McArthur v. McArthur

IN THE COURT OF APPEALS OF NORTH CAROLINA No. COA25-940 Filed 21 October 2026 Wake County, No. 24CV007469-910 ALANA MCARTHUR, Plaintiff, v. JESSE J. MCARTHUR, II, Defendant. Appeal by defendant from order entered 14 February 2025 by Judge Rhonda Young in District Court, Wake County. Heard in the Court of Appeals 3 June 2026. Poyner Spruill LLP, by Steven B. Epstein, for plaintiff-appellee. Connell & Gelb PLLC, by Michelle D. Connell, for defendant-appellant. STROUD, Judge. Defendant-Husband Jesse McArthur, II appeals from the trial court’s equitable distribution order involving a townhome he purchased prior to marrying Plaintiff-Wife Alana McArthur. Husband challenges the trial court’s classification of the townhome as marital property. Husband is correct that the trial court erred by classifying the townhome as marital property instead of a mixed asset with marital and separate components. But based on the evidence, Husband’s separate interest was 0 percent of the date of separation value, and the marital interest was 100 percent of the value. So technically the trial court erred in its conclusion of law classifying the townhome as entirely marital property, but on these facts, the result  MCARTHUR V. MCARTHUR Opinion of the Court would be the same even if we were to remand to the trial court to issue a new order correcting the wording of the order as to classification of the townhome as a mixed asset with a marital component of 100 percent and a separate component of 0 percent. Therefore, we affirm the trial court’s order. I. Procedural Background The parties married on 19 December 2008 and separated on 23 June 2023. Wife filed a complaint seeking equitable distribution on 5 March 2024.1 Husband filed an answer and counterclaim for equitable distribution on 7 May 2024. Both parties filed equitable distribution affidavits and engaged in discovery. On 18 November 2024, the trial court entered a final pretrial order setting out the parties’ stipulations and the issues for the hearing. The hearing began that day. On 14 February 2025, the court entered an equitable distribution order. Husband timely appealed on 12 March 2025. II. Jurisdiction This Court has jurisdiction because the equitable distribution order is a “final judgment of a district court in a civil action.” N.C. Gen. Stat. § 7A-27(b)(2) (2025). III. Townhome’s Classification as Marital Property Husband raises one issue on appeal: whether the trial court erred in 1 Wife’s complaint and Husband’s counterclaims also raised claims for child custody, child support, post-separation support, alimony, and attorney’s fees. But only equitable distribution is at issue on appeal. 2  MCARTHUR V. MCARTHUR Opinion of the Court “classifying property that [he] acquired prior to the date of marriage as marital property rather than separate.” The property is a townhome Husband bought from his parents the day before the parties married. A. Standard of Review This Court’s standard of review of an equitable distribution order is well established: [W]hen 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. While findings of fact by the trial court in a non-jury case are conclusive on appeal if there is evidence to support those findings, conclusions of law are reviewable de novo. We review the trial court’s distribution of property for an abuse of discretion. Romulus v. Romulus, 215 N.C. App. 495, 498, 715 S.E.2d 308, 311 (2011) (citations, quotation marks, and brackets omitted). “[U]nchallenged findings of fact are presumed to be supported by competent evidence and are binding on appeal.” Klein v. Klein, 290 N.C. App. 570, 577, 892 S.E.2d 894, 903 (2023). The classification of property is a conclusion of law, which we review de novo. See Romulus, 215 N.C. App. at 500, 715 S.E.2d at 312 (“Because the classification of property in an equitable distribution proceeding requires the application of legal principles, this determination is most appropriately considered a conclusion of law.” (citation and quotation marks omitted)). B. Order’s Provisions Regarding the Townhome 3  MCARTHUR V. MCARTHUR Opinion of the Court The trial court made detailed findings of fact about the townhome. Husband does not challenge those findings as unsupported by the evidence, except as noted below, so they are binding on appeal.2 See Klein, 290 N.C. App. at 577, 892 S.E.2d at 903. Our summary of facts is based on the unchallenged findings. In the order, the trial court classified, valued, and distributed substantial other property.3 But Husband challenges only two rulings: the townhome’s classification as marital property and the townhome’s post-separation rental income’s classification as divisible property. These rulings resulted in the townhome’s full value being included in the marital estate and thus distributed. We