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Nelson v. Nelson

Court of Appeals of South Carolina

August 21, 2019

Harrison Shelby Nelson, Appellant/Respondent,
Melissa Starr Nelson, Respondent/Appellant. Appellate Case No. 2017-000291

          Heard May 16, 2019

          Appeal From Charleston County Daniel E. Martin, Jr., Family Court Judge.

          Joseph P. Cerato, of Joseph P. Cerato, P.A., of Charleston, for Appellant/Respondent.

          Alexander Blair Cash, of Rosen Rosen & Hagood, LLC, of Charleston, for Respondent/Appellant.

          THOMAS, J.

         In this cross-appeal arising from an action for divorce, Harrison Shelby Nelson (Husband) appeals the family court's final order and final amended order. Melissa Star Nelson (Wife) appeals the family court's order granting Husband's motion pursuant to Rule 60(b) of the South Carolina Rules of Civil Procedure. On appeal, Husband argues the family court erred in (1) finding the parties' property at 6 Judith Street had no mortgage; (2) valuing the property at 6 Judith Street; (3) finding Husband had a 50% ownership interest in 6 Judith Street; (4) valuing the parties' property at 109 North Shelmore Boulevard; (5) failing to equitably divide the parties' debt; (6) including a vehicle owned by Wife's father as a marital asset and the loan to finance that vehicle as a marital debt; (7) making numerous findings not supported by the record; (8) failing to credit Husband for using the sale of proceeds from an investment property at 18 Reid Street for marital purposes; (9) failing to equitably divide the parties' personal property; and (10) requiring Husband to contribute to Wife's attorney's fees. In her cross-appeal, Wife argues the family court erred in (1) finding excusable neglect existed to grant Husband's Rule 60(b) motion; (2) causing her unfair prejudice by granting Husband's Rule 60(b) motion; and (3) failing to find Husband was estopped from seeking relief under Rule 60(b) due to his own bad conduct. We affirm.


         Husband filed this action for divorce in May 2015 after eighteen years of marriage with Wife. The parties reached a settlement agreement regarding the custody and visitation of their two daughters in June 2016, and tried the remaining issues of equitable apportionment and attorney's fees in September 2016.

         At the outset of the trial on the financial and property issues, Husband and Wife stipulated each party would retain the ownership interests and liabilities to their respective businesses, as well as the ownership interests in their business property, and agreed the approximate values of those assets were equal for the purposes of equitable apportionment. The remainder of the marital estate consisted predominately of the marital home, numerous real estate investments, tax debts, and personal property. The parties agreed the family court should apportion the total marital estate on an equal 50/50 basis, but disputed the values of certain assets and how the assets and liabilities should be distributed.

         I. Property at 6 Judith Street

         In 2007, Husband and his cousins, Hill Carter Redd and Samuel Cornelius Range Redd (collectively, the Redds), purchased an investment property at 6 Judith Street in Charleston for $920, 000. Although only the Redds were listed on the deed to the property, Husband admitted in his financial declarations and at trial he used his commission from the sale of 6 Judith Street, $50, 000, to purchase an interest in the property. In his initial financial declaration, Husband claimed he had a 50% interest in the property. However, in his subsequent financial declarations, he claimed he only had a "contingent interest." At trial, Husband claimed he was not sure what this interest was worth and did not know the terms of his agreement with his partners; however, he acknowledged the Redds invested approximately $450, 000 in the property.

         Wife testified Husband informed her of the $50, 000 investment in 6 Judith Street shortly after he made the decision to invest in the property. According to Wife, Husband stated he would have "50 percent ownership in [the] property." Additionally, Wife recalled Husband stated he would receive $800 per month to manage the property.

         Husband initially filed a sworn financial declaration indicating there was a $1.1 million mortgage on the property; however, in his subsequent declarations, he listed the mortgage owed as "UNKNOWN." At trial, Husband testified he believed the property was mortgaged, his partners handled the mortgage, and he "had nothing to do with the mortgage." He also testified the $1.1 million mortgage listed in his initial financial declaration was not correct. Husband admitted he failed to produce any documentation of any mortgage on the property despite Wife's attorney's request for these documents. Other than his testimony and his initial claim of a $1.1 million mortgage, Husband did not produce evidence of a mortgage on the property until after trial.

         During Husband's cross-examination, Wife introduced the following documents she obtained from the Charleston County Register of Mesne Conveyances's office: a copy of the deed to the property in the name of Husband's partners, a copy of the original mortgage, and a document showing the satisfaction of the original mortgage. Husband objected to the introduction of these documents, arguing there was no foundation for their introduction because he previously testified he had never seen them before. Wife argued Husband testified he had an ownership interest in the property and the property was mortgaged; therefore, she sought to impeach his testimony using public records. Husband stated, "I would withdraw [the objection] if the purpose of their being put in, your [h]onor, is for impeachment of my client's financial declaration, I withdraw the objection." However, when each document was subsequently introduced, Husband stated he had no objection. After Wife introduced these documents, Husband testified he was not aware the mortgage had been satisfied but acknowledged there was currently not a mortgage on the property.

