Bradshaw v. Bradshaw , 264 N.C. App. 669 ( 2019 )

IN THE COURT OF APPEALS OF NORTH CAROLINA
No. COA18-432
Filed: 2 April 2019
Camden County, No. 17 CVD 9
DEBORAH C. BRADSHAW, Plaintiff,
v.
RONALD D. BRADSHAW, Defendant.
Appeal by defendant from declaratory judgment entered 6 February 2018 by Judge
Meader W. Harriss, III, in District Court, Camden County. Heard in the Court of
Appeals 17 October 2018.
Shilling, Pass & Barlow, by Andrew T. Shilling, and The Twiford Law Firm,
by Lauren Arizaga-Womble, for plaintiff-appellee.
Ward and Smith, P.A., by John M. Martin; and Darlene Gill Chambers, P.C.,
Attorney at Law, by Darlene Gill Chambers, for defendant-appellant.
STROUD, Judge.
Defendant-husband appeals from a declaratory judgment rendering void for
public policy reasons a 1993 Virginia separation agreement and property settlement
agreement. The parties reconciled after signing the agreement, moved to North
Carolina, and separated again in 2013. North Carolina’s public policy allows property
settlement agreements to survive reconciliation, so the Virginia Agreement is
enforceable in North Carolina. We reverse the trial court’s order and remand.
I. Background
BRADSHAW V. BRADSHAW
Opinion of the Court
Husband and Wife married in 1987 in Virginia and separated in 1991. In
October 1993, the parties entered into a Stipulation and Agreement in Virginia
governed by Virginia law (“the Agreement”). The Agreement was a comprehensive
agreement with provisions addressing separation, spousal support, and property
division. As relevant to this appeal, the Agreement made “full and complete
settlement of all property rights between them and their right to equitable
distribution pursuant to Virginia Code Annotated §20-107.3” and provided that “from
the time of execution of this Agreement neither Husband nor Wife shall have any
interest of any kind or nature whatsoever in or to any of the marital property of the
parties or the property of the other except as provided in this Agreement and
Stipulation.” The parties waived “any and all rights to equitable distribution or any
monetary award pursuant to Virginia Code Annotated §20-107.3.” The Agreement
divided the parties’ property and also provided that “each party hereafter may own,
have and enjoy, independently of any claim or right of the other party, all items of
real and personal property now or hereafter belonging to him or her[.]” (Emphasis
added.) Each party “forever waive[d], now and forever” any rights to “spousal support
and maintenance or alimony” (original in all caps) from the other, except that
Husband agreed to “immediately pay directly to Wife the sum of $25,000.00” as a “one
time lump sum spousal support payment.”
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Opinion of the Court
The reconciliation provision of the Agreement is the primary subject of the
issues on appeal:
RECONCILIATION
20. In the event of reconciliation and resumption of
the marital relationship between the parties, the
provisions of this Agreement for settlement of property
rights, spousal support, debt payments and all other
provisions shall nevertheless continue in full force and
effect without abatement of any term or provisions hereof,
except as otherwise provided by written agreement duly
executed by each of the parties after the date of the
reconciliation.
In 1994, the parties reconciled, and, in 1997, they moved to North Carolina. In 2013,
the parties separated for the second time. They never entered into any written
agreement modifying or revoking the Agreement.
On 30 January 2017, Wife filed a complaint seeking absolute divorce and
equitable distribution, but not postseparation support or alimony. Husband filed an
answer admitting the allegations relevant to absolute divorce but denying those
relevant to equitable distribution, and he counterclaimed for a declaratory judgment
that the Agreement “remains in full force and effect” and bars Wife’s claim for
equitable distribution. Regarding the Agreement, Husband alleged:
6. On October 19, 1993, the parties entered into a
Stipulation and Agreement (Attached as Exhibit A)
which in pertinent part:
a. provided for the distribution between the
parties of all marital and separate property of the
parties
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Opinion of the Court
b. accepted the division as fair and
reasonable and waived equitable distribution,
postseparation support, and alimony claims
c. stated that in the event of reconciliation
this settlement shall continue in full force and effect
unless decided otherwise and by a new written
agreement formally entered
d. at the time the parties executed said
Agreement Defendant paid Plaintiff the required
$25,000 lump sum postseparation support payment
and each party initialed the amount paid[.]
