N.B. On January 9, 2019, the Court of Appeals issued a slightly revised opinion in this case.
The September 19, 2018 Court of Appeals opinion in Brown v. Odom supports the general proposition that it’s hard to win an appeal when you don’t show up for trial. Brown primarily addresses issues of transmutation and the inclusion in the marital estate of an asset Husband re-deeded to his uncle shortly before Wife filed her divorce action.
Husband formed two businesses prior to the parties marriage: an LLC which owned a building, and a corporation which ran an assisted living facility within that building. Prior to the marriage, Husband approached Wife for a loan for the business and for help running the business. Per testimony Wife presented at trial, Husband often introduced Wife as a 50/50 partner in the businesses. Wife testified Husband assured her he would complete the necessary paperwork to transfer fifty percent ownership to Wife after he obtained a HUD loan; however, Husband never transferred the shares to Wife.
Meanwhile, during the marriage, the parties purchased land from Husband’s uncle. They used marital funds for the down payment and the initial monthly installments. When Husband could not pay the final installment, they refinanced for a much longer term at a much lower payment. After the parties separated, and a month before Wife filed her divorce action, Husband claimed he was unable to make these monthly payments and executed a quitclaim deed in lieu of foreclosure to uncle. Around this time, Husband also conveyed an asset worth $452,939 to his prior wife’s LLC to hold in trust for his daughters from a prior marriage.
Husband abruptly left in the middle of mediation and failed to disclose his whereabouts. Trial proceeded without his presence and the family court found both the LCC and corporation transmuted but treated them as one entity. It further found the payments the parties had made to uncle for the real estate should have been included in the marital estate. It awarded Wife a 50% interest in these entities.
Husband filed a motion to reconsider, arguing that the family court should have treated the corporation and LLC as separate entities. The family court then found both entities transmuted. Husband appealed.
In defending transmutation Wife raised an error preservation issue, arguing that because Husband did not address the transmutation issue until his post-trial motion, and had not raised it at trial, the issue was not preserved (as parties cannot raise an issue in a post-trial motion that they could have raised at trial). The Court of Appeals found the transmutation issue preserved, holding “[t]he family court’s ruling, which treated Wife’s involvement with the entities as a whole, rather than separate entities, created the distinction issue.”
However the Court of Appeals rejected Husband’s claims that the corporation and LCC were not transmuted. It rejected Husband’s claims that his premarital declarations of intention could not be used to determine his intention to treat these entities as marital. It noted uncontoverted testimony regarding Husband’s intent to treat these entities as marital and documented substantial evidence of Wife’s contribution towards these entities.
As it regarded uncle’s real estate, the Court of Appeals affirmed the family court’s determination that Husband’s interest in that property should be included in the marital estate despite title shifting back to uncle prior to the date of filing. The Court of Appeals noted Husband’s transfer of substantial assets to his ex-wife at the same time he claimed he lacked that ability to pay the mortgage on uncle’s property, coupled with his failure to inform Wife of his difficulty in making the monthly $282 payments on the $11,647 loan balance, was evidence of fraud. Thus the payments the parties made towards the purchase of uncle’s property was properly included in the marital estate.
Because Wife was the only party presenting evidence on these contested issues at trial, the trial record is overwhelmingly favorable to Wife. As the Brown case demonstrates, given uncontroverted evidence, it’s easy to prove transmutation and easier to prove fraud.
