Lee v. Lee

Annotate this Case

378 S.E.2d 554 (1989)

Robert E. LEE v. Joyce S. LEE.

No. 881DC786.

Court of Appeals of North Carolina.

May 2, 1989.

*555 W.T. Culpepper, III, Edenton, for plaintiff-appellee.

D. Keith Teague by Joseph H. Forbes, Jr., Elizabeth City, for defendant-appellant.

EAGLES, Judge.

Defendant appeals the trial court's ruling that the parties' separation agreement bars her claim for equitable distribution and alimony. We hold that plaintiff breached the separation agreement and, accordingly, we reverse and remand for trial.

Defendant first assigns as error the trial court's finding of fact that the plaintiff's loan of $102,000 to Edenton was not an asset owned by plaintiff. We hold that the monies owed plaintiff pursuant to his loan to Edenton was an asset which he was obligated, under the separation agreement, to disclose to defendant.

Pursuant to G.S. 50-20(d) parties may agree in a separation agreement to distribute their property in any fashion they desire without resorting to litigation for equitable distribution. The separation agreement, however, must comply with G.S. 52-10. See Hagler v. Hagler, 319 N.C. 287, 354 S.E.2d 228 (1987). A validly drawn separation agreement which distributes all of the parties' property and complies with G.S. 52-10 bars an equitable distribution claim. Knight v. Knight, 76 N.C.App. 395, 333 S.E.2d 331 (1985). Here defendant does not deny the existence of the separation agreement, but she argues that because plaintiff breached the agreement's terms, it is now void.

In construing separation agreements we are bound by the rules which apply in *556 interpreting any other contract. Blount v. Blount, 72 N.C.App. 193, 323 S.E.2d 738 (1984), disc.rev. denied, 313 N.C. 506, 329 S.E.2d 389 (1985). When a contract is unambiguous, our courts will "determine the legal effect and enforce it as written by the parties." Id. at 195, 323 S.E.2d at 739. Paragraph 7 of the separation agreement states, in part,

The Husband and Wife acknowledge and affirm that the assets listed herein and on the financial statement prepared by Husband attached hereto as Exhibit "A" constitute all of the real property and all of the items of personal property having a value of $100.00 or more per item owned by them, either separately or together, and that neither party has an interest in any real property or in any personal property having a value of more than $100.00 per item which has not been disclosed to the other. The Husband and Wife further acknowledged [sic] and affirm that they have relied upon the disclosure of assets as set forth above. The parties further acknowledge, understand and agree that the failure to disclose property shall constitute a material breach of this Agreement and give rise to whatever remedies at law or in equity may be available to either.

Paragraph 7 imposed upon each party an unambiguous obligation to disclose all assets whose values are $100 or more. The trial court found that the $102,000 loan "did not constitute an asset owned by the [p]laintiff at the time of his preparation of his financial statement." We disagree. Edenton carried the loan on its corporate books as a liability. Furthermore, upon cross-examination plaintiff admitted that he never intended the transfer of monies to be a gift. He argues that because the corporation's liabilities now exceed its assets the loan is uncollectible and, therefore, worthless. We reject this argument. Even if the loan is uncollectible, as a bad debt the loan could still have certain tax consequences that defendant would need to know in order to properly evaluate the distribution of marital property.

Defendant next argues that the trial court erred in finding that defendant was familiar with the corporation's financial records and should have known about the $102,000 loan. Defendant contends that plaintiff's testimony in this regard violates Rule 602 of the North Carolina Rules of Evidence that a witness may only testify as to matters of which he has personal knowledge. We agree. Plaintiff may testify only about those events to which he has personal knowledge. The evidence presented here does not support the finding that defendant was familiar with the corporation's books.

Defendant's final assignment of error is that the trial court erred in concluding as a matter of law that plaintiff had not committed a material breach of the separation agreement when he failed to disclose the loan to Edenton on his financial statement. We disagree with the trial court. If defendant shows that plaintiff substantially failed to perform those duties required of him pursuant to the separation agreement, the separation agreement may be rescinded. Wilson v. Wilson, 261 N.C. 40, 134 S.E.2d 240 (1964); see also Cator v. Cator, 70 N.C.App. 719, 321 S.E.2d 36 (1984).

Here the essence of the separation agreement was that the parties must fully disclose all of their assets worth $100 or more. Plaintiff failed to disclose a loan of $102,000 to a corporation in which he held a controlling interest. We hold that plaintiff's failure to disclose the loan, notwithstanding the corporation's current financial condition, constituted a material breach of the separation agreement. Therefore, defendant may elect to rescind the separation agreement. Accordingly, we reverse the trial court's order and remand for further proceedings.

Reversed and remanded.

COZORT and GREENE, JJ., concur.