Often when people marry one of the spouses has an ownership interest in a home that was purchased prior to the date of the marriage. When a divorce occurs, the court must determine whether the interest in the home is marital property subject to distribution with the personal property, retirement and other marital property or whether it is it the separate property of the owner-spouse and not subject to distribution.

Classification: Marital/ Separate Property

Under North Carolina law, when parties get divorced the court must first classify property as marital or separate property. Marital property is valued and distributed between the parties. Marital property is defined as all property acquired during the marriage and prior to the date of separation, except property that is classified as separate property. Separate property is defined as all property acquired by a spouse before marriage or acquired by a spouse by bequest, devise, descent, or gift during the course of the marriage. Separate property remains the separate property of the spouse who received the property.

Special Rule Regarding Real Estate

Under North Carolina law, real property acquired prior to the marriage or with separate funds which would ordinarily be the separate property of the spouse/ owner is presumed to be a gift to the marriage if the spouse titles the property as tenancy by the entireties. The presumption can be overcome, but it is the burden of the spouse claiming it was not a gift to show that he or she did not intend for it to be a gift to the marriage. The burden is very high to show that a gift was not his or her intent. Testimony alone is not enough. Additional evidence is required to overcome the presumption that a gift to the marriage was not intended when the owner spouse titled the property as tenancy by the entireties

Hidden Refinance Danger for Spouses

Very often when the owner/ spouse refinances the house, the mortgage company suggests or may insist that title be put in both spouses’ names. One of the reasons given is that the house can pass to the other spouse automatically in the event of the death of one of the spouses. However, the act of titling the house as tenancy by the entireties triggers the legal presumption that the owner spouse intended to gift his or her interest in the house to the marriage.

Active Efforts Create Marital Property

When there is an increase in value of the separate property and that increase is due to the efforts of the owner spouse (“active efforts”), then the increase in value should be classified as marital property and subject to distribution to the parties. With respect to real property, active efforts include payment on the mortgage with income earned during the marriage or increasing the value of the home through additional improvements paid for with income earned during the marriage or with sweat equity.

Analyzing the conditions surrounding the titling of property and the intent of the parties as well as analyzing efforts that are active such that they contribute to an increase in value of the property versus an increase in value from merely passive forces such as the economy are highly technical areas under the law. When parties are getting divorced, there are a number of strategic issues involved in analyzing the transferring intent and the “active/ passive” factors relative to the owner spouse. One of the most important things a spouse must do when faced with divorce is to retain counsel with experience in real property issues in marital dissolution cases to provide essential advice on protecting the rights and assets of the real property owner.

Contributor: Cathy C. Hunt: Cathy C. Hunt, Raleigh Family Law Attorney is a leading North Carolina Divorce Lawyer and is experienced in business valuation in cases of separation and divorce. She is a partner with the North Carolina Family Law Firm of Gailor, Wallis & Hunt, PLLC. For more information contact: North Carolina Family Law Firm, Gailor, Wallis & Hunt, PLLC, 1101 Haynes Street, Suite 201,Raleigh, NC 27604,Tel: 919-832-8488, www.gailorwallishunt.com.

Disclaimer: The information contained in this article is intended as a general guide and is not to be used as legal advice by Gailor, Wallis & Hunt, PLLC. Whether or not you may be entitled to take action in regard to the information addressed in this article can only be determined after a thorough review of the facts and circumstances of your case by a qualified family law attorney

In North Carolina, the trial court has the authority to make an order on all issues o pertaining to custody and visitation of children as well as child support. These initial orders are always modifiable by the court. In regard to custody, the court will always ask, “What is in the best interests of the child?” In considering what is in the “best interests” of the child, the court may review a number of different factors. Essentially the court may review anything and everything that affects the welfare of the child. For example, these factors may include (but are certainly not limited to) the morality of the parents and child, wishes of the child, domestic violence in the home, and nurture of a child’s spirituality. Furthermore, when modifying a custody determination, the court must decide if there has been a “substantial change of circumstances” which affects the welfare of the child. The Court may consider all changes, regardless if the change affects the child negatively or positively.

