IN RE: Real Estate of Billy Keith Hunsucker and William Morgan ( 2019 )

COURT OF CHANCERY
OF THE
STATE OF DELAWARE
PATRICIA W. GRIFFIN CHANCERY COURTHOUSE
MASTER IN CHANCERY 34 The Circle
GEORGETOWN, DELAWARE 19947
Final Report: May 3, 2019
Draft Report:
Date Submitted: April 17, 2019
David J. Bever, Esquire
Barros McNamara Malkiewicz & Taylor, PA
2 West Loockerman Street
PO Box 1298
Dover, DE 19903
William Morgan
179 New Castle Avenue
Felton, DE 19943
RE: In re: Real Estate of Billy Keith Hunsucker and William Morgan
C.A. No. 9566-MG
Dear Counsel and Mr. Morgan:
The last stage of a partition proceeding involves the distribution of proceeds
from the sale of the partitioned property. This dispute centers around whether the
co-tenants are entitled to contributions for payments each made towards repairs,
taxes, insurance, among other expenditures, and the allotment of the trustee’s fees
and costs. This is my final report.
In re: Real Estate of Billy Keith Hunsucker and William Morgan
C.A. No. 9566-MG
May 3, 2019
I. Background
This is a decree for distribution in a partition action filed by Billy Keith
Hunsucker (“Hunsucker”) against William Morgan (“Morgan”) on April 22, 2014
seeking to partition property (“Property”) at 36 Railroad Avenue, Camden-
Wyoming, Delaware. Hunsucker claimed he and Morgan owned the Property as
tenants in common pursuant to a deed executed on April 22, 2009 between Russell
Edward Morgan (“Decedent”) and Hunsucker and Morgan, who received equal
interests in the Property as tenants in common.
The Property includes a house and two apartments. The order for sale in
partition was granted on September 21, 2017, the partition sale held on November
10, 2017, and a motion filed to set aside the sale was filed on November 16, 2017.
Following a hearing on the motion, on November 21, 2017, I ordered the partition
sale set aside, a second partition sale conducted, and the costs associated with the
second partition sale paid out of Morgan’s share of the partition proceeds.1
Exceptions were filed, and, after briefing, the Court overruled the exceptions and
affirmed the Master’s November 21, 2017 Order on May 8, 2018.2 A second
1
Docket Item (“D.I.”) 63.
2
D.I. 71.
2
In re: Real Estate of Billy Keith Hunsucker and William Morgan
C.A. No. 9566-MG
May 3, 2019
partition sale was held on August 17, 2018, and the return of sale for the second
partition sale was approved by the Court on October 2, 2018.3
Morgan filed a motion on November 30, 2018 asking the Court to distribute
the sale proceeds equally to him and Hunsucker.4 Hunsucker’s December 20, 2018
answer to the motion seeks to reduce Morgan’s share of the proceeds to reflect the
value of Morgan’s occupancy of the house rent-free, the cost of the repairs,
improvements, taxes, water, sewer and other expenses that Hunsucker paid related
to the Property, and losses due to Morgan’s failure to make repairs to the house on
the Property.5 Morgan responded on January 22, 2019 that he is entitled to receive
one-half of the sale proceeds as tenant in common with Hunsucker, that
Hunsucker’s calculation of the Trustee’s fees and costs owed by Morgan is
incorrect, that Morgan made repairs to the Property, and that no rent is due because
Hunsucker could have used the house.6
The hearing on the distribution of proceeds was held on March 18, 2019, I
reserved my decision, and the record was held open until April 8, 2019 to allow for
the filing of supplemental evidence by the parties.
3
D.I. 77.
4
D.I. 82.
5
D.I. 85.
3
In re: Real Estate of Billy Keith Hunsucker and William Morgan
C.A. No. 9566-MG
May 3, 2019
II. Analysis
This is my decision regarding the distribution of the partition sale proceeds.
