Opinion
No. 538360
November 4, 2003
MEMORANDUM OF DECISION
This is an action for the partition of real property brought under the provisions of Connecticut General Statutes §§ 52-495 and 52-500 for real property in the City of New London jointly owned by plaintiff and defendant.
By his answer, defendant agreed to the partition or sale of the property. Defendant also filed a counterclaim in which he alleged that plaintiff had been living in the first-floor apartment on the property without payment of rent. He sought payment of one-half of the value of such rental, together with one-half of the rental income from the other apartments in the building.
The issues being joined, the matter was tried by the court (Hurley, JTR). By judgment dated September 12, 1997, the trial court determined that defendant had a minimal interest in the property and ordered him to transfer his interest to the plaintiff. The plaintiff was ordered to compensate defendant in an amount determined by the court.
The judgment was appealed to the Appellate Court. By decision released August 10, 1999, the Appellate Court upheld the equitable remedy fashioned by the trial court. The judgment was reversed in part and the matter remanded to the trial court to establish the amount of money plaintiff must pay to defendant for one-half of the rental value of the apartment occupied by her. Lavery, J. dissented. Fernandez v. Rodriguez, 54 Conn. App. 444 (1999).
By order dated October 6, 1999, the Supreme Court granted defendant's petition for certification for appeal of the Appellate Court decision limited to the question as to whether the Appellate Court properly concluded that the trial court had the equitable power to order the defendant to convey his interest in the property to plaintiff and plaintiff to pay defendant money damages. Fernandez v. Rodriguez, 251 Conn. 907 (1999). The Supreme Court reversed the decision of the Appellate Court holding that §§ 52-495 and 52-500 do not authorize a trial court to order a remedy other than the partition in kind or partition by sale with McDonald, C.J. dissenting. Fernandez v. Rodriguez, 255 Conn. 47 (2000). By order of the Supreme Court, the case was remanded to the trial court for a new trial.
I.
In accordance with the remand order, a new trial was held and, by memorandum of decision dated August 10, 2001, certain findings of fact were made and the fair market value of the property was found to be $150,000. It was further found that partition of the property was impractical and that sale of the property would be in the best interests of the parties. A committee of sale was appointed and a sale date was set for November 3, 2001, with the usual terms and conditions, including the following:
The first trial found the value of the property to be $61,000. The higher value found at the second trial was not contested by the parties. This increase was due to market factors in the area and by improvements and management conducted by plaintiff.
Terms of the Sale
$15,000 Bank Draft or Certified Check at the time of sale, balance and approval of sale and deed by the court. Deposit forfeited if closing does not take place within 30 days after the approval of sale. Liability and hazard insurance is authorized for the date of sale.
In accordance with the decision, on November 3, 2001, the committee sold the property at public auction on the premises to defendant, Eyvind Rodriguez, the successful bidder for $180,300. In accordance with the terms of sale, defendant submitted the required check in the amount of $15,000 which was paid into court.
The sale was approved by the court on December 4, 2001. In accordance with the terms of sale, the final date for closing would have been January 4, 2002.
By motion filed December 20, 2001, defendant moved to extend the closing date. Over the objections of plaintiff, the motion was granted and a closing date was extended as requested.
Defendant's subsequent motion to extend the closing date was denied after hearing held January 17, 2002.
On February 5, 2002, defendant moved for articulation of the court's reasons for the denial of his second motion to continue the closing. The motion being granted, on February 11, 2002, a memorandum of decision setting forth in detail the reasons for the denial of the second motion for continuance was issued.
Defendant did not proceed with a closing on the property. The committee's fees of $1,481.25 and expenses of $1,784.48 having previously been approved were ordered to be paid from the deposit and the balance forfeited to the State of Connecticut in accordance with the terms of the sale.
The property not having been sold in accordance with the previous order of court, on May 15, 2002, the judgment of August 10, 2001 was modified and a new date of sale, July 13, 2002, was established. The previous committee of sale was reappointed and terms for the second sale was set.