omit all facts on the remainder of the parties’ marital estate. Husband’s parents purchased the townhome in Raleigh as a residence for Husband and his brother while the two attended college. Husband was living there with roommates when he and Wife began dating in early 2008. During the late summer of that year, they learned Wife was pregnant. Husband and Wife began living together in the townhome and stayed there after their marriage that December. Before the marriage, Husband was looking for another home to buy, but he decided 2 Wife points out that Husband failed to challenge the trial court’s findings as unsupported by the evidence. Husband replies that he did, citing his “Proposed Issues on Appeal” listed in the record. But despite listing these potential issues in the record under North Carolina Rule of Appellate Procedure 10(b), Husband’s principal brief presents no argument challenging any findings as unsupported by the evidence. See N.C. R. App. P. 10(b). We recognize that some of the trial court’s conclusions of law do appear under the order’s “Findings of Fact,” and we address Husband’s arguments challenging those conclusions. 3 The marital estate’s total net value was $2,733,130.38. 4  MCARTHUR V. MCARTHUR Opinion of the Court that buying the townhome from his parents was “the most financially viable option.” On 18 December 2008, the day before the parties married, Husband bought the townhome from his parents. The purchase price was $132,500, and he did not make a downpayment. Husband obtained a mortgage from State Employee’s Credit Union (SECU), in his name alone, for $133,500. The parties began making payments on the SECU mortgage in February 2009. They lived in the townhome until 2011. In the summer of 2011, the parties bought and moved to another home, titled jointly, and began renting out the townhome. Since 2011, they have used the townhome as “a long-term rental,” leasing it mainly to college students on annual terms. The rental income covered the mortgage payments, insurance, taxes, and repair and maintenance costs. Every year, the townhome produced net income. In May 2013, the parties refinanced the SECU loan for $105,600, with both Husband and Wife listed as obligors on the loan. They refinanced again in September 2019, for $92,000, again with both listed as obligors. After the findings about the townhome’s purchase and use, the trial court summarized the parties’ arguments and set out its conclusions of law on classification: h. [Wife] contends the [townhome] is entirely marital property. [Husband] contended the property is his separate property, as it was acquired prior to marriage, but 5  MCARTHUR V. MCARTHUR Opinion of the Court nevertheless has a marital component of $27,900[4] consisting of the reduction in mortgage principle paid by the parties during the marriage as well as active appreciation, if any, from improvements to the property during the marriage. The court disagrees with [Husband]’s analysis of the property. i. At the time of the parties’ separation, 100% of all funds used to acquire this property had been paid during the parties’ marriage. j. Pursuant to the source-of-funds rule, [Husband] did not have a separate ownership interest in the property either on the date of marriage or as of the date of separation and the property is therefore entirely marital property. k. [Wife]’s expert real estate appraiser, Mike Ogburn, testified to his opinion that the fair market value of this property on the date of separation was $315,000 and that that value had increased to $320,000 as of the date of trial as the result of changed market conditions. [Husband] offered no contrary evidence. The [c]ourt therefore concludes that the distributable value associated with this property is $320,000 and that this value should be distributed to whomever receives distribution of this property. l. The parties have stipulated and agreed to the distribution of this property to [Husband]. m. The parties have stipulated and agreed that the principal balance owed on the jointly held mortgage as of the date of separation was $82,517 and at the time of trial was $78,686 and that this debt should be distributed to [Husband]. 4 Husband claimed that this figure represented the mortgage reduction while the parties lived in the townhome—from their marriage until 2011, when they moved out and began renting it—not the reduction over the entire marriage. The remaining findings make that clear. Obviously, Husband did not contend that 100 percent of the mortgage reduction during the marriage came from marital funds; that was Wife’s contention. 