First, the proceeds remaining to be distributed following the second partition sale
of the Property are $97,107.15, after $9,367.15 in Trustee’s fees and costs are
subtracted from $106,474.30 in sale proceeds.
Next, Morgan and Hunsucker each own 50% of the property based upon the
deed dated April 22, 2009.7
Hunsucker and Morgan’s claims for offsetting profits received and liabilities
incurred related to the Property in the process of dividing the partition sale
proceeds, and the assessment of the Trustee’s fees and costs, are addressed in turn
6
D.I. 89.
7
With Morgan’s answer filed on June 6, 2014, he filed a counterclaim in which he sought
the imposition of a resulting or constructive trust on the Property because he alleged the
Decedent conveyed the Property in order to be eligible for Medicaid benefits if he needed
to enter a nursing home and intended that the Property be divided among his six heirs
upon his death. D.I. 5. Hunsucker argues the counterclaim was abandoned because there
was no mention of it by Morgan during the lengthy case proceedings and Morgan
confirmed, in his November 30, 2018 Motion, that he is entitled to one-half of the
balance of the proceeds as co-owner of the property. D.I. 82. Hunsucker also noted that
court orders for both the first and second partition sale concluded that Hunsucker and
Morgan “hold as tenants in common in fee simple all the lands and premises mentioned
and described in the [partition petition],” and no exceptions were filed related to that
holding. D.I. 57; D.I. 74. At the March 18, 2019 hearing, Morgan withdrew the
counterclaim, stating that he did not wish to pursue it. Trial Tr. 89: 17-23.
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In re: Real Estate of Billy Keith Hunsucker and William Morgan
C.A. No. 9566-MG
May 3, 2019
below. The party claiming contribution for repairs, improvements, taxes or other
costs has the burden of proof.8
1. Apartments’ Income and Expenses
The two one-bedroom apartments on the Property are rental properties and
have been rented, except for limited transitional periods between tenants,
continuously during the time period at issue in this case. Up until October of 2013,
Hunsucker and Morgan jointly managed the renting of the two apartments and
placed income into, and paid expenses out of, a joint bank account.9 After their
falling out, the arrangements worked out that Hunsucker managed rental
arrangements for Apartment #1 and Morgan managed the rental of Apartment #2.
Both apartments rented for approximately $600 per month, and Hunsucker and
Morgan each kept the rental income from, and generally paid repair expenses on,
the apartment they individually managed.10 Income and expenses related to the co-
tenants’ management of their respective apartment will not be considered as offsets
8
Cf. Estate of Weber v. Weber, 2014 WL 589714, at *6 (Del. Ch. Feb. 17, 2014).
9
There is an issue pertaining to the distribution of funds from the joint account in which
rental income for the two apartments was placed. There was testimony that $15,000 from
the Decedent’s estate was placed in that joint account and that, on September 17, 2013,
Morgan withdrew $15,000 from that account and distributed those funds among the heirs
to the Decedent’s estate, except him. Trial Tr. 40: 23 - 41: 18; 42: 6-8; see also Pl. Tr. Ex.
9. The joint account was closed on October 24, 2013. Pl. Tr. Ex. 10. Issues related to the
Decedent’s estate, including the distribution of estate funds, are not properly addressed
through this partition action.
10
Trial Tr. 18: 22 - 19: 4.
5
In re: Real Estate of Billy Keith Hunsucker and William Morgan
C.A. No. 9566-MG
May 3, 2019
to the partition sale proceeds, since the co-tenants’ arrangement was for each to
manage one apartment with equal rental potential and there was no evidence that
expenses incurred for the apartments were dissimilar.
