TERESA GOMES v. FRANCISCA GOMES

Introduction

This is a partition action between two sisters, plaintiff Teresa Gomes and defendant Francisca Gomes. [Note 1] The property being partitioned — home, from time to time, to numerous members of the extended Gomes family, natives of Cape Verde — is the multi-family dwelling at 28 Clarkson Street in the Dorchester section of Boston, formerly titled in the name of the 28 Clarkson Street Realty Trust and, following the termination of that trust, in Teresa and Francisca's individual names as tenants in common.

Partition is an absolute right of every co-tenant, "even to the great inconvenience and loss of the parties." See O'Brien v. Mahoney, 179 Mass. 200 , 203 (1901). It is often initiated by a co-tenant who no longer lives at the property and wants to be "cashed out," and such is the case with Teresa here. The house cannot physically be divided, so it has been partitioned by sale. [Note 2]

The net proceeds from that sale are currently being held in escrow by the partition commissioner. At issue is the appropriate division of those proceeds.

This issue was tried before me, jury-waived. 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

The members of the Gomes family may have viewed this as a "family" house, owned in common and operated for their common benefit, [Note 3] but this is incorrect. It began as Francisca's house and it remained Francisca's alone, until the foreclosure described below. The relevant events thus split into two time periods, pre- and post-foreclosure. I begin with the first.

Francisca bought the house on September 13, 2006, putting its title in her own name, using her own funds for the down payment, and borrowing the rest through two mortgages. Several family members, including Teresa, moved into the building — some living with Francisca, some occupying the other units — but they did so as tenants, with Francisca typically charging them below-market rates.

Francisca used the money she received in rents to make mortgage payments and other property-related bills, but also used some of it for her personal living expenses. She has never had much money — she works as a cleaner in a hospital — and at some point the bills became more than she could handle. She stopped paying the mortgage but continued collecting rents, angering the family members living there when they discovered this. Why, they thought, should they pay rent when she wasn't paying the mortgage? But this anger was misplaced. It had no legal basis because everyone but Francisca was a tenant — only a tenant [Note 4] — and, as such, had rent obligations independent of the mortgage. Part of their anger was also fueled by the belief that Francisca was using some of the money to purchase inventory for her business in Cape Verde. Whether this was true or not (Francisca denies it) is irrelevant. As a legal matter, the money from the building was Francisca's, and her debt to the banks was a matter between her and the banks. None of the banks ever sought to attach the family members' or other tenants' rents, or brought eviction or other proceedings against them.

The banks, however, did bring foreclosure proceedings against Francisca, which she managed to resolve in the following way. Foreclosure took place on March 9, 2011. By pre-arrangement with Francisca, NSP Residential LLC ("NSP") and Boston Community Capital ("BCC"), a non-profit, stepped in to purchase the house at foreclosure and then turned around and arranged for Francisca to continue to stay there with NSP as the new mortgagee. There were two requirements for this, however. Francisca could not continue as the owner of record, [Note 5] and an additional person needed to co-sign the note. Accordingly, the 28 Clarkson Street Realty Trust (a "nominee trust") [Note 6] was set up to hold title, with Francisca and her brother Manuel co-signing the note, each becoming 50% beneficiaries of the trust, and Teresa becoming the trustee but with no independent powers. [Note 7] Neither Manuel nor Teresa made any financial contribution towards the property acquisition or the trust, nor did Teresa sign the note. All funds that were needed in connection with the transaction came from either Francisca (a $5,000 payment to NSP, plus $650 for the drafting of the trust) or the new loans.

The property was conveyed to the trust on June 25, 2012. The next day (June 26, 2012) Teresa and her husband Abilio Barbosa signed a lease agreement to rent one of the units in the building for $1,100 per month, with Francisca as landlord. I infer, and so find, that this was an acknowledgement by Teresa that, for all practical purposes, the building was Francisca's. Like Teresa, most of the other tenants were family members, and all leases were signed with Francisca as landlord. Rents continued to be at below-market rates.

On or about November 1, 2013, Teresa stopped paying rent. Francisca, however, waited until July 10, 2014 before filing a summary process eviction action against her in Dorchester District Court. On July 18, 2014, having no desire to become involved in the dispute, Manuel assigned his 50% beneficial interest in the trust to Teresa. On October 14, 2014 the court entered judgment in favor of Francisca against Teresa for both possession of the unit and damages. In that judgment, Teresa was ordered to pay $8,100 in back rent (which included October), to pay Francisca $1,100 per month in rent thereafter, and to vacate the unit by no later than February 5, 2015 if she did not do so. Teresa paid the $8,100 on November 14, 2014, but nothing further. On January 23, 2015 Teresa filed a motion for new trial based on Manuel's assignment to her of his 50% beneficial interest in the trust. The court heard the motion and, on February 19, 2015, denied it. An eviction order was entered on February 26, 2015 and Teresa was physically removed from the property in early March of 2015.

