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Profit-Sharing Plan Not Disclosed Until Divorce Hearing
© 2004 National Legal Research Group, Inc.
NORTH CAROLINA: Fitzgerald v. Fitzgerald, ___ N.C. App. ___, 588 S.E.2d 517 (2003).
Even though the husband failed to list the wife's profit-sharing plan as a marital asset in the trial court's pre-trial order, the court still erred by failing to treat the plan as marital property, where the wife did not disclose the existence of the plan until the divorce hearing. Appraisals dated one and three years after the proper date of valuation were not reliable valuation evidence. The trial court erred by failing to consider post-separation appreciation in marital property as a factor in dividing the marital estate. The trial court erred by valuing the husband's medical practice without explaining its methodology, even though its valuation was between the estimates of the parties' competing experts.
Following the parties' separation in April 1998, a divorce was granted by the trial court in June 2002. Both parties appealed the amended judgment and order of equitable distribution as it related to the inclusion of the wife's profit-sharing plan in the marital estate, the valuation of the marital residence, and the valuation of the husband's interest in a medical practice. The appellate court reversed.
With regard to the profit-sharing plan of the wife, which the trial court had not included in its equitable distribution order, the record showed, nevertheless, that the wife had admitted that the plan was vested, and the husband introduced evidence to show the balance from 1999 to 2000. The wife argued that the value of the plan should not be included in the marital estate because the husband had waived equitable distribution thereof by not including it in the pre-trial order. The appellate court rejected this argument and found that the court below had erred in not including the value of the plan in the order of equitable distribution. The wife had failed to include the plan in her equitable distribution affidavit and did not disclose its existence until the hearing. The appellate court ordered a remand.
The trial court valued the marital residence at $375,000. The husband had submitted two appraisals of the property. Both appraisals, the first in December 1999 and the other in July 2001, valued the property at $395,000. But neither party submitted appraisals as to its value on the date of separation in April 1998. An appraisal performed more than one year after the separation and another performed more than three years after the separation could not provide the basis for a reliable valuation without an explanation by the court. Here, the trial court offered no explanation as to how it arrived at its valuation of $375,000. Because the trial court's finding of fact as to the valuation was not supported by any competent evidence, the appellate court held that it could not be considered conclusive and that the matter must be remanded. Even if the trial court properly valued the house as of the date of the separation, added the court, it erred in failing to consider the post-separation increase in the value of the property, as evidenced by the appraisals, as a distributional factor, as it was required to do under North Carolina law when there is such appreciation, whether active or passive in nature. A remand was also required on this point.
Finally, the court considered the valuation of the husband's medical practice made by the trial court. The husband offered proof that the practice had a value of $89,000, while the wife's expert testified that it had a value of $170,000. The trial court rejected both valuations and, without making any findings as to the methodology it applied or the facts upon which its finding was made, it placed a value of $125,000 on the medical practice. The appellate court found that this was reversible error. A trial court's valuation of a professional practice will be upheld on appeal if it appears the trial court reasonably approximated the net value of the practice and its goodwill based on competent evidence and on a sound valuation method. Here, the trial court failed to satisfy this standard, thereby requiring a remand on this basis as well.
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