Wife replied to Husband’s counterclaim and admitted the allegations of
Paragraph 6 “to the extent that the parties entered into a Separation Agreement on
October 19, 1993.” She responded to the sub-parts of Paragraph 6, admitting that
“the Separation Agreement provided for the distribution of all marital and separate
property between the parties owned at the time of the Agreement” but alleging that
the Agreement did not apply to “property acquired after the date of reconciliation,
including active appreciation of the Defendant’s separate property . . . .” Wife also
admitted that Husband had paid her the $25,000.00 lump sum postseparation
support payment. Wife also cross-claimed for a declaratory judgment that “the
Separation Agreement entered into between the parties on October 19, 1993, does not
bar future claims of equitable distribution and spousal support after reconciliation of
the parties.” She alleged that
11. The Defendant through counsel is alleging
that the property acquired after the date of reconciliation
is not marital property and the Separation Agreement
applies to after reconciliation acquired property which is
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Opinion of the Court
contrary to our Equitable Distribution Statutes.
12. The Plaintiff’s position, supported by the law
of this state, that the separation agreement divided the
property that was in the parties’ possession at the time of
the entry of the agreement and that at any property
acquired after date of reconciliation, including active
appreciation, is subject to equitable distribution.
Wife filed a motion to sever the equitable distribution claim from the absolute
divorce claim, which was granted by the trial court. The trial court granted Wife’s
motion for summary judgment for absolute divorce and reserved the pending claims
for equitable distribution and declaratory judgment. The material facts were not in
dispute before the trial court, and the declaratory judgment claims presented only
the legal question of the enforceability of the Agreement. The trial court requested
the parties to submit briefs addressing these issues:
(1) Whether the Stipulation and Agreement is still valid
and enforceable under Virginia Law; if yes, then:
(2) Whether paragraph 20 of the Stipulation and
Agreement titled “Reconciliation” violates North Carolina
Public Policy; if no, then:
(3) Whether the Stipulation and Agreement completely
bars further Equitable Distribution under Virginia law.
After considering the arguments presented by both parties in their briefs, the trial
court concluded in relevant part that: (1) the Agreement is valid under Virginia law;
(2) application of Virginia law would be contrary to North Carolina’s public policy; (3)
the Agreement’s reconciliation provision violates North Carolina public policy; and,
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BRADSHAW V. BRADSHAW
Opinion of the Court
(4) the Agreement does not apply to Wife’s claim for equitable distribution. Upon
motion by Husband, the trial court certified the declaratory judgment for immediate
appeal under N.C. Gen. Stat. § 1A-1, Rule 54(b), and Husband timely appealed.
II. Standard of Review
The material facts are not contested, and the order on appeal presents only
questions of law.1
“In a declaratory judgment action where the trial court
decides questions of fact, we review the challenged findings
of fact and determine whether they are supported by
competent evidence. If we determine that the challenged
findings are supported by competent evidence, they are
conclusive on appeal. We review the trial court’s
conclusions of law de novo.” We will therefore review the
order’s legal conclusion of the enforceability of the
agreement de novo.
Raymond v. Raymond, ___ N.C. App. ___, ___, 811 S.E.2d 168, 174 (2018) (citation
and brackets omitted).
III. Choice of Law
The parties lived in Virginia in 1993 when they executed the Agreement, and
the Agreement contained a choice of law provision:
APPLICABLE LAW
17. This Agreement shall be construed and
governed in accordance with the laws of the
Commonwealth of Virginia[.]
1 Although Husband’s brief challenges several paragraphs of the order labeled as “findings of fact” as
“not supported by competent evidence,” the findings are actually conclusions of law, and we will review
them accordingly.
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Opinion of the Court
The parties essentially agree that Virginia law governs the validity and
interpretation of the Agreement, although Wife argues that the “Agreement is neither
valid nor enforceable under Virginia law[,]” because North Carolina and Virginia law
agree that “a choice of law provision in a contract will not be honored if the
substantive law of the selected jurisdiction is contrary to the established public policy
of the state where the contract is to be enforced.” Thus, Wife concludes, “because
enforcement of the Agreement in North Carolina is contrary to the established public
policy of North Carolina, Virginia law will not permit the Agreement to be enforced
here.” But the question is not as complicated as Wife contends.
