explorer. Thus, the net value of the vehicle is equal to its fair market value, and the value assigned to the vehicle was proper.
    Plaintiff next argues that a $6,000 promissory note from both parties to Plaintiff's parents, the proceeds of which were used to start up the Mailbox business, should have been classified as marital debt. We agree. Plaintiff's equitable distribution affidavit classified the debt as marital and assigned it a value. His testimony at both the interim allocation hearing and equitable distribution trial reiterated the contents of his affidavit. A copy of the handwritten note, with both Plaintiff's and Defendant's signatures, was submitted into evidence. Defendant did not list the note on her affidavit, but at the interim allocation hearing, she admitted to signing the note. We see no evidence to the contrary. Based on the evidence and testimony at trial, the trial court erred when it failed to classify this note as marital debt of the parties, and assign it a value. For this reason, on remand the court must classify this note and, if marital, determine whether the debt and related interest or finance charges have increased since separation resulting in divisible property under G.S. . 50- 20(b)(4)(d), or whether payments have been made that are controlled by Hay, assign a value based on the evidence, and then incorporate its findings and conclusions into the final distribution, in its discretion.
    Next, Plaintiff argues that the trial court erred when itfailed to classify, value, and distribute Defendant's IRA as marital property. However, Defendant's IRA is not listed in either of the parties' equitable distribution affidavit nor was it the object of argument at either the interim allocation hearing or equitable distribution trial. For these reasons, this argument is not properly before us and we decline to address it. N.C. R. App. P. 10(b)(1) (2003); Crist v. Crist, 145 N.C. App. 418, 423, 550 S.E.2d 260, 264 (2001) (declining to address an argument not asserted before trial court).
    And finally, Plaintiff argues that the trial court erred when it failed to classify, value, and distribute the debt owed by the Mailbox to Plaintiff as marital property. We agree. In their equitable distribution affidavits, both parties listed the debt as a marital asset, represented by a memorandum, owed by the Mailbox business. However, the trial court did not classify or value this asset. On remand, the trial court should classify, value, and distribute this asset.
    For the reasons set forth above, we vacate finding of fact 3 and decretal paragraph 2 of the interim allocation order, and the entire equitable distribution judgment. We remand for new findings and conclusions, and entry of an equitable distribution judgment consistent with this opinion.
    Affirmed in part, Reversed in part, and Remanded.
    Judges McGEE and STEELMAN concur.
    Report per Rule 30(e).


Footnote: 1
    G.S. . 50-20(b)(4)(d) was amended effective 11 October 2002 to included increases “and decreases” in debt, after the date of separation.

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