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In re Real Estate of Hunsucker

Court of Chancery of Delaware

May 3, 2019

RE: In re: Real Estate of Billy Keith Hunsucker and William Morgan

          Submitted: April 17, 2019

          David J. Bever, Esquire Barros McNamara Malkiewicz & Taylor, PA

          Patricia W. Griffin Master in Chancery Judge

         Dear Counsel and Mr. Morgan:

         The last stage of a partition proceeding involves the distribution of proceeds from the sale of the partitioned property. This dispute centers around whether the co-tenants are entitled to contributions for payments each made towards repairs, taxes, insurance, among other expenditures, and the allotment of the trustee's fees and costs. This is my final report.

         I. Background

         This is a decree for distribution in a partition action filed by Billy Keith Hunsucker ("Hunsucker") against William Morgan ("Morgan") on April 22, 2014 seeking to partition property ("Property") at 36 Railroad Avenue, Camden-Wyoming, Delaware. Hunsucker claimed he and Morgan owned the Property as tenants in common pursuant to a deed executed on April 22, 2009 between Russell Edward Morgan ("Decedent") and Hunsucker and Morgan, who received equal interests in the Property as tenants in common.

         The Property includes a house and two apartments. The order for sale in partition was granted on September 21, 2017, the partition sale held on November 10, 2017, and a motion filed to set aside the sale was filed on November 16, 2017. Following a hearing on the motion, on November 21, 2017, I ordered the partition sale set aside, a second partition sale conducted, and the costs associated with the second partition sale paid out of Morgan's share of the partition proceeds.[1]Exceptions were filed, and, after briefing, the Court overruled the exceptions and affirmed the Master's November 21, 2017 Order on May 8, 2018.[2] A second partition sale was held on August 17, 2018, and the return of sale for the second partition sale was approved by the Court on October 2, 2018.[3]

         Morgan filed a motion on November 30, 2018 asking the Court to distribute the sale proceeds equally to him and Hunsucker.[4] Hunsucker's December 20, 2018 answer to the motion seeks to reduce Morgan's share of the proceeds to reflect the value of Morgan's occupancy of the house rent-free, the cost of the repairs, improvements, taxes, water, sewer and other expenses that Hunsucker paid related to the Property, and losses due to Morgan's failure to make repairs to the house on the Property.[5] Morgan responded on January 22, 2019 that he is entitled to receive one-half of the sale proceeds as tenant in common with Hunsucker, that Hunsucker's calculation of the Trustee's fees and costs owed by Morgan is incorrect, that Morgan made repairs to the Property, and that no rent is due because Hunsucker could have used the house.[6]

         The hearing on the distribution of proceeds was held on March 18, 2019, I reserved my decision, and the record was held open until April 8, 2019 to allow for the filing of supplemental evidence by the parties.

         II. Analysis

         This is my decision regarding the distribution of the partition sale proceeds. First, the proceeds remaining to be distributed following the second partition sale of the Property are $97, 107.15, after $9, 367.15 in Trustee's fees and costs are subtracted from $106, 474.30 in sale proceeds.

         Next, Morgan and Hunsucker each own 50% of the property based upon the deed dated April 22, 2009.[7]

         Hunsucker and Morgan's claims for offsetting profits received and liabilities incurred related to the Property in the process of dividing the partition sale proceeds, and the assessment of the Trustee's fees and costs, are addressed in turn below. The party claiming contribution for repairs, improvements, taxes or other costs has the burden of proof.[8]

         1. Apartments' Income and Expenses

         The two one-bedroom apartments on the Property are rental properties and have been rented, except for limited transitional periods between tenants, continuously during the time period at issue in this case. Up until October of 2013, Hunsucker and Morgan jointly managed the renting of the two apartments and placed income into, and paid expenses out of, a joint bank account.[9] After their falling out, the arrangements worked out that Hunsucker managed rental arrangements for Apartment #1 and Morgan managed the rental of Apartment #2. Both apartments rented for approximately $600 per month, and Hunsucker and Morgan each kept the rental income from, and generally paid repair expenses on, the apartment they individually managed.[10] Income and expenses related to the co-tenants' management of their respective apartment will not be considered as offsets to the partition sale proceeds, since the co-tenants' arrangement was for each to manage one apartment with equal rental potential and there was no evidence that expenses incurred for the apartments were dissimilar.

         2. Contribution for Payments on Taxes or Insurance for the Property

         Hunsucker and Morgan both claim offsets for their respective payments of taxes and insurance on the Property. Co-tenants share taxes and insurance costs equally even if one cotenant has exclusive possession of property.[11] After review of the evidence, I calculate that Hunsucker paid $2, 311.57, and Morgan paid $8, 759.57, in taxes and insurance on the Property.[12] Hunsucker's share of the sale proceeds will be reduced by $3, 224.00, or one-half of $6, 448.00, which is the difference between what he paid and what Morgan paid for taxes and insurance.

         3. Morgan's Possession and Control of the House

         Hunsucker claims the value of sole and exclusive use of property by Morgan was $43, 200 and Morgan should be assessed one-half or $21, 600. Morgan asserts that no rent is due as Hunsucker could have occupied and used the property equally with him but chose not to. A co-tenant living on property has no obligation to pay rent unless the co-tenants agreed that rent would be paid.[13] However, if a co-tenant ousts another co-tenant, then rental value for the benefit received by the co-tenant in exclusive possession may be set off against payments made by the co-tenant in exclusive possession.[14]

         Teresa Bell ("Bell"), the Decedent's daughter, testified at the hearing concerning occupancy of the house between 2013 and 2019.[15] At the time of Decedent's death in June of 2013, Morgan and Russell Morgan, Jr., another of the Decedent's sons, lived in the house. Morgan moved out of the house in July of 2013, and Russell Morgan, Jr. moved out in April of 2014. In October of 2013, after Morgan and Hunsucker had a falling out, Morgan changed the locks on the house.[16] Morgan refused to give Hunsucker a key to the Property until mid-January of 2016, when Hunsucker had the broken boiler/heater in the house fixed to make the house livable again.[17] During this time period, Hunsucker communicated his desire to jointly rent the house but Morgan refused to do so.[18] Between April and September of 2014, Bell testified that no one lived in the house. Morgan moved back into the house for approximately one month and then the house was again left vacant until Bell moved into the house in July of 2015, staying until January of 2016, with Morgan joining her at times. Bell moved out of the house in January of 2016. She testified that she moved back in August of 2016, remaining until December of 2016. Bell's testimony conflicted with Hunsucker's, who testified that the house was only vacant briefly during the time he was fixing the heater. Morgan testified that he had resided in the house ...


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