The general rule is that things done in one
sovereignty in pursuance of the laws of that sovereignty
are regarded as valid and binding everywhere. North
Carolina has long adhered to the general rule that lex loci
contractus, the law of the place where the contract is
executed governs the validity of the contract. . . . However,
foreign law or rights based thereon will not be given effect
or enforced if opposed to the settled public policy of the
forum.
Muchmore v. Trask, 192 N.C. App. 635, 639-40, 666 S.E.2d 667, 669-70 (2008)
(citations, ellipsis, brackets, and quotation marks omitted). Virginia law governs the
validity of the Agreement, which was the first question addressed in the briefs before
the trial court. Virginia law also controls the interpretation of the Agreement, but
the Agreement is enforceable in North Carolina only if it is not “opposed to the settled
public policy” of this State. Id. at 640, 666 S.E.2d at 670.
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Opinion of the Court
IV. Public Policy
Although Husband’s brief breaks the questions presented by this appeal into
various issues, there is only one question of law presented: whether the Agreement
is unenforceable because the reconciliation provision is against the public policy of
North Carolina. The trial court concluded that “[t]he agreement is valid under
Virginia law.” In addition to addressing the public policy issue, Wife argues that
“[t]he Agreement is neither valid nor enforceable under Virginia law.” But the
validity of the Agreement under Virginia law is not at issue in this appeal. Husband
did not challenge the trial court’s conclusion that the Agreement was valid under
Virginia law, and Wife has not cross-appealed. See McLeod v. Wal-Mart Stores, Inc.,
208 N.C. App. 555, 562, 703 S.E.2d 471, 476 (2010) (finding failure to cross-appeal to
preclude this Court from considering one of plaintiff’s arguments). In addition, Wife
has never denied that the Agreement was a valid and enforceable agreement under
Virginia law in 1993 when it was executed, and her own pleadings acknowledge as
much.2 Therefore, whether this Agreement is valid under Virginia law is not before
this Court, and we need consider only whether the Agreement is “opposed to the
2 Wife’s pleadings below also did not raise the issue of unenforceability based upon violation of North
Carolina’s public policy or the validity of the Agreement, but instead alleged that the Agreement did
not apply to property acquired after the reconciliation of the parties. Her defense in her answer was
based upon interpretation of the Agreement. But when the trial court heard the declaratory judgment
claims, both parties addressed the public policy argument, and Wife abandoned her contention based
upon her interpretation of the Agreement as not applying to property acquired after the date of the
Agreement.
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Opinion of the Court
settled public policy of [North Carolina].” Muchmore, 192 N.C. App. at 640, 666
S.E.2d at 670.
The trial court’s order made the following findings of fact:
15. The Agreement contemplated the parties
would forever live separate and apart due to the
“irreconcilability of their differences.”
16. The Agreement is integrated in that the
separation of the parties was reciprocal consideration for
the property provisions.
17. The Reconciliation provision contained in
Paragraph 20 is void as it violates North Carolina public
policy in that separation and property settlement
agreements are void unless the parties are living apart.
Reconciliation voids the entire agreement. Stegall v.
Stegall, 100 N.C. App. 398 (1990).
18. The Reconciliation provision contained in
Paragraph 20 is void as it violates public policy in that it
discourages the reconciliation of the marital relationship.
Patterson v. Patterson, 774 S.E.2d 860 (2015).
19. The terms of the Agreement are void. Stegall
v. Stegall, 100 N.C. App. 398 (1990), Morrison v. Morrison,
102 N.C. App. 514, (1991).
20. The choice of law provision with the
Agreement states, “This Agreement shall be construed
with the law of the Commonwealth of Virginia.”
21. Application of Virginia law would be contrary
to the established public policy of North Carolina and
should not be applied.
22. The agreement is valid under Virginia law in
the Commonwealth of Virginia recognizes that Separation
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BRADSHAW V. BRADSHAW
Opinion of the Court
and Property Settlement Agreements can remain intact
even upon reconciliation of the parties.
....
24. The Agreement has no application to
Plaintiff’s claim for Equitable Distribution.
