WILMINGTON SAVINGS FUND SOCIETY FSB vs. PETER POULOS as trustee of the 48 Aunt Julia Ann's Road Trust

Introduction

This is a partition proceeding, governed by G.L. c.241, §§1 et seq. [Note 2] The property partitioned is the single-family home at 48 Aunt Julia Ann's Road on the Bass River waterfront in West Dennis, owned 50-50 as tenants in common by plaintiff Wilmington Savings Fund Society FSB ("Wilmington") and defendant Peter Poulos as trustee of the 48 Aunt Julia Ann's Road Trust ("Mr. Poulos"). Partition took place by private sale under the supervision of the court-appointed Partition Commissioner, J. Marlin Hawthorne Esq. The gross sale price was $1,300,000, with a net of $1,210,250.02 after payment of the broker's fees and other closing adjustments.

The time to appeal the partition has long past, and its ruling on the parties' respective title interests (50-50 co-tenants) is thus final. [Note 3] In fact, the co-tenancy had previously been adjudicated, and Mr. Poulos' challenge to it rejected, in Poulos v. Financial Freedom, et al., Land Court Case No. 10 MISC. 432847 (HMG), aff'd 89 Mass. App. Ct. 1107 (2016), 2016 WL 689066 (Mem. & Order Pursuant to Rule 1:28 (Feb. 22, 2016)) (hereafter, "Poulos v. Financial Freedom") and was thus res judicata even before this partition proceeding was brought.

Since the time partition was ordered (Apr. 24, 2018), numerous orders have been entered regarding marketing, sale, and post-sale matters. The only remaining issue in the case is the appropriate distribution of the net sale proceeds -- what the caselaw calls the "final decree." [Note 4] The Commissioner made recommendations regarding that distribution as requested by the court. The parties responded to those recommendations with their own positions and arguments, and a hearing was held. I find and rule as follows.

Legal Principles

In an ordinary partition case, distribution is determined as follows.

First, the costs of the proceeding are paid. These are primarily the Commissioner's fees and expenses as determined by the court. See G.L. c.241, §22; Howe v. Tarvezian, 73 Mass. App. Ct. 10 , 13 (2008) (court "to determine how much time was reasonably spent on a case, and the fair value of the attorney's services") (internal citations and quotations omitted).

Next, the court determines if any adjustments to an otherwise proportional distribution of the sale proceeds are appropriate, i.e. one different from the co-tenants' percentage ownership. All such adjustments are "confined [only] to the settling of accounts concerning the land held in common between the owners as owners" and do not include personal obligations or contracts beyond the maintenance and preservation of the value of the property itself." Moseley v. Moseley, 240 Mass. 22 , 25 (1921). In a typical case, such adjustments involve an inquiry into whether there have been any disproportionate contributions from one co-tenant or another towards (1) the preservation of the value of the property (e.g., insurance, property taxes, or mortgage payments), or (2) physical improvements that increased its sale value. If so, the court then determines, as a matter of equity, how much the party that made them should be reimbursed. See G.L. c. 241, §23; Canepari v. Pascale, 78 Mass. App. Ct. 840 , 846 (2011); Stylianopoulos, 17 Mass. App. Ct. at 69-70. [Note 5] Similarly, where a co-tenant has kept a disproportionate share of the income a property has generated, that disproportion will be deducted from that party's distribution and allocated to the others. See Restatement (1st) of Restitution §125; [Note 6] Stylianopoulos, 17 Mass. App. Ct. at 67 (adjustment for rents and profits received from third persons). And in instances where a co-tenant has "ousted" the others from the property and been in sole occupancy, the court has discretion to determine the fair rental value of that occupancy and then require the occupant to pay the others their share of what that rent would be. See Stylianopoulos, 17 Mass. App. Ct. at 66-69; Sanborn v. Johns, 19 Mass. App. Ct. 721 , 724 (1985). After all these adjustments have been made, the remaining net sale proceeds are then divided in accordance with the parties' respective percentage interests.

