Brown v. Brown

Citations: 434 S.E.2d 873; 112 N.C. App. 15; 1993 N.C. App. LEXIS 1011Docket: 9224DC669

Court: Court of Appeals of North Carolina; September 21, 1993; North Carolina; State Appellate Court

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JoAnn Brown and D.T. Brown, Jr. were married in 1949 and separated in 1981. JoAnn filed for alimony, possession of the marital home, and equitable distribution in 1982, leading to a Consent Judgment that awarded her $1,200/month in temporary alimony and possession of the marital home, while requiring D.T. to maintain her health insurance. In 1983, JoAnn amended her complaint to include Paul Brown and his ex-wife, Gladys, as additional defendants, claiming an equitable interest in properties allegedly purchased with funds from the Brown Brothers Construction Company, a significant marital asset. 

In 1984, the trial court granted Paul partial summary judgment, dismissing JoAnn's claims against properties titled in Paul and Gladys' names, but denied it for properties titled in Paul and D.T.'s names. A referee was appointed in 1988 to identify and value marital assets for equitable distribution. After a preliminary report and subsequent supplemental report addressing objections, JoAnn filed for an interim distribution in October 1991 under N.C.G.S. 50-20(i1). The trial court ordered D.T. to pay JoAnn $400,000 and granted her a lien against his property, with provisions for Brown Brothers Construction Company to cover the payment if D.T. defaulted. JoAnn's attorneys were appointed as receivers for the company’s assets to ensure payment distribution. D.T. and Paul appealed, claiming the interim award violated N.C.G.S. 50-20(i1). The court agreed with the defendants' argument.

N.C.G.S. 50-20(i1), effective October 1, 1991, allows for interim distribution of marital property, enabling a court to order the spouse controlling marital assets to transfer the use and possession of those assets to the other spouse during equitable distribution proceedings. However, any assets transferred must be fully accounted for in the final equitable distribution judgment, and such transfers do not limit either spouse's rights to contest asset classification or value later. The statute does not grant the court authority to order lump sum cash payments as interim awards when cash is not an identifiable marital asset. The purpose of the statute is to prevent one spouse from having control over all cash and income-generating assets while the other derives no benefits, potentially leading to hardship and incentivizing delays in proceedings. The court’s interpretation confirms that 50-20(i1) is confined to in-kind asset transfers and does not support cash payments; thus, the trial court exceeded its authority by ordering a $400,000 payment without evidence of such cash as a marital asset. Transfers under this provision are meant to allow the receiving spouse to utilize the asset as intended, such as living in the marital home or benefiting from rental income, rather than transferring non-existent or non-marital assets.

The statute allows for an interim transfer of assets during the process of equitable distribution, ensuring that neither party's rights are prejudiced in the final distribution. Specifically, any assets transferred are subject to a full accounting in the final judgment, and such transfers do not affect either spouse's right to contest classification or distribution. A court-ordered breakup of assets for cash transfer would undermine this protective intent. The defendant's proposal to sell the family business for cash would negatively impact both parties' long-term financial well-being, as the business is their main income source.

North Carolina law mandates that all marital property distributions adhere closely to N.C.G.S. 50-20, which presumes that distributions are to occur in kind. The trial court must classify, value, and distribute property accordingly. A distributive award, allowed only when in-kind distribution is impractical, serves as a secondary remedy to facilitate equitable distribution. Interim awards, intended for quick relief before final resolution, cannot include cash distributive awards because the requisite findings for impracticality have not yet been made.

The statute aims to maintain the integrity of the marital estate until a final order is issued. Provisions exist to prevent waste or loss of marital property, and any waste is considered in the distribution process. Statutory construction principles indicate that amendments do not change existing law beyond what is expressly stated. Since N.C.G.S. 50-20(i1) only addresses asset transfers, it does not authorize lump sum cash payments or distributive awards, reinforcing that these remedies are not permissible under this provision.

The language differences between sections 50-20(i1) and 50-20(e) indicate that 'asset transfers' in the former do not include 'distributive awards.' While 50-20(e) permits 'distribution of marital property' and 'distributive awards,' 50-20(i1) allows a court to order a spouse to 'transfer the use and possession of some or all of (the marital) assets.' The principle of statutory construction suggests that changes in phrasing imply a change in meaning, as established in Latham v. Latham. The legislature could have included terms related to 'distributive awards' in 50-20(i1) but did not, suggesting an intention to exclude such options. Additionally, allowing equitable and lump sum distributions under 50-20(i1) would render sections 50-20(a) and (d) unnecessary, contradicting the legislative intent that all provisions remain effective. The court can still provide adequate relief for the plaintiff by transferring an interest in Brown Brothers Construction, enabling her to benefit from company profits without needing to sell the business, which 50-20(i1) aims to prevent. The defendants argue the trial court erred in not considering all provisions of section 50-20 and in prematurely awarding the lump sum cash award. However, since the court's lump sum award was found to be erroneous, the merits of these assignments of error are deemed unnecessary to address. Notably, if the trial court considers all provisions of section 50-20 and rules on objections to the referee's report, it would lead to a final equitable distribution order, thus undermining the interim transfer's purpose as initially intended by the legislature. Consequently, the trial court's decision is vacated.

Judge Greene dissents regarding the interim cash award of $400,000 to the plaintiff, arguing that it does not contravene N.C. Gen. Stat. 50-20(i1). Greene contends that the trial court was not required to consider all provisions of section 50-20 when making the award or to rule on objections to the referee's report. Although the appeal is interlocutory and typically would be dismissed, Greene suggests treating it as a petition for writ of certiorari due to significant issues concerning the application of N.C. Gen. Stat. 50-20(i1), particularly whether the statute allows for interim distributive awards.

While section 50-20(i1) does not explicitly address distributive awards, Greene emphasizes the need to interpret the statute as a whole. Section 50-20(e) permits distributive awards when equitable distribution of marital property in kind is impractical. Greene argues that this section could apply to interim awards, as they may help ensure equity between parties and facilitate interim transfers of marital assets.

Greene asserts that any interim distributive award must include adequate written findings of fact. The court found "just cause" for the interim award, supported by evidence that the plaintiff has faced significant financial hardship over a decade, including reliance on minimum-wage jobs and limited access to marital assets. The ordinary meaning of "just cause" includes fair and reasonable grounds, which Greene believes applies in this case, justifying the interim award.

The trial court must find that an in-kind transfer of marital assets is impractical before issuing an interim distributive award. Despite the absence of such a finding in the order, the omission does not warrant reversing the award as the defendants' assignment of error is insufficient for review. The assignment lacked specificity, merely challenging the order broadly without addressing specific findings. Evidence supports that transferring a portion of a construction company to the plaintiff would disrupt operations and converting partnership interests to cash would be challenging.

The defendants contend that interim awards must comply with all provisions of Section 50-20, but interim allocations are treated like preliminary injunctions. They can be decided based on verified pleadings and affidavits, with the moving party only needing to show a likelihood of success in the equitable distribution proceeding. The trial court's process for interim awards differs from that for final judgments, as it does not require the evaluation of distributional factors. 

In this case, the trial court reviewed a referee's report valuing the marital property at $2.4 million without evidence of marital debt, indicating the plaintiff's likelihood of success for an interim award of at least $400,000. The court was not required to address the defendants' objections to the referee's report before ordering the interim allocation, as such obligations pertain only to final judgments. Thus, the defendants can raise their objections before the final equitable distribution judgment. The analysis supports affirming the trial judge's order granting the plaintiff an interim cash award.