The trial court went on to conclude that “[a]pplication of Virginia law would be
contrary to the established public policy of North Carolina[,]” and decreed that the
Agreement “is an integrated agreement and the Reconciliation provision in
paragraph 20 providing for survival past reconciliation is void as it violates North
Carolina Public Policy, and is not binding in the State of North Carolina.” Husband
challenges findings of fact 15 through 19, 21, and 24, and conclusion of law 3 which
is identical to finding of fact 21.
Only finding 15 could be considered as a finding of fact, and it is supported by
the evidence as it is based upon the language of the Agreement: “WHEREAS, marital
difficulties have arisen between the parties, and the parties are now and have been
separated, living separate and apart, with no possible chance of reconciliation since
May 24, 1991[.]” The remainder of the “findings” are actually conclusions of law, and
we therefore review the challenged “findings” de novo. See Barnette v. Lowe’s Home
Ctrs., Inc., 247 N.C. App. 1, 6, 785 S.E.2d 161, 165 (2016) (“Regardless of how they
may be labeled, we treat findings of fact as findings of fact and conclusions of law as
conclusions of law for purposes of our review.”).
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BRADSHAW V. BRADSHAW
Opinion of the Court
Husband argues that the trial court erred by holding the Agreement is void
under North Carolina’s public policy. Wife argues that the Agreement was an
integrated separation agreement and property settlement agreement, and since it
would violate North Carolina’s public policy if reconciliation did not void the
separation provisions of the Agreement, the reconciliation provision is also
unenforceable; since the separation provisions were reciprocal consideration for the
property settlement provisions, the entire Agreement is then void. The trial court
agreed with Wife that the Agreement was an integrated agreement, based upon the
language of the preamble, finding as follows:
14. The First Paragraph of Page 3 of the
Agreement specifically states
“NOW, THEREFORE, for and in consideration of the
promises and in consideration of the mutual covenants and
agreements hereinafter contained, and other good and
valuable consideration deemed adequate and sufficient at
law . . . without in any way attempting to facilitate divorce
or separation, but rather in recognition of the prior existing
separation of the parties, the irreconcilability of their
differences, and in order to determine finally and settle
their property rights . . . the parties do hereby covenant
and agree as follows:
SEPARATE LIVES
1. The parties hereafter shall live separate and
apart from each other . . . .”
We first note that the parties’ briefs rely primarily upon North Carolina law
for the distinction between a property settlement agreement and a pure separation
agreement how to determine if an agreement with both types of provisions is an
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Opinion of the Court
integrated agreement. See Morrison v. Morrison, 102 N.C. App. 514, 519, 402 S.E.2d
855, 858 (1991) (“Whether the executory provisions of a property settlement
agreement are rescinded upon resumption of marital relations depends on whether
the property settlement is negotiated in reciprocal consideration for the separation
agreement. This is so whether the property settlement and the separation agreement
are contained in a single document or separate documents. If the property settlement
is negotiated as reciprocal consideration for the separation agreement, the
agreements are deemed integrated and the resumption of marital relations will
terminate the executory provisions of the property settlement agreement. If not in
reciprocal consideration, the provisions of the property settlement are deemed
separate and the resumption of marital relations will not affect either the executed
or executory provisions of the property settlement agreement.” (quotation marks
omitted)). But in accord with the choice of law provision of the Agreement, we must
interpret the Agreement under Virginia law, and Virginia law does not have case law
addressing the concepts of “integrated” separation and property settlement
agreements in exactly the same way as North Carolina. Under Virginia law, we must
interpret the Agreement as a contract:
Property settlement agreements are contracts;
therefore, we must apply the same rules of interpretation
applicable to contracts generally. We state at the outset
our belief that the property settlement agreement is
unambiguous; thus, its meaning and effect are questions of
law to be determined by the court. On review we are not
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Opinion of the Court
bound by the trial court’s construction of the contract
provisions here in issue.
In construing contracts, ordinary words are to be
given their ordinary meaning. The Supreme Court of
Virginia restated the applicable principles in Berry v.
Klinger, 225 Va. 201, 208, 300 S.E.2d 792, 796 (1983):
We adhere to the plain meaning rule in
Virginia: Where an agreement is complete on
its face, is plain and unambiguous in its
terms, the court is not at liberty to search for
its meaning beyond the instrument itself.