         In his first two financial declarations, Husband claimed the property had a value of $1 million. In his third financial declaration, Husband listed the value of the property as "UNKNOWN." At trial, Husband acknowledged he listed the property for sale for $1.2 million, but he did not receive any offers. However, he stated he never listed the property for a lower price. He also admitted the property generated roughly $87, 000 of rental income per year. Husband claimed the property was in poor condition due to lack of maintenance and testified he believed the property was not worth more than the $920, 000 he and his partners paid for it. However, he also claimed he spent large sums of money to make repairs and improvements to the property. Wife testified she had "no idea how much money [was] in [6 Judith Street]" but, according to an estimate she found on the internet, she believed the property was worth roughly $1.2 million.

         The family court found Husband's testimony regarding 6 Judith Street was not credible because he offered conflicting information in his financial declarations and gave conflicting testimony regarding the value of the property, his ownership interest, and the mortgage. The family court determined the property was worth $1 million and it was not mortgaged. Further, the family court found Husband and his cousins entered into a partnership to purchase and manage 6 Judith Street as a rental property because the evidence presented at trial reflected Husband and his partners agreed they would receive their initial investment and split the remaining profit in half when they sold the property. Accordingly, the family court found the marital value of Husband's investment in the property was $300, 000.

         II. Property at 109 North Shelmore Boulevard (Marital Home)

         Wife purchased the marital home at 109 North Shelmore Boulevard in the I'On neighborhood of Mount Pleasant in 2004. In his initial financial declaration, Husband claimed the property was worth $900, 000; however, in his subsequent declarations, he claimed the property was worth at least $1.13 million. Husband's expert witness, a real estate appraiser, testified he believed the property was worth $1.13 million. However, on cross-examination, Husband's expert acknowledged three of the five properties he used to value 109 North Shelmore sold for prices ranging from $938, 000 to $995, 000, and the other two properties had significantly more square footage than the marital home. He also admitted that out of the seventy recent sales in the I'On neighborhood, no houses with similar square footage sold for over $1 million. Husband's expert acknowledged he did not use sales of multiple properties similar in size to 109 North Shelmore, including a home within a block of the marital home that sold for $899, 000 four months before trial.

         In her financial declaration, Wife stated she believed the property was worth $975, 000. Wife also presented an expert witness, a realtor, who testified the property had a value of between $925, 000 and $955, 000. Wife's expert stated the home was "incredibly dated" compared to other homes in the area. Furthermore, Wife's expert testified all of the comparable homes she used sold within four months of trial and all of them sold for less than $1 million, including two properties with nearly the same square footage as the marital home, which each sold for less than $900, 000. However, on cross-examination, Wife's expert admitted that when she initially valued the home at $875, 000, she believed the home measured 2, 800 square feet and valued the property at $312.50 per square foot. She acknowledged the property's tax records indicated the marital home was actually 3, 313 square feet and that at her previous price per square foot, it would have a value of just over $1.03 million.

         The family court found that although both experts presented credible testimony, Husband's expert did not rely upon many recent sales of comparable homes on the same street. The family court noted Husband's expert acknowledged most of the comparable home sales were for less than $1 million. Accordingly, the family court found 109 North Shelmore had a value of $975, 000.

         III. Teton Ranch, LLC and Tetonas, LLC

         In his financial declarations, Husband claimed he had a 25% interest in Teton Ranch, LLC, which owned two properties in Idaho. In his first two financial declarations, Husband claimed a net loss of $38, 500 and $53, 750, respectively. However, in his final financial declaration and at trial, Husband indicated both of the properties had been foreclosed on, there were no deficiencies, and one of the properties had no 1099 tax liability and any 1099 liability for the other property was unknown. Husband admitted the mortgages on the Teton Ranch, LLC's properties were nonrecourse loans and he had no exposure to any deficiency judgment.

         In addition to Teton Ranch, LLC, Husband also claimed he had a 25% interest in Tetonas, LLC, which owned two other properties in Idaho. Husband's initial financial declarations indicated the properties had large negative net values. However, his final financial declaration indicated a negative net value in Tetonas, LLC of approximately $5, 000 from the properties. Husband also claimed he owed $13, 705 in unpaid capital calls. At trial, Husband acknowledged the mortgages on these properties were nonrecourse debts and he had no personal exposure unless he incurred any 1099 tax liability. He also maintained he owed money for unpaid capital calls but acknowledged he did not provide any documentation regarding previous capital calls, expenses, and rents for Tetonas, LLC. Husband claimed he asked the managing partner of Tetonas, LLC for the documentation but the managing partner refused to give him the information. He later admitted the managing partner was a friend he had known for thirty to forty years but stated they had a falling out recently due to failed business ventures. Husband also admitted he and the managing partner shared an office and saw each other nearly every day.

         The family court found the Teton Ranch, LLC's properties were foreclosed on without any deficiency judgment. The family court noted Husband could be liable for some 1099 tax liability in the future; however, the family court determined Husband failed to present any credible evidence on what that amount would be. Additionally, the family court found Tetonas, LLC had a negative net value of approximately $5, 000; however, because the loans were nonrecourse, the value to Husband was effectively zero. The family court also determined Husband's testimony regarding the alleged capital call debt to Tetonas, LLC was not credible because he failed to provide any documentation to support his claim. Accordingly, the family court found the net value of these properties was zero.

