Bailey v. Bailey

• Court: Court of Appeals of North Carolina
• Decided: March 18, 2026
• Docket: 25-483
• Status: Published
• Author: Judge John Arrowood

Opinion

IN THE COURT OF APPEALS OF NORTH CAROLINA

No. COA25-483

Filed 18 March 2026

Moore County, No. 22CVD000450-620

CHRISTOPHER BAILEY, Plaintiff,

v.

HOLLY BAILEY, Defendant.

Appeal by defendant from order entered 8 November 2024 by Judge Warren

McSweeney in Moore County District Court. Heard in the Court of Appeals

10 February 2026.

Wilson, Reives & Doran, PLLC, by Nathalie M. Doran, for plaintiff-appellant.

The Baker Law Firm, by Christina E. Baker, for defendant-appellee.

ARROWOOD, Judge.

Christopher Bailey (“plaintiff”) appeals from an equitable distribution order

awarding real property to his ex-wife, Holly Bailey (“defendant”). For the following

reasons, we reverse the trial court’s order and remand for further proceedings

consistent with this opinion.

I. Background

Plaintiff and defendant married on 18 April 2015. At the time, plaintiff owned

a house in Aberdeen, North Carolina (“Aberdeen property”) that he purchased in 2009

with his former wife. Plaintiff’s former wife had deeded the Aberdeen property to BAILEY V. BAILEY

Opinion of the Court

plaintiff on 13 January 2015 and plaintiff refinanced the property that same day.

Plaintiff refinanced the property again on 12 November 2020. At no point did

plaintiff convey an interest in the Aberdeen property to defendant. The Aberdeen

property was used as a rental property from 2015 until early 2020 when the parties

moved in and began using it as their primary residence.

The parties separated in the fall of 2021. Plaintiff contends that the precise

date of separation was 27 October 2021 while defendant maintains that their date of

separation was 28 November 2021. On 21 April 2022, plaintiff filed a Complaint for

Child Custody and Equitable Distribution seeking in part an equitable distribution

of the parties’ marital and divisible property with an unequal distribution in his

favor. Defendant filed her answer and counterclaims on 28 July 2022 seeking in part

an equitable distribution of the parties’ marital property with an unequal distribution

in her favor. Defendant also requested that she be granted a writ of possession for

the Aberdeen property, which plaintiff opposed in his reply on 26 August 2022.

On 12 December 2022, the trial court entered an order granting temporary use

and possession of the Aberdeen property to defendant and ordering plaintiff to pay

the mortgage, taxes, and insurance on the Aberdeen property as temporary child

support.1 On 25 May 2023, the trial court entered a pretrial order that contained

1 The memorandum order contained a clerical error ordering defendant, who resided with the children,

to pay the mortgage, taxes, and insurance on the Aberdeen property as temporary child support. In actuality, plaintiff paid the mortgage, taxes, and insurance on the Aberdeen property as temporary child support.

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schedules and contentions concerning the parties’ property. The trial court held

hearings on 17 October 2023 and 16 April 2024.

On the day of the second hearing, the trial court entered stipulations signed by

the parties. The parties stipulated that the Aberdeen property was valued at

$177,000.00 on the date of marriage, $248,000.00 on the date of separation, and

$280,500.00 at the time of signing. They also stipulated that the mortgage on the

Aberdeen property was $201,000.00 on the date of marriage, $174,183.36 on the date

of separation, and $162,429.95 at the time of signing. They made no stipulation as

to the classification of the Aberdeen property. Finally, the parties stipulated that the

business plaintiff started in 2019, Strider Chainbridge, was marital property but did

not stipulate the value of the business.

On 8 November 2024, the trial court entered an equitable distribution order

granting an unequal distribution in defendant’s favor. The order did not classify the

Aberdeen property itself but found that the property had negative equity on the date

of marriage and that there were no active contributions of separate property in the

home. Instead, the court found that all of the active contributions, namely the

mortgage reduction, and the passive appreciation of the Aberdeen property was

marital property. The trial court distributed the Aberdeen property and all equity

therein to defendant. As to Strider Chainbridge, the trial court valued it at

$32,307.00 on the date of separation and distributed it solely to plaintiff. After

distributing the rest of the property, the trial court ordered that defendant pay

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plaintiff a $20,000.00 distributive award. Plaintiff filed a Notice of Appeal to this

Court on 19 November 2024.

