Recent North Carolina Court of Appeals Decisions Regarding Family Law

Barker v Barker – Civil Contempt

Defendant/Father appealed from an order finding him in contempt for failure to comply with a consent order directing him to pay a portion of his child’s college tuition and expenses. The order was affirmed by the North Carolina Court of Appeals. The parties signed a consent order on August 20, 2003, which resolved all of the issues between them regarding child custody, child support, equitable distribution and spousal support. The issue pertinent to the appeal was the parties’ agreement regarding payment of tuition costs and expenses for college. Father agreed to pay 90% and Mother agreed to pay 10% of the tuition, room and board costs of the children’s college education, as long as the “diligently applied themselves to the pursuit of education.”

The parties had two children, a daughter named Holly and a son named Alex. In the Fall of 2010, Holly enrolled in college. After her first semester, her GPA was 1.955 and she was placed on academic probation and she stayed on academic probation when her cumulative GPA for the 2010-2011 school year was 1.908. Father paid his 90% share for that school year.

Holly only completed 7.5 hours of credit out of the 16.5 that she was enrolled in for the Fall 2011 semester after her best friend died unexpectedly. Holly was treated for depression and prescribed medication and therapy. She finished with a 1.000 GPA for the semester. For the Spring 2012 semester, her GPA was 2.907 and her cumulative GPA increased to 2.000. Father decided he would not pay Holly’s tuition for 2011-2012 until he saw her transcript and notified Holly and Mother that he would not pay her college expenses. Mother sought to hold Father in contempt for his failure to pay the tuition and expenses and the trial court found that Holly had diligently applied herself in college, that Father had the ability to pay the tuition and expenses, and found Father in civil contempt. Father appealed, contending that Holly had not diligently applied herself to the pursuit of her education.

The Court of Appeals held that parents may agree to contractual obligations beyond those imposed by law, such as paying for college expenses after a child turns 18 and graduates high school, and that such an agreement is enforceable. The Court held that consent judgments are contracts, that contracts are to be interpreted as written when a term is unambiguous, and that undefined terms in a contract are to be given ordinary significance. The trial court made Findings of Fact regarding the scholarships Holly obtained and maintained, the heavy course loads that she took, including upper level courses, taking internships, the sudden death of her friend and Holly’s involvement with the funeral, that she was working to graduate in three years, and that she was no longer on academic probation and found that she had diligently applied herself. The Court of Appeals held that the parties’ agreement did not define what constituted ‘diligently’ applying themselves and that the trial court’s findings regarding heavy course loads, internships, scholarships and improvement of her GPA supported the finding of fact that she was diligently applying herself. The Court held that while her academic probation was some evidence of not diligently applying herself, the trial court’s findings show that despite setbacks, Holly was persistent and improved her grades. Therefore, there was sufficient evidence to support the conclusion that she was diligently applying herself and Father was required to pay his 90%.

Father also contested the trial court’s findings that he willfully failed to comply and that he had the ability to comply. The trial court found that Father had ‘decided’ not to pay the tuition and expenses in order to ‘leverage’ Holly to do better in school. Father had also testified that after receiving the 2011-2012 grades he was willing to pay the expenses going forward ‘with no problems whatsoever.’ The Court held that his own testimony indicated that Father’s failure to pay was because of his belief that Holly was not performing as she should, not because he lacked the ability to pay.

Watkins v Watkins – Equitable Distribution

Defendant/Husband appealed the order of equitable distribution and on numerous grounds. One issue presented on appeal was the valuation of two IRAs. Both IRAs were opened during the marriage, but funded via rollovers from two accounts with his employment that started prior to marriage. The trial court did not use the marital coverture fraction found in N.C.G.S. 50-20.1 when valuing the marital and separate portions of the accounts. Husband’s appeal argued that the coverture fraction should have been applied to both IRAs. The Court of Appeals analyzed precedent and the statute, and differentiated between retirement accounts that are deferred compensation, meaning the funds cannot be accessed by the employee until they are vested, and retirement accounts that contain funds that are immediately available to the employee. The Court held that one of Husband’s IRAs was funded through his 401k and there was no evidence that the contributions were not immediately available to Husband. Therefore, the Court held that this IRA was not subject to the coverture fraction. However, Husband’s other IRA was funded through his pension plan, that the benefit was based on years of service, and that the coverture fraction should apply when the marital component was valued by the trial court.

Another issue presented by Husband’s appeal was the value of Wife’s 401k account. Husband contended that the trial court found the value to be $221,519 and that the actual value should have been $212,518.64. However, the Court of Appeals held that this error, if it was an error, benefited Husband and thus there was no prejudice to him and no issue that could be appealed.

Another issue in the appeal was the trial court’s classification of two parcels of real property as Wife’s separate property. One parcel of property was owned by Wife prior the marriage, was never titled in Husband’s name, and was rented during the marriage and the rent was used to pay the mortgage on the property. The Court of Appeals held that the property was properly classified as Wife’s separate property. Husband’s contentions that his acts of painting the walls and installing a sheetrock ceiling actively increased the value failed because he had the burden of proving that the increase in value of the property was marital. Wife’s other parcel of property was purchased during the marriage, but was funded through a loan on the first parcel of property, was placed in Wife’s sole name, and all expenses for the house were paid by rent derived from the house. The trial court held that this was Wife’s separate property and the Court of Appeals agreed, finding that while Husband proved the property was purchased during the marriage and was thus presumed marital, Wife rebutted the presumption by proving that the property was acquired by separate property and maintained as separate property.

Another issue that was raised by Husband was that a Rolex watch Wife received from her employer should be marital property, not separate property as found by the trial court. The Court of Appeals held that since the watch was not given as compensation, but as a gift, it was properly classified as Wife’s separate property.

Kelly v Kelly – Modification of Alimony

Defendant/Husband sought a decrease in his alimony obligation of $12,000 per month.  The alimony amount had been set in a Consent Order entered in December 2004.  Husband sought a decrease based on his alleged decreased ability to pay support and the ex-wife’s changed financial needs and that such changes were a substantial change of circumstances.

Husband alleged that his income had decreased for a number of reasons.  However, the trial court found that Husband’s income had actually increased on average since 2004, and had only been lower in the two most recent years prior to his filing of the motion to modify.  This was the same pattern in the years prior to the 2004 Consent Order.  Additionally, Husband had increased his discretionary spending voluntarily, including vacations, a three-car garage addition, and the purchase of a boat and dock repairs, in addition to paying off unsecured debt.

Husband also contended that the trial court failed to make enough Finding of Fact to support its order, stating that a three page order was not sufficient after a three day trial.  The Court of Appeals held that the trial court is required to find enough facts to support its decision and that ultimate facts, rather than all facts, are sufficient.  The Court of Appeals held that the trial court’s findings that Husband’s depletion of his separate estate was voluntary was not in error.  Husband claimed that the trial court failed to consider that he had aged eight years and that his health had declined.  However, the Court of Appeals held this was not error since Husband failed to provide any evidence that these factors affected his ability to work or his ability to pay alimony.

Husband also contended that Wife’s expenses should have decreased since the 2004 Consent Order.  The Court of Appeals rejected this argument, stating that there is no law or requirement that a dependent spouse reduce living expenses over time.  The Court of Appeals upheld the trial court’s order denying Husband’s motion to modify alimony.