2. Contribution for Payments on Taxes or Insurance for the Property
Hunsucker and Morgan both claim offsets for their respective payments of
taxes and insurance on the Property. Co-tenants share taxes and insurance costs
equally even if one cotenant has exclusive possession of property.11 After review
of the evidence, I calculate that Hunsucker paid $2,311.57, and Morgan paid
$8,759.57, in taxes and insurance on the Property.12 Hunsucker’s share of the sale
11
Estate of Weber, 2014 WL 589714, at *5 (“Delaware law requires cotenants to share
equally the taxes imposed on jointly-owned property and insurance costs associated with
the property, even when one cotenant has exclusive possession of the property.”)
(citations omitted); see also In the Matter of Real Estate of Turulski, 1993 WL 18767, at
*5 (Del. Ch. Jan. 21, 1993) (co-tenant is reimbursed for payments on taxes related to
partition sale proceeds distribution).
12
The parties each have the burden of providing sufficient proof of their claimed
contributions, including cancelled checks or receipts, to show that the expenses or
damages claimed are proven to a reasonable certainty and are not speculative or
conjectural. See generally H & H Brand Farms, Inc. v. Simpler, 1994 WL 374308, at *5
(Del. Ch. June 10, 1994). Here, the parties were allowed additional time to include
supplemental proof of expenses in the record. The evidence supports Hunsucker’s claim
for contribution for 2014 taxes paid on the Property, in the amount of $1,719.57, and
$592.00 for insurance on the Property paid in 2017 (based upon Hunsucker’s testimony).
Morgan’s evidence shows that he made monthly insurance payments on the Property
between February 24, 2014 and September 13, 2017 (except for November 2016 through
January 2017). Those payments totaled $4,962.45. Morgan also paid $3,797.12 in taxes
on the Property in 2015 and 2016.
6
In re: Real Estate of Billy Keith Hunsucker and William Morgan
C.A. No. 9566-MG
May 3, 2019
proceeds will be reduced by $3,224.00, or one-half of $6,448.00, which is the
difference between what he paid and what Morgan paid for taxes and insurance.
3. Morgan’s Possession and Control of the House
Hunsucker claims the value of sole and exclusive use of property by Morgan
was $43,200 and Morgan should be assessed one-half or $21,600. Morgan asserts
that no rent is due as Hunsucker could have occupied and used the property equally
with him but chose not to. A co-tenant living on property has no obligation to pay
rent unless the co-tenants agreed that rent would be paid.13 However, if a co-tenant
ousts another co-tenant, then rental value for the benefit received by the co-tenant
in exclusive possession may be set off against payments made by the co-tenant in
exclusive possession.14
Teresa Bell (“Bell”), the Decedent’s daughter, testified at the hearing
concerning occupancy of the house between 2013 and 2019.15 At the time of
Decedent’s death in June of 2013, Morgan and Russell Morgan, Jr., another of the
Decedent’s sons, lived in the house. Morgan moved out of the house in July of
13
Estate of Gedling, 2000 WL 567879, at *13; see generally Fuqua v. Fuqua, 750
S.W.2d 238, 246 (Tex. App. 1988) writ denied (Sept. 28, 1988).
14
Estate of Turulski, 1993 WL 18767, at *5 (denying claims for payments towards
maintenance and utilities on property where a co-tenant lived rent free); see generally
Jeffress v. Piatt, 370 S.W.2d 383, 386 (Mo. 1963); Goforth v. Ellis, 300 S.W.2d 379, 383
(Mo. 1957).
15
Trial Tr. 154: 13 - 159: 14.
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In re: Real Estate of Billy Keith Hunsucker and William Morgan
C.A. No. 9566-MG
May 3, 2019
2013, and Russell Morgan, Jr. moved out in April of 2014. In October of 2013,
after Morgan and Hunsucker had a falling out, Morgan changed the locks on the
house.16 Morgan refused to give Hunsucker a key to the Property until mid-January
of 2016, when Hunsucker had the broken boiler/heater in the house fixed to make
the house livable again.17 During this time period, Hunsucker communicated his
desire to jointly rent the house but Morgan refused to do so.18 Between April and
September of 2014, Bell testified that no one lived in the house. Morgan moved
back into the house for approximately one month and then the house was again left
vacant until Bell moved into the house in July of 2015, staying until January of
2016, with Morgan joining her at times. Bell moved out of the house in January of
2016. She testified that she moved back in August of 2016, remaining until
December of 2016. Bell’s testimony conflicted with Hunsucker’s, who testified
that the house was only vacant briefly during the time he was fixing the heater.