But there are cases, and this is one of them, where further adjustments are appropriate. These occur in proceedings where a party's "conduct of the litigation itself . . .give[s] rise to equitable considerations favoring deviation from the presumptive proportionate allocation (such as, for example, when [a party] needlessly pursues a course that causes the cost of the proceedings to escalate)." Aiello v. Aiello, 63 Mass. App. Ct. 914 , 916 (2005). Such adjustments are made (1) in the allocation of the Commissioner's fees if one tenant's unjustified actions force the Commissioner to take otherwise unnecessary time and measures to respond to them, and (2) to reimburse the other co-tenant for its otherwise unnecessary attorney's fees and expenses. See Gifford v. Burke, Mem. & Order Pursuant to Rule 1:28, 89 Mass. App. Ct. 1116 , 2016 WL 1295018 at *1 - *2 (Apr. 4, 2016) (citing Aiello); G.L. c. 241, §§22 & 25.

Facts

Wilmington's 50% co-tenancy in the property is the interest previously held by Mr. Poulos' ex-wife Katheryne Snowden Poulos, now deceased, [Note 7] which she received in connection with their divorce. Ms. Poulos granted a reverse mortgage on that interest and, after her death without its redemption and the subsequent rejection of Mr. Poulos' challenge to the validity and extent of its encumbrance on the property, [Note 8] the mortgage was foreclosed at auction by its then- holder, CIT Bank N.A., on July 20, 2017. Wilmington then acquired that interest by deed from CIT on September 20, 2017. Mr. Poulos' 50% co-tenancy -- his share from the divorce -- was not subject to the mortgage and thus remained. As a result, when this action was brought on November 20, 2017, Wilmington and Mr. Poulos were both tenants in common of the property, each with an undivided 50% ownership interest.

A tenant in common has the absolute right to partition whether its co-tenants agree or not, "even to the great inconvenience and loss of the parties." O'Brien v. Mahoney, 179 Mass. 200 , 203 (1901). Mr. Poulos has never acknowledged this or cooperated with the partition in any way. Instead, he has contested it at every turn. The reason for this was soon apparent. The house was primarily a vacation rental property, and Mr. Poulos rented it as often as possible when he was not staying there himself, keeping the entirety of the income for himself. Whether or not he had his ex-wife's permission to do so (as he claims), [Note 9] Wilmington gave no such permission and whatever unilateral right Mr. Poulos had to rent it thus ended, at the latest, when Wilmington acquired its co-tenancy title on September 20, 2017. Any rentals of the property by Mr. Poulos after that time, and any retention by him of any money he received, were thus improper.

Where, as here, a property cannot physically be divided, the goal of partition is to sell it for maximum value. See Morgan, 67 Mass. App. Ct. at 20 - 21, 23. Mr. Poulos' clear intention, however, was to frustrate and delay the sale as long as he could, even with no basis to do so. As the case docket shows, his actions included (1) making filing after filing, all baseless, seeking to challenge Wilmington's co-tenancy (res judicata even before this proceeding was brought), [Note 10] (2) falsely claiming that the case had been "settled" and should thus be dismissed, [Note 11] (3) seeking to delay the appointment of a partition commissioner and, subsequently, to remove the Commissioner for alleged bias when all the Commissioner did was carry out the court's orders, [Note 12] (4) dragging his feet in responding to court orders to produce property rental records -- records which ultimately revealed that he had violated the court's orders to cease making such rentals, [Note 13] (5) refusing to cooperate with the partition commissioner, going so far as to change the locks to bar the Commissioner's entry, [Note 14] (6) refusing to turn over rental deposits and receipts to the Commissioner, in violation of this court's orders, [Note 15] (7) violating the court's orders by refusing to pay his equal share of property expenses, [Note 16] (8) challenging the marketing of the property and the sale itself on meritless grounds, [Note 17] (9) filing a "notice of appeal" at the Registry of the court's approval of the terms of the sale, in a clear attempt to cause that sale to fall apart (requiring a court order to have the notice stricken), [Note 18] and (10) dragging his feet in removing his personal property from the house (a condition of the sale), which required a court order authorizing a bonded commercial mover and storage facility to do so. [Note 19] All of this required hearing after hearing and court order after court order, significantly increasing the costs of the proceeding without justification, and delayed the marketing of the property until late August 2018.