         IV. Investment Properties in Costa Rica

         Husband and Wife owned a 50% interest in three rental homes in Costa Rica. At trial, Husband stated the property was listed for $350, 000 and believed a sale would net $300, 000. He testified he owed his mother $50, 000 for a loan that was to be paid upon the sale of the Costa Rica property. Husband also claimed he owed his mother interest on this loan, bringing the total amount he claimed was due to his mother to $74, 432. In his first two financial declarations, Husband stated he owed his mother $50, 000; however, in his final financial declaration, he claimed the amount was $74, 432. Husband's mother appeared at trial. Although she did not testify about the loan or the Costa Rica property, she acknowledged she regularly gave Husband substantial monetary gifts of up to $15, 000 each year.

         Husband claimed he incurred $28, 487 in net costs from the Costa Rica property since the filing of the divorce action. However, the records Husband used to support this claim did not include any information on the rental income for the properties. Further, these records showed Husband's partners in the Costa Rica property only contributed $10, 000 to cover these costs. Husband claimed he did not have any records of the property's rental income and could not get them because they were in Costa Rica. Husband also submitted bank records showing various transfers to a bank in Costa Rica totaling $21, 760 since he filed the divorce action. Husband testified he typically rented out the Costa Rica property three to four times per year at a rate of $3, 000 per week.

         The family court determined the Costa Rica property was worth $300, 000 and Husband and Wife's 50% interest was worth $150, 000. The family court also determined Husband's records for the property were not reliable due to the lack of rental income and the disparity between Husband's and his partners' contributions, which the family court found was evidence Husband was sending payments on behalf of all of his partners. Instead, the family court relied on Husband's bank records showing he transferred approximately $22, 000 to Costa Rica to maintain the property. The family court also relied on Husband's testimony to determine the parties received approximately $12, 000 in rental income to offset the $22, 000 in costs, leaving a balance of $10, 000, $5, 000 of which was Husband's responsibility due to his 50% interest in the property.

         The family court also determined Husband owed his mother $50, 000 for the loan which was to be paid from the sale proceeds of the Costa Rica property. However, the family court did not find Husband's claim his mother would collect interest in the loan credible and believed that even if she did, she would likely return that money in the form of a gift.

         V. Tax Debts and Other Debts

         Although Husband and Wife filed joint tax returns in 2013, they filed separate returns beginning in 2014. Just before trial, Husband produced copies of drafts for his 2014 and 2015 tax returns. According to his draft returns, Husband owed $7, 470 in federal taxes for 2014 and $2, 710 in penalties and interest for filing late. Husband also owed $1, 853 in South Carolina state taxes and $703 in interest and penalties for filing late. Husband's draft 2015 tax returns claimed he owed $42, 121 in federal taxes and $11, 549 in penalties and interest for filing late. Of the $42, 121 in federal taxes owed, he claimed $26, 874 were from capital gains due to the sale of properties at 51 and 18 Reid Street. However, Husband's Form 4797 ("Sales of Business Property") from his draft 2015 return was not filled out with all of the necessary information needed to determine his tax liability for the sale of properties at 51 and 18 Reid Street. He also claimed to owe $6, 443 in South Carolina state taxes for 2015 and $1, 918 in penalties and interest for filing late.

         The family court found the late fees and interest Husband incurred were not part of the parties' marital debt because they were incurred due to Husband's failure to file his tax returns and pay taxes in a timely manner. The family court found the remaining amount of Husband's 2014 taxes, $7, 470, was marital debt and apportioned to him. The family court's order did not address Husband's 2014 and 2015 South Carolina state taxes.

         The family court found the capital gains tax from the sale of the Reid Street properties in 2015 was marital debt. However, the family court took issue with Husband's draft 2015 federal tax return because his Form 4797 was incomplete and did not provide the details necessary to determine the taxable gain solely from the sale of the Reid Street properties. The family court noted Husband did not call his accountant to testify to why this form was incomplete. The family court determined it would not use the $26, 874 figure listed in Husband's Schedule D because it was the total tax on all income, including his business income. However, the family court noted line 29 of Husband's Schedule D was helpful for determining the capital gains tax for the Reid Street properties. Relying on the best evidence presented, the family court found the capital gains tax Husband incurred from the sale of these properties was $14, 783. The family court then apportioned the 2015 capital gains tax debt to Husband.

         Husband also claimed a debt of $23, 671 for their children's private school tuition and $4, 400 in medical bills were marital debts and should be equitably apportioned. The family court did not address these debts in its final order.

         VI. Wife's Vehicle

         Husband and Wife acknowledged Wife owned a 2012 Honda and Wife's father took out a loan in his name to finance the purchase of the vehicle. The family court admitted the loan document into evidence without objection. Wife testified the car and loan were in her father's name due to her low credit score but she had been making the payments. The ...

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