6  MCARTHUR V. MCARTHUR Opinion of the Court n. The [c]ourt has considered and rejects [Husband]’s contention that $12,573 in net rental income associated with this property since the parties’ separation should be considered his sole and separate property. Based on the foregoing finding related to the source-of-funds rule, all such rental income is properly classified as divisible property and was fully consumed by the parties to pay their individual and joint expenses during the 17 months between their separation and the trial, as is discussed further in the findings below. The trial court then concluded that the townhome was “marital property within the meaning of [North Carolina General Statute Section] 50-20.” Consistent with the parties’ stipulations, it distributed the townhome as marital property to Husband at a value of $320,000, along with the $78,686 mortgage. Exhibit A to the order—a spreadsheet listing each item of property with its value, classification, and distribution—likewise classified the townhome as “Marital Property–source of funds rule.” C. Classification of Townhome Husband argues that the townhome is his separate property because: (1) property “acquired prior to the date of marriage is separate property”; (2) the source of funds rule “determine[s] the percentage of separate property or marital property in an asset after the asset has been classified”; and (3) marital and separate property “may be acquired by various methods and not just by financial contributions.” 1. Relevant Law “Under North Carolina General Statute [Section] 50-20(c), equitable 7  MCARTHUR V. MCARTHUR Opinion of the Court distribution is a three-step process: the trial court must (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.” Asare v. Asare, 281 N.C. App. 217, 239, 869 S.E.2d 6, 22 (2022); see also N.C. Gen. Stat. § 50-20(c) (2025) (“There shall be an equal division by using net value of marital property and net value of divisible property unless the court determines that an equal division is not equitable. If the court determines that an equal division is not equitable, the court shall divide the marital property and divisible property equitably.”). North Carolina General Statute Section 50-20(b)(1) defines marital property as “[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 in accordance with this subsection.” N.C. Gen. Stat. § 50-20(b)(1b) (2025). Section 50-20(b)(2) defines separate property as “[a]ll real and personal property acquired by a spouse before marriage or acquired by a spouse by devise, descent, or gift during the course of the marriage.” N.C. Gen. Stat. § 50-20(b)(2) (2025). The trial court “calculates the marital property’s net value at the date of the parties’ separation.” MacDonald v. MacDonald, No. COA 24-759, ___ N.C. App. ___, ___ 932 S.E.2d 254, 273 (2026) (citation and quotation marks omitted). The party claiming that property is marital bears the burden of showing, “by 8  MCARTHUR V. MCARTHUR Opinion of the Court a preponderance of the evidence,” that the property “(1) was acquired by either spouse or both spouses; (2) during the marriage; (3) before the date of the separation of the parties; and (4) is presently owned.” Ahdi v. Ahdi, Nos. COA 24-344, 24-638, ___ N.C. App. ___, ___ S.E.2d ___, 2026 WL 1407626, at *11 (2026) (citation omitted). When property is “acquired with a mixture of marital and separate property, North Carolina courts apply the ‘source of funds’ rule.” Crago v. Crago, 268 N.C. App. 154, 159–60, 834 S.E.2d 700, 705 (2019) (citation omitted). Under that rule, “property is ‘acquired’ as it is paid for,” so it “may include both marital and separate ownership interests.” Id. 2. Acquisition of Townhome Husband argues that the townhome, which he owned before the marriage, is his separate property. He admits the townhome has a small “marital component as a result of active appreciation during the marriage; specifically, marital funds being used to reduce the mortgage principal.” But the trial court, he says, “committed reversible error by transmuting the property from separate property to marital property.” Although the parties paid the mortgage and other expenses throughout the marriage, Husband contends that marital contributions stopped in 2011 because rental income from the townhome covered its expenses. As the trial court found, the marital contribution to the reduction in the mortgage before 2011 was $27,900. Husband also claims that since he owned and took title to the townhome before the parties’ marriage, the townhome is separate property under Section 50-20(b)(2). 