The property was actively marketed by one of the premier real estate brokers on Cape Cod in a manner reviewed and approved by the court, [Note 20] and then sold to the highest-bidding third-party buyers in its "as is, where is" condition. [Note 21] The closing took place on December 7, 2018. The gross sale price was $1,300,000, with a net of $1,210,250.02 after payment of the broker's fees and other closing adjustments. Those net proceeds, plus accrued interest and a homeowner's insurance refund check of $54, are currently in an interest-bearing escrow account being held by the Commissioner pending further order of this court.

Whether Mr. Poulos or his daughter Marianne (apparently the beneficiary of the trust) is entitled to receive the trust's share of those proceeds is the subject of a Barnstable Probate & Family Court action currently on appeal. In that action, Ms. Poulos alleges that her father mismanaged trust assets and wrongfully kept trust income that was rightfully hers. Her attorney has requested this court to retain the trust's share of the sale proceeds pending the final outcome of that case.

Further facts are set forth in the Analysis section below.

Analysis

The Allocation of Prior Disbursements from the Escrow Account

As noted above, the property sold on December 7, 2018 for $1,300,000.00, with net sale proceeds of $1,210,250.02. All of it was deposited in an interest-bearing escrow account under the control of the Commissioner. A homeowner's insurance refund check of $54 was later added, bringing the principal amount in the account to $1,210,304.02.

Three categories of expenses have been paid from that account since it was established.

The first category is payment for expenses due solely to Mr. Poulos, which thus shall be deducted from his share of the remaining funds prior to distribution and paid to Wilmington. These are (1) the cost of removing Mr. Poulos' personal belongings from the property -- necessary so that the house could be timely delivered to the purchasers, broom clean, when Mr. Poulos did not timely remove them himself ($5,500); [Note 22] (2) one month of storage of Mr. Poulos' belongings ($825); (3) constable service on Mr. Poulos of the notices associated with the removal of his belongings ($350); [Note 23] and (4) the cost of the Dennis Police Department security detail during the removal of Mr. Poulos' property ($215.60). [Note 24] The total of these amounts is $6,890.60.

The second category is the $12,832 that was paid from the escrow account to reimburse the renters from whom Mr. Poulos improperly took deposits. [Note 25] Mr. Poulos kept the entirety of those deposits (all $12,832) and never repaid any of it, so Wilmington is entitled to payment of one-half that amount from Mr. Poulos's share of the escrow ($6,416) to adjust the accounts between them. Thus, $6,416 shall be deducted from Mr. Poulos' share of the net proceeds and paid to Wilmington.

The third category is payment for expenses that were necessary for the care of the property and to prepare it for sale (a benefit to both parties), and thus will be split evenly between them: (1) smoke detectors ($152.40), [Note 26] (2) the cost of a surveyor to prepare a plan of the property ($956), [Note 27] (3) lawn maintenance during the period the house was shown to prospective buyers ($320), (4) winterizing the house (draining pipes to avoid damage from freezing) ($253.60), and (5) cleaning services to make it "broom clean" for sale ($682). Their total is $2,364. Because these expenses have already been paid from the escrow account for the benefit of both parties, no adjustments for them between the parties need be made. They simply reduce the amount that would otherwise have been distributed equally between them in accordance with their 50-50 co-tenancy interest.

These three categories of expenses total $22,086.60. In addition, in March 2020, $54.10 was paid from the escrow account to the Town of Dennis for taxes. Thus, there is $1,188,163.32 (plus accrued interest) left in the escrow account to be dispersed in accordance with the instructions set forth above and below.

Further Adjustments

There are also additional expenses to be paid or reimbursed -- the Commissioner's fees and expenses, a portion of Wilmington's legal fees, and other items that maintained the value of the property such as the payment of its insurance and real estate taxes -- that require further adjustments to Wilmington's and Mr. Poulos' shares of the proceeds. I turn to these next.

Reimbursement to Mr. Poulos for Payments Made That Benefited Both His Interest and Wilmington's Interest

Mr. Poulos seeks reimbursement for various payments associated with the property he alleges he made. As noted by both the Commissioner and Wilmington, none were corroborated by adequate documentation, with one exception. [Note 28] This was Mr. Poulos' payment for property insurance during the period he and Wilmington were co-tenants, and it is telling that the Commissioner himself had to contact the insurance agent to get the documentation. Those records reflect a total payment of $1,696.45 for that insurance. [Note 29] Mr. Poulos shall thus be reimbursed by Wilmington for half of that amount ($848.23, reflecting the benefit to Wilmington's 50% of the property), with that payment coming from the sale proceeds Wilmington would otherwise have received.

