Appeal by defendant from judgment entered 10 March 2003 and
from order dated 14 May 2003
by Judge Joseph E. Turner in District
Court, Guilford County. Heard in the Court of Appeals 9 June 2004.
Marilyn Cahoon and Robert S. Cahoon, for plaintiff-appellee.
Woodruff & Associates, P.A., by Carolyn J. Woodruff, for
defendant-appellant.
McGEE, Judge.
Donnie Dianne Clodfelter (plaintiff) filed a complaint on 13
December 1996 against Roger Dean Clodfelter, Sr. (defendant)
seeking an absolute divorce and equitable distribution.
Plaintiff
filed an amended complaint on 20 December 1996 to reflect
defendant's correct name.
Defendant filed an answer and
counterclaim on 19 February 1997 seeking alimony, attorney's fees,
and equitable distribution.
Plaintiff filed a reply to defendant's
counterclaim and an amendment to her complaint on 10 March 1997.
In an order filed 10 March 1997, the trial court granted plaintiff
an absolute divorce from defendant.
The trial court entered a pre-trial order regarding equitabledistribution of the parties' marital property on 6 March 2002.
The
trial court held an equitable distribution hearing on 26 March, 27
March, and 4 April 2002. Defendant filed a motion pursuant to
Rules 52, 59, and 60 on 15 August 2002 for additional findings or,
in the alternative, for a new trial on a specific issue. The trial
court entered an equitable distribution judgment on 10 March 2003.
In an order dated 14 May 2003, the trial court denied defendant's
Rule 52, 59, and 60 motion.
Defendant appeals the equitable
distribution judgment.
Defendant also filed notice of appeal
from
the trial court's order denying his Rule 52, 59, and 60 motion;
however, defendant did not perfect that appeal.
The evidence before the trial court tended to show that
plaintiff and defendant were married on 5 September 1969
and
separated on 1 December 1995. At the time of separation, defendant
was employed by AT&T and had a 401(k) retirement plan (401(k))
valued at approximately $191,275.00. The trial court divided this
amount equally between plaintiff and defendant.
Defendant
testified that after the separation, he made "daily trades on
investment decisions in the [401(k)]." Defendant testified that he
did his own research
and did not use a broker or an investment
advisor for his trades. Rather, defendant made "individual trades
via the Internet[.]" The trial court found that defendant's
activities increased the value of the 401(k) by $141,207.00.
The
trial court awarded ten percent of this post-separation increase to
plaintiff and ninety percent of the increase to defendant.
Defendant also had an AT&T pension plan (pension plan) on thedate of separation. The trial court valued this pension plan at
$53,770.00. In the equitable distribution judgment, the trial
court referred to this pension plan as the "AT&T (now Lucent)
Pension." However, on the exhibit attached to the judgment, this
pension plan is referred to only as the "Lucent Tech. Pension."
The trial court found that the marital portion of this pension plan
would be divided equally through a qualified domestic relations
order (QDRO).
We first note defendant has failed to present an argument in
support of assignment of error number three and it is deemed
abandoned pursuant to N.C.R. App. P. 28(b)(6).
Defendant's first two arguments are general in nature in that
they challenge how the trial court classified marital property and
applied distributional factors. Because these general arguments
are encompassed within arguments three and four, we find it
appropriate to address defendant's latter two arguments regarding
the classification of specific assets.
Defendant argues in assignments of error numbers one, four,
five, and six that the trial court erred in including post-
separation active appreciation of defendant's 401(k) in the marital
estate. For the reasons stated below, we agree.
The complaint for divorce and equitable distribution in this
case was filed on 13 December 1996. Accordingly, the applicable
equitable distribution statute is N.C. Gen. Stat. § 50-20 (1995).
"In an equitable distribution case filed before 1 October 1997, the
trial court must undergo a three-step analysis: (1) identify whatis marital property and what is separate property; (2) calculate
the net value of the marital property; and (3) distribute the
marital property in an equitable manner."
O'Brien v. O'Brien, 131
N.C. App. 411, 417, 508 S.E.2d 300, 304-05 (1998),
disc. review
denied, 350 N.C. 98, 528 S.E.2d 365 (1999). In the case before our
Court, we are concerned with the first step, the classification of
the 401(k) appreciation.
Under N.C. Gen. Stat. § 50-20(a), the trial court must decide
what constitutes marital property and "provide for an equitable
distribution of the marital property between the parties[.]"
Marital property is defined as "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). "Property is not part of the
marital estate unless it is owned by the parties on the date of
separation."
Chandler v. Chandler, 108 N.C. App. 66, 68, 422
S.E.2d 587, 589 (1992). "The statute provides no authority to
distribute non-marital property or separate property."
Id.
In this case, the trial court found as a fact that
b.
After the date of separation, Defendant
routinely and regularly used the funds in the
AT&T 401(k) held in Defendant's name to invest
and reinvest in active day trading. Said
active trading through decisions made by
Defendant increased the value of the funds
because of his active efforts.
. . .
3. By Defendant's activities in
trading, investing and reinvesting
the fund, the account has increased
in value by one hundred forty-onethousand two hundred seven dollars
($141,207.00).
