MISC 17-000729

January 17, 2019

Middlesex, ss.



Petitioner Kevin Riffe commenced this action in December 2017. He seeks partition of a property jointly owned by him and (as of the time of filing) an unknown number of others. On the property is a building that has two living units, each with its own Newton, Massachusetts street address (Unit 1, at 3 Emerald Street; and Unit 2, at 89 Hawthorn Street). There's also a stand-alone garage that's shared by those who live in Units 1 and 2.

Partition cases have their issues: there often are disputes over things such as who owns how much of the jointly owned property, the property's value, the value of improvements to the property (and who paid for them), how partition should be made, who should pay the expenses of partition, and so on. This case has many of those issues, but there are three non-partition issues that complicate things further.

First and most significant is a title defect. In 2003, persons then holding only 80% of the ownership shares in the property (this Order calls their successors in interest the "Condominium Tenants") signed a master deed that purported to create a two-unit condominium. Why "purported"? Because Massachusetts law requires all of the owners of a property that's being turned into a condominium to sign the condominium's master deed. See G.L c. 183A, § 16. So not only did the actions of the Condominium Tenants in 2003 not bind those who owned the other 20% of the shares in the property (this Order calls their successors in interest the "Minority Tenants"): by failing to get the Minority Tenants to sign the master deed, the Condominium Tenants may have created nothing in the way of real-estate interests.

Notwithstanding the defect lurking in the Condominium's master deed, some of the Condominium Tenants were deeded Unit 1 and others were deeded Unit 2, each thinking they had good title to a condominium unit. (There's some overlap in ownership, but let's ignore that issue for now.) The City of Newton also began treating the two units as separate parcels for purposes of assessing real-estate taxes. That brings us to the second problem in this case: at some point the owners of Unit 1 stopped paying their real-estate taxes. The City has recorded liens for over $100,000 in unpaid taxes against Unit 1, but now the City confronts this question: may it enforce a lien on a condominium unit that (arguably) doesn't exist?

The owners of Unit 2 have done better by the City – they paid their taxes – but in 2008, the then-owner of Unit 2, Cecil Riffe, created the third problem in this case: he agreed to a "reverse mortgage" on Unit 2, a mortgage now held by Nationstar Mortgage. Cecil has died, the debt secured by the reverse mortgage is unpaid, and Nationstar would like to foreclose. But now Nationstar has a problem: may it foreclose on a condominium unit that (arguably) doesn't exist? (Nationstar's mortgage also contains another defect – it has a schedule that purports to encumber the entire property (and not just Unit 2) -- but the Court will overlook that issue for present purposes. Nationstar has counterclaimed and has asked the Court to reform its mortgage.)

The Court appointed a commissioner to investigate the situation and make recommendations. The Court also authorized the Commissioner to engage an appraiser to estimate the value of the property both as-is (that is, as a residentially zoned property containing one two-family building with detached garage, but no condominium) and as the purported condominium. After reviewing the appraiser's report and conferring with those parties who haven't been defaulted in this action, the Commissioner recommended in December 2018 that the Court try to preserve the property as a condominium. If that fails, the Commissioner likely will have to sell the property and divide the proceeds.

While the courts enjoy certain equitable powers under the partition statute, see G.L. c. 241, § 25, the Commissioner and the parties have presented no authorities that suggest that those powers are strong enough to correct the defect in the condominium's master deed. But there's one tool, available in all partition cases, that might be helpful to the parties here. Chapter 241, § 14 provides that if a property can't be divided physically, "the whole . . . may be set off to any one or more of the parties, with his or their consent, upon payment by him or them to any one or more of the others of such amounts of money as the commissioners award to make the partition just and equal." A court is free to use its § 14 powers as the sole means of resolving a partition action; the court also can use setoffs in combination with other means of partition to end the case. See Delta Materials Corp. v. Bagdon, 33 Mass. App. Ct. 333 , 339-40 (1992); Duangpratheep v. Calnan, 26 LCR 547 , 548 (2018).

How could a setoff fix things here? Provided that all of c. 241's requirements are met, especially those pertaining to setoffs, the Court could set off to some or all of the Condominium Tenants the interests of the Minority Tenants. Once some or all of the Condominium Tenants possess 100% of the interests in the property, the Condominium Tenants arguably may be free, without court intervention, to ratify the condominium. But the key to a setoff under § 14 is consent: a court can't force an owner to purchase another owner's share. Setoffs also play by their own valuation and deduction rules. See Duangpratheep, 26 LCR at 548-550. The Court doesn't know how those rules affect the prospects of a setoff in this case.

Two final comments on the Commissioner's December 2018 report. The report assumes that the interests of the Minority Tenants attach solely to Unit #1. The Commissioner's reports to date do not explain why that's correct as a matter of title. Instead, it appears that the Minority Tenants have interests in the property as a whole, and not just Unit #1. It also appears that those interests should be as follows (each Tenant except the first, Delores Delgado Armstrong, has been served with process in this case and was later defaulted):

Delores Delgado Armstrong: 5%

Candido Delgado, Jr.: 5%

Diane McIssac: 1.67%

Kathleen McQuade: 1.67%

John Whelan: 1.67%

Marsha Whelan: 1.67%

Paul Whelan: 1.67%

Second, the Commissioner's reports recommend that the Court treat John Whelan as having forfeited his share of the property. The Commissioner claims that John has lived in Unit #1 for some time, and that he allegedly agreed to be responsible after 2003 for maintaining that unit and paying its real-estate taxes. The Commissioner alleges that John has done neither, and thus he should be treated as having lost his interest in the property and/or Unit #1. The Commissioner points to no authority for his recommendation. Chapter 241 provides various mechanisms for adjusting, in the case of a setoff, the compensation (the "owelty") due for a forced sale of one's interest in jointly owned property. Chapter 241 also allows equitable adjustments in the division of the proceeds of a sale or public auction of a jointly owned property. It may turn out, as a practical matter, that if the Court sets off John's share to other owners, or if the Court orders the property to be sold and its proceeds divided among all of the owners (including John), John's alleged failure to pay maintenance expenses and taxes will reduce or eliminate what he receives. But c. 241 prevents the Court from declaring at this time, as a matter of frontier justice, that John owns nothing: instead, someday, the Commissioner will have to go through the exercise of determining, first, what John deserves for his ownership interest (or what John's distribution from a sale will be), and then whether adjustments to his owelty or distribution are appropriate. See Campari v. Pascale, 78 Mass. App. Ct. 840 , 846 (2011); Duangpratheep, 26 LCR at 549.

With these thoughts in mind, the Court ORDERS any party or collection of parties who wishes to propose a setoff of the interests of the Minority Tenants (or any other setoff) to provide to the Commissioner by February 15, 2019 that proposal and its terms. The Court ORDERS the Commissioner, by February 22, 2019, to report to the Court (a) if he has received any setoff proposals (in which case, the Commissioner also should tell the Court how much time he needs to evaluate them); or (b) if he has received no proposals. In the latter event, the Court likely will order the Commissioner to engage a broker to sell the property.