Mr. Poulos' claims for other reimbursements are denied for lack of proper documentation, for lack of credibility, [Note 30] and because they neither maintained nor increased the sale value of the property (a requirement under partition law, see G.L. c. 241, §23; Canepari, 78 Mass. App. Ct at 846; Stylianopoulos, 17 Mass. App. Ct. at 69-70).

Reimbursement to Wilmington for Tax and Mortgage Payments It Made That Benefited Both Its Interest and Mr. Poulos' Interest

Katheryne Poulos died in June 2009 and, either at that point or shortly thereafter, despite owning 50% of the property, Mr. Poulos stopped paying any portion of its property taxes. To avoid a tax lien foreclosure that would have wiped out both of their ownership interests, [Note 31] Wilmington's predecessor-in-title began paying the entire amount owed, year after year. These payments totaled $57,475.30. [Note 32] Wilmington is thus entitled to reimbursement from Mr. Poulos for his 50% share of this common benefit. See Stylianopoulos v. Stylianopoulos, 17 Mass. App. Ct. 64 (1983); Canepari v. Pascale, 78 Mass. App. Ct. 840 , 846 (2011); Batchelder v. Munroe, 335 Mass. 216 , 219 (1957) (successor in interest entitled to reimbursement for value added or payments made to preserve property by predecessor). That 50% amount ($28,737.65) shall thus be paid to Wilmington from the portion of the net proceeds Mr. Poulos would otherwise have received.

Similarly, Wilmington is entitled to reimbursement for Mr. Poulos' 50% share of the payments its predecessor (Katheryne) made to pay off the prior mortgages that covered the entirety of the property. Not to do so would unjustly enrich Mr. Poulos, since his 50% interest received 50% of the benefit. These payoffs (from the proceeds of the loan made to Katheryne on her 50% share) totaled $71,188.28. [Note 33] Mr. Poulos' 50% share of that total ($35,594.14 -- the benefit his 50% interest in the property received) shall thus be paid to Wilmington from the portion of the net proceeds Mr. Poulos otherwise would have received. See Stylianopoulos v. Stylianopoulos, 17 Mass. App. Ct. 64 , 69-70 (1983).

Reimbursement to Wilmington For 50% of Other "Common Benefit" Payments It Made, To Which Mr. Poulos Made No Contribution

Despite the explicit court order that he pay an equal share, [Note 34] Mr. Poulos paid nothing towards the expenses necessary to maintain the property during the time it was under the supervision of the Commissioner, and nothing towards the expenses necessary to prepare it for sale. All of these funds were advanced by Wilmington and were as follows: (1) $351 to change the locks on the house and for "no trespassing" signs, [Note 35] (2) $269 for septic tank clean-out, (3) $291.99 for water repair, (4) $885 for a Title V (waste system) inspection, and (5) $300.55 for homeowner's insurance, a total of $2097.54. Mr. Poulos' 50% share of these expenses is $1,048.77, which shall be deducted from his share of the net sale proceeds and paid to Wilmington.

The Allocation of the Commissioner's Fees

The Commissioner has submitted two invoices reflecting 305.20 hours of work by him and .7 hours by his law clerk. I have reviewed those entries in light of what I personally observed over the course of this case and have no doubt that every one of those hours is genuine. The inquiry does not stop there, however. I must also determine what a reasonable fee for those hours should be given the nature of the individual services, and then how to allocate that fee between the parties. See Howe, 73 Mass. App. Ct. at 13 (court "to determine how much time was reasonably spent on a case, and the fair value of the attorney's services") (internal citations and quotations omitted); G.L. c.241, §22 (court to determine "the reasonable expenses and charges of partition proceedings, including . . . the fees . . . of the commissioners"); Gifford, Mem. & Order Pursuant to Rule 1:28, 89 Mass. App. Ct. 1116 , 2016 WL 1295018 at *1 - *2 (allocation of fees may be based on conduct of parties).

