MISC 14-481984

July 18, 2019

Suffolk, ss.




This is a partition case. The property at issue is the two-unit commercial building at 1299-1301 River Street in the Hyde Park neighborhood of Boston. One unit was occupied by a Chinese restaurant operated by Mr. Li, [Note 1] and the other was retail space rented to a third-party tenant as a hair salon. The parties (two married couples — one older (Mr. Li and Ms. Wu) and one younger (Mr. Huang and Ms. Zhong), all members of the same extended family) [Note 2] purchased the building together on September 20, 1999 for $235,000 — $164,500 from a mortgage loan and the rest in equal contributions from each. Title was placed in the couples' names as tenants in common, Mr. Li and Ms. Wu with a 50% interest and Mr. Huang and Ms. Zhong with the other 50%.

This much is agreed, but little else. It is no exaggeration to say that each side feels profoundly betrayed by the other, primarily on the underlying business aspects of their relationship. Those are beyond this court's jurisdiction, [Note 3] the subject of other litigation, [Note 4] and unnecessary to resolve the partition issues.

The partition itself occurred on October 6, 2014 through the defendants' buyout of the plaintiffs' 50% interest for the agreed sum of $213,750, placed in escrow, subject to whatever G.L. c. 241, §23 adjustments the court deemed appropriate before that money was released. [Note 5] Those "adjustment" issues were then tried before me, jury-waived.

In a partition case, the presumptive division is in accordance with the parties' respective percentage interests. See Canepari v. Pascale, 78 Mass. App. Ct. 840 , 844 (2011). Here, that would be 50 – 50, an even split. This presumption is rebuttable (the record interest may not accurately reflect the true beneficial ownership), but the burden of proving any difference is on the party asserting it. Id.

The partition statute also allows credits and adjustments ("credits") for disproportionate contributions to (1) physical improvements that increase the property's fair market value (measured by that increase), or (2) such things as insurance, property taxes, or mortgage payments that preserved that value. See G.L. c. 241, §23; Chiminiello v. Chiminiello, 8 Mass. App. Ct. 806 , 808 (1979); Stylianopoulos v. Stylianopoulos, 17 Mass. App. Ct. 64 , 69-70 (1983). Both are evaluated in the discretionary judgment of the court and to be applied if, but only if, the court deems them appropriate "to make the portions just and equal, i.e. just and equitable." See Stylianopoulos, 17 Mass. App. Ct. at 68-69. Here again, the party asserting such a credit has the burden of proving it. See Stylianopoulos. 17 Mass. App. Ct. at 71; Asker v. Asker, 8 Mass. App. Ct. 634 , 638-639 (1979).

No other credits or adjustments may be made in a partition proceeding. Stylianopoulos, 17 Mass. App. Ct. at 66, n.4 ("Petitions for partition are comprehensively governed by [G.L.] c. 241…[which] embrace[s] the whole subject, superseding previous provisions of the statutory and common law.") (internal citations and quotations omitted). [Note 6] Importantly, even though a credit might otherwise have been appropriate, the court must determine if the parties, either expressly or implicitly, made a different agreement, and then rule accordingly. See Stylianopoulos, 17 Mass. App. Ct. at 66-67, 66 n.4 (noting that, while "accountings" for a co-tenant's occupancy of a property are not appropriate absent ouster of the other tenant(s), the parties' agreement that such rent be paid controls).

Neither side challenges the underlying 50-50 ownership. That is what they agreed, and that is what it is. Each, however, at various points in these proceedings, asserted claims for G.L. c. 241, §23 credits, although the particulars of those claims and the evidence offered to support them frequently changed. Indeed, by the time of closing arguments, the plaintiffs [Note 7] asserted that the evidence on those credits was such — confused, contradictory, or unsupported by anything truly persuasive [Note 8] — that the only fair way of resolving the partition case was by following the presumption of 50-50 division, with no credits to either side. In large part (with one major exception) I agree, primarily because the parties' own contemporaneous individual tax returns [Note 9] reflect an exact 50-50 receipt of the building's rents (including rent paid, or deemed paid, by Mr. Li's restaurant), a 50-50 payment for expenses and repairs, and a 50-50 sharing of the benefit of its depreciation and other deductions. This either (1) undercuts their subsequent assertions that one made the actual payments without contribution from the other, that one did not pay the other their fair share of net building receipts, and certainly that this was done without the other's knowledge, or (2) reflects a contemporaneous agreement that, whoever was paying or receiving something, from whatever source of funds, both were satisfied that it be credited 50-50 between them. The exception is the post-2003 mortgage payments — a mortgage not on this building but rather on the defendants' personal residence, used to pay off the building mortgage with a lower-rate obligation — which are not reflected on the parties' tax returns but the parties agreed were for this building. Those payments were made by the defendants, and whether Mr. Li reimbursed them his share in cash is a matter of credibility, which I discuss below.