Morgan testified that he had resided in the house on and off between 2013 and
2016, but he was not clear as to the exact dates when he lived there. There was
evidence that throughout this time period, family members kept their belongings in
16
Trial Tr. 13: 11-18; 174: 10-19.
17
Trial Tr. 13: 23-24; 27: 9 - 28: 4.
18
Def. Tr. Ex. I (July 21, 2014 Letter from B. Hunsucker to W. Morgan) (“As I explained
to you that we have already lost tens of thousands of dollars in rent revenue, after I rode
all the way down to Dagsboro, you refused to rent the property and I still do not have the
keys, saying there are only two rentals on the property, not three.”).
8
In re: Real Estate of Billy Keith Hunsucker and William Morgan
C.A. No. 9566-MG
May 3, 2019
the house (except there was no evidence that Hunsucker did so), and others outside
of the family may have lived in the house with Morgan’s permission.19
I find Morgan had exclusive possession of the house, benefitting from the
use of the house, between October of 2013, when he changed the locks on the
house ousting Hunsucker, and mid-January of 2016, when Hunsucker was
provided a key to the house and accessed the house to fix a broken heater. 20 He
resided in the house intermittently during that time and, even when he was not
living in the house, he controlled the occupancy of the house. Given the on-going
partition action (which commenced in 2014), the dispute between Hunsucker and
Morgan, and Morgan’s actions with regard to possession of the house, I find
Morgan ousted Hunsucker from the house between October of 2013 and mid-
January of 2016.
The difficulty is how to determine the rental value to be attributed to Morgan
during the time he had exclusive possession of the house. If Morgan had not
occupied that house, it could have been rented and the co-tenants would have
shared the income and expenses equally. Hunsucker testified that he had “looked
19
Def. Tr. Ex. H (Sept. 1, 2016 Letter from B. Hunsucker to W. Morgan) (“[a]t first you
said the house was not a rental, but now you have tenants in there”).
20
The receipt for the heater repair is dated January 20, 2016. Pl. Tr. Ex. 5. I include one-
half of January of 2016 in the time period during which Morgan exclusively possessed
the house.
9
In re: Real Estate of Billy Keith Hunsucker and William Morgan
C.A. No. 9566-MG
May 3, 2019
up” the “fair rental price” for a four-bedroom house in the area, which could rent
for $2,000 to $2,500 per month, although he stated that, based upon the house’s
condition, it could rent for $1,000 or $1,400 per month.21 This is the only evidence
about rental value that was provided by either party.22 Although it would have
been preferable to have more evidence concerning comparable rental values in the
area during the relevant time period, I find it reasonable, under the circumstances,
to use the lay testimony provided as the basis for rental value in this case. 23 I rely
on the lowest estimate provided, or $1,000 per month, which adds up to $26,500
for the 26 and one-half months between November of 2013 and mid-January of
2016. The proportionate rental value attributable to Morgan for this period is one-
half of the total rental value, or $13,250, and Morgan’s share of the sale proceeds
will be reduced by $13,250.
4. Repairs or improvements to the Property
In the absence of agreement or consent by the other co-tenant, a co-tenant in
sole possession is not entitled to contribution from other co-tenant for repairs to
21
Trial Tr. 52: 8-16.
22
I confirmed at the end of the hearing that the issue of rental value of the house
remained open for submission of supplemental evidence. Trial Tr. 186: 16-23.
23
Cf. State ex rel. Smith v. 0.15 Acres of Land, 164 A.2d 591, 593 (Del. Super. 1960),
aff’d, 169 A.2d 256 (1961) (“[i]n an ordinary case, the owner of a leasehold should be
permitted to testify as to the value of his leasehold”).
