|
|
|
Monetary Award Made to Spouse Was Not Subject to Creditor's
© 2004 National Legal Research Group, Inc.
NORTH CAROLINA: Painter v. Painter-Jamieson, ___ N.C. App. ___ 594 S.E.2d 217, review withdrawn, 2004 WL 1595686 (N.C. 2004).
Where the husband was deceased, a monetary award made to the wife under the law of equitable distribution was a transfer of property to the wife, and not an obligation owed by the deceased spouse's estate. Thus, the award went directly to the wife and was not subject to claims of superior creditors under the law of decedent's estates.
The North Carolina Court of Appeals recently decided a case involving the obligation of the estate of a deceased spouse to pay a distributive award to the former wife where the husband died following the entry of the divorce decree but before the completion of the equitable distribution action. At issue was the relationship between the obligation of a spouse's representative to pay in a prompt fashion an award made regarding the division of property following a divorce and the priority system for claims against the estate as set forth in the Probate Code, specifically N.C. Gen. Stat. 28A-19. The trial court determined that the distributive award owed to the wife was her own money, derived from the marital estate, and did not belong to the estate of the deceased spouse. It ordered the estate representative to pay the award within 30 days. This order was affirmed.
The appellate court first recognized that equitable distribution under N.C.G.S. 50-20 represented the cessation of common ownership and the division of property belonging to the marriage between the parties of the marriage. While in-kind distribution was preferred, the court also noted that a distributive award to facilitate, effectuate, or supplement a distribution of the property may be made. Here, by stipulation, the parties agreed that the husband and wife would retain certain properties but because of the inequality in the values of such assets, and in order to render an equitable distribution of the marital estate, which herein was deemed to be equal shares, the trial court ordered that the husband pay a lump-sum distributive award of $167,413 to the wife. There was no secured lien against the deceased spouse's property.
The appellate court then examined the relevant Probate Code statutes under Chapter 28A, including N.C.G.S. 28A-19-6, which sets forth the priority for paying claims against the estate. In so doing, it acknowledged that, under the circumstances herein, if the statutory priority schedule was applicable to the distributive award order at issue, it was clear that this order, not being secured by a lien, would be subordinated to claims for at least several categories of claims, including estate administration costs, funeral expenses, and taxes. Moreover, it was noted that the impact of this priority system was more extreme in this case because the decedent's estate did not contain sufficient assets to pay all of the claims, and the estate would be extinguished before reaching the distributive award order.
After reviewing the applicable statutes and conflicting policy issues, the court held that the distributive award should not be treated as a claim under Chapter 28A. While the deceased husband's representative was correct in asserting that the Probate Code sections were the sole authority on administering a decedent's estate, it is, nevertheless, provided in the statute that the decedent's estate is comprised of the decedent's assets, including all real and personal property. Although such assets would include those he acquired from an equitable distribution order, his assets would not include those marital assets awarded to his former spouse. Here the value of the distributive award belonged solely to the wife. A party's right to an equitable distribution of property from a marital estate vests at the time of the parties' separation. N.C.G.S. 50-20(k). The husband's possession of the distributive award at the time of his death did not grant him or his representative the authority to consider the award as part of his estate. If the provisions of Chapter 28A were applied to equitable distribution awards, there would be a reversion back not to a title system but to a system of simple possession, thus permitting a spouse who dies with possession of his former spouse's portion of the marital estate to usurp equitable distribution and consider the property as his. The former spouse would have a mere claim against the possessor's estate. Such an analysis conflicts with the essence of equitable distribution, which provides for division of the marital estate and generally does not concern itself with title or possession.
According to the appellate court, what the wife desired to accomplish herein by seeking prompt payment of the distributive award was merely to excise from the husband's assets property rightfully belonging to her, not make a claim against the husband's estate. The estate representative must not commingle, therefore, the assets of the estate with the wife's portion of the marital property. Only after the marital property belonging to the wife is separated from the deceased husband's estate, can the estate representative determine the husband's assets and proceed to pay creditors and distribute the assets pursuant to Chapter 28A.
Finally, the court noted that Chapters 28A and 50 were amended to provide, inter alia, that the priority-of-payment provisions of Chapter 28A would apply to a claim for equitable distribution against the estate of the deceased spouse. However, the amended statute did not apply to pending actions and the court declined to do so, as such an application of the statute would impinge vested rights.
Given the potential that this conflict between estate administration and equitable distribution statutory schemes could continue to arise in other jurisdictions that have not specifically addressed the matter by legislative action, the analysis and rationale by the court in this case could be useful in constructing an argument in favor of giving deference to the equitable distribution code provisions.
Go to: Division of Property Category
Go to: Cases of Interest by Category
Go to: Previous Page
| Featured Services | |
|
| The Research Center: (Divorce Cases of Interest) | Research Home | ||||
Find Case Law, Case Analysis, and Divorce Information...
| |||||
Copyright© 1996-2009. All rights reserved by Divorce Source, Inc.
Comments & Suggestions? or Recommend This Page to a Friend!