The 28 Clarkson Street Realty Trust instrument provided for the trust's dissolution at the request of any beneficiary. A year after she was evicted, Teresa (as 50% beneficiary) instructed Teresa (as trustee) to terminate the trust. The trust was formally terminated on April 4, 2016 and, by the terms of the trust, the property was then conveyed to its beneficiaries, Teresa and Francisca, as tenants in common, 50% each. Teresa made no attempt to reoccupy the property but, instead, brought this partition action.

By order of this court, under the supervision of the partition commissioner, the property was sold on November 21, 2017 for a gross price of $875,000. After payment of closing costs, the mortgages and other liens, $337,940.59 remains to be distributed. The appropriate division of that sum was the subject of this trial.

Neither Teresa nor Francisca seriously contests the 50-50 ownership of the property, nor can they. [Note 8] As noted above, it was a requirement of the re-acquisition out of foreclosure, agreed-upon as such, and thus, in the popular phrase, "a feature, not a bug." Instead, the dispute is over two things: (1) whether Teresa was "ousted" from a rightful occupancy and thus has a potential claim for the rental value of the space from which she was "ousted," see Stylianopoulos v. Stylianopoulos, 17 Mass. App. Ct. 64 , 66-69 (1983), and (2) what, if any, G.L. c. 241, §§23 & 25 credits are appropriate to compensate Teresa or Francisca for their disproportionate contributions, if any, to physical improvements that increased the property's market value or towards property-related obligations such as taxes, mortgage debt service, or insurance that were necessary to enhance or preserve such value. See Chiminiello v. Chiminiello, 8 Mass. App. Ct. 806 , 808 (1979); Stylianopoulos, 17 Mass. App. Ct. at 69-70. Both types of "credits" are discretionary with the court, and to be applied if, and only if, in the exercise of that discretion, the court deems them appropriate "to make the portions just and equal." Stylianopoulos, 17 Mass. App. Ct. at 69. No other credits or adjustments may be made. Id. 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).

Teresa's claim of ouster is based on her eviction from the property by the Dorchester District Court in Francisca's summary process case. In her view — rejected by the Dorchester District Court — her status as trustee, and then later as 50% beneficiary of the trust, entitled her to occupancy without any obligation to pay rent, making that eviction wrongful and thus compensable. As discussed more fully below, I disagree. Her claim to other G.L. c. 241, §23 compensation is based on her contention that the rent she paid, to the extent she paid it, [Note 9] should be viewed as contributions towards property-related improvements, taxes, mortgages, or insurance. As discussed more fully below, I disagree with that as well.

For her part, other than reimbursement of 50% of the sums she paid in connection with the re-acquisition of the property out of foreclosure, Francisca is content with an equal division of the net proceeds, and argues for G.L. c. 241, §23 "credits" only if division is not equal.

Further facts are set forth in the discussion section below.

Discussion

I start with Teresa's argument that her role as trustee of the 28 Clarkson Street Realty Trust was a co-tenancy interest in the property, making her eviction for non-payment of rent a wrongful ouster. She is incorrect. Even were she correct, as a matter of discretion in making the partition "just and equal," I decline to find it compensable.

As noted above, the 28 Clarkson Street Realty Trust was a nominee trust. A nominee trust is "an entity created for the purpose of holding legal title to property with the trustees having only perfunctory duties." Morrison v. Lennett, 415 Mass. 857 , 860 (1993) (internal quotation and citation omitted). Nominee trusts are different from "true trusts" in that "the trustees of a nominee trust have no power, as such, to act in respect of the trust property, but may only act at the direction of . . . the beneficiaries." Id. The beneficiaries, and not the trustee, are considered the true owners of the property involved in such a trust. Id. at Mass. 862 (noting that, "[i]n prior decisions, involving nominee provisions in trust instruments, this court has disregarded the trustees' record ownership of the property and liability has been imposed directly on the beneficiaries").

In this instance, the trust form of ownership was required by Boston Community Capital as a condition of providing financing for the purchase of the property out of foreclosure. Any funds needed for the purchase beyond those provided by the loan came from Francisca. Other than being the named trustee of the trust, Teresa had no role in the purchase whatsoever. She did not sign the note, had no liability for its repayment, and made no payments towards it. Importantly, nothing in the trust instrument gave her a right to possession. As stated in that instrument, "except as hereinafter provided in case of the termination of this Trust, [Note 10] the Trustees shall have no power to deal in or with the Trust Estate except as directed by all Beneficiaries…" Declaration of Trust Establishing 28 Clarkson Street Realty Trust, § 4.2. The cases cited by Teresa in support of her assertion that, as trustee, she was entitled to possession of the property (Ferri v. Powell-Ferri, 476 Mass. 651 , 660 (2017), citing McClintock v. Scahill, 3 Mass. 397 , 399 (1998)) do nothing of the kind. They were far different types of trusts — not a nominee trust such as this one — with far different language regarding the rights and powers of the trustee. Tellingly, the Dorchester District Court ruled against Teresa's argument, and she took no appeal from its judgment. [Note 11] In the view of that court, Teresa's only right to possession arose from her rental agreement, and those rights ceased when she ceased paying rent. That adjudication is res judicata. See Wright Mach. Corp. v. Seaman-Andwall Corp., 364 Mass. 683 , 688 (1974) ("res judicata is founded on the necessity for finality in litigation…those who have contested an issue shall be bound by the result of the contest.").

