Case Summary: Watson 2018 – Equitable Distribution

By Ketan P. Soni

Equitable Distribution, Unequal Distribution of Marital Property, Classification, Valuation; COA17-899; August 2018

Dwight Watson v. Gurtha Watson

Wake County

In this nearly 20 year marriage, this case was tried on Equitable Distribution. The court awarded an unequal distribution to Wife, which Husband appealed.

The parties had a home acquired one year before marriage held as joint tenants, which the court found was “separate property” of each of the parties. Despite this classification, the court distributed the entire home to Wife, and the court ordered Husband to pay the HELOC secured by the residence.

The trial court also found that Husband’s 401(k) plan was marital but found insufficient no competent evidence to value the 401(k) on the date of separation.

Finally, the trial court made findings that the parties’ El Dorado was marital property valued at $10,000.

The Court of Appeals found that separate property cannot be distributed and therefore the trial court’s ruling was improper. However, since the trial court also found that there is “considerable equity which is marital property”, the COA instead remanded so the trial court could make consistent findings instead of contradictory ones.

The trial court valued this asset at $10,000, despite the fact that both parties stipulated to a value of $1,880 by testimony and there was no other evidence presented.

Finally, regarding the 401(k), the trial court used the 401(k) as a distribution factor even though the court found this was marital property. Separate property that is being used as a distributional factor does not need to be valued. Marital property must be valued in order to have any impact on an equitable distribution.

The COA went on to classify that a “liquid” asset does not constitute real property or a 401(k) because of either tax consequences or time and funds required to sell a property.

Upon review of the factors involved in this case, the COA reversed the trial court’s ruling that an unequal distribution was equitable, and in general remanded the case for further findings and proceedings consistent with the decision.