Of the many factors that affect the welfare of the child, one of the more interesting areas that the Court may consider is the “lifestyle of the parent.” The term lifestyle covers a wide range of topics, from adultery to substance abuse to career change to military service.

One of the topics included within the pertinent case law dealing with a parent’s lifestyle is homosexuality. The flagship case on this topic is Pulliam v. Smith, 348 N.C. 616, 501 S.E.2d 898 (1998), which is a North Carolina Supreme Court decision from 1998. In Pulliam, the facts showed that the mother and father separated in 1990 when the mother went to live with her boyfriend in Wichita, Kansas. In 1991, pursuant to a consent order, the father was granted physical custody of the two minor children. At the time of the consent order, the two boys were six and three years old, respectively. In 1993, the mother married her boyfriend, Mr. Pulliam, in Kansas. In 1994, Tim Tipton, the father’s boyfriend, moved into the home with the father and the two minor children.

In 1995, based upon the father’s homosexual relationship, the mother filed a motion to modify custody. The trial court granted the motion and the father appealed. The North Carolina Court of Appeals reversed the trial court on the grounds that a substantial change in circumstances had not occurred based on the evidence in the record. The mother appealed to the North Carolina Supreme Court.

The North Carolina Supreme Court reversed the Court of Appeals and ordered that the trial court’s ruling be reinstated. The Supreme Court found that the evidence showed that the father and his boyfriend would kiss and hold hands in front of the children, and shared the same bedroom while the children were in the house. The father and Tim Tipton also admitted to engaging in oral sex in the bedroom, but only with the door closed and never in front of the children. Furthermore, the Supreme Court cited the trial court’s finding that, “The activity of the Defendant will likely create emotional difficulties for the two minor children….That the active homosexuality of the Defendant and his involvement with Tim Tipton by bringing Tim Tipton in to the home of the two minor children is detrimental to the best interest and welfare of the two minor children.” Id. at 623, 902.

Justice John Webb wrote the dissent and claimed that the true reason behind the majority opinion was the fact that the father was gay. The majority responds to the dissent by stating, “We conclude that activities such as the regular commission of sexual acts in the home by unmarried people, failing and refusing to counsel the children against such conduct while acknowledging this conduct to them, allowing the children to see unmarried persons known by the children to be sexual partners in bed together, keeping admittedly improper sexual material in the home…support the trial court’s findings of ‘improper influences’ which are ‘detrimental to the best interest and welfare of the two minor children.’” Id. at 627, 904.

The Court went further to say, “Nor does this Court hold that the mere homosexual status of a parent is sufficient, taken alone, to support denying such parent custody of his or her child or children.”

Despite the Court’s assertion, it is clear from the ruling that leading an openly homosexual lifestyle can be fodder for the court in determining custody between two parents. Those in the gay and lesbian community did not see Pulliam as a step forward in the rights of homosexuals, and many commentators believe that the Court of Appeals wrote the correct opinion. Many in the legal community feel that if the same set of facts had been applied to a heterosexual couple, then the outcome would have been dramatically different.

If you find yourself questioning your spouse’s lifestyle choices, or find that your own lifestyle is being questioned, it may be necessary to meet with a family law attorney in your area to understand the implications it may have on the custody of your child. The family law offices of Gailor, Wallis & Hunt, PLLC in Raleigh, North Carolina are openly accepting of all clients, regardless of their sexual orientation.

Contributor: Rebecca F. Redwine. Rebecca Redwine is a Raleigh Family Law Attorney with the North Carolina Family Law Firm of Gailor, Wallis & Hunt, PLLC.

For more information contact the Raleigh, North Carolina Family Law Firm of Gailor, Wallis & Hunt, PLLC at 1101 Haynes Street, Suite 201, Raleigh, NC 27604, Tel: 919-832-8488, or go to www.gailorwallishunt.com

Disclaimer: The information contained in this article is intended as a general guide and is not to be used as legal advice by Gailor, Wallis & Hunt, PLLC. Whether or not you may be entitled to take action in regard to the information addressed in this article can only be determined after a thorough review of the facts and circumstances of your case.

Cathy C. Hunt educates on the issue of a gifted business interest in divorce and whether one spouse can get part of a business that the other spouse was gifted from his or her parents.