9  MCARTHUR V. MCARTHUR Opinion of the Court And separate property, he notes, includes “[t]he increase in value of separate property and the income derived from separate property is considered separate property.” N.C. Gen. Stat. § 50-20(b)(2) (2025). The trial court thus erred, Husband argues, in finding and concluding that he “did not have a separate ownership interest in the property” on the date of marriage and in classifying the townhome as entirely marital. Husband also contends that he could have held equity in the townhome at the time of the marriage even without making a payment, because he bought it from his parents and the original purchase price may have been below fair market value. But he offered no evidence of the townhome’s value on the date of marriage beyond the $132,500 purchase price. Wife responds that, although Husband received title to the townhome before the marriage, our previous cases have read “acquire” as a dynamic process, not a static event. She is right. Husband held legal title to the townhome before the marriage, but he acquired equity in it through the marital estate’s contributions during the marriage. As this court explained in McLeod, the property’s “acquisition” is the key to Section 50-20(b)’s definitions: The key term in both definitions is “acquired.” In Wade v. Wade, 72 N.C. App. 372, 325 S.E.2d 260 (1985), this Court adopted the source of funds rule, by which property is “acquired” as it is paid for, so that it may include both marital and separate ownership interests. . . . It does not depend upon inception of title but upon monetary or other contributions made by one or both of the parties. In adopting this rule by which to characterize property as marital or separate or some combination, this Court 10  MCARTHUR V. MCARTHUR Opinion of the Court recognized “that a dynamic rather than static interpretation of the term ‘acquired’ as used in [Section] 50–20(b)(1)” best serves to implement the remedial intent of the statute. Using a source of funds analysis, this Court drew a distinction in Wade between increases in value of separate property due to passive appreciation, such as by inflation or governmental action, . . . and increases due to active appreciation, such as by financial or managerial contributions from one or both of the spouses. It interpreted [Section] 50–20(b)(2), which classifies increase in value of separate property as separate property, as referring only to increase due to passive appreciation, which does not deplete the marital estate. It held that increase in value of separate property due to active appreciation, which otherwise would have augmented the marital estate, is marital property. Thus the marital partnership shares in increases in value of property it has proportionately “acquired” in its own right. McLeod v. McLeod, 74 N.C. App. 144, 148, 327 S.E.2d 910, 913 (1985) (citation and quotation marks omitted), overruled in part on other grounds by Johnson v. Johnson, 317 N.C. 437, 346 S.E.2d 430 (1986). 3. Source of Funds Rule After briefing closed and just before oral argument, Husband submitted a memorandum of additional authority, citing Bailey v. Bailey, No. COA25-483, ___ N.C. App. ___, ___, 928 S.E.2d 325, 327 (2026), filed on 18 March 2026. At oral argument, both parties addressed whether Bailey squares with earlier cases on classifying mixed assets. Husband’s counsel contended that Bailey required the trial court to classify the 11  MCARTHUR V. MCARTHUR Opinion of the Court townhome as his separate property, apart from the $27,900 marital component reflecting the mortgage reduction while the parties lived there from the date of marriage until 2011. Wife’s counsel read Bailey the same way. Though the opinion cites Wade, 72 N.C. App. at 372, 325 S.E.2d at 260, and discusses the source of funds rule, counsel said, it “seems to suggest” that “there is no ability for separate property ever to be distributed despite what funds are paid during the course of the marriage to acquire it.” Counsel added that Bailey relied “almost exclusively” on Turner v. Turner, 64 N.C. App. 342, 307 S.E.2d 407 (1983)—a decision that predates Wade and thus the source of funds rule by two years. Husband agreed that Turner, as the older case, was the controlling authority under In re Civil Penalty. See 324 N.C. 373, 384, 379 S.E.2d 30, 37 (1989) (“Where a panel of the Court of Appeals has decided the same issue, albeit in a different case, a subsequent panel of the same court is bound by that precedent, unless it has been overturned by a higher court.” (citations omitted)). Wife’s counsel recognized the reach of that reading. Bailey, counsel said, “seems to be saying that Wade, McLeod, McIver, Johnson, and Mishler were all wrongly decided because in each of those cases, this Court held that the real property itself had both a marital and a separate component and that the real property was distributable.”5 So if the parties read Bailey and Turner correctly, In re Civil Penalty 5 The parties’ briefs cite all these cases. 