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Burgess v. Burgess - 205 N.C. App. 325, 698 S.E.2d 666 (2010)

Rule:

In an equitable distribution action, the district court is empowered to determine what is the marital property and divisible property and shall provide for an equitable distribution of the marital property and divisible property between the parties in accordance with the provisions of this section. N.C. Gen. Stat. § 50-20(a) (2009). The purpose of the Equitable Distribution Act is to divide property equitably, based upon the relative positions of the parties at the time of divorce, rather than on what they may have intended when the property was acquired. Under § 50-20, the trial court is required to conduct a three-step analysis: 1) identification of marital and separate property; 2) determination of the net market value of the marital property as of the date of separation; and 3) division of the property between the parties. The district court is instructed by the General Assembly to effectuate an "equal" distribution, unless such a distribution of the property "is not equitable" under the circumstances. Section 50-20(c). In making an unequal allocation of property, the district court is required to consider the factors listed within § 50-20(c).

Facts:

After ten years of marriage, the parties separated and plaintiff wife instituted an action against defendant husband for divorce from bed and board and equitable distribution of marital property pursuant to Chapter 50 of the North Carolina General Statutes in the district court.  Wife and husband each owned 50% of the shares of a residential contracting company of which the husband served as sole director and president, and the wife served as corporate secretary. In her divorce complaint, the wife requested "exclusive possession and full use" of the corporation pending an equitable distribution of the company.  Several months later, the wife wrote a letter to the husband in his capacity as president, requesting an inspection of the company's records and books. After the husband refused the request, the wife filed a shareholder action (1) demanding an inspection of the books; (2) asking for an accounting; (3) seeking damages for breach of fiduciary duties in excess of $ 10,000; and (4) requesting that the husband be divested of his shares in the corporation as an alternative equitable remedy. With respect to the damages claim for alleged breach of fiduciary duties, the wife asked for recovery "on behalf of the corporation as a shareholder." 

Defendants filed a motion to dismiss the shareholder suit for lack of subject matter jurisdiction, arguing that the action was precluded by N.C. Gen. Stat. § 7A-244 (2009), which vested the district court in which a divorce action was filed with proper jurisdiction for matters concerning equitable distribution. The superior court denied the motion to dismiss. The defendants sought a writ of certiorari to the Supreme Court of North Carolina.

Issue:

Did the superior court have proper jurisdiction to decide matters concerning equitable distribution?

Answer:

Yes.

Conclusion:

The court found that because the district court was barred by statute from hearing the shareholder's derivative action, the superior court properly found that it retained jurisdiction over the shareholder's causes of action for breach of fiduciary duties, accounting, and inspection of the corporate books. However, to the extent the superior court allowed the shareholder to pursue an equitable divestiture of shares in her shareholder derivative suit, it reversed the superior court's order.

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