Brown v. Brown

IN THE COURT OF APPEALS OF NORTH CAROLINA

No. COA22-765

Filed 02 May 2023

Onslow County, No. 12CVD2444

GREGORY D. BROWN, Plaintiff,

v.

TAMMY BROWN, Defendant.

Appeal by plaintiff from order and judgment entered by Judge James L. Moore,

Jr., in Onslow County District Court. Heard in the Court of Appeals 12 April 2023.

Jonathan McGirt for plaintiff-appellant.

Pro Se, Tammy Brown for defendant-appellee, no brief.

GORE, Judge.

This matter arises from a domestic action following the parties’ separation and

absolute divorce. Plaintiff Gregory D. Brown, II, appeals from the trial court’s Order

and Judgment, both denying his motion to dismiss and granting defendant Tammy

Brown an equitable distribution of plaintiff’s military pension. Plaintiff asserts his

discharge in bankruptcy bars defendant from obtaining any relief on her equitable

distribution claim. Upon review, we affirm.

I.

Plaintiff and defendant were married, each to the other, on or about 4 January

1994. Plaintiff was already employed with the United States Marine Corps when the

BROWN V. BROWN

Opinion of the Court

parties were married. The parties separated on 23 June 2011 and were subsequently

divorced on 31 December 2012. Plaintiff enlisted in the United States Marine Corps

on 1 January 1993 and served until 11 August 2018, giving plaintiff a total active-

duty service time of three hundred and six (306) months. The time period the

marriage overlapped plaintiff’s service time is two hundred and ten (210) months.

On 25 June 2012, plaintiff initiated this action by filing a Complaint for child

custody, child support, and equitable distribution. On 6 August 2012, defendant filed

an Answer and Counterclaim for child custody, child support, equitable distribution,

and spousal support.

On 29 January 2013, plaintiff filed a voluntary petition in United States

Bankruptcy Court, Eastern District of North Carolina, seeking relief under Chapter

13 of the Bankruptcy Code Case No. 13-00567-8-DMV. The court took judicial notice

of this case at trial. In his bankruptcy Petition under the statement of financial

affairs, plaintiff listed this lawsuit including the caption, nature of all proceedings,

venue, and status of “pending.” Further, plaintiff listed defendant with her full name

and address as an unsecured creditor with her unsecured claim of “equitable

distribution and debt Potential claims for marital property/debt distribution.”

Defendant’s attorney’s name and address were also listed. Defendant and her then

attorney received notice of the bankruptcy proceeding sent by first class mail on 1

February 2013 and were properly served a copy of the petition.

Defendant never requested relief from the automatic stay to commence her

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Opinion of the Court

claim for equitable distribution, nor did she file for any relief from the bankruptcy

court to protect her interests. On 25 April 2013, the court confirmed plaintiff’s

Chapter 13 Plan. Plaintiff completed payments totaling approximately $60,000.00

under the Plan on 9 November 2017, and the court granted the plaintiff a discharge

pursuant to 11 U.S.C. § 1328(a) (“Bankruptcy Discharge”). On 24 September 2018,

the bankruptcy court entered a Final Decree and closed the case.

In August of 2019, defendant scheduled a hearing in this matter for interim

allocation to assert her claim to plaintiff’s military pension after discovering plaintiff

had retired in August of 2018. On 28 August 2019, plaintiff filed a Motion to Dismiss

the Equitable Distribution Claim based on failure to prosecute the equitable

distribution action. On 6 March 2020, plaintiff filed a Motion to Dismiss the

Equitable Distribution Claim on the basis that plaintiff’s Chapter 13 bankruptcy

action discharged the equitable distribution lawsuit, and such would include

defendant’s right to petition the court to divide plaintiff’s military retirement.

On 11 May 2020, defendant filed a Motion in the United States Bankruptcy

Court to reopen the Chapter 13 case to determine dischargeability of debt. On 21

May 2020, the bankruptcy court denied defendant’s Motion to reopen, concluding

that: (i) the bankruptcy court had concurrent jurisdiction with the North Carolina

district court; and (ii) when plaintiff filed his motion to dismiss using his completed

Chapter 13 bankruptcy case as an affirmative defense, the bankruptcy court no

longer had jurisdiction over this issue, and the North Carolina district court was the

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Opinion of the Court

appropriate forum to handle the matter.

