In a recent case involving trust property in an equitable distribution dispute, the North Carolina Court of Appeals vacated and remanded a trial court’s decision not to add a trust as a necessary party to the case.
In Wenninger v. Wenninger, Husband appealed from three orders entered by the trial court. The orders dealt with, among other things, the issues of equitable distribution and a revocable trust that held marital property.
The revocable trust held property that was not owned by the trust at the time of the parties’ separation, meaning that property was subject to equitable distribution. However, the trial court ruled that it could not distribute the property held in the trust because the trust was not a party to the action. Rather than join the trust as a party to the equitable distribution case, the trial court made a ruling without considering the marital property held in the trust. The trial court ordered an unequal distribution of the marital estate, with 60% going to Wife and 40% going to Husband.
Husband appealed three orders entered by the trial court. Regarding the trust property, he stated that the trial court erred when it failed to add the trust as a necessary party. The appellate court agreed with Husband on this matter, so this was the only issue it considered among Husband’s appeals because the other appeals were made unnecessary by this decision.
In their ruling, the Court of Appeals stated that the North Carolina Rules of Civil Procedure require that if certain other parties are necessary or proper parties to the case, they should be joined to the case.
The Court further states that a necessary party’s interest is directly affected by the outcome of the case, and a judgment cannot be made without adding the person or entity as a party. A proper party to a case may be joined, but it is not a requirement.
Necessary parties, on the other hand, are required to be joined to a case, and the appellate court stated that the lower court should have refused to make a judgment in the matter until the trust was joined to the case as a party.
When determining an equitable distribution, a court must consider the assets, debts, income, businesses, and various other factors before dividing the property. Because the trial court made an equitable decision ruling without considering the marital property held within the trust, the decision was vacated and remanded by the appellate court.