In accordance with the order of sale, the committee held a public sale on the premises on July 13, 2002. This time, the successful bidder was plaintiff whose highest bid in the amount of $160,100 was accepted.
This sale, together with the committee's fees and expenses, was approved on August 19, 2002. Because of appeals taken by defendant and reasonable caution exercised by the bank financing the purchase, the actual closing was delayed until November 8, 2002. The net proceeds of the sale with deductions for the committee's fees and expenses, the payment of the mortgage and other adjustments and expenses of sale in the amount of $123,273.25 having been paid into court. Such funds are now available for distribution.
II.
The real property which was the subject of this partition action was a two and a-half story residential building built in 1870. The building had been converted to three apartments. The first-floor apartment was 1,550 square feet in area. The second-floor apartment was 908 square feet in area, and the third-floor apartment was 450 square feet in area. Plaintiff occupied the first-floor apartment as her residence from the date of purchase.
By his counterclaim, defendant sought to recover the rental value of the apartment on the premises occupied by plaintiff. The original trial court determined that defendant was not entitled to this compensation. The Appellate Court, however, determined otherwise and stated:
Accordingly, we must remand the ease so that the trial court can establish the amount of money that plaintiff must pay the defendant for one-half of the rental value of the apartment in which the plaintiff lived.
Fernandez v. Rodriguez, supra, 54 Conn. App. 454.
It is significant to note that the Appellate Court recognized that the partition action itself was equitable in nature and that the court should examine all relevant circumstances to adjust unequal shares. Id., 450. The claim of the parties as to their separate interests in a partition action should be considered in the distribution of the proceeds of the sale. Gayer Bros., Inc. v. Mott, 147 Conn. 411, 415 (1960). In connection with the rental value of plaintiff's apartment, however, the Appellate Court determined that the value of plaintiff's occupation of the premises should be divided according to the legal interest of the parties with one-half of that value going to defendant.
The Supreme Court accepted certification of defendant's appeal from the Appellate Court's decision limited to the issue of the trial court's authority to order defendant to convey his interest to defendant and the plaintiff to pay damages. Fernandez v. Rodriguez, 251 Conn. 907 (1994). In footnote 4 of its decision, the Supreme Court stated that it declined to review other issues raised by defendant. The Supreme Court did, however, mention, and by implication approve, that defendant would be entitled to one-half of the fair rental value of the apartment on the premises occupied by plaintiff. Fernandez v. Rodriguez, supra, 255 Conn. 53, fn. 4. In carrying out the mandate of an appellate court, the trial court is limited to the specific direction of the mandate as interpreted in light of the appellate court opinion. Wendland v. Ridgefield Construction Services, Inc., 190 Conn. 791, 794 (1983). It must then be concluded that although the Supreme Court remanded the case to the trial court for a new trial, the Appellate Court remand that plaintiff must pay defendant one-half of the rental value of the apartment which she occupied is still in effect.
The evidence indicated that the parties acquired title to the property on July 11, 1994 and that they immediately commenced occupying the first-floor apartment. During this period, defendant either occupied the apartment with plaintiff or had the right and opportunity to do so. In September 1995, plaintiff obtained an ex parte restraining order to prevent defendant from entering the premises. Fernandez v. Rodriguez, supra, 54 Conn. App. 454. September 1995 is then found to be the start of the period for which the rental value of plaintiff's apartment must be computed. The end date would be the date on which defendant's rights in the property were extinguished by the sale to plaintiff on November 8, 2002.
It must be determined then that defendant is entitled to one-half of the fair rental value of the apartment occupied by plaintiff from September 1995 to November 7, 2002.
At the first trial, the value of the rent for plaintiff's apartment was litigated. In its decision of September 12, 1997, the trial court determined that the fair rental value of this apartment was $500 per month. The Appellate Court upheld this determination. Id. This rental value is not greatly at variance with the evidence of such value presented at the second trial.
The fair rental value of plaintiff's first-floor apartment for the 24-month period from September 1995 to September 1997 is then found to be $500 per month.
