Chafin v. ChafinÂ
250 N.C. App. 19
| N.C. Ct. App. | 2016Background
- Denise and Stephen Chafin married in 1988, separated in June 2008; Stephen formed I Rush Auto Sales, LLC during the marriage; the LLC was administratively dissolved August 2008.
- Plaintiff filed for equitable distribution in May 2009 and, through multiple affidavits and a pretrial order, listed Rush Auto and specific assets (Bank of America account, SunTrust accounts, cash on hand, and nine vehicles) as marital property.
- Defendant largely failed to complete the required equitable distribution affidavit, disputed mainly values and some ownership facts, and filed multiple motions late in the process (including after trial began).
- At trial the court found Rush Auto was marital property (but left the company’s standalone value blank), and distributed the checking account ($11,110.13), inventory (vehicles at $36,350), and cash on hand ($4,218.16) to defendant; it found one SunTrust account funds were taken by defendant’s partner.
- The court awarded plaintiff a distributive award of $89,385.44 payable $550/month, found defendant had ability to pay, and imposed $10,000 in Rule 11 attorney’s fees sanctions against defendant for dilatory and frivolous litigation conduct.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Jurisdiction to distribute Rush Auto assets / former-company property | Chafin treated the company interest and its assets as marital property and sought distribution | Rush Auto (entity) held legal title to assets; court lacked jurisdiction to distribute nonparty company assets | Defendant failed to preserve this argument; court properly distributed assets as marital property reflected in the record |
| Valuation / distribution of the LLC interest | Assets listed and valued individually; business interest represented by aggregate assets | Error: distributing the LLC without assigning a value to the business interest | Court may distribute interest represented by the itemized assets; no remand required where aggregate assets were distributed to reflect the interest |
| Classification and value of vehicles listed in inventory | Vehicles were on lot at separation; plaintiff used NADA to value them (initial total $52,825) | Challenged that some listed vehicles were not owned/present at separation and raised encumbrance issues | Competent evidence supported the court’s finding that vehicles were marital and supported valuation at $36,350 (price paid) |
| Ability to pay distributive award | N/A (plaintiff sought award and payment schedule) | Award was improper because court did not sufficiently consider defendant’s ability to pay | Court expressly found defendant employed with sufficient assets/income; finding supported by evidence, so award upheld |
| Rule 11 sanctions for litigation conduct | Plaintiff sought sanctions for frivolous/dilatory filings and abuse of pretrial process | Defendant argues motions were in good faith to prevent injustice | De novo review: record supports the court’s findings that motions were dilatory and sanction award was proper |
Key Cases Cited
- Smith v. Smith, 111 N.C. App. 460, 433 S.E.2d 196 (N.C. Ct. App. 1993) (three-step equitable-distribution framework)
- Wiencek-Adams v. Adams, 331 N.C. 688, 417 S.E.2d 449 (N.C. 1992) (equitable distribution review standard; abuse of discretion)
- Quesinberry v. Quesinberry, 210 N.C. App. 578, 709 S.E.2d 367 (N.C. Ct. App. 2011) (failure to preserve objection to business-asset distribution)
- Poore v. Poore, 75 N.C. App. 414, 331 S.E.2d 266 (N.C. Ct. App. 1985) (factors for valuing business in equitable distribution)
- Turner v. Duke Univ., 325 N.C. 152, 381 S.E.2d 706 (N.C. 1989) (de novo review framework for Rule 11 sanctions)
- Hill v. Hill, 229 N.C. App. 511, 748 S.E.2d 352 (N.C. Ct. App. 2013) (business or corporate interests formed during marriage are marital property)