Thursday, January 3, 2013

“Lots” of Litigation



In re Estate of Maggio, 2012 VT 99

This case seems complicated at first, but it can be broken down into two primary sets of issues.  The first set of issues concerns whether certain evidence is admissible; the second set of issues concerns how the Uniform Partnership Act (UPA) applies to a Connecticut partnership that held property in Vermont, when one partner has died. 

But if you like complicated . . . the instant case stems from a quiet-title action, which morphed into an ancillary intestate estate proceeding, followed by a superior court appeal, which went one way when appellant thought it should’ve gone another. 

Confused?  If you’re not, I am.  Let’s go through it a little bit slower.


Mr. Maggio and Mr. Silas had a Connecticut-based partnership.  Back in the days of big hair and Mötley Crüe, Mr. Silas made a down payment on eight lots in Holland, Vermont and executed a promissory note in favor of the seller company.  A year later he re-conveyed the lots to himself and Mr. Maggio as tenants in common (for our non-law-initiated readers, “tenants in common” means that each “tenant” (read owner) owns an interest in real property that survives that owner’s demise).  You’re going to want a more-eloquent-and-detailed definition if you’re taking the bar exam, but for purposes of our discussion today, that should suffice.           

The Maggio–Silas partnership ended in ’91.  And Mr. Maggio died three years later.  In 1992, Mr. Silas learned that the divided lots as conveyed violated Act 250.  So, he stopped paying on the note.  Then the seller-company sued him and Mr. Silas counterclaimed seeking rescission (a fancy-lawyer word for “take it back ‘cause it ain’t what I paid for).  He won at the trial court and at the SCOV.  Neither Mr. Maggio nor his estate was involved.   

Mr. Silas foreclosed on the judgment, but then he couldn’t sell the property because Mr. Maggio’s name was still on the deed. 

So, Mr. Silas goes to probate court to quiet title, and Mr. Maggio’s widow (and sole beneficiary) objects.  They agree to sell the property, and then decide who owes whom what. 

This ends the real estate portion of the case.  From this is the point, it becomes an ancillary intestate proceeding and shifts forums to the Probate Division.  The probate court’s mission?: To determine whether Mr. Maggio owned an interest in the property at the time of his death. 

The probate court looks at the deed and decides that Mr. Maggio had a one-half interest at the time of his death.  That’s what the deed says, right? 

Yeah, but . . . .

Mr. Silas appeals to the superior court, which holds a bench trial: one witness, neither party, and a whole bunch of documents.  The superior court reverses the probate court on the basis that despite the deed’s characterization, the property was a partnership property, and when the partnership ended, Mr. Maggio’s interest went with it. 

The trial court finds a few indicators that the property was partnership property.  One indicator is Mrs. Maggio’s answer to an interrogatory, which indicated that the property was purchased with partnership funds.  Another indicator is tax returns that show carrying costs paid with partnership funds.   According to Mrs. Maggio’s interrogatory answers, Mr. Maggio received $15,000 when the partnership ended and Mr. Silas received everything else.  The superior court notes Mr. Maggio’s lack of involvement in the previous litigation concerning the property.     

Under Connecticut law, property purchased with partnership funds is partnership property regardless of deed classification.  Further, any interest in a partnership, including real property held by the partnership, is personal property.  Hence, the trial court found that the property was partnership property; that Mr. Maggio’s interest accrued to Mr. Silas when the partnership ended; and that there was no statute-of-frauds issue because the transfer was of personal, not real property.  Do not pass “GO”; do not collect $200.

Mrs. Maggio appeals, arguing that the superior court screwed up by: “(1) admitting her answers to interrogatories in violation of the best evidence rule and the ‘dead man’s’ statutes, and without an adequate foundation showing that she had personal knowledge about her husband’s business affairs; (2) finding that the property was a partnership asset; (3) finding that Mr. Maggio relinquished his interest in the property to Mr. Silas in the partnership dissolution; (4) holding that the statute of frauds did not apply to the transfer of Mr. Maggio’s interest in the property to Mr. Silas; and (5) relying on Connecticut law in its decision without first notifying the parties.”

The evidentiary issues subject to the trial court’s discretion are reviewed for abuse of that discretion; questions of law are reviewed de novo.  

The SCOV first considers the best-evidence-rule argument.  Simply stated, the best-evidence rule prohibits testimony about the content of a writing in lieu of the writing itself.  Mrs. Maggio’s argument is that her answer about what Mr. Maggio and Mr. Silas received in business assets was based on what was probably a written dissolution agreement and Mr. Silas didn’t make a good-faith effort to find the agreement. 