Howard B. Russ, a licensed real estate appraiser who was familiar with real estate values in the New London area, testified as to such values in connection with the premises in question. He testified as to the fair rental value of the first-floor apartment occupied by plaintiff. Based upon Mr. Russ's testimony and the rent charged for the other apartments, it is found that the fair rental value of the apartment occupied by plaintiff is as follows:
Year Months Amount/Mo Total
1995 4 $ 500 $ 2,000
1996 12 $ 500 $ 6,000
1997 9 $ 500 $ 4,500
1997 4 $ 600 $ 2,400
1998 12 $ 750 $ 9,000
1999 12 $1,000 $12,000
2000 12 $1,200 $14,400
2001 12 $1,200 $14,400
2002 10 $1,200 $12,000
2002 7days @ $40 a day $280
TOTAL $76,980
There was testimony that after the second-floor tenant moved out of that apartment, plaintiff had difficulty renting the apartment. During this period, she made incidental use of the vacant apartment for about sixteen months. Since plaintiff made only incidental use of the second-floor apartment while it was vacant, no value can be assessed and no liability incurred.
The total fair market value of plaintiff's use of the premises is found to be $76,980.00. One-half of the value is $38,490.
III.
By his counterclaim, defendant sought one-half of the rental income from the two apartments in the building.
Plaintiff does not appear to contest this claim, but the parties are far apart in their determination of what the net income amounts to. Defendant contends that from the time the parties first acquired the property in 1994 to November 8, 2002, the date of sale, plaintiff has been collecting and retaking the rent from the two apartments. Plaintiff admits to collecting the rent, but claims that such collections have resulted in a net loss of $8,577 which defendant must share.
Defendant argues that many of the expenses claimed by plaintiff in maintaining the property were actually expended for the upkeep of other rental property acquired by plaintiff. He has, however, introduced no evidence to support this speculation. The testimony and exhibits submitted by plaintiff concerning these expenses are credible and are accepted by the court.
In determining rental income, primary reliance has been placed upon plaintiff's federal income tax statements (Schedule B) and the accountant's spreadsheets submitted by plaintiff. The net rental income figure on the tax returns has been adjusted by the $745 amount allowed for depreciation which is inappropriate in determining the actual income of the owners. As agreed to by plaintiff, the rental income for 2000 was increased by $276 and the mortgage payment was changed to $2,818.
Rental income for the second- and third-floor apartments in the building owned by the parties is found to be:
Year Net Loss/Net Income Amount
1994 Net Loss -$8,666
1995 Net Income $4,577
1996 Net Income $3,647
1997 Net Income $5,935
1998 Net Income $1,147
1999 Net Income $2,490
2000 Net Loss -$2,105
2001 Net Loss -$5,641
2002 Net Loss -$4,345
Net Total
Rent Collected: -$2,961
The above calculations indicate that although the property has increased in value, it has not produced a profit. The turmoil surrounding ownership of the property may have been a factor in this. Plaintiff testified as to the difficulties in renting the second-floor apartment under the circumstances. Considering the age and condition of the house, expenses for its upkeep are understandable.
Defendant may be entitled to judgment on the counterclaim for the rent collected. Since this has resulted in a loss, there is no recovery.
IV.
This is a partition action in which the property was sold in accordance with the order of court. The net proceeds of the sale have been paid into court and are now available for distribution. Plaintiff and defendant each had an undivided one-half interest in the property. "Although each party was the owner of an undivided one-half interest in the property, it does not follow that he (or she) will necessarily be entitled to equal shares of the money obtained from the sale. Equities must be considered and, if established, must be liquidated before distribution is ordered." Segal v. Segal, 65 Conn. App. 17, 21 (2001), Leavy v. Leavy, 137 Conn. 92, 96 (1950). Ordinarily, in a partition by sale, the claims of the parties as to their interest in the property are considered in connection with the distribution of the proceeds. Gaer Bros., Inc. v. Mott, 147 Conn. 411, 415 (1960). This principle was recognized by the Appellate Court in this case. Fernandez v. Rodriguez, supra, 54 Conn. App. 450. The Supreme Court also confirmed this principle when the case was before it. Fernandez v. Rodriguez, supra, 255 Conn. 59.