On 23 October 2020, the trial court conducted a hearing for a ruling on

plaintiff’s Motion to Dismiss heard 7 August 2020 and to hear all remaining issues of

equitable distribution. On 8 December 2021, the trial court entered an Order relating

to the equitable distribution of plaintiff’s military pension with the following

operative findings and conclusions:

18. The Court finds:

a. The defendant’s interest in the military pension is

proprietary as a co-owner of marital property and,

her interest in the military pension is not a claim

upon debt.

b. That military pensions have been held to be

beyond the reach of a chapter 7 Trustee.

c. Plaintiff’s military pension was not liquidated or

otherwise distributed to any creditor and the

plaintiff continues to receive the pension based on

military employment during the course of his

marriage to defendant.

d. The retirement could not be reached by a creditor.

e. The military pension is not personal property

upon which an execution lien could have been levied.

f. The marital property rights in a military pension

are not dischargeable.

g. The defendant has a marital property right in the

plaintiff’s military retirement and this right is not

held in the nature of a creditor’s claim.

h. The defendant’s right to pursue her claim for a

portion of the plaintiff’s military retirement was not

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Opinion of the Court

extinguished by the plaintiff’s discharge in

bankruptcy.

i. The plaintiff was not receiving retirement

payments during the entirety of his Bankruptcy

Payment Plan.

j. The military pension of plaintiff was a per se

marital property asset without any defensible

argument to the contrary.

k. The Public Policy associated with the entitlement

to, and ultimate division of Military Retirement is

an appropriate shield to the efforts of avoiding an

equitable apportionment thereof by the use of the

Bankruptcy Code.

l. The parties stipulated and the court finds [50%] of

the marital portion of Plaintiff’s military pension is

[34.3%].1

...

CONCLUSIONS OF LAW

1. The Court has jurisdiction over the parties and of the

subject matter herein.

2. The defendant has a martial property right in the

plaintiff’s military retirement, and this right is not held

in the nature of a creditor’s claim.

3. The defendant’s right to prosecute her claim for a

portion of the plaintiff’s military retirement has not

been lost by virtue of the plaintiff’s discharge in

bankruptcy.

4. The monies paid to and thru the bankruptcy court is a

distribution factor for the court to consider.

1 The parties stipulated as to the mathematical calculation of what 50% of the “martial portion”

subject to division would be if it were subject to an equitable division.

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Opinion of the Court

5. No other assets or indebtedness remains subject to this

court’s jurisdiction.

6. That an equitable division of the marital portion of the

plaintiff’s military pension is equitable.

IT IS THEREFORE ORDERED, ADJUDGED AND

DECREED as follows:

1. That the plaintiff’s motion to dismiss is denied.

2. That the defendant is hereby awarded [34.3%] of the

plaintiff’s military pension with payments to begin on

[1 November 2020].

3. The court has considered the plaintiff’s monetary

expenses paid to and thru the bankruptcy court as a

distributional factor and awards no arrears; however,

arrears since [1 November 2020] shall accrue until

entry of this Order and become payable in the amount

of $100.00 per month until fully satisfied.

4. This judgment is a final judgment on all issues

regarding the issue of Equitable Distribution pursuant

to [N.C. R. Civ. P. 54(b)].

On 7 January 2022, plaintiff timely filed and served notice of appeal from the

trial court’s 8 December 2020 Order. On 13 January 2022, defendant filed and served

a notice of cross-appeal from the same Order. Defendant has not filed a brief with

this Court.

II.

As a preliminary matter, we must discuss whether this Court has jurisdiction

to hear plaintiff’s appeal. We note the Order appealed addresses fewer than all the

parties’ claims; defendant’s 2012 alimony counterclaim is still pending in the trial

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Opinion of the Court

court. Further, plaintiff asserts in his statement of grounds for appellate review,

“[a]lthough it is not apparent on the face of the [8 December 2021] ‘equitable

distribution’ Order, it would appear from the colloquy at the [18 August 2020] hearing

that the trial court understood that it was entering some species of ‘interim

distribution’ order, pursuant to N.C. Gen. Stat. § 50-20(i1).” Such a distinction does

matter for the purposes of appellate jurisdiction because “[i]nterim equitable

distribution orders are by nature preliminary to entry of a final equitable distribution

judgment and thus are interlocutory.” Hunter v. Hunter, 126 N.C. App. 705, 707, 486

S.E.2d 244, 245 (1997) (citation omitted). “‘[I]nterim’ orders entered in the domestic

context are not immediately appealable.” Id. at 708, 486 S.E.2d at 245 (citation

omitted).

A.

