Davis v. Davis

An unpublished opinion of the North Carolina Court of Appeals does not constitute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. COA13-984

NORTH CAROLINA COURT OF APPEALS

Filed: 15 April 2014

MOLLY DREW DAVIS,

Plaintiff,

v. Davidson County

No. 10 CVD 3929

MICHAEL R. DAVIS,

Defendant.

Appeal by defendant from judgment and order entered 5

February 2013 by Judge Mary F. Covington in Davidson County

District Court. Heard in the Court of Appeals 8 January 2014.

Molly Brown Davis, pro se, plaintiff-appellee.

The Law Offices of Lee M. Cecil, by Lee M. Cecil for

defendant-appellant.

DAVIS, Judge.

Michael R. Davis (“Defendant”) appeals from the trial

court’s equitable distribution judgment and alimony order. On

appeal, Defendant argues that the trial court erred (1) in its

valuation and distribution of 500 shares of stock in a closely-

held corporation; and (2) by failing to make adequate findings

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of fact to support the amount and duration of the alimony

awarded. After careful review, we vacate and remand.

Factual Background

Molly Drew Davis (“Plaintiff”) and Defendant were married

on 14 October 1989, separated on 15 September 2009, and divorced

on 11 February 2011. Two children were born during the parties’

marriage, one of whom is still a minor. On 8 November 2010,

Plaintiff filed a complaint seeking absolute divorce, child

custody and support, post-separation support, permanent alimony,

equitable distribution, and attorneys’ fees. Defendant filed an

answer and counterclaims for child custody and support,

equitable distribution, and absolute divorce.

The trial court heard the parties’ claims for equitable

distribution and Plaintiff’s claim for alimony on 11 October

2012. The trial court entered its judgment and order on 5

February 2013 that provided for (1) an equal division of the

marital property; and (2) monthly alimony payments of $1,000.00

from Defendant to Plaintiff until 1 January 2032. Defendant

gave timely notice of appeal to this Court.

Analysis

I. Equitable Distribution

We review a trial court’s order of equitable distribution

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under an abuse of discretion standard. Wieneck-Adams v. Adams,

331 N.C. 688, 691, 417 S.E.2d 449, 451 (1992). “Only a finding

that the judgment was unsupported by reason and could not have

been a result of competent inquiry or a finding that the trial

judge failed to comply with the statute will establish an abuse

of discretion.” Id. (internal citations omitted).

In his first argument on appeal, Defendant asserts that the

trial court erred in its valuation and subsequent distribution

of 500 shares of stock in American Auto Supply, Inc., a closely-

held corporation founded by Defendant’s grandfather. Defendant

contends that the trial court’s valuation of the shares is not

supported by competent evidence. Defendant further asserts that

because there was insufficient evidence offered at trial

concerning the valuation of the 500 shares of American Auto

Supply, Inc., the shares should be removed and excluded from the

distribution scheme.

“In valuing a marital interest in a business, the task of

the trial court is to arrive at a date of separation value which

reasonably approximates the net value of the business interest.”

Fitzgerald v. Fitzgerald, 161 N.C. App. 414, 419, 588 S.E.2d

517, 521 (2003) (citations and quotation marks omitted). In

Poore v. Poore, 75 N.C. App. 414, 331 S.E.2d 266, disc. review

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denied, 314 N.C. 543, 335 S.E.2d 316 (1985), this Court

explained that

[i]n ordering a distribution of marital

property, a court should make specific

findings regarding the value of a spouse’s

professional practice and the existence and

value of its goodwill, and should clearly

indicate the evidence on which its

valuations are based, preferably noting the

valuation method or methods on which it

relied. On appeal, if it appears that the

trial court reasonably approximated the net

value of the practice and its goodwill, if

any, based on competent evidence and on a

sound valuation method or methods, the

valuation will not be disturbed.

Id. at 422, 331 S.E.2d at 272.

Our Supreme Court has made clear that the standard

articulated in Poore — requiring specific findings concerning

the trial court’s valuation of a business and the methods it

used to arrive at that valuation — is also applicable to the

valuation of a marital interest in a closely-held corporation.

See Patton v. Patton, 318 N.C. 404, 406, 348 S.E.2d 593, 595

(1986) (“[T]he requirement of specific findings is no less

applicable in an equitable distribution order involving a

spouse’s interest in a closely-held corporation.”).

Here, the only finding made by the trial court regarding

the valuation of the American Auto Supply, Inc. shares is

contained in finding of fact 8 and states:

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The Court finds that the shares of stock are

marital, having been purchased with funds

during the course of the marriage; however,

the Court finds that $20,000.00 is the value

of the 500 shares based on the fact that the

parties separated two years prior to the

date of the final accounting along with the

state of the market at the time of the

separation.

