North Carolina Divorce Lawyers BlogWillis v. Willis
Sam Willis and Sarah Willis were married in August 1981. Sam filed his Complaint on March 28, 1985, seeking a divorce from bed and board, alimony, and equitable distribution. Before the parties married, Sam sold Sarah a house and lot on Claremont Road. Throughout the marriage, the couple lived at the Claremont Road property. Sam made all of the mortgage payments during the marriage. These payments amounted to $9,900. Sarah appeals from the equitable distribution judgment entered pursuant to N.C. Gen. Stat. § 50-20.
On appeal, Sarah raises two issues. This blog focuses on the first issue raised on appeal: whether the trial court erred in its conclusion that the Claremont Road property was marital and that it had actively appreciated in the amount of $9,900.
Sarah argues that the Claremont Road property is her separate property. Sarah argues that the property was purchased by her from Sam before the marriage and has remained solely in her name ever since. Sarah’s reliance on the inception of title to determine the classification of the property is flawed. The Court has recognized that “acquisition” of property is an ongoing process. This is because mortgage payments and other contributions to the property are often made throughout the marriage. Because “acquisition” of property is an ongoing process, property often has a dual classification. Here, the trial judge chose to apply to the Claremont Road property a dual classification and found that its separate property value was $8,410 and its marital property value was $9,900.
Even though the evidence supports the trial judge’s dual classification of the Claremont Road property, the Court of Appeals must determine if the trial judge erred in determining the proportions invested by the separate and marital estates. There is evidence that the Claremont Road property increased in value from purchase date to the parties’ date of separation. At the time of the parties’ marriage, the property had a tax value of $23, 410. The property had an approximate tax value of $40,000 at the time of the parties’ separation. The trial judge determined that the marital estate invested $9,900 into the property during the marriage by way of mortgage payments. The equity is the net value of the property (the present value minus the outstanding mortgage). The trial judge must divide the equity based on the proportion invested by the marital and separate estates.
The trial judge assigned the Claremont Road property a value of $18,310 when he distributed the property. The trial judge also classified the $9,900 made in the form of mortgage payments during the marriage as active appreciation. Mortgage payments are acquisition, not appreciation. Active/passive distinction of the Claremont Road property is of no utility in this case given that the property has a dual classification, and the marital and separate estates are entitled to a proportionate return on their investment whether the appreciation is active or passive.
As a result, the Court of Appeals remanded for the trial judge to determine the net market value of the marital property as of the date of separation and make an equitable distribution that is proportionate to each estate’s return on investment, then distribute.