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In re: Real Estate of Billy Keith Hunsucker and William Morgan
C.A. No. 9566-MG
May 3, 2019
property.24 With respect to improvements to the property, a court may, as a matter
of equity, compensate a co-tenant proportionally out of sale proceeds in a partition
for improvements made by one co-tenant if “those improvements have enhanced
the value of the property.”25 To be entitled to contribution from sale proceeds, a
co-tenant must show that the other co-tenant agreed to the repairs or that
improvements enhanced the property’s value. Hunsucker and Morgan submitted
claims seeking contribution for repairs each of them made related to the house or
the Property.26 However, the only claims that meet the criteria required to obtain
contribution for repairs on property in a partition are Hunsucker’s $1,500 expense
to repair the heater in the house on January 20, 2016, and the $184.89 Hunsucker
paid for supplies to fix the house’s porch in order to sell it. 27 Other requests for
contribution, including requests for tree removal, pest control service costs, electric
or plumbing work, or other expenses, are denied, either because there is no
evidence that the parties agreed to the repairs or there is not sufficient
24
Estate of Weber v. Weber, 2014 WL 589714, at *5 (Del. Ch. Feb. 17, 2014).
25
Id.
26
I deny Hunsucker’s claim for loss associated with Morgan’s failure to maintain the
Property, since he has not met his burden of showing a basis, or a reliable measure, for
such a claim.
27
Hunsucker also submitted claims for labor costs on a spreadsheet that detailed his total
costs associated with the Property. I do not find that the labor costs and other expenses
provided by Hunsucker are sufficiently detailed or reliable to be entitled to contribution
from sale proceeds.
11
In re: Real Estate of Billy Keith Hunsucker and William Morgan
C.A. No. 9566-MG
May 3, 2019
documentation showing payment for the repairs, such as cancelled checks or credit
card receipts. Hunsucker is entitled to contribution for the $1,684.89 he paid in
documented repairs to the Property, and Morgan’s share of the sale proceeds will
be reduced by $842.45, or one-half of $1,684.89.
5. Other claimed contributions
Both Hunsucker and Morgan submitted water and sewer expenditures for the
Property. Morgan’s claims for water and sewer expenditures for the house are
denied since he had exclusive possession of the house and he, or those he allowed
to stay at the house, benefitted from those expenditures.
Water and sewer bills for both apartments on the Property are combined, and
reliable evidence, including cancelled checks or stamped receipts on the bills, was
submitted showing that Morgan paid $1,944.90, and Hunsucker paid $1,088.11,
towards those costs during the relevant time period.28 Hunsucker’s share of the
28
Morgan’s payments on water and sewer for the apartments, which were evidenced by
invoices and cancelled checks included payments made on April 11, 2014 ($77.88), May
29, 2014 ($461.76), July 29, 2014 ($126.54), October 14, 2014 ($193.88), January 19,
2015 ($222.74), April 12, 2015 ($213.12), July 5, 2015 ($222.74), October 19, 2015
($203.50), and January 7, 2016 ($222.74). Hunsucker’s payments were evidenced by
invoices stamped that payments were “received” on July 15, 2016 ($165.02), May 1,
2017 ($221.80), July 24, 2017 ($215.17), October 27, 2017 ($201.88), January 29, 2018
($162.04), and July 5, 2018 ($122.20). Invoices which had a handwritten notation of
“paid” and check number, without copies of relevant cancelled checks, were not deemed
sufficiently reliable to be included.
12
In re: Real Estate of Billy Keith Hunsucker and William Morgan
C.A. No. 9566-MG
May 3, 2019
sale proceeds will be reduced by $428.40, or one-half of the $856.79 difference in
payments made by Morgan and Hunsucker.