This finding merely references (1) “the state of the market

at the time”; and (2) a final accounting of Defendant’s mother’s

estate that took place two years after the date of the parties’

separation and valued 233 shares of American Auto Supply, Inc.

at $16,500.00. In light of the lack of clarity and specificity

of this finding, we believe that the judgment fails to “state

specifically how the court arrived at its valuation.” Offerman

v. Offerman, 137 N.C. App. 289, 296, 527 S.E.2d 684, 688 (2000);

see Locklear v. Locklear, 92 N.C. App. 299, 302, 374 S.E.2d 406,

407-08 (1988) (“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.”), disc. review

allowed, 324 N.C. 336, 378 S.E.2d 794 (1989).

However, while the trial court’s findings are insufficient,

we must determine whether the parties offered sufficient

evidence at trial that would have allowed the trial court to

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make appropriate findings on the issue containing the requisite

level of specificity. It is well established that the trial

court’s “obligation to make specific findings regarding the

value of any property classified as marital, including any

business owned by one of the parties . . . . exists only when

there is credible evidence supporting the value of the asset.”

Grasty v. Grasty, 125 N.C. App. 736, 738-39, 482 S.E.2d 752, 754

(internal citations and quotation marks omitted), disc. review

denied, 346 N.C. 278, 487 S.E.2d 545 (1997); see Miller v.

Miller, 97 N.C. App. 77, 80, 387 S.E.2d 181, 184 (1990) (“The

requirements that the trial court (1) classify and value all

property of the parties, both separate and marital, (2) consider

the separate property in making a distribution of the marital

property, and (3) distribute the marital property, necessarily

exist only when evidence is presented to the trial court which

supports the claimed classification, valuation and

distribution.”).

In the present case, neither party offered any evidence of

the value of the 500 shares of stock at the date of separation.

Indeed, at the equitable distribution hearing, the trial court

expressed its frustration at the absence of evidence upon which

to value the shares, asking the parties’ attorneys: “So we don’t

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have the value of that stock as of the date of separation?” and

“We’re supposed to pull that number out of my robe, is that what

I’m being told?”

Because the parties failed to offer evidence at the

equitable distribution hearing regarding the value of the 500

shares of American Auto Supply, Inc. stock as of the date of

separation, we remand to the trial court for the entry of a new

equitable distribution judgment removing the shares from the

distribution scheme. The parties had “ample opportunity to

present evidence [of the shares’ value] and have failed to do

so.” Miller, 97 N.C. App. at 80, 387 S.E.2d at 184. Thus,

“remanding the matter for the taking of new evidence, in essence

granting . . . a second opportunity to present evidence, would

only protract the litigation and clog the trial courts with

issues which should have been disposed of at the initial

hearing.” Id. (citation and quotation marks omitted).

II. Alimony

Defendant next contends that the trial court erred by

awarding Plaintiff a monthly alimony award of $1,000.00 until 1

January 2032 without making sufficient findings of fact

regarding the amount and duration of the award. We agree.

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N.C. Gen. Stat. § 50-16.3A provides, in pertinent part,

that the trial court “shall set forth the reasons for its award

or denial of alimony, and if making an award, the reasons for

its amount, duration, and manner of payment.” N.C. Gen. Stat. §

50-16.3A(c) (2013). In making an alimony award, the trial court

is to consider all relevant factors, including:

(1) The marital misconduct of either of the

spouses. Nothing herein shall prevent a

court from considering incidents of post

date-of-separation marital misconduct as

corroborating evidence supporting other

evidence that marital misconduct occurred

during the marriage and prior to [the] date

of separation;

(2) The relative earnings and earning

capacities of the spouses;

(3) The ages and the physical, mental, and

emotional conditions of the spouses;

(4) The amount and sources of earned and

unearned income of both spouses, including,

but not limited to, earnings, dividends, and

benefits such as medical, retirement,

insurance, social security, or others;

(5) The duration of the marriage;

(6) The contribution by one spouse to the

education, training, or increased earning

power of the other spouse;

(7) The extent to which the earning power,

expenses, or financial obligations of a

spouse will be affected by reason of serving

as the custodian of a minor child;

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(8) The standard of living of the spouses

established during the marriage;

(9) The relative education of the spouses

and the time necessary to acquire sufficient

education or training to enable the spouse

seeking alimony to find employment to meet

his or her reasonable economic needs;

(10) The relative assets and liabilities of

the spouses and the relative debt service

requirements of the spouses, including legal

obligations of support;

(11) The property brought to the marriage by

either spouse;

(12) The contribution of a spouse as

homemaker;

(13) The relative needs of the spouses;

(14) The federal, State, and local tax

ramifications of the alimony award;

(15) Any other factor relating to the

economic circumstances of the parties that

the court finds to be just and proper.