Many of the facts underlying the determination of equities and final distribution of funds are in dispute. However, considering the credibility of the witnesses and all of the evidence before the court, the following facts are found.
Prior to their acquisition of the property, plaintiff and defendant had been living together in Florida for about one year. In 1993, plaintiff decided to return to Connecticut. A factor in motivation was her desire to return to her roots. She was also motivated to return by her father's deteriorating health. Upon returning to Connecticut, she moved in with her parents. She also began to look around for real property which she could purchase. In due course, plaintiff found the subject property.
The property consisted of a two and a-half story Victorian house built in 1870 with a one-story addition, the house had been converted to three apartments. The largest first-floor apartment had 1,560 square feet. The second-floor apartment had 908 square feet, and the smaller third-floor apartment had 450 square feet. The house was on a narrow, sloping lot, but allowed a pleasant view of the Thames River. The structure had exterior asbestos siding and was in very bad condition. It was vacant, had been on the market for some time and had gone through foreclosure. There was no on-site parking.
On April 5, 1994, plaintiff contracted to purchase the property for $45,900 by making a down payment of $500. Being a single woman, she did not qualify for the mortgage loan necessary to purchase the property. At first, the financing was to be resolved by plaintiff purchasing the property with her father. Because of his ill health, this could not be done. The possibility of plaintiff's mother or sisters joining in the purchase was also considered.
The Appellate Court decision states that the "real estate was purchased by the parties as an investment." While investment may have been partial motivation for the purchase, plaintiff's motivation appears to have been broader. She has continually resided on the property since it was acquired and has evidenced the desire to continue to do so. Fernandez v. Rodriguez, 54 Conn. App. 444, 446 (1999); Fernandez v. Rodriguez, supra, 255 Conn. 49.
Eventually, plaintiff and defendant reached an agreement whereby they would purchase the property jointly and live on the property. The defendant would then rent his condominium in Florida.
The closing on the property was held July 11, 1994. The contributions of the parties at the closing are relevant to the issues now before the court. It is noted that the Appellate Court remarked on the differences between closing costs as shown on the Federal Department of Housing and Urban Development (HUD) form and the closing costs found at the original trial. Id. It is not possible to totally reconcile the figures on the HUD form with the evidence in the case. For example, the HUD form shows the mortgage to be in the amount of $36,700. All of the evidence indicates that the mortgage was in the amount of $36,000. The HUD statement shows that the cash, together with credits required by the purchasers for the closing, was $11,162.46. Of this amount, plaintiff contributed $6,662.46 and the defendant contributed $4,500.
Plaintiff claims that she contributed a total of $9,248.53 to the closing costs, but the better evidence indicates that she was given credit, as shown on the HUD form, for a number of items for which she advanced funds. For example, the $500 down payment; the application and origination fees, $813.20; water bill, $768.77. All of these items are included in the $11,162.46. Plaintiff did, however, expend additional funds for insurance and pest control for which she did not receive credit on the HUD statement.
In addition to the sums advanced for the closing, the parties executed a mortgage and note obligating them jointly to G.E. Capital Mortgage Services, Inc. in the amount of $36,000.
As above noted, defendant contributed $4,500 towards the closing costs. This amount was obtained by a loan from defendant's mother, Elisa Torres. Although it is in dispute, it is found that the plaintiff directly reimbursed the mother in the amount of $527 by check on October 18, 1994. Plaintiff also paid to defendant on account of this loan from his mother $500 on August 11, 1994, and $2,500 by two checks on November 11, 1994. The total amount paid by plaintiff as reimbursement on the loan was $3,527.
Although the property was barely habitable, the parties moved into the premises almost immediately after the closing. The house required a great deal of cleaning and repair. Although there is some dispute as to how, and by whom this work was done, better evidence indicates that almost all of the work was done by the plaintiff who was then working two regular jobs. Members of plaintiff's family also helped her in this work.