This is so because the writing is the repository
of the final agreement of the parties.
The court must give effect to all of the
language of a contract if its parts can be read
together without conflict. Where possible,
meaning must be given to every clause. The
contract must be read as a single document.
Its meaning is to be gathered from all its
associated parts assembled as the unitary
expression of the agreement of the parties.
However inartfully it may have been drawn,
the court cannot make a new contract for the
parties, but must construe its language as
written.
Tiffany v. Tiffany, 332 S.E.2d 796, 799 (Va. Ct. App. 1985) (citations, quotation
marks, brackets, ellipsis and parentheticals omitted).
The trial court’s order focused on the language of the Preamble, as quoted
above in finding 14. But the Agreement includes other relevant provisions which
must be given effect “if its parts can be read together without conflict.” Id. The
Agreement includes specific provisions regarding severability of invalid provisions:
SEVERABILITY OF PROVISIONS
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Opinion of the Court
12. If any provision of this Agreement shall be
deemed by a court of competent jurisdiction to be invalid,
the remainder of this Agreement shall remain in full force
and effect.
Under Virginia law, we must give “meaning . . . to every clause. The contract
must be read as a single document.” Id. The trial court’s order focused on general
language from the Preamble but ignored the far more specific provision of
severability. The Preamble simply states the consideration for the Agreement and
even notes that the Agreement is not “in any way attempting to facilitate divorce or
separation[.]” The Preamble language in finding 14 and the Severability provision
are not in conflict. Even if the reconciliation provision is “invalid” because it is
against North Carolina public policy as applied to the “pure separation” provisions of
the Agreement, the remainder of the Agreement regarding property settlement is still
enforceable, according to the Severability of Provisions language in the Agreement.
And even under North Carolina law—which the trial court used instead of Virginia
law—the agreement to separate was not “reciprocal consideration” for the property
settlement, since the Agreement has a specific provision that the Agreement’s
provisions are severable. See Hayes v. Hayes, 100 N.C. App. 138, 147, 394 S.E.2d 675,
680 (1990) (“[W]here the parties include unequivocal integration or non-integration
clauses in the agreement, this language governs.”).
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Opinion of the Court
After de novo review of the challenged conclusions of law, including the cases
cited by the trial court to support its conclusions, the conclusions are not supported
by law. The trial court’s order included references to several specific cases, so we will
address those. We first note that the parties were separated when they signed the
Agreement, so the Agreement would not violate North Carolina’s public policy as to
entering into a separation agreement without physical separation, which is one of the
issues discussed in Stegall, 100 N.C. App. 398, 403, 397 S.E.2d 306, 309 (1990), and
cited as support for finding 17. In finding 17, the trial court concluded that “[t]he
Reconciliation provision contained in Paragraph 20 is void as it violates North
Carolina public policy in that separation and property settlement agreements are
void unless the parties are living apart. Reconciliation voids the entire agreement.
Stegall v. Stegall, 100 N.C. App. 398 (1990).” But Stegall does not hold that
reconciliation necessarily voids a property settlement agreement, and it does not
address the effect of a reconciliation provision in an agreement at all, since the
agreement in Stegall did not have this provision. See id. at 411, 397 S.E.2d at 313.
The relevance of the second case noted in the findings is also unclear. In
Patterson, this Court held that the alimony provisions of a separation agreement
which did not provide for termination of alimony payments upon the wife’s
cohabitation were not against public policy and were enforceable. 242 N.C. App. 114,
774 S.E.2d 860 (2015). Although N.C. Gen. Stat. § 50-16.9 provides for termination
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of court-ordered alimony upon cohabitation by the dependent spouse, parties are free
to enter into a contract providing otherwise. Patterson notes that a provision is
against public policy only if the agreement by its own terms promotes an objection
against public policy:
Moreover, as this Court pointed out in Sethness, the
clear implication of cases where separation agreements
were found to be void as against public policy and N.C. Gen.
Stat. § 52-10.1 is that such agreements may not by their
own terms promote objectives (i.e.: divorce, termination of
parental rights) which are offensive to public policy.
Patterson, 242 N.C. App. at 118, 774 S.E.2d at 862-63 (brackets, ellipsis, and
quotation marks omitted).