12  MCARTHUR V. MCARTHUR Opinion of the Court compels us to follow Turner, and the later cases the briefs rely on would not bind us. We take challenges to settled precedents (like Wade and McLeod) seriously. We therefore begin with Turner’s precedential effect. We then determine whether Bailey actually relied on Turner and, in doing so, departed from Wade, McLeod, and the cases that followed them. a. Turner v. Turner “In 1981, the General Assembly sought to alleviate the unfairness of the common law rule by enacting our Equitable Distribution Act which is now codified as [North Carolina General Statute Sections] 50-20 and 21.” White v. White, 312 N.C. 770, 774–75, 324 S.E.2d 829, 831 (1985). The Equitable Distribution Act took effect on 1 October 1981. See Myers v. Myers, 62 N.C. App. 291, 296, 302 S.E.2d 476, 480 (1983) (“Section 7 of the Act for the Equitable Distribution of Marital Property (c. 815, Sess. Laws 1981) became effective in actions for absolute divorce filed on and after 1 October 1981.”). By 1983, few appeals from equitable distribution orders had reached this Court, and only two cases—issued in 1983—dealt with equitable distribution.6 Turner was the first reported case from this Court addressing a substantive issue under Section 50-20. See Turner, 64 N.C. App. at 345–46, 307 S.E.2d at 408– 09. But the order on appeal was not really an equitable distribution order, although 6 The other was White v. White, 64 N.C. App. 432, 308 S.E.2d 68 (1983), aff’d as modified, 312 N.C. 770, 324 S.E.2d 829 (1985). 13  MCARTHUR V. MCARTHUR Opinion of the Court it dealt with an equitable distribution claim. The husband instead appealed an interlocutory order. Id. at 344–45, 307 S.E.2d at 408. The opinion quotes the trial court’s findings and conclusions nearly in full, and they read much like the pretrial order that North Carolina General Statute Section 50-21(d) requires today.7 Id.; see N.C. Gen. Stat. § 50-21(d) (2025). The order directed the wife to “inquire through subpoena or otherwise” about the husband’s Duke Power shares, required the parties to have the marital residence appraised, and enjoined the husband from disposing of the stock or encumbering the residence pending further hearing. Id. at 345, 307 S.E.2d at 408. It explicitly did not make a final distribution of all marital property. It also set the cause “for further hearing before the undersigned at which time both parties may offer additional evidence as to the value of said marital property above described to achieve an equitable distribution.” Id. This Court reversed and remanded. The findings and conclusions, we held, would not permit review. See id. at 345–46, 307 S.E.2d at 408–09. The Court’s holding—the binding precedent of the case—was as follows: These findings and conclusions are inadequate or incorrect for several reasons. For one thing, the findings of fact and conclusions of law are not stated separately, as Rule 52(a)(1) of the North Carolina Rules of Civil Procedure requires. This requirement is not a mere technicality; it 7 Section 50-21(d) requires the trial court to hold a scheduling and discovery conference and a pretrial conference. N.C. Gen. Stat. § 50-21(d). It also requires it to enter a pretrial order addressing “any matters reasonably necessary to effect a fair and prompt disposition of the case in the interests of justice.” Id. The General Assembly added Subsection (d) in 1995, twelve years after Turner. See 1995 North Carolina Laws Ch. 244 (H.B. 269). 14  MCARTHUR V. MCARTHUR Opinion of the Court serves a necessary purpose. Only by examining specific findings and conclusions can either the litigants, the trial court, or a reviewing court determine if there has been a correct application of law to fact. Nor do the written findings and conclusions “support the determination that the marital property has been equitably divided,” as [Section] 50-20(j) directs. Id. at 345, 307 S.E.2d at 408 (citation omitted). After noting the order’s many deficiencies, we described several hypothetical conclusions that the trial court might reach on remand, depending on its findings, since it had not yet made the required findings on the parties’ marital estate: If the house was purchased by [the husband] before the marriage, as the finding states, then it was error to subject the house, as such, to equitable distribution, since under [Section] 50-20(b)(2), property acquired by a spouse before marriage is “separate,” rather than “marital,” property. If, however, an equity in this property developed during the marriage because of improvements or payments contributed to by [the wife], 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. The stock also could be marital property if appropriate, supportable findings are made. But the findings made do not support the division ordered. Id. at 346, 307 S.E.2d at 409 (emphasis added). So again, the ruling in Turner—the legal question decided by this Court—was only that the order on appeal lacked the findings and conclusions that Section 50-20 15  MCARTHUR