Based on the testimony and exhibits admitted at trial and my assessment of the credibility, weight, and appropriate inferences to be drawn from that evidence, I find and rule as follows.

Facts and Discussion

These are the facts as I find them after trial, and the rulings I base on those facts.

As noted above, the parties are all members of the same extended family. Plaintiff Kwok Li is defendant Qing Zhong's uncle and her oldest male relative. Both Mr. Li and Mr. Huang have had long, successful careers in running Chinese restaurants and are nobody's fools. No one is successful in the restaurant business without paying careful attention to all aspects of its operations. I thus find that, whatever actions or inactions either took, it was what they knowingly chose to do and reflected either an express or implied agreement between them. They may presently claim otherwise, but cannot change the past.

Their relationship with respect to the property at issue — 1299-1301 River Street in Hyde Park — began as follows. Mr. Li had been operating a restaurant, Liane's Kitchen, at another location in partnership with his brothers. The restaurant was damaged by fire, and Mr. Li had an acquaintance who was willing to sell him this building, close by, to move to. Mr. Li's brothers were not interested in continuing in the business — they no longer wished to work the long hours required by the restaurant — so Mr. Li approached Mr. Huang to see if he wanted to join in the purchase of the building. He was. It is unclear whether Mr. Huang initially wanted to participate in running the restaurant as well as jointly owning the building — he had another restaurant which required most of his time, and Mr. Li was clearly going to insist on having the dominant say in how this restaurant was operated — but both sides agree that he never did so. Instead, Mr. Li moved Liane's Kitchen to the new location, found a tenant for the rental space (a hair salon), negotiated and signed the lease with the tenant, and opened bank accounts in joint name in which the rents were to be deposited and the mortgage and other building-related bills were intended to be paid. Both sides signed the $164,500 note and mortgage, and both contributed equally to the equity part of the $235,000 purchase.

What happened subsequently was the subject of sharply conflicting testimony. Both sides agree that Mr. Li ran the restaurant, handled tenant relations, and paid the mortgage, property tax, and insurance at least through 2003. [Note 10] The source of the funds he used to do so is disputed and cannot presently be tracked other than as reflected on the parties' tax returns. Mr. Li did not always deposit the tenant checks in the joint account, did not always (and perhaps never) deposit in that account the rents his corporate tax returns indicated Liane's Kitchen was paying to the building owners (the plaintiffs and the defendants) for the space it was occupying, [Note 11] did not always pay building expenses from that account, and on occasion paid completely unrelated expenses from it. The defendants claim they contributed to alleged "deficiencies" whenever asked, and at various times received distribution checks, but nowhere near their one-half share. The plaintiffs, for their part, claim that the defendants were paid what they were owed, and anything not currently reflected in a writing or bank account record was dealt with in cash. The parties concede that much occurred in cash, but disagree on the occasions and amounts. As best I can understand it, the plaintiffs' overall argument is that they were left on their own to run the restaurant, and any discrepancies in income and expense sharing were either paid in cash or were compensation for their assuming this extra burden. For their part, the defendants claim that they left Mr. Li in charge, pretty much unmonitored, because of his position of trust in the family (the eldest male) and his alleged promise (allegedly later broken) that he would convey them his interest in the building, cost free, after a certain number of years during which he would keep everything the building generated.

I find neither of these competing narratives credible [Note 12] and, in any event, I find and rule that neither of them controls how the partition should be addressed. As noted above, their contemporaneous tax returns tell a different story and, with the exception noted below, those returns indicate a straight-up 50-50 split of building income, expenses (including insurance), and depreciation. [Note 13] In any event, with the following exception, I find and rule that neither the plaintiffs nor the defendants carried their burden of proving anything different.

The exception is this. The parties agree that the amount still remaining on the initial $164,500 mortgage on the building was refinanced in 2003 through a $130,000 equity line mortgage on the defendants' home and an additional $5,000 the defendants paid by check. Up to that point, the parties' tax returns show a 50-50 split of the mortgage interest expense.