“Generally, there is no right of immediate appeal from an interlocutory order.”

Hanna v. Wright, 253 N.C. App. 413, 415, 800 S.E.2d 475, 476 (2017) (quotation

marks and citation omitted). “An interlocutory order is one made during the

pendency of an action, which does not dispose of the case, but leaves it for further

action by the trial court in order to settle and determine the entire controversy.”

Veazey v. Durham, 231 N.C. 357, 362, 57 S.E.2d 377, 381 (1950) (citation omitted).

On the other hand, “[a] final judgment is one which disposes of the cause as to all the

parties, leaving nothing to be judicially determined between them in the trial court.”

Id. at 361-62, 57 S.E.2d at 381 (citations omitted).

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Opinion of the Court

Ordinarily, appeal from an interlocutory order is allowed in two instances. To

obtain appellate review, “the trial court’s order must: (1) certify the case for appeal

pursuant to N.C. R. Civ. P. 54(b); or (2) have deprived the appellant of a substantial

right that will be lost absent review before final disposition of the case.” Bessemer

City Express v. City of Kings Mt., 155 N.C. App. 637, 639, 573 S.E.2d 712, 714 (2002)

(citing N.C. Gen. Stat. §§ 1-277(a) and 7A-27(d)(1) (2001)). Here, plaintiff does not

argue the Order appealed affects a substantial right, and the trial court did not certify

this case for appeal pursuant to N.C. R. Civ. P. 54(b). See IO Moonwalkers, Inc. v.

Banc of Am. Merch. Servs., LLC, 258 N.C. App. 618, 627, 814 S.E.2d 583, 589 (Dillon,

J., concurring) (citation omitted) (“[T]he plain language of Rule 54(b) requires that

the trial court expressly state in the order that it has determined that there is ‘no just

reason for delay’ for it to be properly certified as a final judgment.”), disc. rev. denied,

371 N.C. 341, 814 S.E.2d 101 (2018).

B.

In the absence of a Rule 54(b) certification or a showing that the Order

appealed affects a substantial right, “this Court has jurisdiction to review some

interlocutory family law orders under North Carolina General Statute § 50-19.1.”

Bezzek v. Bezzek, 264 N.C. App. 1, 4, 824 S.E.2d 865, 867 (2019); see also N.C. Gen.

Stat. § 7A-27(b)(3)(e) (2021) (allowing for immediate appeal when an interlocutory

order or judgment determines a claim prosecuted under N.C. Gen. Stat. § 50-19.1.).

Section 50-19.1 provides, in pertinent part:

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Opinion of the Court

Notwithstanding any other pending claims filed in the

same action, a party may appeal from an order or judgment

adjudicating a claim for absolute divorce, divorce from bed

and board, the validity of a premarital agreement as

defined by G.S. 52B-2(1), child custody, child support,

alimony, or equitable distribution if the order or judgment

would otherwise be a final order or judgment within the

meaning of G.S. 1A-1, Rule 54(b), but for the other pending

claims in the same action.

N.C. Gen. Stat. § 50-19.1 (2021) (emphasis added). Appellate jurisdiction under

section 50-19.1 does not require the appellant to demonstrate the order affects a

substantial right, nor does it require the trial court to certify the order for immediate

appellate review pursuant to Rule 54(b). Beasley v. Beasley, 259 N.C. App. 735, 742,

816 S.E.2d 866, 873 (2018). Thus, plaintiff must demonstrate the trial court’s 8

December 2021 Order is a final order “adjudicating a claim for . . . equitable

distribution . . . .” for this Court to have jurisdiction to hear this appeal. § 50-19.1.

As previously noted, plaintiff raises the issue of whether the trial court

intended to enter an interim allocation with a distributive award, or a final judgment

on all issues of equitable distribution. Our review of the transcript and the record

reveals the written Order from which plaintiff appeals is final for the purposes of

equitable distribution, and thus, immediately appealable. The Order states the trial

court conducted a full evidentiary hearing “on all remaining issues of equitable

distribution.” The trial court concluded as a matter of law that “[n]o other assets or

indebtedness remains subject to this court’s jurisdiction,” and declared that “[t]his

judgment is a final judgment on all issues regarding the issue of Equitable

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Opinion of the Court

Distribution pursuant to [N.C. R. Civ. P. 54(b)].” The trial court did not schedule

future proceedings to be conducted on the matter. There is no indication that the

Order is temporary or subject to change, or that there is anything remaining to be

judicially determined on the issue of equitable distribution. Therefore, we have

jurisdiction to review this final equitable distribution Order pursuant to N.C. Gen.