The Commissioner bases his fee request on a straight-up multiplication of (1) a $350/hour rate (for him) x 305.20 hours ($106,820), and (2) a $40/hour rate (for his law clerk) x .7 hours ($28). He also seeks reimbursement of $417.78 in out-of-pocket expenses (mail charges, copy charges, and parking). I find and rule that those expenses were necessary and reasonable. I further find that the number of hours was not out-of-line with the needs of this case, particularly the level of inquiry and supervision needed due to Mr. Poulos' lack of cooperation (literally everything required a court order), Mr. Poulos' disregard of those orders, and the time necessary to unravel the rental agreements Mr. Poulos signed and took deposits on in violation of this court's orders. [Note 36] I disagree, however, that a $350/hour rate is reasonable given the numerous hours spent and the types of tasks the Commissioner performed. Those tasks ran the gamut from the highly analytical and important to the merely ministerial, with a not-insignificant percentage falling into the latter category. I do not fault the Commissioner for this -- he did what needed to be done, and the fact that much of it was ministerial was largely due to the micro-management made necessary by Mr. Poulos' conduct -- but it is not reasonable to charge it all at a $350 rate. Many of the tasks do not rise to that level.

It is impossible to separate out the categories and the precise time spent on each from the descriptions in the time entries (often aggregating different types of tasks into the same "hours") and, in any event, assigning different rates to different tasks is not in keeping with Massachusetts practice in fee-setting. See Connolly v. Harrelson, 33 F.Supp. 2d 92, 96 (D. Mass. 1999). Fortunately I have overseen this case from the beginning and, from the many court hearings and written submissions, have a well-informed knowledge of what was needed and what was done. In that context, based on that knowledge, I find that a "blended" rate of $250/hour is the appropriate one to span the tasks. It is, among other things, the rate charged to Wilmington by its counsel in this case [Note 37] and thus a fair measure of the market value of what was done. The Commissioner is thus awarded his out-of-pocket expenses ($417.78), $28 for his law clerk, and $76,300 for his own services ($250 x 305.20), for a total of $76,745.78.

The question now turns to the allocation of that expense between the parties. As noted above, when a party "needlessly pursues a course that causes the cost of the proceedings to escalate" it is appropriate to charge them with that cost, including that portion of the Commissioner's fees. Aiello, 63 Mass. App. Ct. at 915-916. See also Gifford, Mem. & Order Pursuant to Rule 1:28, 89 Mass. App. Ct. 1116 , 2016 WL 1295018 at *1 - *2 (citing Aiello).

The Commissioner calculated that 200 of his 305.2 hours were spent "needlessly," owing solely to Mr. Poulos' actions. I have reviewed the Commissioner's time entries in the light of my own knowledge of the case and Mr. Poulos' conduct, and arrive at a somewhat different number. The hours needlessly spent by the Commissioner, due solely to Mr. Poulos' wrongful or frivolous actions, fall into the following categories:

* the time spent extracting information from Mr. Poulos on the rental agreements he had entered into (requiring multiple court orders to get that information), requesting the transfer of the deposit money Mr. Poulos had received (which, despite court order that he do so, Mr. Poulos never turned over), requesting an accounting for all other rental income he had received during the time Wilmington had been his co-tenant (never, despite court order, completely provided), contacting those with whom Mr. Poulos had signed agreements, learning the details of those agreements, and then returning their deposits,

* the additional time spent, over and above what a normal case requires, on communicating with Mr. Poulos and his counsel, seeking their cooperation (either never given or only given in part, grudgingly) to get access to the property, deal with its problems, and prepare it for sale,

* the time spent arranging movers, storage, and a police detail for removal of Mr. Poulos' personal belongings from the property and obtaining court orders for such removal,

* the additional time spent, over and above what a normal case requires, reviewing Mr. Poulos' reimbursement claims and attempting to obtain adequate supporting documentation, never supplied,

* the time spent dealing with trespassers on the property who were there because they had been given "permission" by Mr. Poulos, despite the court's order that only the Commissioner had control of the property,

* the time spent responding to Mr. Poulos' frivolous motion to remove the Commissioner, and

* the time spent obtaining the removal of the Notice of Appeal Mr. Poulos recorded at the Registry in an attempt to block the sale -- a recording with no legal basis. See Order Directing Barnstable Registry of Deeds to Strike "Notice of Appeal" and its Associated "Affidavit of Gerson M. Gulko" (Dec. 6, 2018)

The Commissioner spent 86.25 hours on these, for a total of $21,562.50 ($250 x 86.25), all of which is chargeable to Mr. Poulos alone. [Note 38] The remainder of the Commissioner's charges ($55,183.28) shall be split evenly between the parties in accordance with their percentage ownership in the property, i.e. $27,591.64 each.

