August 27, 2010
KAREN TROHALIDES, PLAINTIFF-RESPONDENT/ CROSS-APPELLANT,
PETER MACHAT, DEFENDANT-APPELLANT/CROSS-RESPONDENT.
On appeal from Superior Court of New Jersey, Chancery Division, Middlesex County, Docket No. C-41-08.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Submitted August 17, 2010
Before Judges Lihotz and Baxter.
In this partition action, defendant Peter Machat appeals from a Chancery Division judgment that, among other things, ordered he transfer all right, title and interest in one residence to plaintiff Karen Trohalides and granted plaintiff an equitable interest in a second residence titled solely to him. Defendant argues the trial court erred by applying equitable distribution rather than partition principles when fixing the parties' respective interests in the realty. Plaintiff cross-appeals, challenging another provision of the judgment retroactively offsetting her awarded interest in the realty titled to defendant by her share of unpaid carrying charges. We affirm.
Plaintiff and defendant met in 1999, when they became line-dancing partners. Shortly thereafter, they fell in love and began "a very romantic, intimate relationship[.]" The parties decided to live together. As defendant was a home improvement contractor, the two agreed to look for a single family "handyman special." They located a home on Clayton Avenue, Monroe Township (Clayton property), which fit their needs.
The contract price of the Clayton property was $150,000. At the November 27, 2000 closing, plaintiff took sole title (1) using a $10,000 down payment provided by defendant, half of which plaintiff maintained was a birthday gift and the other half she labeled a loan, (2) executing a $130,100 loan secured by a purchase money mortgage, and (3) contributing her separate funds to complete the purchase. Plaintiff stated the mortgage was in her name "because it was [her] home" and, because she was a first-time home buyer, she qualified for a better mortgage interest rate. Defendant concurs with the latter statement and asserts plaintiff had a better credit rating than he. Also, defendant maintains plaintiff did not want to jeopardize her alimony payments, which could cease if the parties owned the home together.
At closing, the parties executed an agreement obligating them to equally contribute to the ongoing carrying charges of the Clayton property and stating that "[u]pon the sale of the aforementioned property, the net proceeds shall be divided equally between the parties." Defendant immediately moved into the Clayton property and began extensive renovations and repairs. He testified the parties had agreed plaintiff would pay for the renovation materials and complete the repairs, then plaintiff would compensate him for his labor. Plaintiff moved into the residence approximately two months later.
In July 2003, the parties' relationship became strained. Following a dispute and brief separation, the parties signed a "Reconciliation Agreement" (reconciliation agreement) dated July 10, 2003, which stated:
After a 48 hour separation [the parties] have agreed to reconcile and resume living at [the Clayton property]. We have both jointly financially paid and maintained the above residence equally together to date. This agreement is written to confirm an initial agreement on the day of the purchase of this house. We agree within 90 days we will define the original purchase agreement with an attorney.
During separation, defendant testified the parties "talked about [him] being compensated [for the labor] from the equity of the house, the equity that [he] built into [Clayton]." He asserts the final clause in the reconciliation agreement addressed the parties' intent "to add that [compensation] language to the original purchase agreement." Additionally, he claims the anticipated agreement "was supposed to include that [he] was half owner of the house even though [he] wasn't on the deed."*fn1
Defendant learned plaintiff had made withdrawals, using a home-equity line of credit secured by the Clayton property, to pay her son's college costs and to purchase an automobile. When confronted, plaintiff agreed to make an equivalent withdrawal of funds, which she gave to defendant.
In March 2005, plaintiff refinanced the Clayton property. She also transferred title to herself and defendant as tenants in common. As part of the refinance, the parties withdrew an additional $54,942.29 from the equity of the Clayton property. Plaintiff endorsed the check to defendant, who deposited the funds into his personal checking account.
Plaintiff contends this money was designated for defendant's newly formed business to purchase realty, renovate the structure, "then re-sell the home for a profit." She testified she endorsed the check so the funds "would be readily available to  [d]efendant when a house was located, ensuring he could act quickly to purchase it." On the other hand, defendant asserts "[h]e understood that the payment was compensation for his [past] services" and he suggests plaintiff's endorsement of the funds shows her intent to compensate him. Defendant soon moved the funds to an interest-bearing account.
Over two years later, defendant purchased a residence on Harrison Avenue, Monroe Township (the Harrison property) for $275,000. Title was acquired in defendant's name. He received $23,000 in credits from the seller, executed a $200,000 purchase-money mortgage, and paid $58,720.82 in cash to cover the balance.