The trial court cites to Morrison v. Morrison, 102 N.C. App. 514, 402 S.E.2d
855, in finding 19, and concluded, “The terms of the Agreement are void.” The
primary focus of Morrison is the distinction between a separation agreement and a
property settlement agreement, and where an agreement includes both types of
provisions, how to determine if the agreement is integrated. Id. As noted above, we
must construe the Agreement under Virginia law, but as to North Carolina’s public
policy, Morrison also notes that reconciliation provisions in agreements with
provisions regarding both separation and property rights are not against public
policy:
We therefore reject the suggestion that all
agreements, whether in one document or two, relating to
support and property rights are reciprocal as a matter of
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law. To so hold would prohibit the parties from entering
into contracts which do not violate law or public policy.
Because contracts providing that a reconciliation will not
affect the terms of a property settlement are not contrary to
law or public policy, adopting the rule that all agreements
relating to support and property rights are reciprocal as a
matter of law would impermissibly interfere with the
parties’ freedom of contract rights. On the other hand,
contracts which provide that reconciliation will not affect
the terms of a separation agreement violate the policy
behind separation agreements and are therefore void.
Id. at 519–20, 402 S.E.2d at 858-59 (emphasis added) (citations omitted).
In Porter v. Porter, this Court analyzed a North Carolina separation agreement
that contained a reconciliation provision similar to the one at issue in the Agreement:
13. In the event of the reconciliation and
resumption of the marital relationship
between the parties, the provisions of this
agreement for settlement of property rights
shall nevertheless continue in full force and
effect without abatement of any term or
provision thereof, except as otherwise
provided by written agreement duly executed
by each of the parties after the date of
reconciliation.
Thus, according to the express terms of the Agreement, and
with full information as to the legal rights of equitable
distribution and distributive award contained in North
Carolina General Statute Section 50 20, husband and wife
agreed that each would relinquish any and all claims to any
and all real or personal property owned by the other party
or that said party may hereafter own. In other words, the
parties exercised the broad contractual freedom afforded
them under North Carolina law by entering into their 1988
Agreement and foregoing their right to seek equitable
distribution of the marital estate. Additionally, the parties
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specifically contemplated and agreed that, were they to
reconcile and resume the marital relationship after
entering into the Agreement in 1988, the provisions of the
Agreement regarding settlement of property rights shall
continue in full force and effect without abatement of any
term or provision thereof. Thus, the Agreement makes the
parties’ intent clear that the provisions regarding
ownership of property acquired after husband and wife
entered into the 1988 Agreement were to remain
unaffected by any later reconciliation and resumption of
the marital relationship. Accordingly, we conclude that the
trial court erred by ordering equitable distribution of the
property in contravention of the express terms of the
now-court-ordered Agreement. Therefore, we vacate the
trial court’s order for equitable distribution and remand
with instructions to distribute the property in accordance
with the terms of the parties’ Agreement, which provided
that any property not specifically provided for under this
Agreement shall be deemed to be separate property to be
solely owned by the party holding title to the same.
Porter v. Porter, 217 N.C. App. 629, 633-34, 720 S.E.2d 778, 780-81 (2011) (citations,
quotation marks, brackets, and ellipsis omitted).
Here, even the reconciliation provision of the Agreement would offend North
Carolina’s public policy if applied to the “pure separation” provisions of the
Agreement; the “pure separation” provisions were not reciprocal consideration for the
property settlement provisions. The parties agreed that the provisions of the
Agreement are severable, and enforcement of the property settlement provisions of
the Agreement does not conflict with North Carolina’s public policy. Therefore, the
trial court’s finding and conclusion stating that “[a]pplication of Virginia law would
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be contrary to the established public policy of North Carolina and should not be
applied” is in error.
V. Conclusion
The reconciliation provision of the Agreement does not violate North Carolina’s
public policy as applied to the property settlement provisions of the Agreement. Both
parties waived any rights to equitable distribution in the Agreement, so the trial
court erred by concluding that Wife’s equitable distribution claim is not affected by
the Agreement. We reverse the trial court’s order and remand for further proceedings
consistent with this opinion.
REVERSED AND REMANDED.
Judges DILLON and BERGER concur.
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