Power v. Power

NO. COA14-249

NORTH CAROLINA COURT OF APPEALS

Filed: 7 October 2014

ROSEMARY LYNN GROVE POWER,

Plaintiff,

v. Wake County

No. 12 CVD 9258

THOMAS ALFRED POWER,

Defendant.

Appeal by defendant from equitable distribution judgment

entered 28 August 2013 by Judge Christine Walczyk in Wake County

District Court. Heard in the Court of Appeals 26 August 2014.

Allen & Spence, PLLC, by Scott E. Allen, for plaintiff-

appellee.

Manning, Fulton & Skinner, P.A., by Michael S. Harrell, for

defendant-appellant.

BRYANT, Judge.

Where defendant failed to present evidence of potential tax

consequences before the close of evidence, the trial court was

not required to consider those potential tax consequences when

entering an equitable distribution judgment. Although the

Kelley Blue Book falls within Rule 803(17) as a hearsay

exception, defendant was not prejudiced by the omission of such

evidence where defendant was permitted to give opinion testimony

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as to the value of the marital cars. Where defendant failed to

show that a monetary gift to the marital couple was not marital

property, the trial court properly considered that money as part

of the marital assets.

On 2 July 2012, plaintiff Rosemary Lynn Grove Parker filed

a complaint against defendant Thomas Alfred Power seeking

equitable distribution, divorce from bed and board, and a

temporary restraining order to prevent defendant from wasting

marital assets. Defendant answered and counterclaimed for

alimony and post-separation support, equitable distribution, and

expenses and attorneys’ fees.

On 21 May 2013, plaintiff and defendant filed a joint

dismissal in which plaintiff dismissed her claim for divorce

from bed and board and defendant dismissed his claim for alimony

and post-separation support.

A hearing on the parties’ competing equitable distribution

claims was held on 8 April 2013 in Wake County District Court,

the Honorable Christine Walczyk, Judge presiding. On 28 August,

the trial court entered a judgment for equitable distribution

between the parties. Defendant appeals.

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On appeal, defendant raises three issues as to whether the

trial court erred in: (I) not considering the tax consequences

arising from its equitable distribution judgment; (II) in

excluding defendant’s Kelley Blue Book values for the marital

cars; and (III) in not deducting from the marital estate

financial gifts made to plaintiff and defendant.

I.

Defendant argues that the trial court erred in not

considering the tax consequences arising from its equitable

distribution judgment. We disagree.

Our review of an equitable distribution

order is limited to determining whether the

trial court abused its discretion in

distributing the parties' marital property.

The distribution of marital property is

vested in the discretion of the trial courts

and the exercise of that discretion will not

be upset absent clear abuse. Accordingly,

the findings of fact are conclusive if they

are supported by any competent evidence from

the record.

Robinson v. Robinson, 210 N.C. App. 319, 322, 707 S.E.2d 785,

789 (2011) (citations, quotations, and parentheses omitted).

Defendant contends the trial court erred in not considering

the tax consequences of its equitable distribution judgment.

Specifically, defendant argues that pursuant to N.C. Gen. Stat.

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§ 50-20(c), the trial court was required to consider tax

consequences prior to making its judgment.

North Carolina General Statutes, section 50-20, holds that:

There shall be an equal division by using

net value of marital property and net value

of divisible property unless the court

determines that an equal division is not

equitable. If the court determines that an

equal division is not equitable, the court

shall divide the marital property and

divisible property equitably. The court

shall consider all of the following factors

under this subsection:

. . .

(11) The tax consequences to each party . .

. . The trial court may, however, in its

discretion, consider whether or when such

tax consequences are reasonably likely to

occur in determining the equitable value

deemed appropriate for this factor.

N.C.G.S. § 50-20(c)(11) (2013). However, a trial court must

consider all of the distributional factors in N.C.G.S. § 50-

20(c) only when a party presents evidence that an equal

distribution would be inequitable. Embler v. Embler, 159 N.C.

App. 186, 189, 582 S.E.2d 628, 631 (2003) (emphasis added)

(citations and quotation omitted).