II. Discussion

Plaintiff argues that the trial court erred by 1) distributing the Aberdeen

property to defendant, 2) valuing Strider Chainbridge at $32,307.00, 3) ordering an

unequal distribution without supporting findings of fact, 4) failing to determine the

net value of the marital estate, 5) ordering a distributive award instead of an in-kind

distribution, 6) failing to identify how the distributive award would be paid, and 7)

distributing the property at issue considering the errors in the order. We address

plaintiff’s arguments below.

A. Standard of Review

“When the trial court sits without a jury, the standard of review on appeal is

whether there was competent evidence to support the trial court’s findings of fact and

whether its conclusions of law were proper in light of such facts.” Miller v. Miller,

253 N.C. App. 85, 100 (2017) (citation and quotation marks omitted). “Our review of

an equitable distribution order ‘is limited to a determination of whether there was a

clear abuse of discretion.’ ” Kaylor v. Kaylor, 296 N.C. App. 80, 82 (2024) (quoting

White v. White, 312 N.C. 770, 777 (1985)). “ ‘A trial court may be reversed for abuse

of discretion only upon a showing that its actions are manifestly unsupported by

reason.’ ” Id. (quoting Petty v. Petty, 199 N.C. App. 192, 197 (2009)).

B. Aberdeen Property

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Plaintiff contends that the trial court erred in distributing the Aberdeen

property to defendant. Specifically, plaintiff argues that the trial court erred by

failing to classify the Aberdeen property as his separate property, failing to

distinguish the classification and the appreciation of the Aberdeen property, finding

that the appreciation of the Aberdeen property was active, and failing to determine a

date of separation to value the Aberdeen property. For the following reasons, we

agree that the trial court erred in distributing the Aberdeen property to defendant.

Accordingly, we reverse the trial court’s equitable distribution order and remand for

further proceedings.

1. Classification of the Property and Equity

In an action for equitable distribution, the trial court is required to “conduct a

three-step process: (1) classify property as being marital, divisible, or separate

property; (2) calculate the net value of the marital and divisible property; and (3)

distribute equitably the marital and divisible property.” Smith v. Smith, 387 N.C.

255, 258 (2025) (citation and quotation marks omitted). “Separate property may not

be distributed.” Crowell v. Crowell, 372 N.C. 362, 368 (2019) (citation omitted).

Under North Carolina law, marital property is “[a]ll real and personal property

acquired by either spouse or both spouses during the course of the marriage and

before the date of the separation of the parties, and presently owned, except property

determined to be separate property or divisible property[.]” N.C.G.S. § 50-20(b)(1b)

(2025). Divisible property generally refers to certain property received after the date

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of separation but prior to distribution. Id. § 50-20(b)(1a). Separate property is that

“acquired by a spouse before marriage or acquired by a spouse by devise, descent, or

gift during the course of the marriage.” Id. § 50-20(b)(2). The passive appreciation

of separate property and the income derived from separate property is considered

separate property. Id.; see also Roberts v. Kyle, 291 N.C. App. 69, 76–77 (2023).

This Court has described the burden of parties in an equitable distribution case

as follows:

The party claiming the property to be marital must meet her burden by showing by the preponderance of the evidence that the property: (1) was “acquired by either spouse or both spouses”; and (2) was acquired “during the course of the marriage”; and (3) was acquired “before the date of the separation of the parties”; and (4) is “presently owned.” N.C.G.S. § 50–20(b)(1). If this burden is met and a party claims the property to be separate, that party has the burden of showing the property is separate. This burden is met by showing by the preponderance of the evidence that the property was: (1) “acquired by a spouse by bequest, devise, descent, or gift during the course of the marriage” (third-party gift provision); or (2) “acquired by gift from the other spouse during the course of marriage” and the intent that it be separate property is “stated in the conveyance” (inter-spousal gift provision); or (3) was “acquired in exchange for separate property” and no contrary intention that it be marital property is “stated in the conveyance” (exchange provision). N.C.G.S. § 50–20(b)(2). If both parties meet their burdens, then under the statutory scheme of N.C.G.S. § 50–20(b)(1) and (b)(2), the property is excepted from the definition of marital property and is, therefore, separate property.

