Intent Can Confer Unequal Distribution

Montague v. Montague, 767 S.E.2d 71 (N.C. App. 2014)

Equitable Distribution (ED) is one of the mechanisms by which former spouses separate their personal and real property. What if the during the marriage one party opens a small business? Businesses are subject to ED, and valuation of a business can be very complex. In the case below, we encounter one issue where a family law specialist with experience in Equitable Distribution can be valuable.

• Facts: Plaintiff husband filed claims for divorce and ED in 2010. He was active in real estate at the time, operating L.T. Montague Properties, LLC (hereafter, LLC), which was opened during the marriage with Plaintiff as 51% owner and Defendant 49%. Plaintiff’s parents had transferred a commercial property named Montague Center (hereafter, The Center) to LLC. After an ED hearing in 2012, judgment was entered allowing unequal distribution in favor of the Plaintiff. As part of the unequal judgment, the trial court gave much weight to intent behind Plaintiff’s parents transfer of The Center to LLC. Defendant wife appealed.
• Issue: Was the trial court in error in giving weight to Plaintiff’s parents intent as a distributional factor?
• Holding:
• Rationale: The presumption is that a trial court will divide the net value of all marital and divisible property equally between spouses. In some circumstances, a court may find that equal division is not equitable. In making that determination, a trial court considers certain distributive factors set out by statute (§ 50-20(c)). There are usually multiple factors at play, and a court must assign weight to each one in making the determination to divide property unequally. Evaluating a spouse’s interest in a business being divided during ED is difficult. The trial court here took into consideration the “history and acquisition” of The Center, and found that it weighed in favor of the Plaintiff. They also explained that the conveyance of The Center to LLC was also intended to be part of Plaintiff’s parents’ estate planning. Furthermore, Defendant did not make any contributions towards the LLC, nor did she offer any services to the LLC.
• Lessons and Observations:

1. This Court cited a previous decision in Hunt, stating that consideration of intent was permissible when determining unequal distribution. The difference is that the Hunt Court was not determining distribution when considering intent but rather whether the property was marital or separate. In this case, the property seemed to have already been classified as marital. It is a slight jump to go from such classification to being a factor in distribution.
2. Classification and arguing distributive factors as applied to business interests is difficult and complex. Although not discussed, Defendant seemed not to cooperate fully with the ED process (her ED affidavit failed to list values of certain assets that may have been costly at trial). There are many distributive factors in the ED statute, and some other factors could have applied to the LLC and The Center. It is unclear if those arguments were made at trial.