It’s an interesting argument, but it gets about as much traction as racing slicks on a steep incline during freezing rain.  Mrs. Maggio’s “testimony” is not based on her viewing of the document and her suspicion that there was a partnership separation agreement doesn’t necessarily mean there was.  The best-evidence rule doesn’t apply.

So-called “dead man’s” statutes forbid testimony in one’s favor from a party to a contract when the other party is dead or insane.  Mrs. Maggio’s argument here is that admitting her interrogatory answers allowed Mr. Silas to accomplish that forbidden act by proxy.  The SCOV is not convinced.

Because the bar applies only to the other party, and not to a non-party, there was no violation of the dead man’s statute.

Mrs. Maggio also argues that there was no foundation of personal knowledge as to her husband’s business affairs to admit her interrogatory answers.  Mr. Silas counters that they are admissions by a party-opponent, and that there’s no requirement of personal knowledge to admit such statements.

The SCOV agrees with Mr. Silas.  What hearsay is and isn’t is well beyond the scope of this summary, but as some of you likely know, a statement made by a person who is a party to a lawsuit is not, by definition, to be considered hearsay.  Though there’s a lengthy discussion about this provision to the hearsay rule and the foundational aspects required to admit an admission by a party opponent (there’s really no foundation required), the answer to the problem is simple.  Under the admission-by-a-party-opponent rule, no personal-knowledge foundation is required.  And, thus, the interrogatory statements are admissible as they stand.  In other words, if you admit it in discovery, you should be prepared for it to come into court.

Mrs. Maggio also argues that the trial court oughtn’t to find that the Holland property was partnership property because the deed didn’t mention the partnership.  The applicable Connecticut statute provided that property purchased with partnership funds is partnership property absent evidence of contrary intent. 

In the realm of issues before the SCOV: Was the trial court required to find that the property was owned as the deed said it was?  Was the deed compulsory contrary intent? 

Nope.  The deed is a factor in the determination, but not the final say.  Accordingly, when the trial court had evidence supporting its determination that the property was purchased and maintained with partnership funds, including the interrogatory answers and partnership tax records, then its determination that the property belonged to the partnership is adequately supported by the evidence.

Mrs. Maggio’s next argument is that the trial court had insufficient evidence to conclude that Mr. Maggio’s partnership interest transferred to Mr. Silas on dissolution of the partnership.  The trial court’s conclusion was based on Mrs. Maggio’s interrogatory answer that Mr. Silas got “everything else” when the partnership dissolved.  The trial court also noted Mr. Maggio’s lack of involvement in the lack-of-Act-250-approval-snafu litigation. 

This is where Mrs. Maggio focused most of her brief.  The SCOV concludes that focus is misplaced.  The lack of involvement in the litigation is simply indicative that no one really thought Mr. Maggio had an interest in the property after the partnership dissolved.  Accordingly, the SCOV finds no error with the trial court’s finding. 

The statute of frauds requires a writing to prove legal relationships in certain circumstances.  One of those circumstances is a transfer of an interest in real property.  Mrs. Maggio argues that no writing transferred Mr. Maggio’s interest in the property to Mr. Silas.  In this case, the SCOV agrees with the trial court’s conclusion that the property was partnership property.  Because partnership property is considered personal property under Connecticut’s version of the Uniform Partnership Act (UPA), the statute of frauds does not apply.  Accordingly, when the partnership dissolved, Mr. Silas received “everything else,” which included the partnership’s interest in the property.

Still with me?  Mrs. Maggio’s final argument is that the trial court erred when it applied Connecticut law to the case without adequate notice to the parties.  The SCOV notes that in response to Mrs. Maggio’s motion to reconsider, the trial court reached the same conclusions applying Vermont law.  Accordingly, the SCOV concludes that this is a six-in-one-half-dozen-in-the-other argument and has no merit.  

This case illustrates the importance of a clean wrap-up when a partnership dissolves.  If there had been a dissolution agreement that spelled out the parties’ respective rights to all purported partnership property and required a quitclaim deed or reformation, none of this litigation would have been necessary.  Undoubtedly, all this litigation must have cost more than the property was ever worth . . . . Or to put it another way, “Lots” of luck to Appellee in trying to re-coup legal fees from the sale of the property.

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