Afterwards, no mortgage interest attributed to this property is reflected on either's returns.

However, other records indicate that the monthly payments on this re-financing mortgage were, in fact, paid, and paid by the defendants. [Note 14] Mr. Li claims that he reimbursed the defendants for his share, in cash or with an occasional check, but I do not believe him. I find that such checks as he points to were for other things, and (here) give no credit to his claim of cash transfers. Had he made such payments, their interest component would have been reflected on his tax returns. There is no such reflection on anything post-2003, and I find that he is too sophisticated a businessman to have ignored or forgotten them had they been made.

The defendants' bank records show that a total of $56,094.56 in interest and $85,179.21 in principal was paid on the equity line mortgage from its beginning in October 2003 through the time the defendants bought out the plaintiffs' interest in the building in October 2014. [Note 15] They are thus entitled to a one-half reimbursement of those sums from the plaintiffs (the interest because it was owed on the mortgage, and the principal because each payment increased the parties' equity in the property by that amount), plus one-half of the $5,000, since the plaintiffs (as 50% owners) received that benefit. This totals $73,136.89, which shall be paid from the escrow as a credit for the defendants. The defendants shall also receive a credit for one-half of the remaining principal due on the loan as of the October 2014 buy-out date ($22,410.40). [Note 16] This is because the net to the parties from a fair market value sale in October 2014 (the basis of the $213,750 the defendants paid into escrow for the plaintiffs' interest) would have been reduced by the amount needed to pay-off the mortgage on that date. The defendants are not entitled to a credit for any interest paid on the loan from and after the buy-out date because, as of that date, the plaintiffs no longer had any interest in the property and thus had no obligation to continue paying on the mortgage obligation. [Note 17] Whether to continue with the loan or pay it off was entirely at the discretion of the defendants.


For the foregoing reasons, the defendants shall receive $95,547.29 from the escrow, the plaintiffs shall receive $118,202.71, and the interest that accrued on the $213,750 sum during the period of the escrow shall be paid 44.7% to the defendants and 55.3% to the plaintiffs. [Note 18] If they have not done so already, the plaintiffs must formally deed their entire interest in the property to the defendants. All other partition-based claims between the parties are DISMISSED, WITH PREJUDICE.

Judgment shall enter accordingly.



[Note 1] Tai Fu Restaurant Corp., d/b/a Liane's Kitchen.

[Note 2] Mr. Li is Ms. Zhong's uncle (her mother's brother).

[Note 3] Partition proceedings are "confined to matters in reference to the common land." See Asker v. Asker, 8 Mass. App. Ct. 634 , 640 (1979) (internal citations and quotations omitted).

[Note 4] Tai Fu Restaurant Corp. v. Huang, et al., Suffolk Superior Court Civil Action No. SUCV2014-00710.

[Note 5] The $213,750 figure was 50% of the price offered by an arm's-length third-party buyer ($450,000), less 50% of the 5% broker's fee. It was thus 50% of the property's net fair market value. If there are no net adjustments due the defendants, the plaintiffs will receive it all, plus all accrued interest. If there are such net adjustments, the plaintiffs will receive that sum less those adjustments, and the remainder will then be disbursed to the defendants, with each side getting the accrued interest on their respective disbursements.

[Note 6] Thus, among others, water, sewer and other utility-type expenses are not part of partition proceeding adjustments. None either adds to or maintains the building's fair market value as measured at the time of sale.

[Note 7] Despite full and timely notice, the defendants did not attend closing arguments, thus waiving their right to make them. They did, however, submit a post-trial brief, which I fully considered.

[Note 8] See, e.g., the series of Home Depot receipts offered by the defendants for items which they initially alleged were used in connection with improvements or maintenance of the property, but later withdrew as "unrelated" or because, when under oath, could not recall their purpose. There was also no proof of what "value" to the building they contributed or maintained — an essential element of a G.L. c.241, §23 credit. See also defendants' checks to Rainbow Construction from July, August, and September 1999 which they claimed paid for work on this building, but which seems unlikely for the simple reason that the parties did not purchase the building until later. When challenged with this discrepancy, the defendants did not offer any evidence to corroborate their testimony, nor was there any evidence on what value they contributed or maintained to the building. No one from Rainbow Construction was called to testify about where the work was actually performed or what it was for, nor were any contracts or invoices for the work offered into evidence which presumably would have reflected its particulars and location. Problems with other parts of the defendants' evidence are discussed below.