Morgan claims an offset for his documented $500.00 for rental permits for
the Property for 2013 through 2016.29 I consider these claims in the context that
they benefitted both parties equally since they each rented one of the apartments.
Hunsucker’s share of the sale proceeds will be reduced by one-half of $500.00, or
$250.00.
6. Trustee fees and costs
The Master’s November 21, 2017 Order provided that “Trustee’s costs
associated with the second partition sale should be paid out of [Morgan’s] share of
partition proceeds.”30 The Trustee incurred $8,163.00 in fees and $1,204.15 in
costs, or $9,367.15 total, for the partition proceedings in this case.31 Hunsucker
claims Morgan should be assessed $4,852.75 individually for expenses associated
with the second partition sale. Morgan argues that he should not be assessed for
fees incurred related to Hunsucker’s exceptions to the November 21, 2017 Court
29
The evidence showed a rental permit for the Property from the Town of Wyoming cost
$125.00 per year.
30
D.I. 63.
31
D.I. 78.
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In re: Real Estate of Billy Keith Hunsucker and William Morgan
C.A. No. 9566-MG
May 3, 2019
Order, and any fees incurred after the August 17, 2017 sale should be divided
equally.
Hunsucker filed exceptions to the Master’s November 21, 2017 Order,
which were denied by the Court, and the November 21, 2017 Order was approved
by the Court, on May 8, 2018. Following that approval, the Trustee commenced
actions to conduct the second partition sale, filing a proposed order for the second
sale on June 28, 2018 and an amended proposed order on July 11, 2018.
Consistent with the provision in the November 21, 2017 Order, Morgan is solely
responsible for the Trustee’s fees and costs associated with the second partition
sale, including $3,917.00 in fees for work performed by the Trustee between May
9, 2018 and October 4, 2018, and $828.75 in costs incurred between June 30, 2018
and October 15, 2018, for a total of $4,745.75.32 Trustee fees associated with
Hunsucker’s exceptions to the November 21, 2017 Order, in the amount of
$214.00, and costs of $10.50, for a total of $224.50, are attributed to Hunsucker.33
32
Trustee’s fees and costs associated with the second partition sale include fees for work
performed by the Trustee starting on May 9, 2018 “[setting] up conference call regarding
second sale,” and ending with Trustee’s October 4, 2018 email with buyer’s counsel
regarding the sending of funds, and include costs from June 30, 2018 through October 15,
2018, such as the costs to advertise the partition sale in Delaware State
News/Independent News Media, Inc. USA, on August 1 and 9, 2019. D.I. 78; see also
D.I. 75, Ex. B.
33
Trustee fees attributed to Hunsucker were incurred between December 14, 2017 and
May 8, 2018, and costs were incurred on January 8, 2018.
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In re: Real Estate of Billy Keith Hunsucker and William Morgan
C.A. No. 9566-MG
May 3, 2019
The remaining fees ($4,032.00) and costs ($364.90) are divided equally between
Morgan and Hunsucker.34 Morgan’s share of the Trustee’s fees and costs is
$6,944.20, and Hunsucker’s share is $2,422.95.
III. Conclusion
For the reasons set forth above, I recommend the Court find that Hunsucker
is entitled to receive $61,004.25, and Morgan is entitled to receive $36,102.90,
from the sale proceeds of the Property. An explanation supporting these
calculations is attached to this report. This is a final report and exceptions may be
taken pursuant to Court of Chancery Rule 144.
Respectfully,
/s/ Patricia W. Griffin
Patricia W. Griffin
Master in Chancery
34
Subtracting Trustee fees attributed to Morgan ($3,917.00) and fees attributed to
Hunsucker ($214.00) from the total fees due ($8,163.00) leaves $4,032.00 or $2,016.00
each. For Trustee costs, the costs attributed to Morgan ($828.75) and Hunsucker
($10.50) are subtracted from the total costs of $1,204.15, leaving $364.90 in costs to be
shared equally, or $182.45 each.
15