V. MCARTHUR Opinion of the Court requires. This is unsurprising, because it was not a final equitable distribution order. While Turner never discussed mixed classification property—i.e., property with both marital and separate components—it recognized the possibility of the classification. Id. To the extent Wade or later cases seem inconsistent with Turner, we first note that most of Turner is dicta. See Obiter Dictum, Black’s Law Dictionary (12th ed. 2024) (“A judicial comment . . . unnecessary to the decision in the case and therefore not precedential (although it may be considered persuasive).”); see also Hayes v. City of Wilmington, 243 N.C. 525, 536, 91 S.E.2d 673, 682 (1956) (“In every case what is actually decided is the law applicable to the particular facts; all other legal conclusions therein are but obiter dicta.” (citation and quotation marks omitted)). Courts have cited Turner’s language with approval many times, including in Wade and in decisions of our Supreme Court. But repetition does not convert it into a holding. It is a maxim not to be disregarded, that general expressions in every opinion are to be taken in connection with the case in which those expressions are used. If they go beyond the case, they may be respected, but ought not to control the judgment in a subsequent suit where the very point is presented for decision. Moose v. Board of Com’rs of Alexander County, 172 N.C. 419, 433, 90 S.E. 441, 448– 49 (1916). As our Supreme Court put it more recently, “dicta upon dicta does not the law make.” McKinney v. Goins, 387 N.C. 35, 57, 911 S.E.2d 1, 17 (2025) (citation and quotation marks omitted). 16  MCARTHUR V. MCARTHUR Opinion of the Court b. Wade v. Wade Two years after Turner, this Court adopted the source of funds rule and with it the concept of mixed property. See Wade, 72 N.C. App. at 372, 325 S.E.2d at 260. In Wade, the husband owned unimproved land before the marriage, titled solely in his name. Id. at 377, 325 S.E.2d at 266–67. During the marriage, the parties built a house on that land; the husband’s business stood on another part of it. Id. at 375, 377, 325 S.E.2d at 265, 266–67. He tried to show at trial that he had put some $40,000 of separate funds into the house against the wife’s $5,000. Id. at 378, 325 S.E.2d at 267. But the trial court found his testimony untruthful and tainted by forgery. Id. Instead, it found that the wife had contributed substantial sums to the construction and maintenance of the house and that construction began only after the marriage. Id. The trial court determined that the house was marital property and a “separate asset from the realty on which it was built.” Id. at 377, 325 S.E.2d at 266– 67. It awarded the wife the house, the land underlying it, and a 1977 automobile; the husband received the remaining marital property. Id. at 375, 325 S.E.2d at 265. Because the “land on which the house was built was titled solely in [the husband’s] name,” the court ordered him to deed to [the wife] the house and all of the land underlying or contiguous to the house, excluding that part of the land on which [the husband]’s business was built, but not to exceed three acres. The court further ordered that [the husband], in lieu of deeding such property to [the wife], 17  MCARTHUR V. MCARTHUR Opinion of the Court could elect to pay [the wife] the sum of $80,000 in cash or certified funds. Id. at 375, 325 S.E.2d at 265. The husband appealed, arguing that the “court did not have authority to order the transfer of his land which he claims was his separate property.” Id. at 375, 325 S.E.2d at 265. Based on several problems in the judgment, this Court vacated and remanded for entry of a new order. Id. at 387, 325 S.E.2d at 272. We concluded that the trial court’s order failed to meet “the standards for orders of equitable distribution” established in Alexander v. Alexander, 68 N.C. App. 548, 315 S.E.2d 772 (1984).8 Id. at 376, 325 S.E.2d at 266. The final question remaining in Wade was the same one that matters here: how to classify, value, and distribute the house and land. This Court held that the house and the land were a single asset. A house affixed to land ordinarily becomes part of the realty, and the party claiming otherwise bears the burden of showing an agreement to that effect. Id. at 377, 325 S.E.2d at 8 The trial court in Alexander made no findings on the net value of the marital property at the date of separation, and it ordered an unequal division without findings on most of the Section 50-20(c) factors—the parties’ property and liabilities, their age and health, the custodial parent’s need for the residence, and the liquid or nonliquid character of the property. Alexander v. Alexander, 68 N.C. App. 548, 552–53, 315 S.E.2d 772, 776 (1984). This Court reversed and remanded. Id. at 553, 315 