In its pre-trial order, the trial court noted that both

parties had raised contentions, including tax consequences, as

to why an equal division of marital assets would not be

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equitable. However, during the equitable distribution hearing,

neither party presented any evidence regarding potential tax

consequences caused by an equal distribution. In fact, the

record shows that defendant only raised the issue of tax

consequences as to a single marital account, a Scottrade

account, at the end of the hearing:

[DEFENDANT]: Does Your Honor also consider

that Scottrade account? I shouldn't be

penalized with all the tax burden on that if

you're weighing the cash-out values.

THE COURT: I'm going to consider -- I mean,

you guys didn't put on any evidence about

tax consequences, but I'm going to consider

the liquid or nonliquid nature of assets

when I do the division.

[DEFENDANT]: Okay.

As defendant failed to present evidence during the hearing

regarding potential tax consequences caused by an equal

distribution, the trial court did not err in failing to consider

tax consequences in awarding an equitable distribution. See id.

Defendant further argues that the trial court erred in not

considering the potential tax consequences of its equitable

distribution judgment because defendant sent to the trial court,

after the equitable distribution hearing, an email challenging

plaintiff’s proposed equitable distribution order. In his

email, defendant asked the trial court to address “a few

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discrepancies” and to “consider[] the tax consequences on the

Defendant’s behalf.” Plaintiff immediately objected to

defendant’s email, and the trial court did not respond to either

party. In its equitable distribution judgment, the trial court

did not make any findings of fact as to tax consequences created

by an equal distribution and concluded as a matter of law that

“[a]n equal distribution of marital and divisible property is

equitable.”

Defendant’s argument that he offered evidence concerning

potential tax consequences to the trial court is without merit,

as defendant’s email was sent after the close of evidence. See

Wall v. Wall, 140 N.C. App. 303, 312, 536 S.E.2d 647, 653 (2000)

(“The trial court is not required to consider tax consequences

unless the parties offer evidence about them. Defendant may not

now ascribe error to the trial court's failure to make such

findings without demonstrating that such evidence was brought to

the trial court's attention before the close of evidence.

Defendant has the burden of showing that the tax consequences of

the distribution were not properly considered, and he has failed

to carry that burden.”). Accordingly, the trial court acted

within its discretion in ordering an equitable distribution

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judgment that did not address tax consequences. Defendant’s

argument is overruled.

II.

Defendant next argues that the trial court erred in

excluding defendant’s Kelley Blue Book values for the marital

cars.

During the equitable distribution hearing, the trial court

permitted plaintiff to testify as to the value of the two

marital cars. Plaintiff testified that she believed the value

of her car to be about $3,500.00, based on existing mechanical

and cosmetic issues with the car and based on an appraisal of

the car by Carmax. Plaintiff then testified that she believed

the value of defendant’s car to be somewhere between $2,673.00

and $2,773.00, based on the Kelley Blue Book. Defendant did not

object to plaintiff’s testimony.

When defendant testified as to the value of the marital

cars, he sought to admit into evidence copies of the Kelley Blue

Book values of the cars. The trial court sustained plaintiff’s

objection to this evidence, stating it was “hearsay information”

and that defendant could “tell me what your opinion is about the

value of the car, but you can’t show me the Blue Book value.”

Defendant then gave his opinion that plaintiff’s car was worth

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$7,197.00 and his own car $3,001.00, based on the Kelley Blue

Book values.

Defendant contends the trial court erred in refusing to

admit his evidence of the cars’ Kelley Blue Book values and that

this “preclusion of [defendant’s] opinion evidence substantially

prejudiced [him].” This Court has previously held that the

Kelley Blue Book falls within Rule 803(17) as a hearsay

exception for market reports. See State v. Dallas, 205 N.C.

App. 216, 220, 695 S.E.2d 474, 477 (2010) (“Rule 803(17) of the

Rules of Evidence provides that [m]arket quotations,

tabulations, lists, directories, or other published

compilations, generally used and relied upon by the public or by

persons in particular occupations are not excluded by the

hearsay rule. We hold that both the Kelley Blue Book and the

NADA pricing guide fall within the Rule 803(17) hearsay

exception.”). As such, the trial court erred in refusing to

admit defendant’s Kelley Blue Book values as evidence.

