Domestic Relations – Equitable Distribution – Stipulations – Marital Debt Payments – Divisible Property – ‘Credit’ – Bank Account – Commingling – Transmutation

Stovall v. Stovall. (Lawyers Weekly No. 10-07-0693, 16 pp.) (Donna S. Stroud, J.) Appealed from Stokes County District Court. (Angela B. Puckett, J.) N.C. App.

Holding: Where the parties stipulated that an equal division was equitable but disagreed about the treatment of post-separation payments on a marital debt, the trial court could treat the debt payments as divisible property and divide them unequally.

We affirm the trial court’s equitable distribution order.

The parties’ stipulations complicated this case.

The parties stipulated in the pretrial order that “an equal division would be equitable.” However, the parties also stipulated in the pretrial order that “Schedule I attached hereto is a list of the debts, if any, of the parties hereto that were in existence and were unpaid as of the date of the separation of the parties upon which the parties’ agreements and disagreements with regard to specific debts are noted” and that “the Presiding Judge shall rule … with regard to Schedule I, which debts are marital, what were and are the outstanding balances of said marital debts, which party should receive credit for the prior payment of said marital debts, and which party should pay the said marital debts that remain unpaid. …”

Schedule I includes the mortgages on the New Madison Tobacco warehouse, classified as marital property.

Stipulations in pretrial orders should be construed in the same manner as a contract between the parties.

The pretrial order is ambiguous, as it provides for an equal distribution, but then also provides for the trial court to consider “which party should receive credit for the prior payment of said marital debts,” a factor for unequal distribution.

The plaintiff-wife argued that the pretrial order limited the trial court to determining the value of divisible debt, which would have to be divided equally in accord with the stipulation to an equal distribution. The defendant-husband was essentially asking the trial court for an unequal distribution of the divisible property related to New Madison, based upon distributional factors under G.S. § 50-20(c)(11a).

The trial court addressed the conflict within the pretrial order. Neither party has assigned error to the trial court’s conclusion as to the meaning of the stipulations: “The Court cannot, as a matter of law, make any division of marital and divisible properties other than an equal division, with the exception of the items in Schedule I regarding the stipulation that the Court was to determine any credit to be given for prior payments of marital debts.”

We agree with the trial court in its construction of the stipulations of the pretrial order. Because the pretrial order provided that the trial court must determine “which party” would receive credit for the payments, the trial court could distribute the divisible property related to the New Madison debt unequally, if the trial court decided that an unequal distribution of this divisible property would be equitable. This interpretation harmonizes the two apparently contradictory stipulations and is in accord with the manner in which the parties presented evidence before the trial court.

The trial court properly classified the husband’s post-separation payments as divisible property, and went on to conclude that “New Madison Tobacco Warehouse must be divided equally, with the exception that the defendant is entitled to a credit of $160,000 for the payments of the marital debt in accordance with the Pre-trial Order.”

Though the trial court labeled the $160,000 as a “credit,” in actuality, it treated the $160,000 as divisible property and concluded that an equal distribution was not equitable, and thus gave defendant $160,000 more of New Madison due to his previous payments.

The trial court specifically set forth findings as to its reasons for ordering an unequal distribution in this regard, and we conclude that the trial court’s unequal distribution of divisible property arising from defendant’s post-separation payments was not an abuse of discretion in the context of the parties’ stipulations.

The husband’s own testimony supports the trial court’s finding that he paid $20,000 a year on the New Madison debt as he stated that he paid approximately $20,000 to $30,000 a year to maintain New Madison. Although there was also evidence which could have supported a finding of a higher amount of payments toward the New Madison debts, we do not reweigh the evidence on appeal.

As the trial court was required, pursuant to the parties’ stipulations, to divide the marital and divisible property equally except as to Schedule I, which included only debt payments, it could not consider the tax consequences to the husband; tax consequences are only considered “if the court determines that an equal division is not equitable. …” G.S. § 50-20(c). Thus, the trial court did not err in not considering the tax implications to the husband.

Even if the funds the husband deposited into the First Citizens Bank money market account during the marriage were separate funds, he commingled them with marital funds and failed to trace the separate funds into their form at the date of separation.

The husband failed to rebut the presumption under G.S. § 50-20(b)(1) that the funds in the account as of the date of separation were marital. The evidence showed that the husband used the account during marriage by putting marital funds “in and out” of the account without presenting sufficient evidence to trace any separate contributions, so the trial court properly classified the entire account balance as marital property.

Affirmed.