S.E.2d at 776. The Equitable Distribution Act was new then—effective 1 October 1981—and Alexander, Wade, and Turner all arose in its first years, before trial courts had fully appreciated the statute’s steps of classification, valuation, and distribution or the detailed findings those steps require. Both Alexander and Wade also came burdened with substantial appellate rule violations that this Court excused because of the importance of the issues presented. See, e.g., id. at 550, 315 S.E.2d at 774–75 (“Such procedure is in clear violation of Rules 10 and 28 of the Rules of Appellate Procedure and therefore this appeal is subject to dismissal. Because of the important questions apparent in the appeal, we deem it appropriate, in our discretion, to consider [the] plaintiff’s appeal on its merits.”). 18  MCARTHUR V. MCARTHUR Opinion of the Court 267. No evidence showed any agreement to separate the house and land. Id. So we said that we “must view the house and the land as one asset, that asset being real property.” Id. The next question was whether that single asset—the house and land together—was marital or separate property. Id. Because the husband acquired the unimproved land before the marriage, the land would ordinarily be separate in character. Id. at 378, 325 S.E.2d at 267. And if the land was separate, one might argue that the house merely increased the land’s value, which Section 50-20(b)(2) also classifies as separate property. Id. at 378–79, 325 S.E.2d at 267. This Court found that argument unpersuasive. Id. Section 50-20, we explained, is a “remedial statute enacted to ensure a fairer distribution of marital assets than under common law rules,” and remedial statutes are construed broadly in light of the evils they address. Id. at 379, 325 S.E.2d at 267- 68. Reading the increase-in-value provision to swallow the house would defeat that purpose. This Court therefore construed that provision as “referring only to passive appreciation of separate property, such as that due to inflation, and not to active appreciation resulting from the contributions, monetary or otherwise, by one or both of the spouses.” Id. at 379, 325 S.E.2d at 268. The appreciation there was active, so the provision did not require classifying the improved property as entirely separate. Id. Any other rule, this Court added, would invite a “sophisticated spouse to divert marital funds into improving his or her separate property,” cutting the other spouse 19  MCARTHUR V. MCARTHUR Opinion of the Court out of any return on the marital investment. Id. at 380, 325 S.E.2d at 268 (citation omitted). This Court then noted it was clear the marital estate had “invested substantial sums” to improve the land by building the house, so the marital estate [was] entitled to a proportionate return of its investment. Accord, Turner v. Turner, 64 N.C. App. 342, 307 S.E.2d 407 (1983) (where an equity developed in a house purchased by the husband before marriage because of improvements or payments contributed to by the wife during the marriage, that equity could be marital property). Id. That is, the Wade Court recognized “a dynamic rather than static interpretation of the term ‘acquired’ as used in [Section] 50–20(b)(1)” to prevent inequity. Id. This “dynamic” interpretation saw “acquisition . . . as the ongoing process of making payment for property or contributing to the marital estate rather than being fixed on the date that legal title to property is obtained.” Id. at 380, 325 S.E.2d at 268–69 (citation omitted). The marital estate had “invested substantial sums” in the property by building the house on it, so the estate was “entitled to a proportionate return of its investment.” Id. This Court cited Turner in accord. Id. On the other hand, the wife urged this Court to adopt the “transmutation through commingling” theory and hold the improved real property entirely marital. Id. at 381, 325 S.E.2d at 269. We declined to do so. Nothing in Section 50-20 supported that theory or indicated a legislative preference for classifying property as marital. Id. Just the opposite: the statute, this Court said, reflects “a clear legislative 20  MCARTHUR V. MCARTHUR Opinion of the Court intent that separate property brought into the marriage or acquired by a spouse during the marriage be returned to that spouse, if possible, upon dissolution of the marriage.” Id. We held instead that the property had to be “characterized as part separate and part marital”—the source of funds approach: Under this theory, when both the marital and separate estates contribute assets towards the acquisition of property, each estate is entitled to an interest in the property in the ratio its contribution bears to the total investment in the property. Thus, both the separate and marital estates receive a proportionate and fair return