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2001 National Legal Research Group, Inc.

NORTH CAROLINA: Hamby v. Hamby, No. COA00-151 (N.C. Ct. App. June 5, 2001).

The husband contended that his insurance agency and the deferred compensation plans therefrom were improperly valued and distributed.

In this case, the couple married on February 27, 1988, separated on August 17, 1995, and divorced on December 19, 1996. The couple had two children born within the marriage. Before the marriage, the husband had worked as an insurance agent. Shortly after the marriage, however, the husband became an independent contractor with the insurance company, opening his own office.

The husband contended that the trial court erred in its valuation of his insurance agency, in that the valuation was not supported by competent evidence. The husband argued that since, pursuant to the agency agreement with the insurance company, he could not transfer or sell the business, the trial court should not have valued the agency as though it could be sold.

The couple did not dispute that the husband's insurance agency was marital property. However, the husband argued that because he was an exclusive agent and represented only one company he had virtually no business to sell. Evidence at trial revealed that the husband did not own the policies he sold and that the insurance company had the authority to transfer those policies or do anything with them.

The husband's expert witness valued the agency at $18,950 as of the date of separation. Conversely, the wife's expert witness valued the agency at $110,000 as of the date of separation. The wife's expert witness disagreed with the husband's expert's valuation and methods. He stated that he "valued the . . . agency as a going concern. It was a going concern on date of separation. And it's my understanding when we say we're valuing at fair market value we're trying to determine what if the entity that's being valued could have traded hands on date of separation, date of valuation. We don't have to know there's a buyer. It's a hypothetical situation. . . . So I certainly agree with the definition of a going concern, is one that we do expect it is an operating entity and we expect it to continue to operate as it has been in the most recent past. . . . So there are many businesses that I valued that might not be able to trade hands that easily. . . . [However,] there can still be a value to having a practice [or agency] over and above just earning a salary."

The appeals court agreed with the trial court that the agency had value to the husband above and beyond a salary or the net worth of the agency's fixed assets which could be sold.

The husband then assigned error to the trial court's finding that the insurance company's extended earnings plan was a deferred compensation benefit plan pursuant to N.C. Gen. Stat. 50-20(b)(3) and, as such, had a value of $179,151.90, which should be equitably distributed as marital property. Although the husband admitted that he stipulated in the couple's pretrial order that his deferred compensation plans were marital property, he nevertheless argued that neither his retirement nor deferred compensation plans were marital property under N.C.G.S. 50-20. Thus, the husband argued that the trial court committed reversible error in finding the plans to be marital property and subjecting them to equitable distribution.

However, a representative of the insurance company had testified that she was familiar with the husband's rights concerning the extended earnings plan, and she further testified as to the amounts Mr. Hamby would have been entitled to receive had he died, retired, or been otherwise severed from service with the insurance company. Thus, the trial court found that the couple had stipulated that the extended earnings plan was marital property, and that the plan was a deferred compensation benefit plan under the provisions of 50-20(b)(3), having a value on the date of separation of $179,151.90.

The husband then assigned error to the trial court's equitable distribution of his deferred income compensation credits in the amount of $128,955, stating that there was no evidence to support the valuation finding of fact.

The husband argued that because neither the documents nor any witness gave a specific figure for the deferred compensation as of the date of separation, the trial court erred in attempting to calculate one. The appeals court noted that if it were to follow the husband's logic, a trial court could never calculate the equitable amount of any asset for which a document or an expert witness was unable to positively give an exact figure as of the date of separation. The court refused to accept this logic. "We believe the trial court's simple averaging of the figures resulted in an equitable figure for the purposes of distribution. We hold that the record supports the trial court's findings and conclusions as to this issue."

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