Stat. §§ 7A-27(b)(3)(e) and 50-19.1.

III.

We now turn to address plaintiff’s sole issue presented on appeal: whether the

trial court erred by entering an equitable distribution order after plaintiff’s discharge

in bankruptcy.

“In 1981, our legislature provided a framework for the equitable division of

marital property upon divorce by enacting the Equitable Distribution Act, now

codified as N.C.G.S. §§ 50-20 and 50-21.” Armstrong v. Armstrong, 322 N.C. 396, 400-

01, 368 S.E.2d 595, 597 (1988) (citation omitted). In 1982, the United States Congress

passed the Uniformed Services Former Spouses Protection Act (“USFSPA”), codified

in part as 10 U.S.C. § 1408, which “authorized the states, after 25 June 1981, to

classify military retirement pay as either marital or separate property and to provide

for direct payments to a former spouse who was married to the member for at least

ten years while the member performed military service.” Id. at 401, 368 S.E.2d at

597-98 (citing 10 U.S.C. § 1408(c)(1) (1983)). “In response to this federal enactment,

our legislature amended the Equitable Distribution Act to include within its

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definition of marital property ‘all vested pension and retirement rights, including

military pensions eligible under the federal . . . [USFSPA].’” Id. at 401, 368 S.E.2d at

598 (quoting N.C. Gen. Stat. § 50-20(b)(1) (1987)); see also N.C. Gen. Stat. § 50-

20(b)(1) (2021) (“Marital property includes all vested and nonvested . . . military

pensions eligible under the federal [USFSPA].”).

A.

Our standard of review on appeal from a final equitable distribution order is

well-settled:

When the trial court conducts a trial without a jury, the

trial court’s findings of fact have the force and effect of a

jury verdict and are conclusive on appeal if there is

competent evidence to support them, even though the

evidence could be viewed as supporting a different finding.

A trial court’s unchallenged findings of fact are presumed

to be supported by competent evidence and are binding on

appeal. Findings not supported by competent evidence are

not conclusive and will be set aside on appeal. By contrast,

conclusions of law drawn by the trial court from its findings

of fact are reviewable de novo on appeal.

Reynolds Am. Inc. v. Third Motion Equities Master Fund Ltd., 379 N.C. 524, 529, 866

S.E.2d 869, 880-81 (2021) (cleaned up). Additionally, “[t]he division of property in an

equitable distribution is a matter within the sound discretion of the trial court.”

Cunningham v. Cunningham, 171 N.C. App. 550, 555, 615 S.E.2d 675, 680 (2005)

(quotation marks and citation omitted).

It is well established that where matters are left to the

discretion of the trial court, appellate review is limited to a

determination of whether there was a clear abuse of

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discretion. A trial court may be reversed for abuse of

discretion only upon a showing that its actions are

manifestly unsupported by reason. A ruling committed to

a trial court’s discretion is to be accorded great deference

and will be upset only upon a showing that it was so

arbitrary that it could not have been the result of a

reasoned decision.

White v. White, 312 N.C. 770, 777, 324 S.E.2d 829, 833 (1985) (citations omitted).

B.

Plaintiff effectively challenges the trial court’s conclusion of law 3, that “the

defendant’s right to prosecute her claim for a portion of the plaintiff’s military

retirement has not been lost by virtue of the plaintiff’s discharge in bankruptcy.”

It is undisputed that plaintiff was granted a discharge as relief in his Chapter

13 bankruptcy. The debt relating to defendant’s equitable distribution claim was

provided for by plaintiff’s Chapter 13 Plan and was discharged by the bankruptcy

court. Plaintiff contends a North Carolina trial court has no mechanism for the

involuntary assignment of a portion of a servicemember’s military pension to the

servicemember’s former spouse after a bankruptcy discharge of an equitable

distribution claim. Plaintiff asserts the trial court’s conclusion of law stands in direct

contradiction to the holdings in Perlow v. Perlow, 128 B.R. 412 (E.D.N.C. 1991),

Justice v. Justice, 123 N.C. App. 733, 475 S.E.2d 225 (1996), and Hearndon v.

Hearndon, 132 N.C. App. 98, 510 S.E.2d 183 (1999), all of which addressed the

application of dischargeability proceedings to equitable distribution claims. We

disagree.

