Court Decides If Remedy is Partition or Sale Under RPAPL Article 9
Christine E.. Beattie and David J. Johnson, Jr. s are the owners in fee simple of certain real property located at 87 Old Gick Road in the Town of Wilton. Beattie filed an action, pursuant to RPAPL Article 9, seeking the partition or sale of the property. Johnson served an answer requesting that the complaint be dismissed or, alternatively, that the Court direct an accounting and adjust the parties’ share of the sale proceeds based on their contributions for taxes, insurance, and maintenance.
In July 2023, the Court conducted a non-jury trial and heard testimony from the parties and a real estate broker. The Court received into evidence a real estate appraisal report and a written opinion from the broker, as well as copies of the deed and bill of sale.
Based upon the credible evidence, the Court made the following findings:
The parties jointly purchased the property in November 2009. The property included a 1973 single wide mobile home (980 square feet) situated on 0.36 acres of land. The deed to the land identified the parties as joint tenants with a right of survivorship.
The original purchase price was $50,000.00. The seller subsequently agreed to reduce the price to approximately $40,000.00. The parties each contributed towards the down payment and the subsequent installment payments. In April 2015, the parties made the final payment due for the property. Both parties alleged that they had paid at least 50% or more towards the purchase price.
While residing together at the property, the parties each contributed towards paying the taxes and making repairs/improvements. Beattie’s parents paid for some of the repairs/improvements as a gift.
Both parties alleged that they paid at least 50% or more towards the taxes while they were residing together at the property. Johnson also sought, by way of a prior affidavit, an adjustment or credit for repairs/improvements that he allegedly made in 2019 and 2020 (estimated as $8,830.00 for materials and his labor). He alleged that he personally installed a new metal roof and ridge in 2020. He also alleged that he removed paint, installed well pump parts, and installed a new furnace in 2019. He alleged, without providing a date, that he installed a new water heater and a new distribution box for the septic system.
Johnson also testified that he had paid all the insurance premiums.
In or around March 2018, Beattie vacated the property. The parties orally agreed at the time that Johnson could continue to reside at the property, without paying rent, but that he would be responsible for paying the taxes on the property.
Neither Beattie nor Johnson provided sufficient receipts or other documentation to demonstrate their alleged contributions. Neither party persuaded the Court that, while residing together, either party contributed more than the other towards the purchase price, taxes, or maintenance.
Johnson also failed to demonstrate that his payment of insurance premiums while the parties resided together, or his maintenance contributions after March 2018, resulted in him contributing more than 50% of the total amounts paid/contributed by the parties for all the expenses associated with the property.
As a result of a breakdown in the parties’ relationship (including litigation in Family Court), they were unable to co-occupy the property since March 2018. Pursuant to the parties’ agreement, Johnson assumed responsibility for paying the taxes. There was therefore no basis to charge Beattie for any tax payments made by the Johnsont since March 2018.
Similarly, Johnson benefitted from his continued use of the property, without having to pay rent, while Beattie had not enjoyed that benefit. Considering the equities, the Court declined to charge Beattie for the maintenance contributions allegedly made by Johnson after March 2018.
Accordingly, no reason existed to adjust the parties’ interests in the sales proceeds. The parties each owned a 50% interest in the property and would share equally in the sale proceeds.
Johnson previously requested an accounting and an adjustment for, among other things, his payment of insurance premiums. Johnson apparently insured the property in only his name after Beattie vacated the property in 2018, and paid all the premiums. In 2023, Johnson received insurance proceeds from damage to the garage ($14,000.00).
Presumably, Johnson was no longer seeking an adjustment for the insurance expenses, as any adjustment for the insurance expenses would also require an adjustment for the insurance proceeds. That would result in a net credit in favor of the Beattie. Johnson previously estimated that he has paid approximately $8,358.00 in insurance premiums over a period of 14 years. In contrast, Johnson had received approximately $14,000.00 in insurance proceeds.
Beattie did not request an adjustment for Johnson’s receipt of insurance proceeds. Nor did Beattie attempt to provide any case law or evidence in support of such an adjustment. Based on the evidence and legal arguments presented, Beattie was not liable for the insurance expenses, nor was she entitled to share in any of the insurance proceeds.
Johnson’s appraisal report (dated March 8, 2022) estimated the property’s value, as improved (and with a garage), as $32,000.00. Beattie failed to offer any evidence on value or otherwise impeach Johnson’s appraisal. Based on the circumstances, the Court found that Johnson’s appraisal report to be credible and adopted its conclusion of value for the property.
The Court rejected the valuation from the broker price opinion received into evidence. Two of the three comparable sales/properties in the opinion were located more than 20 miles from the property. The third comparable was located 13 miles away. The opinion also did not make or explain any adjustments to account for the differences between the property and the comparable sales/properties relied upon by the broker. The estimate discussed in the opinion to remove the trailer also appeared to be significantly more than the attached cost estimate.