(emphasis added)
. Although the trial court found that this
appreciation occurred after the parties separated, the trial court
nonetheless included this $141,207.00 in the $653,046.30 it
determined to be the marital estate.
We note that the trial court did not explicitly state that it
included the post-separation appreciation as part of the marital
estate. However, by examining the exhibit attached to the
equitable distribution judgment (the exhibit), it is clear that the
$141,207.00 was included in the amount the trial court deemed to be
the "marital estate." The exhibit listed plaintiff's total value
as $326,523.15 and defendant's total value as $326,850.34. Because
the values differed slightly, the trial court designated $163.60 as
the "[e]qualizer." This amount was derived by dividing the
difference in plaintiff's and defendant's totals by two. The
"marital estate" as designated by the trial court consists of
plaintiff's total and defendant's total minus the difference
between these totals. A simple calculation reveals that this
"marital estate" amount, $653,046.30, includes the $141,207.00 of
post-separation appreciation.
"The post-separation appreciation of marital property is
itself neither marital nor separate property."
Truesdale v.
Truesdale, 89 N.C. App. 445, 448, 366 S.E.2d 512, 514 (1988).
"Post-separation appreciation of a marital asset, whether passive
appreciation or appreciation due to the efforts of an individual
spouse, is not therefore marital property and cannot be distributedby the trial court."
Gum v. Gum, 107 N.C. App. 734, 737-38, 421
S.E.2d 788, 790 (1992). When marital assets increase between the
date of separation and the date of the equitable distribution, this
"is a factor which the [trial] court must consider in its
determination of what constitutes an equitable distribution of the
marital estate pursuant to N.C.G.S. §§ 50-20(c)(1), (c)(11a), or
(c)(12)[.]"
Id. at 738, 421 S.E.2d at 790 (citing
Mishler v.
Mishler, 90 N.C. App. 72, 77, 367 S.E.2d 385, 388,
disc. review
denied, 323 N.C. 174, 373 S.E.2d 111 (1988)).
Plaintiff responds to defendant's argument by asserting that
the trial court properly classified and distributed the post-
separation 401(k) appreciation. Plaintiff points to the fact that
the trial court listed the 401(k) date of separation value and the
401(k) post-separation increase separately. Plaintiff further
points to the fact that line 35 of the exhibit specifies that the
increase is a "distrib[utional] factor."
Plaintiff also notes a
portion of the transcript where the trial court correctly stated
that
you have to conclude that the increase in
value of the marital portion of the AT&T
401(k), which was controlled by the defendant,
affected by his investment strategies, is a
factor considered by the [trial] [c]ourt in
determining that unequal distribution is an
equitable distribution [in this] case.
Despite the trial court's stated intentions, the $141,207.00 post-
separation increase was included in the amount the trial court
considered to be the "marital estate." This violates prevailing
case law and the mandate in N.C. Gen. Stat. § 50-20(a) that thetrial court can only distribute marital property. Thus, we hold
that the trial court abused its discretion in considering this
appreciation as part of the marital estate and subsequently
dividing it between the parties.
Defendant next argues in assignments of error numbers two,
four, five, and six that the trial court erred in dividing the
Lucent Retirement Income Plan (Lucent Plan) as marital property.
Within this argument, defendant first asserts that the benefits
under the Lucent Plan cannot be considered marital property because
these benefits did not exist at the date of separation. Defendant
is correct in his assertion that the Lucent Plan was not in
existence on 1 December 1995.
On this date, defendant was still
employed by AT&T and Lucent Technologies was not yet in existence.
According to plaintiff's contentions, at the time of separation,
defendant's position was being transferred from AT&T to Lucent
Technologies. We recognize that there is uncertainty as to whether
the plan should be called the Lucent Plan or the AT&T plan.
However, the specific label placed on the plan is not relevant in
light of the fact that plaintiff and defendant stipulated in a pre-
trial agreement that the Lucent Plan was marital property.
Although the parties disagreed about the value and the appropriate
distribution of the Lucent Plan, there was no protest regarding the
classification of the Lucent Plan as marital property.
Accordingly, in light of this stipulation, defendant's argument
that the Lucent Plan was not marital property is without merit.
Defendant notes in his second argument that the trial courtcorrectly valued the AT&T pension plan at $53,770.00. However,
defendant asserts that the trial court erred by not including this
amount as part of the marital estate. For the reasons stated
below, we agree.
As explained above, the trial court must identify the marital
property, calculate its value, and then distribute the martial
property equitably.
O'Brien, 131 N.C. App. at 417, 508 S.E.2d at
304-05.
In this case, the trial court properly identified the
pension plan as partly marital and valued it as of the date of
separation.
However, the trial court failed to include the
$53,770.00, the value of the pension plan, in the amount it found
to be the net value of the marital estate. The exhibit shows that
even though a portion of the pension plan was deemed marital, it
was erroneously not included in the net value of the martial
estate.
Accordingly, we reverse the judgment and remand to the trial
court with the instruction to remove the $141,207.00 of active
401(k) appreciation from the marital estate and to include the
$53,770.00 attributable to the AT&T pension plan in the marital
estate. Based on these changes, the trial court is then to make a
new distribution order.
Reversed and remanded.
Judges McCULLOUGH and ELMORE concur.
Report per Rule 30(e).
*** Converted from WordPerfect ***