Atkins v. Atkins, 102 N.C. App. 199, 206 (1991).

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Additionally, property can have dual character and when this is the case, “the

component interests of the marital and separate estates must be identified[.]” Crago

v. Crago, 268 N.C. App. 154, 159 (2019) (quoting McIver v. McIver, 92 N.C. App. 116,

124 (1988)). “North Carolina recognizes the ‘source of funds’ rule, under which assets

purchased with, or comprised of, part marital and part separate funds are considered

‘mixed property’ for equitable distribution purposes.” Carpenter v. Carpenter, 245

N.C. App. 1, 11 (2016) (citation omitted). “In instances where a trial court is charged

with distributing mixed property, ‘each [party] is entitled to an interest in the

property in the ratio [his] contribution bears to the total investment in the property.’ ”

Id. at 11–12 (quoting Wade v. Wade, 72 N.C. App. 372, 382 (1985)).

This Court has recognized that real property can be separate property while

equity in that real property is marital. See Turner v. Turner, 64 N.C App. 342, 346

(1983); Watson v. Watson, 261 N.C. App. 94, 98–99 (2018). In Turner, the trial court

found that the plaintiff purchased a house before the marriage and that during the

marriage, the defendant helped pay for the house and make improvements to the

house. 64 N.C. App. at 345. The trial court found that the defendant was entitled to

one-half of the equity in the house and included the house in the distribution. We

held that the trial court erred, explaining:

If the house was purchased by plaintiff before the marriage, as the finding states, then it was error to subject the house, as such, to equitable distribution, since under G.S. 50–20(b)(2), property acquired by a spouse before marriage is “separate,” rather than “marital,” property. If,

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however, an equity in this property developed during the marriage because of improvements or payments contributed to by defendant, that equity (as distinguished from a mere increase in value of separate property, excluded by the statute) could be marital property, in our opinion, upon appropriate, supportable findings being made. And if not marital property, such equity, if it developed, would be a factor requiring consideration by the court, along with the other factors specified in the statute, before determining how much of the marital property each party is entitled to receive.

Id. at 346.

This Court reaffirmed that North Carolina law recognizes the dual nature of

real property in Wade. There, the plaintiff purchased land prior to the marriage and

then he and the defendant built a house on the land. Wade, 72 N.C. App. at 378. The

plaintiff was awarded both the land and the house in the trial court’s equitable

distribution order. The defendant appealed and asked this Court to “adopt the theory

of ‘transmutation through commingling’ ” under which “affirmative acts of

augmenting separate property by commingling it with marital resources is viewed as

indicative of an intent to transmute, or transform, the separate property to marital

property.” Id. at 381. This court refused to adopt the theory of transmutation because

N.C.G.S. § 50-20 demonstrates “a clear legislative intent that separate property

brought into the marriage or acquired by a spouse during the marriage be returned

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to that spouse, if possible, upon dissolution of the marriage.”2 Id. Accordingly, this

Court recognized that the land and the house constituted one asset that was partially

separate and partially marital. Id. at 382.

Here, the trial court erred by distributing the Aberdeen property to defendant

and classifying the passive appreciation of the property as marital. The Aberdeen

property was purchased by plaintiff prior to the marriage, making it his separate

property. Thus, the Aberdeen property is not subject to distribution under N.C.G.S.

§ 50-20(b)(2) and any passive appreciation of the property is separate property.

Under Turner, any increase in equity that was developed because of mortgage

payments made with marital funds may be marital property, but that does not

convert the Aberdeen property itself into marital property.

Defendant argues that the distribution of the Aberdeen property was

appropriate because the property had negative equity on the date of marriage. To

support her argument, she cites Brackney v. Brackney, 199 N.C. App. 375, 383–85

(2009), in which this Court affirmed the classification of a house that a husband

closed on post-separation as marital where the active contributions to the equity came

from marital funds. However, in Brackney, the home itself was purchased using

entirely marital funds. Id. at 383. Thus, this Court’s distinction in Turner between

2 This Court has since recognized transmutation in the limited circumstance where separate property

and marital property are commingled, and the separate property cannot be traced into its form at the date of separation. Fountain v. Fountain, 148 N.C. App. 329, 333 (2002).