Often when people are married one of the spouses has an ownership interest in a family business that was gifted to him or her by a parent or other family member. When a divorce occurs, the court must determine whether the business interest is marital property subject to distribution with the house, retirement and other marital property or whether it is the separate property of the owner-spouse and not subject to distribution.

Under North Carolina law, when parties get divorced the court must first classify property as marital or separate property. Marital property is valued and distributed between the parties. Marital property is defined as all property acquired during the marriage and prior to the date of separation, except property that is classified as separate property. Separate property is defined as all property acquired by a spouse before marriage or acquired by a spouse by bequest, devise, descent, or gift during the course of the marriage. Separate property remains the separate property of the spouse who received the property. However, if during the marriage there is an increase in value of the separate property and that increase is due to the efforts of the owner spouse (“active efforts”), then the increase in value will be classified as marital property and subject to distribution to the parties.

For example, if during the marriage the husband received shares of stock in the family business from his father, that ownership interest in the business is the husband’s separate property, and the wife is not entitled to any of the husband’s interest in the business. However, if during the marriage the husband also worked in the business and his active efforts during the marriage contributed to an increase in value of the business, that increase in value that can be attributed to the husband’s efforts should be classified as marital property and included in the marital estate for distribution. In the alternative, if the husband worked in the business during the marriage but his role was not one that had any impact on the value of the business, then any increase in value should remain the separate property of the husband and not be subject to distribution with the remainder of the marital estate.

Determining efforts that are active such that they contribute to an increase in value of the business and determining an increase in value from merely passive forces such as the economy is a highly technical area of law. When business owners are getting divorced, there are a number of strategic issues involved in valuing the business and analyzing the “active/ passive” factors relative to the owner spouse. One of the most important things a business owner must do when faced with divorce is to retain counsel with experience in business valuation cases to provide essential advice on protecting the rights and assets of the business owner.

Contributor: Cathy C. Hunt: Cathy C. Hunt, Raleigh Family Law Attorney is a leading North Carolina Divorce Lawyer and is experienced in business valuation in cases of separation and divorce. She is a partner with the North Carolina Family Law Firm of Gailor, Wallis & Hunt, PLLC. For more information contact: North Carolina Family Law Firm, Gailor, Wallis & Hunt, PLLC, 1101 Haynes Street, Suite 201,Raleigh, NC 27604,Tel: 919-832-8488, www.gailorwallishunt.com.

Disclaimer: The information contained in this article is intended as a general guide and is not to be used as legal advice by Gailor, Wallis & Hunt, PLLC. Whether or not you may be entitled to take action in regard to the information addressed in this article can only be determined after a thorough review of the facts and circumstances of your case by a qualified family law attorney

Your spouse, who works for a fairly large company, has been acting suspicious lately: putting in more hours at work, traveling extensively for business, having conference calls at odd times. Your marriage is strained from the behavior, and your spouse wants a separation.

After investigation, you find that your spouse has been having an affair with the supervisor at work. The seducing supervisor and your spouse are both employed by a multi-million dollar corporation. You believe the paramour enticed your spouse while the two were working, carried on the relationship while both were on the job, and even had sexual relations within the office. Further, there exists evidence that other employees knew about the affair. Now your spouse and the supervisor are living together, and divorce is imminent.

In North Carolina, you may have a suit for alienation of affection or criminal conversation, i.e. a tort claim, against the paramour. However, the “big pockets” belong to the corporation. Can you sue the paramour and the corporation? Is the corporation liable for the supervisor seducing your spouse while “on the clock?”

Until very recently, this question remained unanswered by North Carolina case law. However, in October 2007, the United States District Court for the Western District of North Carolina, in Smith v. Lee, 2007 U.S. Dist. LEXIS 78987, decided the answer is “No.” (As a procedural note, the case was heard in federal court because the parties were from different states.)

In Smith v. Lee, the facts were similar to the scenario described above. Douglas Smith was married to Melissa Smith. Douglas discovered that Melissa was having an affair with her supervisor, Troy Lee. Troy and Melissa both worked for Progressive Lighting, Inc. Douglas decided to sue Troy for alienation of affections and criminal conversation. However, Douglas also decided to join Progressive Lighting, Inc. as a party, on the theory of vicarious liability to the claim for alienation of affection.

