Reeder v. Carter
740 S.E.2d 913, 226 N.C. App. 270, 2013 WL 1296744 (2013)
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Rule of Law:
A party seeking specific performance of a separation agreement not incorporated into a divorce decree must prove that the legal remedy is inadequate, the obligor can perform, and the obligee has performed her obligations; a contractual clause purporting to mandate specific performance does not negate these equitable requirements.
Facts:
- Crystal Y. Reeder and Brian David Carter married on December 31, 2002, and had two minor children during their marriage.
- The couple separated on June 1, 2008, and divorced on January 5, 2010.
- On September 15, 2009, Crystal and Brian executed a separation agreement and property settlement (the “Separation Agreement”).
- The Separation Agreement required Brian to pay $1,200 per month in child support, the taxes, insurance, and monthly mortgage payments for the couple’s former residence, and a $56,000 debt owed to Robert Ferguson, Inc.
- The Separation Agreement contained a clause stating either party had the right to compel specific performance and acknowledged that neither party had a plain, speedy, or adequate legal remedy.
- Crystal admitted during a hearing that Brian had paid her household expenses despite her own obligation under the Separation Agreement.
- Crystal acknowledged that Brian had recently filed for bankruptcy.
Procedural Posture:
- Crystal Y. Reeder and Brian David Carter separated on June 1, 2008, and divorced on January 5, 2010.
- On December 22, 2010, Crystal filed a complaint in Randolph County District Court (trial court/court of first instance) alleging Brian breached their Separation Agreement and sought specific performance and damages.
- Brian did not file an answer to Crystal's complaint.
- The case came for hearing during the June 13, 2011 Session of Randolph County District Court’s Family Court Division.
- On August 3, 2011, the trial court e-mailed the parties its proposed ruling, indicating it would deny Crystal’s claim for specific performance.
- On August 24, 2011, Crystal filed a motion for judgment notwithstanding the verdict, a motion to include specific findings of fact, and a motion for a new trial in the trial court.
- On February 20, 2012, the trial court denied Crystal’s August 24, 2011 motions.
- On February 24, 2012, the trial court issued a final order denying Crystal’s specific performance claim, granting her damages for unpaid child support and the Ferguson Debt, awarding attorney’s fees, and denying her claim for unpaid mortgage payments.
- On March 2, 2012, Crystal filed another motion with the trial court to set aside the February 20, 2012 order and to grant the requests in her August 24, 2011 motions.
- On March 20, 2012, while her March 2, 2012 motions were pending, Crystal filed a timely written notice of appeal to the North Carolina Court of Appeals, appealing the trial court’s February 20, 2012 and February 24, 2012 orders.
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Issue:
Does a specific performance clause within a separation agreement negate the plaintiff's burden to prove the obligor's ability to perform as an equitable requirement for specific performance?
Opinions:
Majority - Hunter, Jr., Judge
No, a specific performance clause within a separation agreement does not negate the plaintiff's burden to prove the obligor's ability to perform as an equitable requirement for specific performance. The court affirmed the trial court’s denial of specific performance. In North Carolina, a separation agreement not incorporated into a divorce decree is enforced like any other contract, and specific performance is an available equitable remedy. However, to receive specific performance, the moving party must prove three equitable requirements: (1) the legal remedy (e.g., monetary damages) is inadequate; (2) the obligor (the party who owes the performance) has the ability to perform; and (3) the obligee (the party seeking performance) has performed her obligations under the agreement. The court clarified that an "adequate remedy" is a full and complete one, and damages are often considered inadequate in separation agreement breaches due to the need for repeated lawsuits for accruals. While a movant need not always present direct evidence of income, they must show the obligor's ability to pay, such as demonstrating depressed income to avoid payment. The court held that the contractual specific performance clause in the Separation Agreement does not eliminate the plaintiff's burden to prove these equitable requirements. Citing North Carolina precedent and persuasive authority from other jurisdictions, the court reasoned that parties cannot contractually establish a legal standard that circumvents established equitable principles. Furthermore, Plaintiff misapplied precedent regarding the burden of proof for the obligor’s ability to perform, as that burden shifts only if the obligor offers evidence of inability or if specific performance is actually ordered. Finally, Defendant’s failure to answer the complaint only admitted the factual allegations in the complaint; it did not establish Defendant’s ability to perform because Plaintiff’s complaint failed to allege specific facts demonstrating that ability. In fact, Plaintiff herself acknowledged that Defendant had recently declared bankruptcy, further undermining her claim of his ability to perform. Thus, Plaintiff failed to meet her burden of proving Defendant’s ability to perform the terms of the Separation Agreement, justifying the denial of specific performance.
Analysis:
This case clarifies that contractual clauses purporting to mandate specific performance do not override the court's traditional equitable analysis. It reinforces the fundamental principle that specific performance is an extraordinary remedy granted at the court's discretion, dependent on the satisfaction of established equitable requirements, particularly the obligor's ability to perform. This ruling is significant for future cases involving separation agreements, as it emphasizes that parties cannot contractually bypass the judicial assessment of fairness and feasibility, even when an opposing party defaults or expressly agrees to the remedy in the contract. It places a clear burden on the party seeking specific performance to affirmatively demonstrate the obligor's capability.