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the classification of real property and the equity within remains unchanged by

Brackney. We hold that the reasoning in Turner applies the same here where the

separate property had negative equity on the date of marriage. To hold otherwise

would be to allow marital contributions to the equity to transform the property from

separate property to marital property, contrary to our caselaw and the legislature’s

intent to keep separate property separate. Accordingly, we reverse the trial court’s

equitable distribution order classifying the passive appreciation of the Aberdeen

property as separate and distributing the property to defendant and remand to the

trial court to reconsider the classification of the Aberdeen property, including equity

and appreciation, in a manner consistent with this opinion.

2. Classification of the Active Appreciation of the Aberdeen Property

The trial court’s error in failing to classify the Aberdeen property as plaintiff’s

separate property may have also affected its finding that the active contributions to

the property were completely marital. Thus, on remand the trial court should

reconsider the classification of any active appreciation or contributions to the

Aberdeen property. However, to provide additional guidance to the trial court, we

address plaintiff’s argument that the appreciation was not active and should be

considered separate because “a lion’s share of the mortgage payments made during

the marriage were in fact satisfied by the rental income generated by the property

itself.”

“With respect to active appreciation of separate property, any increase in value

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between the date of acquisition and the date of separation is presumptively marital

property unless it is shown to be the result of passive appreciation.” Roberts, 291

N.C. App. at 77 (citation omitted). However, an increase in the value of separate

property can remain separate where the increase is attributable to only the owning

spouse. For example, in Watkins v. Watkins, 228 N.C. App. 548, 558–59 (2013), the

plaintiff acquired real property before the marriage and re-financed it during the

marriage but never transferred a property interest to the defendant. Id. The real

property was awarded to the plaintiff as separate property in an equitable

distribution order and the defendant appealed, arguing that the real property was

entirely marital, in part because mortgage payments were made on the real property

during the marriage. Id. at 559. This Court rejected the defendant’s argument and

affirmed the trial court’s order because the plaintiff had paid the mortgage using

rental income generated by the real property, which was itself separate property. Id.

(citing § 50-20(b)(2)).

Here, the trial court found that both the value of the property and the equity

increased during the marriage, raising the presumption that the increase in value

was marital. Plaintiff could rebut this presumption by demonstrating that the

appreciation was passive or that the active contributions to the mortgage came from

plaintiff’s separate property. Plaintiff did testify that the mortgage payments were

made using the rental income from the Aberdeen property, which under Watkins

would make the increase in equity separate property. However, the trial court as the

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sole judge of credibility is free to weigh the testimony and determine whether and

what portions of the mortgage contributions were made from plaintiff’s separate

property. See Watkins, 228 N.C. App. at 559. On remand, the trial court shall

consider all the evidence before it and make clear findings as to what portions of the

equity and appreciation of the Aberdeen property are separate or marital.

3. Valuation

Plaintiff argues that the trial court erred by failing to determine the date of

separation in order to properly value the Aberdeen property. We hold that the trial

court did not err in its valuation of the Aberdeen property because plaintiff and

defendant stipulated the value of the property on the date of separation.

Parties may stipulate the value of property in equitable distributions. See

Wirth v. Wirth, 193 N.C. App. 657, 662–63 (2008). “ ‘A stipulation is an agreement

between the parties establishing a particular fact in controversy.’ ” Smith, 387 N.C.

at 259 (quoting Smith v. Beasley, 298 N.C. 798, 800 (1979)). “ ‘The effect of a

stipulation is to eliminate the necessity of submitting that issue of fact to the jury.’ ”

Id. (quoting Beasley, 298 N.C. at 800). “While a stipulation remains in place, the

parties are ‘bound by it and . . . may not thereafter take an inconsistent position[.]’ ”

Id. (ellipsis in original) (quoting Rural Plumbing & Heating, Inc. v. H.C. Jones Constr.

Co., 268 N.C. 23, 31 (1966)). A stipulation remains in place until it is set aside by the

court. See id.