For an employer to be liable under a theory of vicarious liability in North Carolina, the plaintiff must prove one of the following about the employer:

1) The employer authorized the employee’s acts;
2) The employee’s acts were committed within the scope of his employment and in
furtherance of the employer’s business; or
3) The employer ratifies the employee’s acts.

A straight-forward example of a typical vicarious liability suit is when a pizza restaurant owner is taken to court for a wreck caused by one of his pizza delivery trucks.

In Smith v. Lee, Douglas tried to use the “pizza delivery boy” theory. Douglas claimed that Troy solicited his wife in his capacity as her supervisor, that Troy’s acts happened while he was at work, and in the scope of his employment and in furtherance of Progressive Lighting’s business; and therefore, Progressive Lighting should be held responsible for the very personal injury inflicted on Douglas and his marriage.

Not only did the Court not agree with Douglas, but they dismissed his claim against Progressive Lighting on a summary judgment motion. The Court found that “even if the Court accept[ed] [Douglas’] allegations that [Troy’s] employer knew of the affair, knowledge alone is not enough to show ratification…Progressive Lighting is not in the business of relationships, and the Court fails to see how relationships between employees would be either in the scope of the company’s business or would further the business in any sort of productive manner.”

The Court did not elaborate on what else – besides actual knowledge of the affair – was needed to show that the company had “ratified” the affair. The Court may have excused itself from such elaboration because of what it found next.

After clarifying that Progressive had not “ratified” the behavior, the Court also extended its holding to include a public policy basis for ruling against Douglas. It stated, “[T]his Court is loathe to apply vicarious liability against employer for torts of alienation of affection or criminal conversation. It is simply unreasonable to expect businesses to regulate the intimate and personal affairs of their employees…NC public policy disfavors the extension of marital torts to employers. Torts of alienation of affection and criminal conversation are private and personal. Holding employers to owe a duty to the spouses of their employees would extend the potential liability of employers infinitely.”

Smith v. Lee presents a broad holding that seems to shut the door on vicarious liability for employers for plaintiffs asserting heart balm torts. If you suspect your spouse is having an affair, regardless if it is with a coworker, you should arrange a consultation with a family law attorney in your area as soon as possible. Such conduct could lead to a claim for alienation of affection, or on a more basic level, affect a claim for alimony.

Contributor: Rebecca F. Redwine. Rebecca Redwine is a Raleigh Family Law Attorney with the North Carolina Family Law Firm of Gailor, Wallis & Hunt, PLLC.

For more information Contact the Raleigh, North Carolina Family Law Firm of Gailor, Wallis & Hunt, PLLC at 1101 Haynes Street, Suite 201, Raleigh, NC 27604, Tel: 919-832-8488, or go to www.gailorwallishunt.com

Disclaimer: The information contained in this article is intended as a general guide and is not to be used as legal advice by Gailor, Wallis & Hunt, PLLC. Whether or not you may be entitled to take action in regard to the information addressed in this article can only be determined after a thorough review of the facts and circumstances of your case.

The Fifth Amendment of the U.S. Constitution provides, “No person shall be held to answer for a capital, or otherwise infamous crime, unless on a presentment or indictment of a grand jury, except in cases arising in the land or naval forces, or in the militia, when in actual service in time of war or public danger; nor shall any person be subject for the same offense to be twice put in jeopardy of life or limb; nor shall be compelled in any criminal case to be a witness against himself (emphasis added) nor be deprived of life, liberty, or property, without due process of law; nor shall private property be taken for public use, without just compensation.”

The clauses incorporated within the Fifth Amendment outline basic constitutional limits on police procedure. The Framers derived the Grand Juries Clause and the Due Process Clause from the Magna Carta, dating back to 1215. Scholars consider the Fifth Amendment as capable of breaking down into the following five distinct constitutional rights: 1) grand juries for capital crimes; 2) a prohibition on double jeopardy; 3) a prohibition against required self-incrimination; 4) a guarantee that all criminal defendants will have a fair trial; 5) and a promise that the government will not seize private property without paying market value. While the Fifth Amendment originally only applied to federal courts, the U.S. Supreme Court has interpreted the Fifth Amendment’s provisions as now applying to the states through the Due Process Clause of the Fourteenth Amendment.

