An unpublished opinion of the North Carolina Court of Appeals does not constitute controlling legal authority.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 Procedure.

NO. COA05-468

NORTH CAROLINA COURT OF APPEALS

Filed: 21 February 2006

EDWARD H. PEREZ,
    Plaintiff

v .                                     Avery County
                                        No. 01-CvD-248
JANINE H. PEREZ,
    Defendant

    Appeal by plaintiff from judgment entered 9 August 2004 and an order entered 10 December 2004 by Judge Bruce B. Briggs in Avery County District Court. Heard in the Court of Appeals 7 December 2005.

    Kathryn G. Hemphill for plaintiff-appellant.

    Hall & Hall Attorneys at Law, P.C., by Douglas L. Hall, for defendant-appellee.

    HUNTER, Judge.

    Edward H. Perez (“plaintiff”) appeals from an equitable distribution judgment entered 9 August 2004 and an order denying an amended judgment entered 10 December 2004. For the reasons stated herein, we reverse the trial court's order.
    Plaintiff and Janine H. Perez (“defendant”) were married on 15 August 1997 and separated on 22 April 2000. A judgment of absolute divorce was entered 27 August 2001. Plaintiff moved for equitable distribution.
    The parties entered into a pre-trial equitable distribution order by consent on 27 March 2003. The order was revised and againentered by consent on 18 November 2003. Remaining disputed issues of equitable distribution proceeded to trial in November 2003. An equitable distribution judgment was entered by the trial court on 9 August 2004.
    The trial court made numerous findings as to marital property and debt related to residential and business property owned by the parties unrelated to this appeal. As relates to the matters pertinent to this appeal, the trial court made the following findings.
    The trial court first found that three loans were made by plaintiff's mother, Lydia Perez, and deceased father, J.E. Perez. The trial court determined that the first two loans made by Lydia Perez, in the amounts of $50,000.00 and $26,000.00, respectively, were to plaintiff personally and were not marital obligations. The trial court also found that the third loan made by J.E. Perez in the amount of $30,000.00 was to plaintiff personally and was not a marital obligation.
    The trial court next found that a loan dated 11 April 2000, eleven days prior to the parties' separation, from First Union National Bank in the amount of $50,000.00, which was used to pay federal income tax obligations, was not a marital debt subject to distribution.
    The trial court considered a Merrill Lynch SEP account in the name of plaintiff, which was valued at the date of separation in the amount of $15,176.00, and determined that it was a marital asset. The account had a distributive value of $16,483.00, but wasdistributed at the date of separation value of $15,176.00 to defendant.
    Finally, the trial court considered a 1996 Mariah 240Z boat with motor and trailer, purchased for $28,065.13, titled in plaintiff's name only. The trial court determined the boat to be a marital asset and valued it in the amount of $17,040.00.
    The judgment stated that an equal division of property was equitable and, as an in-kind distribution was not possible, ordered plaintiff to pay a distributive award of $64,364.60 within thirty days of entry of the judgment. Plaintiff appeals from this order.

I.

    Plaintiff first contends that the trial court erred in failing to classify a bank loan made 11 April 2000 and three loans made to plaintiff by family members as marital debt. We agree.
    “In equitable distribution actions 'the trial court is required to classify, value and distribute, if marital, the debts of the parties to the marriage.'” Pott v. Pott, 126 N.C. App. 285, 288, 484 S.E.2d 822, 825 (1997) (citation omitted). “G.S. 50-20(c)(1) requires the court to consider all debts of the parties, whether a debt is one for which the parties are legally, jointly liable or one for which only one party is legally, individually liable.” Geer v. Geer, 84 N.C. App. 471, 475, 353 S.E.2d 427, 429 (1987). “Regardless of who is legally obligated for the debt, for the purpose of an equitable distribution, a marital debt is defined as a debt incurred during the marriage for the joint benefit of the parties.” Id. “The party claiming thedebt to be marital has the burden of proving 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.'” Miller v. Miller, 97 N.C. App. 77, 79, 387 S.E.2d 181, 183 (1990) (citation omitted).
A. First Union Loan