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Here, plaintiff and defendant stipulated that the value of the Aberdeen

property on the date of separation was $248,000.00 and the balance of the mortgage

on the date of separation was $174,183.36. The effect of that stipulation was to

establish the value of the Aberdeen property on the date of separation, regardless of

what the date of separation was. The trial court properly accepted the stipulations

and they remained in place when the equitable distribution order was filed. Plaintiff

may not now take a position inconsistent with the stipulated value of the Aberdeen

property on the date of separation.

Plaintiff also argues in the alternative that even if this Court determined that

the Aberdeen property was marital property, the trial court erred by failing to

properly value it on the date of distribution. Plaintiff’s argument arises from the

requirement under N.C.G.S. § 50-20(a), (1a) that the court identify and provide for

the equitable distribution of divisible property, which includes the appreciation in

value of marital property occurring after the date of separation and prior to the date

of distribution. Because we conclude that the Aberdeen property was separate

property, we do not reach this issue.

C. Strider Chainbridge

Plaintiff argues that the trial court committed reversible error in its valuation

of Strider Chainbridge because the trial court failed to identify the valuation method

it used and the evidence presented does not demonstrate that the trial court relied on

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a sound method of valuation. We conclude that the trial court erred in its valuation

of Strider Chainbridge.

The trial court explained its distribution and valuation of Strider Chainbridge

Strider Chainbridge is marital property, and it had a date of separation value of $32,307.00. This is from defendant’s exhibit 27 and utilizing the amounts listed in the tax returns for income profit over a two year span prior to date of separation and also considering the bank statements found in defendant’s exhibit 34.

Defendant’s exhibit 27 showed Strider Chainbridge’s net income in 2019 and 2020

which totaled $5,653.00 and $58,962.00, respectively. The bank statements in exhibit

34 showed Strider Chainbridge’s monthly statements from June 2021 through July

2022. The statements generally showed a decline in the business’s bank balance and

deposits.

This Court provided guidance on the valuation of businesses in Poore v. Poore,

75 N.C. App. 414, 419 (1985). There, we held that “a court should consider the

following components of the practice: (a) its fixed assets including cash, furniture,

equipment, and other supplies; (b) its other assets including accounts receivable and

the value of work in progress; (c) its goodwill, if any; and (d) its liabilities.” Id.

Additionally, “a court should make specific findings regarding the value of a spouse's

professional practice and the existence and value of its goodwill, and should clearly

indicate the evidence on which its valuations are based, preferably noting the

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valuation method or methods on which it relied.” Id. at 422. “On appeal, if it appears

that the trial court reasonabl[y] approximated the net value of the practice and its

goodwill, if any, based on competent evidence and on a sound valuation method or

methods, the valuation will not be disturbed.” Id.

The Supreme Court of North Carolina applied the Poore framework in Patton

v. Patton, 318 N.C. 404, 407 (1986). There, the trial court had valued a husband’s

share of a closely-held corporation at “at least $85,000.” Id. at 405–406. The trial

court’s findings of fact listed the evidence considered by the trial court including the

husband’s own estimate, the book value of the business, the capitalization of earnings

of the company and the earning capacity of the company over a four-to-five year

period. Id. Our Supreme Court held that the trial court’s finding of fact “appear[ed]

to be merely an enumeration of the factors considered by the trial court in

determining the value of defendant’s interest in [the corporation], lacking any

indication of what value, if any, the trial court may have attributed to each of the

enumerated factors.” Id. at 407. The Court determined that the list of evidence,

combined with the lack of an exact valuation, was too vague and conclusory to permit

appellate review. Id.

This Court also applied the Poore framework in Stowe v. Stowe, 272 N.C. App,

423, 434–35 (2020). There, the trial court valued an insurance business based on

expert testimony which used a multiplier of gross sales. Id. at 430–32. The trial

court also found that the business “had certain goodwill” but did not specifically

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explain its valuation of the goodwill. Id. at 435. This Court reversed the trial court’s

valuation, holding that the trial court failed to use the Poore framework in

determining the value of the business and its goodwill. Id. at 435, 445.

Here, the trial court’s findings concerning the valuation of Strider Chainbridge

do not demonstrate that the trial court reasonably approximated the value of Strider

Chainbridge on the date of separation. Just as in Patton, the trial court’s finding

about Strider Chainbridge is a mere enumeration of the factors considered by the

trial court with no indication of how it valued each factor or the method it used. The

trial court’s bare findings make review difficult. Our review is further impeded by

the fact that the trial court never determined the parties’ precise date of separation.