Self-Incrimination

The Fifth Amendment protects criminal defendants from having to testify if they may incriminate themselves through the testimony. A witness may “plead the Fifth” and not answer if the witness believes answering the question may be self-incriminatory.

“Pleading the Fifth” typically occurs in family law cases when there is evidence of illegal activity by one of the spouses. According to North Carolina criminal law, adultery is a criminal offense. Because the act of adultery is technically a crime, a spouse or paramour who has committed adultery can refuse to testify about the adulterous behavior based upon his or her Fifth Amendment right, because he or she could technically be subjecting himself or herself to criminal prosecution. Though I know of no prosecutorial district in North Carolina that enforces the adultery statute, it is still valid law and accordingly allows the person(s) to plead the Fifth. Another instance where a spouse may plead the Fifth in a family law case is when there are allegations of illegal drug use. Obviously, the State and/or Federal government could use any admission of illegal drug activity in the indictment and prosecution of such drug offenses. Domestic violence/physical abuse is another potential criminal offense that frequently arises in family law cases. Parties can face criminal and civil liability for abusive conduct and have the right to plead the Fifth Amendment regarding such conduct. Finally, a party may sometimes play private investigator and tape record telephone conversations involving his/her spouse. Clients should proceed with extreme caution before recording any telephone conversations and consult with an attorney about potential civil and criminal liability associated with such recordings. A client may have Fifth Amendment protection associated with potential criminal charges associated with such recordings.

Pleading the Fifth Amendment in a civil domestic, however, can have a dramatic effect on the client’s civil domestic case. Asserting the Fifth Amendment privilege protects the person from self-incrimination in the criminal process. However, North Carolina courts have held that the Fifth Amendment “is intended to be shield and not a sword.” Thus, if a person pleads the Fifth Amendment in a civil domestic action, the trier of fact (judge or jury, depending on the issues involved), is allowed to infer that the answer to the question would have been negative to the person’s interest. If the privileged information sought from the client is material and essential to the defense of the client’s claim, the client must decide whether to come forward with the privileged information or whether to assert the privilege and forego the claim in which such information is necessary. Therefore, a lawyer should consider carefully when a client should plead the Fifth Amendment, weighing the likelihood that the client will actually face criminal prosecution versus the potential impact on the client’s civil domestic action.

Contributor: Stephanie T. Jenkins. Stephanie Jenkins is a Raleigh, North Carolina Family Law Attorney and a Partner in the Family Law Firm of Gailor, Wallis & Hunt, PLLC. She is a former Wake County, North Carolina Assistant District Attorney. Stephanie has been practicing family law and criminal law for over 15 years in Raleigh, North Carolina.

For more information contact: Gailor, Wallis & Hunt, PLLC at 1101 Haynes Street, Suite 201, Raleigh, NC 27604, Tel: 919-832-8488 or go to www.gailorwallishunt.com.

Disclaimer: The information contained in this article is intended as a general guide and is not to be used as legal advice by Gailor, Wallis & Hunt, PLLC. Whether or not you may be entitled to take action in regard to the information addressed in this article can only be determined after a thorough review of the facts and circumstances of your case.

North Carolina is an equitable distribution state. This means that marital assets acquired during the marriage must be valued and that the marital estate be distributed between the parties. Very often, parties to a separation and divorce own in interest in a small business. Most people don’t realize that the business owner’s marital interest in the business will have to be valued for purposes of equitable distribution.The following is a simple fact pattern which illustrates what business owners involved in a separation and divorce need to know. John Businessman is an 80% shareholder in a closely held corporation that he formed prior to marrying Susan. After fifteen years of marriage, John and Susan are divorcing and the company is being valued as part of the marital estate. What do business owners like John and Susan need to know about valuing their business in the event of divorce? (more…)

Kimberly A. Wallis an attorney with the Raleigh North Carolina law firm of Gailor, Wallis & Hunt, PLLC educates on the subject of child custody mediation in the North Carolina family courts. (more…)