    Plaintiff contends that the trial court erred in classifying a $50,000.00 loan made on 11 April 2000 to defendant and plaintiff as non-marital property.
    “A marital debt . . . is one incurred during the marriage and before the date of separation by either spouse 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 (1994) (emphasis added). This Court has held that a trial court's “[c]lassification of property must be supported by the evidence and by appropriate findings of fact.” McIver v. McIver, 92 N.C. App. 116, 127, 374 S.E.2d 144, 151 (1988).
    The trial court found that the loan was executed eleven days prior to the parties' separation, that the note appeared to be signed by someone other than plaintiff and defendant, and that defendant denied knowledge of the note. The trial court further found that shortly after the funds from the loan were deposited into plaintiff's account, a check in the amount of $50,000.00 was drawn on the account and made payable to the Internal Revenue Service. The trial court found that “[t]he $50,000.00 loan was used to pay against the tax liability for the year 1999. Theparties were married during the year 1999 and the tax due to the IRS was a joint liability[.]” The unchallenged findings of fact show that the debt was incurred prior to the date of the parties' separation and that the loan was incurred to pay off a marital obligation, the joint tax liability for the year 1999. The trial court, therefore, erred in finding that the First Union loan was not a marital debt subject to distribution.
B. Family Loans

    Plaintiff contends the trial court erred in classifying three family loans as non-marital property.
    This Court has stated that “[i]n particular, 'loans from close family members must be closely scrutinized for legitimacy.' It is incumbent upon the court distributing a debt to ensure that it was a marital debt, that is, incurred during the marriage for the joint benefit of the parties during the marriage.” Geer, 84 N.C. App. at 475, 353 S.E.2d at 430 (citation omitted). However, regardless of whether a spouse is legally liable, a debt which is used for the benefit of both parties is properly classified as a marital debt. Id. at 475, 353 S.E.2d at 429. Concerns as to which party is the signatory of a marital debt may be treated as distributional factors, but do not change the marital nature of the debt incurred during the marriage and used for the benefit of both parties. Mrozek v. Mrozek, 129 N.C. App. 43, 47, 496 S.E.2d 836, 839 (1998).
    Here, the trial court found that promissory notes were respectively executed by plaintiff for loans from his mother in the amount of $50,000.00 in 1998 and $26,000.00 in 1999, and a loanfrom his father in the amount of $30,000.00 in 1999. The trial court further found that the loans were intended to assist plaintiff in his medical practice. The trial court also found that defendant did not sign the promissory notes.
    However, with regards to all of the loans, the trial court made uncontested findings that the proceeds of the loans were deposited into accounts to which both parties had access, and that the “funds were spent for marital debts and purchases[.]” The trial court, therefore, erred in finding that the loans, even if intended for other purposes, were not a marital obligation, as they were used for the joint benefit of the parties. See McIver, 92 N.C. App. at 127, 374 S.E.2d at 151.
II.

    Plaintiff next contends the trial court erred in its failure to distribute the increase in a Merrill-Lynch SEP account as divisible property. We agree.
    N.C. Gen. Stat. § 50-20(b)(4)(a) (2005) includes as divisible property “[a]ll 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[.]” Id. Divisible property must be equitably distributed between the parties in accordance with the provisions of N.C. Gen. Stat. § 50- 20(a).
    Here, the trial court made the following finding regarding the Merrill Lynch SEP account:
            87.    The Merrill Lynch SEP account in the name of Dr. Edward H. Perez, FBO (for thebenefit of) Ms. Janine Perez, is a marital asset and its value as of the date of separation was $15,176.00. Due to the economy, this account has increased in value since the date of separation and as of May 31, 2002, the value was $16,483.00, however, distribution is to the Defendant at the value of $15,176.00.

The final total of the marital assets of the parties did not include the $1,307.00 in divisible property recognized by the trial court in its uncontested Finding of Fact No. 87.
    N.C. Gen. Stat. § 50-20(a) specifies that the trial court must determine what is marital property, defined by section 50-20(b)(1) as “all real and personal property” falling within the scope of the statute. Id. As “the Act mandates a complete listing of marital property, . . . an order that fails to do so is fatally defective.” Little v. Little, 74 N.C. App. 12, 17, 327 S.E.2d 283, 288 (1985) (citing the requirements of N.C. Gen. Stat. § 50-20(a)-(b)(1)). The trial court, therefore, erred in failing to include the divisible property in its distributional order.
III.