(16) The fact that income received by either

party was previously considered by the court

in determining the value of a marital or

divisible asset in an equitable distribution

of the parties' marital or divisible

property.

N.C. Gen. Stat. § 50-16.3A(b).

Here, although the trial court made findings regarding

several of the above-quoted factors in its order, it failed to

articulate how these findings might support a monthly award in

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the amount of $1,000.00 until 1 January 2032. Indeed, the trial

court’s findings of fact regarding the amount and duration of

the alimony award state in full:

35. The Defendant testified that he received

a substantial inheritance from both his

mother and father’s estates. The Defendant

will have substantial resources from which,

not only to pay his monthly living expenses,

but also a monthly alimony award to the

Plaintiff.

36. Other than the limited income as set

forth above, the Plaintiff has no other

source of income or support and is

substantially in need of support from the

Defendant and as such is the dependent

spouse of the Defendant.

37. Due to the Defendant’s income, the

Plaintiff’s limited income and the expenses

of the parties, the Defendant is the

supporting spouse of the Plaintiff as

defined in N.C.G.S. § 50-16.3[A].

38. Considering the respective estates,

earnings, conditions and accustomed standard

of living of the parties and the ability of

the Defendant to pay monthly alimony,

$1,000.00 represents a reasonable sum of

monthly alimony.

39. Said payments shall begin January 1,

2013. The Court finds that this Order is

made retroactive from the date of the end of

Plaintiff’s post separation support which

was in April, 2012. The Court orders that

the Defendant shall pay an additional

$500.00 per month until those have been

paid. The Defendant’s accumulated arrearage

is $8,000.00 (namely from May, 2012 through

December, 2012).

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40. The alimony payments in the amount of

$1,000.00 will terminate on January 1, 2032.

The Defendant may elect to pay the Plaintiff

the sum of $400,000.00 (Four Hundred

Thousand and No/100 Dollars) in lieu of his

monthly alimony obligation.

In the decretal portion of the order, the trial court

further noted that, in accordance with N.C. Gen. Stat. § 50-

16.9, alimony will terminate at the occurrence of (1)

Plaintiff’s remarriage; (2) Plaintiff’s death; (3) Defendant’s

death; or (4) Plaintiff’s cohabitation as defined by N.C. Gen.

Stat. § 50-16.9(b) – assuming if any of these events occur

before 1 January 2032.

We do not believe that these findings sufficiently

articulate the trial court’s “reasons for its amount, duration,

and manner of payment” as required by N.C. Gen. Stat. § 50-

16.3A(c). In Hartsell v. Hartsell, 189 N.C. App. 65, 76, 657

S.E.2d 724, 731 (2008), we determined that the findings

regarding the amount of the alimony award were inadequate where

“the trial court made only a finding that [the] plaintiff had

the ability to pay that amount, but provided no explanation as

to why it had concluded that [the] defendant was entitled to

that specific amount.”

The same is true here. Though the trial court references

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the “respective estates, earnings, conditions and accustomed

standard of living of the parties” in its finding determining

that $1,000.00 is “a reasonable sum of monthly alimony,” this

cursory discussion does not provide proper insight into the

trial court’s reasoning. See Lucas v. Lucas, 209 N.C. App. 492,

501, 706 S.E.2d 270, 276 (2011) (concluding that trial court’s

findings regarding alimony were “too meager to enable the

reviewing court to determine whether the trial judge exercised

proper discretion in deciding what defendant was to pay

plaintiff” (citation and quotation marks omitted)). Likewise,

when the trial court concluded that Defendant could make a one-

time payment of $400,000.00 to Plaintiff in lieu of the monthly

alimony payments, it provided no rationale as to why this

particular amount and this alternative manner of payment would

be appropriate.

Additionally, the trial court failed to set forth the

reason for its determination that Plaintiff was entitled to

receive alimony from Defendant until 1 January 2032. “[T]his

Court has repeatedly held that an alimony order is inadequate

when it contains no findings explaining the reason for the

duration chosen . . . .” Id. at 502, 706 S.E.2d at 277.

Therefore, we must remand this matter to the trial court so that

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it may make specific findings of fact explaining its reasoning

regarding the amount and duration of the alimony award. See

Works v. Works, ___ N.C. App. ___, ___, 719 S.E.2d 218, 220

(2011) (remanding “with instructions that [the trial court] make

specific findings with respect to its reasons for the specified

duration of its alimony award”); Hartsell, 189 N.C. App. at 76-

77, 657 S.E.2d at 731 (remanding “for further findings of fact

regarding the basis for the amount and duration of the alimony

award”).

Conclusion

For the reasons stated above, we vacate the trial court’s

equitable distribution judgment and alimony order and remand the

case for further proceedings as set out herein.

VACATED AND REMANDED.

Judges STEELMAN and STEPHENS concur.

Report per Rule 30(e).