However, even though the trial court erred in not admitting

this evidence, defendant has failed to show how this error

“substantially prejudiced” him. The record indicates that

plaintiff and defendant each gave opinion testimony as to the

value of the two marital cars, including each party noting that

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they consulted the Kelley Blue Book in determining the cars’

values. Defendant did not offer additional testimony regarding

the condition of the cars, other than the Kelley Blue Book

values, nor did defendant contest plaintiff’s evidence

concerning the cars’ conditions and values. As such, defendant

was not prejudiced because the trial court heard and weighed the

testimony of both parties as to the value of the cars before

making its determination that each party should keep its

respective car as part of the equitable distribution judgment.

See id. at 220—21, 695 S.E.2d at 477 (noting that the defendant

failed to demonstrate prejudice where the testimony of the

witnesses as to the value of several cars was given, considered,

and weighed, even though the testimony varied as to the cars’

values). Accordingly, the trial court’s error about which

defendant argues was not prejudicial to defendant.

III.

Finally, defendant argues that the trial court erred in not

deducting from the marital estate financial gifts made to

plaintiff and defendant. We disagree.

Pursuant to N.C. Gen. Stat. § 50-20, marital property

includes all property “acquired by either spouse or both spouses

during the course of the marriage and before the date of the

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separation of the parties, and presently owned, except property

determined to be separate property[,]” while separate property

includes all property “acquired by a spouse by bequest, devise,

descent, or gift during the course of the marriage.” N.C.G.S. §

50-20(b)(1),(2) (2013). “The party claiming a certain

classification has the burden of showing, by the preponderance

of the evidence, that the property is within the claimed

classification.” Burnett v. Burnett, 122 N.C. App. 712, 714,

471 S.E.2d 649, 651 (1996) (citation omitted).

During the hearing, defendant argued that the trial court

should not consider $51,000.00 as part of the marital estate

because that money was given to defendant by defendant’s father

as a series of gifts. Plaintiff testified that defendant’s

father had gifted $51,000.00 to her and defendant over a period

of time for the purpose of depleting defendant’s father’s

financial interests so he could receive assisted-living care

through the government, if needed. When questioned by defendant

as to where this money was currently located, plaintiff

responded that she did not know where the money was specifically

located, other than “[i]t was just all in the funds. . . . I

don’t know where it’s at.” Plaintiff also agreed with

defendant’s assertion that defendant had deposited the funds

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“into our joint account.” Defendant did not offer any evidence

as to where the money was located, such as in a separate ear-

marked account; rather, defendant only asserted that the funds

were a gift to him from his father.

The trial court, in its equal distribution order, noted

that: “During the marriage, the parties received regular gifts

from the Defendant’s father. The [defendant]1 failed to establish

that there were any funds left from these gifts on the date of

separation that were separate and apart from the accounts

already distributed hereunder.”

Even assuming that the $51,000.00 was given as a gift

solely to defendant and not as a joint gift to both parties, the

evidence showed that these funds were commingled with the

parties’ marital funds in their joint account. Thus, defendant

had the burden of proof “to trace the initial deposit into its

form at the date of separation.” Fountain v. Fountain, 148 N.C.

App. 329, 333, 559 S.E.2d 25, 29 (2002) (citation omitted).

Commingling of separate property with

1

We note that the trial court made a typographical error in this

finding by stating in its second sentence that “The Plaintiff

failed to establish . . . .” A review of the hearing transcript

indicates that defendant, not plaintiff, raised the issue of

whether the $51,000.00 was in fact marital property. As

defendant failed to establish that this money was not marital

property, we therefore correct the trial court’s finding as

presented above.

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marital property, occurring during the

marriage and before the date of separation,

does not necessarily transmute separate

property into marital property.

Transmutation would occur, however, if the

party claiming the property to be his

separate property is unable to trace the

initial deposit into its form at the date of

separation.

Id. (citations omitted).

Here, defendant failed to present any evidence tracing the

gift of $51,000.00 from his father to show where these funds

were located as of the date of separation. Therefore, as

defendant failed to prove that the aggregate sum of $51,000.00

was not marital property, the trial court did not err in

refusing to classify these funds as defendant’s separate

property. Accordingly, defendant’s argument is overruled.

Affirmed.

Judges McGEE and STROUD concur.