Guest Post By Brian King, Managing partner at the King Law Offices
[Editor’s Note: Maryland does not have a Plaintiff’s Inventory Affidavit, but we do have a Financial Statement and a Joint Property Statement. It is interesting to see what other states do.]
Perhaps the most difficult part of an equitable distribution case is the discovery phase. This begins with the difficult task of putting together an inventory affidavit.
The Plaintiff’s Inventory Affidavit begins the process. This must be completed within 90 days after service of a claim for equitable distribution, the party who first asserts the claim shall prepare and serve upon the opposing party an equitable distribution inventory affidavit listing all property claimed by the party to be marital property and all property claimed by the party to be separate property, and the estimated date-of-separation fair market value of each item of marital and separate property. The Defendant’s Inventory Affidavit is then due within 30 days after service of the inventory affidavit, the party upon whom service is made shall prepare and serve an inventory affidavit upon the other party.
The inventory affidavits prepared and served pursuant to this subsection shall be subject to amendment and shall not be binding at trial as to completeness or value. Because the initial inventory affidavits are subject to later amendment, it is unwise to place too much reliance upon them. By the time the case is tried, the facts may be materially different from what was stated in the initial inventory affidavit.
In particular, note that the opposing party’s financial affidavit does not constitute a binding admission as to the classification or value of any property owned by the parties. A party’s own financial affidavit is likewise not binding, especially where relevant information is withheld by the other side. The court may extend the time limits in this subsection for good cause shown.
The affidavits are subject to the requirements of General Statutes section 1A-1, Rule 11, and are deemed to be in the nature of answers to interrogatories propounded to the parties. Any party failing to supply the information required by this subsection in the affidavit is subject to N.C.G.S. § 1A-1, Rules 26, 33, and 37. During the pendency of the action for equitable distribution, discovery may proceed.
The inventory affidavits are therefore intended to supplement traditional discovery, not to replace it. Discovery begins with the inventory affidavits, but it does not end there. “[F]ormal discovery procedures as provided by the North Carolina Rules of Civil Procedure are available to the parties in an equitable distribution action to gather the information needed for the parties to prepare and for the trial court to make its determination.”
Note in particular that the opposing party’s inventory affidavit may well contain good-faith misstatements, inadvertent errors, or even outright lies. The inventory affidavit is no more likely to be correct than a response to an interrogatory or a statement made in a deposition. It is therefore essential to use the traditional discovery process, to the maximum extent possible, to double-check all statements made on the opposing party’s inventory affidavit. To take a very simple answer, if the other party owns a business, do not rely on the value stated on the inventory affidavit. Use the normal discovery process to obtain financial information about the business, and retain an expert to evaluate that information and determine whether the value stated on the affidavit is correct.
As a general rule, the inventory affidavits are more useful for identifying marital property than for classifying or valuing it. Perhaps the most clear issue surrounding the equitable distribution affidavit was in the recent Ross v. Ross case from 2011. In that case, a request for protection asked the husband to produce any and all documents upon which you have relied, or intend to rely, to support your contention that the land and/or the residential building at 7018 Ocean Drive, Emerald Isle, North Carolina is your separate property, including but not limited to any evidence of source of funds used in acquiring said alleged marital property.
The husband ignored the request for a considerable period of time, and then responded: Any and all documents that I have to support my contention that the land and/or residential building at 7018 Ocean Drive, Emerald Isle, North Carolina is my separate property, is [sic] proprietary at this time. This evidence will be presented and reveled [sic] in court at the ED hearing(s) when necessary. I have always contended the Emerald Isle property is my separate property from the beginning. (Refer to Plaintiff’s Interrogatories, June 14, 2002, items 5 and 6.)
The broad claim that the requested information was “proprietary” was essentially a complete failure to respond to discovery. The husband “was claiming that he is the owner of his documents and he will not reveal them to anyone unless and until he wants to; this is not a valid or reasonable response to a discovery request.” Id.
The trial court imposed a very harsh sanction—it struck the husband’s equitable distribution claim, and barred him from testifying at trial. But the Court of Appeals held the sanction justified by the husband’s complete and long-standing failure to comply with discovery.
The Court of Appeals then held that the: “Plaintiff has no right to keep his “proprietary” information which he has been required by court order to produce in discovery a secret until he deems it necessary to reveal it at the equitable distribution hearing. Plaintiff does not have the prerogative to decide what information he will produce in discovery after the trial court has ordered this production. Thanks to plaintiff’s intransigence, the trial court has not yet had the opportunity to reconsider the classification and valuation of the marital and separate interests in the Emerald Isle property and to enter an order as directed by our prior opinion. The trial court’s sanctions order barring plaintiff’s equitable distribution claim and presentation of evidence does not prevent the trial court from entering an order as to classification and valuation of the separate and marital property but affects only the evidence which will be available at the hearing which will someday, we trust, be held on this issue.”
Striking of claims as a discovery sanction is rare, but it is justified when there has been a complete and long-standing failure to comply with discovery.
-  N.C.G.S. § 50-21(a)
-  Id.
-  See Franks v. Franks, 153 N.C. App. 793, 571 S.E.2d 276 (2002) (profit-sharing plan was marital property even though not listed in pretrial order, where husband did not disclose the plan until the actual hearing).
-  N.C.G.S. § 50-21(a).
-  Id. § 50-21(a).
-  Coleman v. Coleman, 182 N.C. App. 25, 29, 641 S.E.2d 332, 336 (2007).
-  Ross v. Ross, ___ N.C. App. ___, ___, 715 S.E.2d 859, 863 (2011)
-  Id. at ___, 715 S.E.2d at 865-66
About The Author: Brian King is the managing partner at the King Law Offices, and is a member of the North and South Carolina bars. Brian King is a graduate of Campbell Law School and completed his undergraduate degree at University of North Carolina at Charlotte.