There were similar problems with the plaintiffs' claims — Mr. Li's repeated assertions, for example, that he himself paid for something, in its entirety, when in actual fact payment came from the parties' joint account, much of whose funds came from building rents to which both were entitled. Falsus in uno, falsus in omnibus, as the Romans cautioned.

I by no means discounted everything that was said by the parties, but I gave almost none of it full credibility and in every instance searched at length for corroborating documentation. Even then it was necessary to assess the documents' reliability as well. Almost none of those documents had sufficient detail to be truly reliable, and the parties both claimed that, if a document evidenced payment by the other, they had contributed "their" share in unrecorded cash payments, even if such payments were not reflected in corresponding withdrawals from their bank accounts. Since the case turned on business transactions and the tracking and accounting of numerous business-related expenditures, I would have expected testimony and supporting source documents from their respective accountants, bookkeepers, and tax preparers. None was offered.

As more fully discussed below, I ultimately relied the most on the parties' tax returns. They were contemporaneous documents, personally signed by the parties "under penalties of perjury" attesting that they had examined those returns and their accompanying schedules and statements and all were "true, correct, and complete." Those returns are thus the most likely source of the underlying truth, alleged cash payments and all, and I so find. In any event, in the circumstances here, I find and rule that the parties are estopped from now denying their accuracy. See Otis v. Arbella Mut. Ins. Co., 443 Mass. 634 , 639-640 (2005).

[Note 9] Because the parties owned the building in their individual capacities, their respective shares of its income, expenses, and depreciation are itemized on the Schedule E's to their Form 1040 returns. These show an exact 50-50 split.

The plaintiffs produced all of their tax returns back to 1999, the year the parties purchased the building. The defendants only produced their returns back to 2007, alleging that they had not retained copies of the earlier ones. I am skeptical of this but, in any event, infer that these earlier returns would show the same 50-50 split with the plaintiffs that is consistently shown on their later returns.

[Note 10] These appear to have been included in the monthly mortgage payments to the bank, which then paid them.

[Note 11] According to the Tai Fu Corporation (d/b/a Liane's Kitchen) tax returns, the rents it paid for its occupation of the building were as follows: 1999 ($16,565), 2000 ($18,000), 2001 ($18,000), 2002 ($18,000), 2003 ($18,000), 2004 ($18,000), 2005 ($18,000), 2006 ($18,000), 2007 ($18,000), 2008 ($18,000), 2009 ($18,000), 2010 ($18,000), 2011 ($16,500), 2012 ($18,000), and 2013 ($16,500). Liane's Kitchen closed in 2014, when the defendants purchased the plaintiffs' interest in the building during this partition proceeding. See discussion above. If you add the Liane's Kitchen amounts to the rents paid by the hair salon, they roughly equal the "rents received" figures (split evenly) as shown on the parties' individual tax returns. Thus, I find they were either paid or knowingly deemed paid by the parties during all those years, and then allocated and distributed between the parties (or agreed that they had been so) as reflected on their tax returns.

[Note 12] Both Mr. Li and Mr. Huang are experienced business persons, and their tax returns show a close attention to their business affairs.

[Note 13] To the extent these returns do not reflect the defendants' alleged expenditures for attorneys or surveyors to resolve an alleged property-line dispute (or, for that matter, any other expense claimed by either party), I find that this was because the parties agreed, either expressly or implicitly, that they would not be considered a "joint" expense payable by both and thus allocable in partition.

[Note 14] This is certainly so. The mortgage was on their house.

[Note 15] See the chalk at pages 6-9 of the defendants' post-trial brief.

[Note 16] This is the principal amount of the loan ($130,000), less the principal paid down to the buy-out date ($85,179.21), divided in two to reflect the 50-50 split.

[Note 17] For the same reason, the defendants' claim that they should receive a credit, in whole or in part, for the real estate taxes they paid from and after the date they bought out the plaintiffs' interest also fails. At that point, they became the property's sole owner with the full benefit and burden of that sole ownership. They were thus solely responsible for its taxes. These benefits and burdens of sole ownership also included the benefit and burden of any changes (up or down) in the property's fair market value.

To the extent the defendants continue to press a claim for damage to the building which they claim was caused by the plaintiffs, that claim is rejected. The sum they paid was for an "as is, where is" purchase — the same terms as the prospective third-party purchaser whose offer they matched. See n. 5, supra.

[Note 18] These percentages are determined in accordance with the percent of the total $213,750 each of the parties are entitled to.