    Plaintiff next contends the trial court erred in classifying a 1996 Mariah 240Z boat as marital rather than separate property. We agree.
    Separate property is defined by N.C. Gen. Stat. § 50-20(b)(2) as:
        “Separate property” means 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. . . . Property acquired in exchange for separate property shall remain separate property regardless of whether thetitle 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.

Id. “The burden of showing the property to be marital is on the party seeking to classify the asset as marital and the burden of showing the property to be separate is on the party seeking to classify the asset as separate.” Atkins v. Atkins, 102 N.C. App. 199, 206, 401 S.E.2d 784, 787 (1991).
    This Court has held that in matters of personal property, the spouse claiming a marital property classification “must demonstrate by a preponderance of the evidence that the exchange of separate property was accompanied by: (1) an intention that the [personal property] be marital property; and (2) that such intention was expressly stated in the conveyance.” Friend-Novorska v. Novorska, 131 N.C. App. 508, 511, 507 S.E.2d 900, 902 (1998).
    Here, the trial court found that the 1996 Mariah 240Z boat with motor and trailer was titled in plaintiff's name only. The trial court also found that the boat was purchased on 22 August 1997, approximately one week after the parties' marriage, with funds from plaintiff's personal account which were deposited prior to marriage. Plaintiff's separate property was exchanged for the boat, and the trial court's findings do not indicate that it was plaintiff's intention that the boat be marital property, as the boat was titled solely in plaintiff's name. The trial court's findings, therefore, do not support the classification of the 1996 Mariah 240Z boat as marital property.
IV.
    Plaintiff finally contends the trial court erred in ordering plaintiff to pay a distributive award without finding plaintiff had sufficient liquid assets with which to pay the award. We agree.
    In Robertson v. Robertson, 167 N.C. App. 567, 605 S.E.2d 667 (2004), after awarding an equal division of property, the trial court ordered the defendant to make a distributive award to the plaintiff within ninety days, as an in-kind distribution was not equitable. Id. at 569, 605 S.E.2d at 669. On appeal, the defendant contended that the trial court erred in ordering him to pay a distributive award without finding that he had sufficient liquid assets with which to pay the award, and this Court agreed. Id. at 570, 605 S.E.2d at 669. Robertson held that under N.C. Gen. Stat. § 50-20(c), “the trial court must consider certain factors and 'must make findings as to each factor for which evidence was presented.'” Id. (citation omitted). Specifically, Robertson noted that the statute required findings as to “(1) [t]he income, property, and liabilities of each party at the time the division of property is to become effective. . . . (9) The liquid or nonliquid character of all marital property and divisible property[] . . . [and] (11) [t]he tax consequences to each party.” Id. When a party is required “to pay the distributive award from a non-liquid asset or by obtaining a loan, the equitable distribution award must be recalculated to take into account any adverse financial ramifications such as adverse tax consequences.” Embler v. Embler, 159 N.C. App. 186, 188-89, 582 S.E.2d 628, 630 (2003).     Here, the trial court found that the total marital estate was valued at $454,841.21, and that an equal division of $227.420.60 per party was equitable. The parties stipulated to in-kind distribution of certain real property assets to plaintiff, but did not stipulate to a distributive award, as both parties requested an unequal distribution of assets from the trial court. Due to the parties' stipulations, plaintiff was awarded property totaling in excess of $291,785.21, composed primarily of real property and pension plans. As this amount exceeded plaintiff's equitable award, the trial court ordered plaintiff to make a distributive award to defendant in the amount of $64,364.60 within thirty days. However the trial court made no findings as to the liquid character of the assets or the potential tax consequences of such a distributive award on the value of the marital assets. As there are no findings as to defendant's liquid assets and ability to pay the award, or as to the potential adverse financial consequences of using the non-liquid assets to pay the distributive award, the trial court failed to make sufficient findings as to the distributive award.
    As we find the trial court erred in failing to classify certain loans as marital debt, in classifying a boat purchased with separate funds as marital property, in failing to include distributive property in the marital assets, and in failing to make sufficient findings as to the distributive award, the trial court's order is reversed and remanded for entry of a new distributional order.    Reversed and remanded.
    Judges McCULLOUGH and GEER concur.
    Report as per Rule 30(e).

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