It is also res judicata of Teresa's right to possession after she became a beneficiary of the trust as a result of Manuel's transfer of his 50% beneficial interest to her. Manuel assigned his beneficial interest to Teresa on July 18, 2014, eight days after the eviction action was filed in Dorchester District Court (July 10, 2014). Judgment in favor of Francisca for possession and damages was entered by that court on October 14, 2014. An essential element of that judgment was Francisca's right to possession of the unit in which Teresa was living. See Bank of New York v. Bailey, 460 Mass. 327 , 333 (2011). Teresa did not challenge that right, and took no appeal. Having not raised it then, she is precluded from doing so subsequently. See Heacock v. Heacock, 402 Mass. 21 , 23 (1988) (doctrine of claim preclusion "makes a valid, final judgment conclusive on the parties and their privies, and bars further litigation of all matters that were or should have been adjudicated in the action. This is so even though the claimant is prepared in a second action to present different evidence or legal theories to support his claim, or seeks different remedies.") (internal citations omitted). In any event, on January 23, 2015, she explicitly raised the issue in a motion for new trial. The court heard the motion and, on February 19, 2015, denied it. An eviction order was entered on February 26, 2015 and Teresa was removed from the property in early March of 2015. Again, no appeal was taken. [Note 12]

Teresa became a tenant in common with Francisca on April 4, 2016 when the trust was terminated. She made no demand for possession at that time, nor did she assert such a right in court until this action was filed. I thus do not find she was "ousted". Even if "ouster" is deemed to have occurred, I decline, as a matter of discretion, to give Teresa any G.L. c. 241, §23 credit for it. She did not appeal the District Court rulings. She has never paid anything towards the property other than below market-rate rent, which she ceased paying entirely on November 14, 2014. There were never any "excess rents" collected by Francisca over and above what was needed to pay the building's bills, and those bills always required additional "out of pocket" contributions by Francisca. I thus cannot, and do not, find that "justice and equity" require any monetary compensation to Teresa over and above her percentage ownership share. See G.L. c. 241, §23 (giving court discretion to decline such compensation).

Francisca's situation is different. As previously noted, Francisca paid NSP $5,000 to buy the building out of foreclosure and $650 for the drafting of the trust. These were all of the out of pocket costs associated with the acquisition of the building, [Note 13] and benefited both Francisca and Teresa in proportion to their ownership share (50-50). I thus reimburse Francisca one-half of those amounts from Teresa's portion, since it would be an unjust enrichment of Teresa not to do so.

I decline to give any other credits to Francisca, for these reasons. Utility bills are generally not compensable under G.L. c. 241, §23 because they do not increase the building's value and, in any event, Francisca received their benefit during her residence in the building. As for insurance, it is unclear whether the premiums were paid from the building's rents rather than Francisca's personal funds, and Francisca failed to meet her burden of proof on this. Again, she received their benefit during her residence in the building and the coverage they provided her against premises-liability claims from tenants and third-parties. Francisca claims to have spent funds on materials and labor to repair damage to the unit previously occupied by Teresa, but I am unpersuaded that the damage was caused by Teresa. Moreover, just because money is spent on a commonly owned building does not mean that it qualifies for G.L. c. 241, §23 credit. To so qualify, the work must have increased the sale value of the property, and the measure of the compensation is that increase. Here, there was no proof of any such increase.

The Commissioner's Fees

Under G.L. c. 241, §22, the court is to determine the reasonable expenses and charges of the partition proceeding, including the fees of the commissioner, and then allocate them as appropriate between the parties. Here, the commissioner seeks $44,915 in fees and $687.72 in expenses.

This was not an easy partition for the commissioner to supervise. The issues were numerous, the parties were always "at odds", and clearing the building of tenants so that it could be sold tenant-free and broom-clean was a struggle requiring the commissioner's close attention. The commissioner's assessments and recommendations, even though many were not accepted by the court (for example, the commissioner's recommendations on "ouster", "rent", and the acquisition costs associated with the purchase out of foreclosure), were nonetheless helpful perspectives for the court to consider, and valuable for that purpose. The $45,602.72 total is approximately 5% of the gross sale price. I thus find the commissioner's fees and expenses to be reasonable, and approve them in their entirety. In the circumstances of this case, I allocate their payment 50-50 in accordance with the parties' respective equity interests in the property.

Conclusion

For the foregoing reasons, out of the $337,940.59 net proceeds remaining, the commissioner is to be paid $45,602.72, Francisca $148,993.93, and Teresa $143,343.94. Any accrued interest is to be split between Francisca and Teresa 50-50. All claims to any other division are DENIED.

Judgment shall enter accordingly.

SO ORDERED.