Unequitable distribution of marital property can’t include non-economic factors

The trial court erroneously considered improper non-economic factors in determining an unequitable distribution was equitable in a division of marital property, the North Carolina Court of Appeals has ruled, vacating the order and remanding.

A couple met in Japan, where they married in February 2005. They later moved to North Carolina and the husband retired from the military in 2009.

The couple separated in July 2014 and the husband filed for divorce in 2021. When the wife filed an answer, she stated that “on June 13, 2015[,] the parties entered into a Separation Agreement” and attached a copy. Among other provisions, the agreement required the husband to pay the wife $1,000 per month in spousal support.

In a later filing, the wife sought an unequal division of the marital estate. She did not reference the separation agreement or attach it as an exhibit.

During a bench trial, the husband introduced the separation agreement into evidence and acknowledged the document was missing a notarized page containing the wife’s signature, as required by statute. He asserted the document was still a valid contract without the missing page.

The wife testified that the husband abused alcohol in the years leading up to their separation, had been verbally and physically abusive and made threats to kill her. The husband denied these claims.

After making findings of fact, the trial court determined that an unequal distribution in favor of the wife was equitable, citing factors including the husband’s alcohol use and domestic violence.

The husband appealed.

Writing for the court in Wheeler v. Wheeler, Judge Toby Hampson reversed. He was joined by Judges Jeffery Carpenter and Christopher Freeman.

The husband first argued that the trial court erred by failing to make a finding about the validity of the parties’ separation agreement, because if the document were found to be valid, it would bar the wife’s equitable distribution claim.

However, the husband never asserted a theory in the proceeding below that the separation agreement barred the wife’s equitable distribution claim; his pleadings did not mention the agreement, let alone raise it as a defense.

Nor did the husband raise the agreement as a defense at trial or ask the trial court to rule on the issue, the court said, meaning the argument was not preserved for review.

The court did agree with the husband that the trial court erred in its application of the statutory distributional factors in determining an unequal division of marital property in favor of the wife was equitable.

N.C. Gen. Stat. § 50-20 governs the distribution of marital and divisible property upon divorce. But the trial court improperly considered factors related to marital fault and misconduct in deciding to order an unequal division of marital property in favor of the wife, the court found.

“[A]lcohol abuse, domestic violence, death threats and taking a spouse’s identity documents are examples of marital misconduct that are ‘not related to the economic condition of the marriage,’” the court wrote. “Therefore, because this information is ‘not germane’ to the division of marital property under Section 50-20(c), the trial court erred by considering it.”

The trial court made three other findings in determining an unequal division, but on appellate review, the court could not determine the weight assigned to the inappropriate factors.

“Therefore, we must vacate the Order and remand this case to the trial court ‘for a reassessment of its decision to order an unequal division without considering the improper factors,’” the court said.

Finally, the husband asserted that the trial court erred by ordering him to maintain Survivor Benefit Plan (SBP) Coverage with the wife as the beneficiary.

But the court determined that evidence was in the record about the existence of SBP coverage as part of the husband’s overall military retirement benefits, and that neither party specifically raised the status of SBP for the purpose of classification.

“In particular, we observe that [the husband] did not even mention SBP at trial – much less challenge its status as distributable marital property, as he now does on appeal,” the court wrote. “Thus, we cannot say the trial court, based on the stipulations and evidence before it, exceeding its authority by classifying SBP as marital property and ordering [the husband] to maintain it with [the wife] as the beneficiary.”

The trial court did not consider how SBP – a federally administered benefit for military veterans – should interact with the North Carolina equitable distribution statute, an issue yet to be addressed by the appellate court.

“[O]n remand, we instruct the trial court to hold a hearing wherein the parties may present arguments and evidence on the SBP issue,” the court directed. “This hearing should permit arguments regarding the appropriate methods of classification, valuation, and distribution of SBP, including, but not limited to, the subject of whether SBP should be considered a component of [the husband’s] military retirement benefits or as a distinct asset subject to independent distribution. In its discretion, the trial court may reconsider whether [the husband] may be required to ‘maintain’ SBP as part of an equitable distribution order.”

The court vacated and remanded.

Mark L. Hayes of Hayes Law Offices in Durham, who represented the husband, noted that the actual split by the trial court amounted to 99 percent of the marital assets being given to the wife and less than one percent to the husband.

“The decision really emphasizes that fault is not a consideration when dividing the marital assets,” he said. “It’s clear the trial court judge must have believed the story that the husband was abusive – which he denied – but when dividing the assets, we aren’t looking for a bad guy and a good guy; we are dividing the economic enterprise of this marriage.”

Hampstead attorney Heather D. Kaemmer of the Kaemmer Law Firm, who represented the wife, did not respond to a request for comment.