Overview
While you may have learned some of these concepts during your equitable distribution trial, anyone seeking to appeal an equitable distribution order should first understand the general equitable distribution framework. “Equitable distribution” refers to the legal process used to divide marital property, assets, and debts when a married couple divorces. Note that in North Carolina it is “equitable” distribution, not “equal” distribution. Property is supposed to be divided fairly, which may or may not mean equally.
The Court must first classify all assets and debts as either marital, separate, or divisible property. “Marital property” generally includes assets and debts acquired by either spouse during the marriage but before the date of separation. The date of the final divorce decree really doesn’t matter.
“Separate property” includes property which belongs to only one of the spouses. Generally, but not always, separate property was owned by that party before the marriage, or it is derivative of property owned by that party before marriage. Separate property can also arise from gifts or from the active and exclusive efforts of one spouse, although timing is critical. Finally, “divisible property” includes some but certainly not all changes to the value of marital assets and debts after the date of separation but before the date of distribution.
Once the court has sorted the assets and debts into these three categories, it must distribute the marital and divisible property, while permitting the owner of any separate property to keep that property. The court begins with the presumption of an equal fifty-fifty division of the total value of the sum of the marital and divisible property and debts. That is the most common split of assets.
The court also begins with a presumption that it will divide the assets and debts using “in-kind” distribution. For example, if the marital estate consists of two cars, some jewelry, and some furniture, one could expect one spouse to get a car and the jewelry while the other spouse gets a car and the furniture, presuming that division gives each party somewhere close to 50% of the value of the marital estate. Of course an exact split is rarely possible, so the court will then equalize the division by having one spouse pay cash to the other. This cash payment is called a distributive award.
Classification Errors
One major source of error in equitable distribution orders arises when the court does not classify the asset correctly. It may seem like classification should be relatively simple, based on the time that the person obtained the property. Nonetheless, a myriad of rules exist that can make these distinctions more subtle. For example, if one spouse owns a home before the marriage, and the married couple then lives in the home during the marriage, does the home remain the original spouse’s separate property? What if the original spouse pays the mortgage on the home using income he earns during the marriage? What if the other spouse stays in the home after the date of separation and continues to pay the mortgage until the equitable distribution trial? Some of the rules which apply to these situations are intuitive; some seem completely unfair but nonetheless are controlling.
Errors In The Findings
Another type of error arises when the court decides to depart from some of the presumptions already discussed (like the presumption of a 50-50 split, or the presumption that the marital estate will be divided through in-kind distributions). In those situations, the court must make findings of fact related to particular factors. If the court fails to make those findings, then the Court of Appeals will instruct the court to reconsider its order and to make new findings. The court may also err when it does makes the required findings, but those findings are not based on competent evidence.
Comprehensive Review
You can quickly see that the division of a marital estate can present a lot of opportunities for the court to make errors. These opportunities only compound when the estate contains multiple assets and debts, as almost every estate does. Some assets “jump out” as particularly important, like the valuation and distribution of the marital home. Other assets and debts may escape notice. Most people have multiple credit cards, and they may have multiple car loans. Retirement accounts can accumulate over the years as people pass through different jobs. One bank may host a whole series of sub-accounts, from checking to money market accounts.
If a divorcing spouse does not want to “leave money on the table,” then the attorney for their appeal should take each asset and debt, one by one, and examine whether there are any winning arguments for that particular item. For example, in a recent case handled by this firm, the client initially reached out because she did not feel that the distribution of three or four of the assets and debts had been fair. By the time this firm reviewed the entire case and briefed it to the Court of Appeals, we had raised thirteen different issues!
Experience Counts
Appealing an equitable distribution case therefore requires an experienced attorney who has a keen eye for the various rules and exceptions that apply. Surprisingly, then, potential clients rarely ask these two critical questions when interviewing appellate attorneys for an equitable distribution case:
- Have you had success before appealing an equitable distribution appeal?
- When was the last time you handled an equitable distribution appeal?
Every attorney is going to have his share of wins and loses. As I often tell clients, even if you’re making lemonade, you have to at least start with some lemons. No attorney can turn every case into a winner. Sometimes the facts and evidence simply do not support a win. Having some wins does show, however, that the attorney knows what it takes to review, develop, and ultimately argue a case when the equitable distribution order contains (arguable) errors.
Having recent experience with equitable distribution appeals helps for two main reasons. First, the law governing equitable distribution can change significantly, instantly making old arguments based on old cases obsolete. A significant revision to the controlling statute, N.C.G.S. § 50-20, occurred less than a year ago.
Second, recent experience provides some assurance that the attorney actively works in this field. If any attorney claims he can do a great job representing you but hasn’t handled an equitable distribution appeal in ten years, he may simply not know what he’s talking about.
Example Cases
Potential clients should be careful in setting their expectations about their particular equitable distribution case based on their attorney’s wins in prior cases. Again, every case differs in its facts, and even the best attorney cannot win every case. Nonetheless, the following cases handled by this firm give some examples of the sorts of issues which might be raised in your case.
In Dalton v. Dalton, a couple with a fairly typical portfolio of assets, but also with a few rental properties, went through equitable distribution. This firm represented the Husband on appeal, and raised eight ways in which the trial court erred, including:
(1) incorrectly valuing the marital property interest and divisible property interest of the Davis property;
(2) miscalculating the marital property interest of the Frances property;
(3) incorrectly valuing the divisible property value of the Wildflower property;
(4) incorrectly concluding it could only value the properties based on appraisals;
(5) incorrectly valuing the marital property interest of the Honda Odyssey and failing to calculate and distribute the divisible value;
(6) incorrectly valuing the marital property interest of the Dodge truck and failing to make a finding regarding its divisible value;
(7) incorrectly finding the parties valued Defendant’s Vanguard IRA by agreement;
(8) failing to order an in-kind distribution of assets; and
(9) failing to make findings regarding the costs of liquidating assets in order for Plaintiff to pay the distributive award.
The resulting opinion by the N.C. Court of Appeals reversed and remanded on most of those issues, saving our client a significant amount of money.
Other cases, like Gien v. Gien, have a more limited number of issues. In that case, this firm argued about the valuation of two business interests which the Husband had acquired. The Court of Appeals agreed with our argument as to one of the businesses, which resulted in a six-figure win for our client.
Quite recently, this firm won an appeal in Wheeler v Wheeler, an unusual case in that the trial court deviated significantly from the normal 50-50 default division of value. This firm argued on appeal that the deviation was not supported by the court’s findings of fact, since the court had relied on findings of the Husband’s “wrongdoing” for allegedly committing acts of domestic violence. Equitable distribution must be based on purely economic factors, not on finding the “good guy” and the “bad guy.” The Court of Appeals remanded the case to the trial court for new findings and a new division.
Sometimes equitable distribution cases can intersect with other types of law as well. In Bradley v. Bradley, this firm represented a Wife who had filed for equitable distribution in North Carolina. The Husband, who lived in New Jersey, wanted the case conducted in New Jersey, where he believed he would get a more favorable result. The case ultimately became about a legal concept known as personal jurisdiction. This firm prevailed, and the Wife was able to pursue her claims in her home court here in North Carolina.