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Opinion of the Court

In Perlow, the court reasoned that following a petition for a Chapter 7

liquidation, a bankruptcy trustee acts as “a hypothetical lien creditor and a

hypothetical bona fide purchaser of property from the debtor,” such that “the vested

interests of the [non-filing spouse] in any specific marital property were cut off by the

bankruptcy filing.” 128 B.R. at 415. Thus, the court determined that “because Ms.

Perlow failed to object to Mr. Perlow’s discharge or request an exception from the stay

in a timely manner, her general unsecured claim for equitable distribution was

discharged along with Mr. Perlow’s other debts . . . .” Id. at 416 (citation omitted).

This holding in Perlow was expressly relied upon by this Court’s decisions in Justice

and Hearndon. The holdings in Perlow, Justice, and Hearndon stand for a general

rule that the non-filing spouse’s “interests in marital property [are] cut off by the

filing of [a] bankruptcy petition where the [non-filing spouse’s] rights had not been

fixed [pre-petition].” Perlow, 128 B.R. at 415.

C.

However, plaintiff acknowledges the fly in the ointment, Walston v. Walston,

190 B.R. 66 (E.D.N.C. 1995), “upon which the trial court clearly relied as the grounds

for its decision.” The court in Walston acknowledged the reasoning in Perlow, but

limited this general rule based on the nature of the property at issue. Walston, 190

B.R. at 68. Specifically, the non-filing spouse has a “proprietary” interest in a military

pension that is not a dischargeable claim. Id. at 67. As an opinion of a United States

District Court, Walston is merely persuasive authority. Nevertheless, Walston is

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“instructive and must be taken into account, particularly in view of the fact that it is

a decision of a federal court interpreting federal bankruptcy law.” Justice, 123 N.C.

App. at 737, 475 S.E.2d at 229 (construing Perlow).

The facts in this case align closely with those in Walston. In Walston, the court

addressed the question of “whether Ms. Walston had a specific right to the military

pension, or merely a general right to have the marital property distributed through

an equitable distribution action.” 190 B.R. at 67. The court held:

[a]s a matter of law, Ms. Walston has a marital property

right in the [military] pension, and this right is not held in

the nature of a creditor’s claim against appellee’s estate as

defined in 11 U.S.C. § 101(5). Ms. Walston further has a

right to prosecute her equitable distribution action, and

this right has not been lost by virtue of her former

husband’s discharge in bankruptcy.

Id. In reaching its holding, the court reasoned that “Perlow makes sense only when

applied to the majority of cases which involve real and personal property,” 190 B.R.

at 68, “[b]ut Perlow’s rationale is inapplicable to military pensions.” Id. “Unlike

furniture or other personal possessions, a military pension could not be reached by a

creditor in bankruptcy . . . .” Id. Therefore, “[t]here is no reason to treat Ms. Walston

as a creditor whose rights to this property were discharged by bankruptcy, since none

of Mr. Walston’s secured creditors could have ever reached this property.” Id.

“Perlow’s outcome resulted from Ms. Perlow’s failure to file a lis pendens or

obtain an execution lien on the personal property.” Id. (citing Perlow, 128 B.R. at

415). “North Carolina law does not authorize the filing of a lis pendens against a

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pension, and thus cannot be said to require this step be taken in order to protect

pension rights.” Id. at 69. The court’s “holding that marital property rights in a

pension are not dischargeable in bankruptcy follows a long line of cases which have

reached the same conclusion.” Id. (citing Bennett v. Bennett, 175 B.R. 181, 184

(Bankr. E.D. Pa. 1994)).

In this case, defendant has a proprietary interest in the military pension that

survives plaintiff’s bankruptcy discharge. Thus, defendant is entitled to prosecute a

claim for distribution of that per se marital property. See N.C. Gen. Stat. § 50-20(b)(1);

see also Walston, 190 B.R. at 70 (“Mr. Walston’s discharge in bankruptcy should have

no effect upon the pending state court action for equitable distribution of the military

pension.”). Defendant’s remaining general claim for an equitable distribution is, as

stated in open court, “gone.” Consistent with both Perlow and Walston, the trial court

accurately concluded in its written Order that “[n]o other assets or indebtedness

remains subject to this court’s jurisdiction.” “Entry of an order herein is more akin

to exercising a property right than to collection of a pre-petition debt.” Walston, 190

B.R. at 69 (cleaned up).

IV.

For the foregoing reasons, we discern no abuse of discretion in this case.

AFFIRMED.

Judges WOOD and STADING concur.

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