Defendant's contribution was limited. He remained in residence for about three weeks after the closing. He then returned to Florida. In October, defendant brought some furniture up from Florida and remained three to four weeks before going back to Florida. When plaintiff saw what furniture defendant had brought from Florida, she concluded that he had no interest in living in the house. He may also have returned for other short visits. In 1995, defendant returned to New London. This time his stay at the property was very short. After a disagreement over the installation of a deadbolt, a restraining order was issued against him. Although the order was terminated, defendant never again returned to the property.
During defendant's initial stay on the property after the closing, he did some work and spent less than $100 in the cleanup and repair effort. On subsequent visits, it does not appear that he did any substantial work on the property. The defendant's claim, in his brief, that he contributed $6,600 for repairs is not credible. His principal activity in Connecticut was gambling at Foxwoods.
It is doubtful that defendant ever intended to take up residence on the property.
The defendant, who was experienced in property management, advised plaintiff concerning certain management activities, such as rent, but he did not actively participate in any of the management of the property in question. From the date of the acquisition of this property until it was sold, plaintiff maintained and managed the property without any substantial assistance from defendant.
The defendant did collect one month's rent from a tenant in the amount of $575. He kept this money for his own purposes.
In retrospect, it must be noted that plaintiff has been extremely fortunate in his acquisition of an interest in the subject property. He was only invited to participate when plaintiff was unable to purchase the property on her own. Since the property was first acquired in 1994, he has had almost nothing to do with it. Plaintiff has expended considerable effort in improving, cleaning and maintaining this old house so that its value has not deteriorated.
It must also be noted that unlike most forced sales, this property was sold for more than the appraised value. This was due, particularly at the first sale which was not consummated, to the animosity of the parties and the second sale due to plaintiff's desire to keep her residence. This has inured to the benefit of defendant.
The majority opinion of the Appellate Court by its approval of the equitable procedure adopted by the trial court agreed that defendant had only a minimal interest in the property. The dissenting opinion, however, disputed this conclusion. Fernandez v. Rodriguez, supra, 54 Conn. App. 458. Although the Supreme Court did not directly take up this issue, it did invite the trial court to reconsider the question. Fernandez v. Rodriguez, supra, 255 Conn. 53, fn. 4.
From the evidence, it must be found that defendant's actual cash contribution to the purchase of the property was minimal. When the money repaid to defendant's mother is considered, his contribution was less than $1,000.
As previously noted, defendant extended some effort in physically improving the property, but this also was minimal.
Defendant's principal contribution was appearing at the closing and signing the documents required. This included his, along with plaintiff, signing and executing the mortgage and note in the amount of $36,000 to G.E. Capital Mortgage Services, Inc.
It could be argued that by executing the note and mortgage, defendant contributed $36,000 to the purchase of the property since he was jointly and severally liable to the lender for that amount. In the event of a foreclosure, he would have been liable for any deficiency judgment. It is also possible that his liability on the note and mortgage might have affected his ability to borrow additional sums. There is no evidence on this point, however.
In fact, defendant's only activity with the mortgage and note was the execution. Plaintiff made all the payments on the mortgage. There is no evidence that it was ever in default and when plaintiff purchased the property on November 8, 2002, the mortgage and note were paid off terminating any liability which defendant may have had. Defendant's contribution to the property is found to be minimal. He was, however, invited by the plaintiff to participate in the purchase, and under the circumstances, his participation was essential. Considering all of the factors involved, it is found that his equitable interest in the property did not exceed 5 percent, and he should receive that amount of the proceeds of the sale. This will take into consideration the appreciation in value of the property.
V.
In accordance with the findings previously made, defendant should receive $38,490, being one-half of the value of plaintiff's use of the premises. This sum should be paid from the proceeds of the sale. Defendant should also receive 5 percent of the net proceeds of the sale being $6,163 for a total of $44,653. There is no recovery for the rental income.
The balance of the proceeds of sale now held by the court should be paid over to the plaintiff.
Judgment may enter accordingly.
Joseph J. Purtill Judge Trial Referee