Additionally, the factors that are listed by the trial court do not include any of the

Poore considerations other than cash. It does not consider other assets, work in

progress, or, most notably, goodwill. Without these considerations, we cannot affirm

that the trial court used a sound valuation method.

Moreover, from what can be discerned from the trial court’s findings, the

valuation methodology used by the trial court does not appear to reasonably

approximate the value of Strider Chainbridge. The trial court’s valuation of Strider

Chainbridge is equal to the average of the company’s net income in 2019 and 2020.

Given the large difference in the net income those two years, likely because the

company was only founded in late 2019, an average of those values is not a reasonably

accurate approximation of the business’ actual value. Additionally, the bank

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statements showed a significant decrease in cash assets and deposits leading up to

the parties’ separation which further demonstrates that past net income is not likely

to be an accurate approximation of the business’ value. Because the trial court failed

to apply the factors in Poore to value Strider Chainbridge or its goodwill and did not

otherwise demonstrate that its valuation method was sound, we reverse the trial

court’s valuation of Strider Chainbridge and remand for further proceedings.

D. Net Value of Marital Estate

Plaintiff argues that the trial court erred by failing to make a specific finding

as to the net value of the marital estate. To support his position, plaintiff cites Carr

v. Carr, 92 N.C. App, 378 (1988), and Robinson v. Robinson, 210 N.C. App. 319 (2011).

In Carr, this Court vacated an equitable distribution order where the trial court failed

to make findings “as to the net value of the total marital estate, or the properties

distributed to each party, or the three tracts of maritally owned real estate.” 92 N.C.

App. at 379–80. There, we stated that when classifying and valuing property, “the

court must be specific and detailed enough to enable a reviewing court to determine

what was done and its correctness.” Id. at 379. Similarly, in Robinson, this Court

found that the trial court erred where it “made no finding with respect to the total

net value of the parties’ marital estate” and did not classify or value the parties’ two

residences. 210 N.C. App. at 323–24.

This case is distinguishable from Carr and Robinson. In both Carr and

Robinson, the trial court failed to make a finding of the net value of the marital estate

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as well as the net value of specific individual assets, making it impossible for this

Court to determine the value of the estate or each party’s share of the distribution.

Without knowing the value of the estate or the individual properties each party

received, this Court could not determine whether the distribution was equitable.

In contrast, here, plaintiff concedes that the trial court made findings

regarding the individual assets and only failed to calculate and make an ultimate

finding as to the net value of the marital estate. While an ultimate finding

aggregating the net value of the marital property may be helpful, the trial court’s

findings as to the net value of each asset is sufficient “to enable a reviewing court to

determine what was done and its correctness.” Accordingly, the trial court did not

err by failing to determine the total net value of the marital estate.

E. Distribution

Plaintiff’s remaining arguments concern the trial court’s distribution of the

marital estate. However, our decision that the Aberdeen property is plaintiff’s

separate property will significantly affect the distribution of the marital estate and

the trial court’s findings and conclusions that plaintiff challenges. For example,

plaintiff challenges the trial court’s conclusion that an equal distribution would be

inequitable. The trial court based its decision in part on the income, property, and

liabilities of the parties, the need of a parent with custody of the children of the

marriage to occupy or own the marital residence, the liquid or non-liquid character of

the marital and divisible property, and the acts of either party to maintain or waste

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marital or divisible property during the period after separation and before the time

of distribution. Each of these factors will change once the Aberdeen property is

classified as separate and distributed to plaintiff, making review of the trial court’s

original conclusion ineffective. Accordingly, because we remand to the trial court to

redistribute the marital estate, we do not reach plaintiff’s remaining arguments

challenging the trial court’s original distribution of the marital estate.

III. Conclusion

For the foregoing reasons, we reverse the trial court’s classification and

distribution of the Aberdeen property and the trial court’s valuation of Strider

Chainbridge. We remand this matter for further proceedings consistent with this

opinion.

REVERSED AND REMANDED.

Judges CARPENTER and GORE concur.

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