Friday, September 26, 2014

Partition Problem

Currie v. Jané, 2014 VT 106

By Elizabeth Kruska

Janet Currie and Paul Jané met in 2002, fell in love, and decided to buy a house. Janet rented an apartment in a house in Orwell. She arranged with the property owners to buy their house. Paul’s mom gave him $200,000, which he used to put toward the purchase of the house, and he also paid some closing costs. Janet arranged with the homeowners that they would do a private mortgage for $45,000, and that Janet would pay them back. Janet and Paul bought the house as joint tenants with right of survivorship.

They also agreed, in writing, that Paul paid the $200,000 and closing costs and that Janet was solely responsible for the $45,000 mortgage debt. Later on, they took out a home equity loan, which they used to pay off some cars and other expenses. Paul paid that back. Paul also did some pretty significant work on the house and land.

You probably see where this is going.

Paul and Janet split up in 2009 and Paul moved out. He stopped paying for the expenses he had paid for while he lived in the home and ignored Janet when she asked for help. Janet continued paying for all the expenses and also did some improvements to the house. She also ended up taking in a renter and generated some rental income from that.

She was supposed to pay off the $45,000 mortgage with a balloon payment, but she didn’t do that. The original homeowners, who were the mortgageholders, filed a petition for foreclosure. Janet borrowed $143,000 from her mom to pay off that obligation, and also to chip away at the home equity loan.

A foreclosure was imminent, and the court ordered Janet to sell the house. She didn’t. The court also found her in contempt for intentionally failing to list the house for sale.

Janet tried to keep the house. She argued that the house was half hers since she and Paul bought it as joint tenants. She pointed to a rebuttable presumption that jointly owned property should be partitioned in equal shares.

The trial court disagreed, and ordered that actually Paul was entitled to 81.7% of the house and Janet was entitled to the rest. The court looked at the initial contributions to the house, and also attempted to figure out some setoffs, based on both parties’ in-kind upkeep and capital improvements, and also the rental income generated. The court had an evidentiary hearing, where it took testimony, and then ultimately figured out the percentages to assign to each party.

The trial court also ordered Janet to either buy out Paul within a pretty short window of time if she wanted to keep the house, or would issue a writ of possession to Paul so he could sell the house and divide the proceeds according to the percentage ordered by the court.

Janet’s not pleased with this ruling and appeals to the SCOV.

SCOV affirms.

SCOV reminds us that where there is an order supported by findings, and that if the findings are credible, that they’ll give a lot of deference to the lower court. Of course, that’s because the lower court actually observes the hearing and can assess witness credibility. Questions of law they review de novo. In a partition action, an equitable remedy is reviewed for abuse of discretion.

SCOV finds that the trial court did not abuse its discretion in assigning partition percentages. The trial court weighed various factors, including financial and in-kind contributions to the property and expenses paid. Even though a partition is presumed to be equal, that can be rebutted with evidence, which the court took. SCOV didn’t see any reason to disturb the lower court’s findings, since they were amply supported by evidence.

Secondly, Janet contends that the court ordered her to pay an unequal share in order to buy out Paul. This is an equitable remedy, which gets reviewed for abuse of discretion.

SCOV says no abuse of discretion. Even though the trial court gave Janet a very short window for the buy-out, that was ok because she had previously shown, through her actions, that she was unreliable when she had previously been ordered to list the house. Furthermore, even though she’d end up paying $300,000 in order to keep the property, it’s not like Paul was going to get some huge windfall. He had put in $200,000, but when all the debts and setoffs were factored in, he would only end up walking away with about $158,000. So, in fact, he loses out.

So, nobody walks away happy and everyone comes out with less than where they started.

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