Wilmington's Motion for Attorneys' Fees

I turn last to Wilmington's motion for an award of attorneys' fees from Mr. Poulos. Such an award is appropriate under Aiello (party "needlessly pursu[ing] a course that causes the cost of the proceedings to escalate") and also, although I need not and do not reach it, under G.L. c.231, §6F as well. [Note 39]

The inquiry thus focusses on the actions taken by Mr. Poulos and his counsel, what justification (if any) existed for those actions, and, where there was no reasonable justification, what efforts, at what cost, were taken by Wilmington in reasonable response.

I begin with what has been clear from the start. Mr. Poulos had no intention to cooperate with the partition, took no steps to do so, and put up every roadblock he could think of, even when there was no factual or legal basis to do so. This included blatant untruths, and the reassertion, again and again, of frivolous arguments previously rejected by the court. [Note 40] Mr. Poulos never accepted that he was just a co-tenant, that the property was not his to use and control as he wished, and that his co-tenant, Wilmington, had an absolute right to have it partitioned whether he agreed to it or not.

I have reviewed Wilmington's affidavit of its attorney's fees, including every time entry. While there are many other entries that, without doubt, reflect work made necessary only because of Mr. Poulos' delaying tactics, there are three categories of tasks that I conclude, beyond legitimate question, were undertaken, and their costs incurred, in response to unjustifiable actions and frivolous motions by Mr. Poulos. These are:

* his motions to dismiss the partition, all of which were based on specious grounds (that Wilmington was not a valid co-tenant [false: its co-tenancy had long-since been decided, and was already res judicata from Poulos v. Financial Freedom]; that partition was not appropriate because the property was held "in trust" [false: only Mr. Poulos' interest was held by a trust, not Wilmington's co-tenancy interest]; and that partition was not appropriate because Wilmington had "agreed" to settle the case by selling its interest to Mr. Poulos [false: no such agreement had been made, see Mem. & Order on Defendant's Pending Motions at 2-7 (Aug. 13, 2018)]),

* his motion for an order stopping all sales efforts by the Commissioner pending the resolution of the motions to dismiss [a clear delaying tactic],

* his rental activities and retention of associated deposits [requiring time and effort by Wilmington to learn their details and then move to enjoin Mr. Poulos], and

* his groundless motion to remove the Commissioner for alleged "bias" and nullify all of the Commissioner's prior actions [see discussion in the Mem. & Order on Defendant's Pending Motions at 7-11 (Aug. 13, 2018)].

Based on my conservative review of Wilmington's attorney's fee affidavit, considering only those entries clearly related to those tasks, I find and rule that 70.8 hours were spent by Wilmington's lawyer on those tasks, that that time was more than reasonable, and that a $250/hour rate is fair, reasonable, and appropriate given the nature of the tasks and the experience and skill of Wilmington's attorney. Mr. Poulos shall thus reimburse Wilmington $17,700 for them (70.8 hours x. $250/hour), which shall be paid to Wilmington from the share of the sale proceeds Mr. Poulos would otherwise have received.

Conclusion

For the foregoing reasons, the Commissioner shall receive $76,745.78 from the net sale proceeds in full payment of his fees and expenses, Wilmington Savings shall receive $658,583.65, and Peter Poulos shall receive $452,833.89, with the accrued interest on the escrow split between Wilmington and Mr. Poulos in proportion to their respective distributions: 59% of all accrued interest to be paid to Wilmington [Note 41] and 41% to Mr. Poulos. [Note 42]

The beneficiary of the 48 Aunt Julia Ann's Road Trust, Mr. Poulos' daughter Marianne Poulos, has filed a motion to intervene and stay the distribution of any proceeds to her father pending the outcome of the appeal of her action against him in Barnstable Probate & Family Court. That motion is ALLOWED. The Commissioner and Wilmington shall receive their funds in full at this time, and the Commissioner shall continue holding Mr. Poulos' share pending the outcome of Marianne Poulos' appeal.

SO ORDERED.