A co-owner of real property may maintain an action for the partition of the property, and for a sale if it appears that a partition cannot be made without great prejudice to the owners. RPAPL Article 9 sets forth the procedure for a trial and the granting of an interlocutory judgment. Where partition cannot be made without great prejudice to the owners, the interlocutory judgment, except as otherwise expressly prescribed in RPAPL Article 9, shall direct that the property be sold at public auction to the highest bidder.
Although those provisions appeared to be rather straightforward, the law is rarely clear. A party does not have an absolute right to relief in a partition action or to obtain an interlocutory judgment. A partition action is equitable in nature and therefore may be precluded by the equities presented. Moreover, even when relief is warranted, a court may still adjust the rights of the parties so each receives his or her proper share of the property and its benefits.
Here, the Court found that Beattie established her ownership interest in the property. In addition, she demonstrated that physical partition was not feasible. The lot was only 0.36 acres. It would be highly unlikely, if not impossible, to obtain a subdivision or a variance from the minimum lot requirements necessary to create two separate lots. The size of the mobile home (980 square feet of living space) was also insufficient for the parties to split into two residential units. In addition, the parties’ relationship appeared to have broken down to such a point where they could no longer live together. Under those circumstances, a sale at a public auction would generally be appropriate unless the parties were to agree to a different resolution–a buyout or market sale.
In opposition, Johnson raised several equitable considerations. Johnson testified that he could not afford to purchase another residence or rent a different property in the area. And the proceeds from a public auction would unlikely provide any meaningful change to his financial situation. On the other hand, the Court considered Beattie’s right to obtain a return on her investment/contributions in the property. Johnson should not be entitled to retain the property’s benefits, while Beattie receives nothing in return.
But several reasons caused the Court to question whether a sale by public auction would be appropriate in this case. The property itself had been valued at only $32,000.00, as improved. That valuation was based on several conditions that did not exist with a public auction. Specifically, the appraisal valuation assumed a sale in the market at arm’s length and a reasonable period of exposure time on the market. A public auction does not have either of these characteristics. The sales price at a public auction would likely be much lower than the appraised value. In addition, the condition of the property would likely deter potential buyers from bidding. There was water damage on the ceilings, the floor was rotted out in some areas, the exterior door was damaged, and the interior had wear and tear. There was also damage to the garage; significant clutter/junk in the yard; alleged set back violations; and alleged health and safety violations regarding the proximity of the private well and private septic.
The mobile home also appeared to be close to reaching its life expectancy. A reasonable bidder desiring to purchase the property for its current use would have to consider the cost necessary to eventually remove the mobile home at the end of its useful life. The cost estimate attached to the opinion indicated that the trailer removal cost would be approximately $16,750.00. The property could also have significant worth based on the value of the land itself. While neither side had credibly valued the property as vacant for potential development, the land assessment value is approximately $30,000.
Nonetheless, the land had a mobile home (which was classified as potentially hazardous based on the year it was built) and a substantial amount of clutter/junk that would have to be removed from the property to build or place a new residence on the land. The total estimated cost of removing the trailer and the clutter/junk was $28,745.00. That was comprised of $16,750.00 to demolish and dispose of the mobile home and $11,995.00 to remove the clutter/junk in the yard. Accounting for those costs reduced the value of the property (using the land assessment value) to a very small amount. When also considering the referee fees and other costs associated with a judicial sale, the parties could each receive nothing for their interests from a public auction.
The Court recognized that the parties themselves might be able to bid on the property at a public auction. It was not entirely clear, however, whether Beattie had any legitimate interest in residing at or investing in the property’s redevelopment. And Johnson had limited resources and lacked sufficient funds to invest in the property’s redevelopment. He had limited funds to purchase Beattie’s interest in the property, and every additional expense incurred with a public action would result in less funds available for Johnson to offer.
There were available options that could avoid the prejudice from a public auction. Johnson, for example, had expressed a desire to purchase Beattie’s interest for $16,000.00 (1/2 of the appraisal value). The Court considered such a proposal more than reasonable given the evidence received on the property’s value. If Beattie was unwilling to accept a buyout at this amount ($16,000.00), the Court would have to consider whether the circumstances warranted the dismissal of the partition or a sale by public auction. Assuming Johnson was to make a firm buyout offer, the Court might ultimately issue an Order dismissing the complaint unless Beattie agreed to accept a buyout at $16,000.00 by a certain date. Any such dismissal would be without prejudice and contingent on Johnson agreeing to pay all the reasonable and necessary expenses for the property moving forward, including taxes, maintenance, and the cost of insurance necessary to cover Beattie’s interest in the property and her potential exposure to liability. Alternatively, the Court was willing to consider reasonable alternatives offered by Beattie, including any firm proposals by her to purchase Johnson’s interest. If Beattie believed that Johnson was significantly undervaluing the property, she could propose placing the property on the market through a licensed broker at a listing price that Beattie considered reasonable. To the extent Beattie desired to proceed in that manner, the Court might be inclined to grant a sale by public auction unless Johnson consented to a market sale.