Defendant asserted the funds used for the purchase were his. Plaintiff suggested the sum represented the equity withdrawal from the Clayton property along with accumulated interest. Plaintiff maintained "[b]efore the purchase of [the Harrison property, [d]efendant sat down with [her] and was laying out the . . . improvements that needed to be done  in which he was to do the labor and [she] was to supply the materials[;]" an arrangement that was "identical to what they had done on [Clayton]." Plaintiff presented three witnesses, Prashant Patel, Christine Sigle, and her mother Rose Cammarata, who related defendant's conversations regarding "the investment" in the Harrison property, calling it "a joint venture."
Defendant testified "[h]e notified [p]laintiff that he was going to buy the house himself . . . [and] both parties were aware that [he] had no interest in undertaking another joint investment project with [p]laintiff." He offered the testimony of Margaret McLaren to support his position that the funds were payment for his labor.
By January 2008, the parties' personal relationship dramatically deteriorated and plaintiff requested entry of a temporary domestic violence restraining order. She later filed this complaint seeking partition of both the Clayton and Harrison properties. The domestic violence action, including the temporary restraints, was dismissed.*fn2 The parties agreed plaintiff would retain possession of the Clayton property and defendant would pay his share of the mortgage obligation of $801 per month. Pending trial, orders were entered on July 14 and October 20, 2008, directing defendant to make the monthly payments, yet he "never made even one payment, ignoring each order."
The trial judge determined "there's really no dispute that Clayton is owned by the two jointly," and narrowed the issue to whether plaintiff held an equitable interest in the Harrison property. Following a four-day bench trial, the court answered the question affirmatively, concluding that, although "titled only in [defendant's] name, it is not his but theirs."
Assessing the trial evidence, including the credibility of the parties and their respective witnesses, the judge determined there was no support for defendant's assertion he was to be paid for his labor in repairing the Clayton property, explaining he question[ed] the fact that there was any expectation from the very beginning that [defendant] is being repaid . . . . These people were to live there virtually as a married couple. And marriages, though this was not[,] -- [are] not a balance sheet. One partner does this, one partner does that. But the bottom line . . . was that from the beginning, there was never an expectation or a contemplation that [plaintiff] might be in debt to [defendant] later down the road.
Further, the court identified contradictions in defendant's testimony, including when such an agreement was struck and the fair value of his labor efforts. Finally, neither the parties' written agreements nor their oral understandings expressed any provision for such a payment.*fn3
Accordingly, the court concluded the $54,942.29 equity withdrawal from the Clayton property was not payment for services as defendant claimed; rather, it was for investment in the Harrison property as a "joint venture" similar to the arrangement for the Clayton property. The judge ordered plaintiff retain the Clayton property and defendant retain the Harrison property subject to determined payments and credits.
Our review of a trial court's factual findings "are considered binding on appeal when supported by adequate, substantial and credible evidence." Rova Farms Resort v. Investors Ins. Co. of Am., 65 N.J. 474, 484 (1974). "Deference to a trial court's fact-findings is especially appropriate when the evidence is largely testimonial and involves questions of credibility." In re Return of Weapons to J.W.D., 149 N.J. 108, 117 (1997). Thus, we disturb such findings only when they "would work an injustice." Ibid. However, "[a] trial court's interpretation of the law and the legal consequences that flow from established facts are not entitled to any special deference." Manalapan Realty, L.P. v. Twp. Comm. of Manalapan, 140 N.J. 366, 378 (1995).
On appeal, defendant contends the Harrison property is not subject to partition because, contrary to the trial court's determination, no joint venture existed regarding the property and "the trial court erred by holding that division of property in the partition matter should be based upon equitable distribution principles." Defendant points to a portion of the trial court's oral opinion equating equitable relief in a divorce action proceeding in the Family Part to the claims presented in this partition matter. The trial judge stated:
Hypothesize the following. Let's assume this couple was married. Would it be an equitable result for this couple, and they were a couple, for [defendant] to leave this union with [Harrison, which has] equity of 102[,000] and for [plaintiff] to leave this union with half of [Clayton?] Meaning he would be getting approximately 75 percent of the properties?
This Harrison's equity is 102[,000]. Clayton is 117[,000]. If they were married, that wouldn't be the result. At least I don't think it would be the result.
So why should it be different because a court of general equity, considering a partition action, as opposed to a Family Part considering equitable distribution action, it shouldn't be different. Especially since this couple lived together, virtually as husband and wife, for years. They loved each other.
[B]ut for Clayton, Harrison would not have been purchased. Clayton was hers, unquestionably, titled in her name. The $54,000 [plaintiff] took out of that property, which she didn't have to do, and then they put it in a bank account to accrue interest for two plus years, that funded Harrison.
In my mind, it would be unfair to say to [plaintiff], well, you participated and you acted in concert to fund Harrison, but now you get nothing. That seems to me to be inequitable.
Defendant correctly recites that the remedy of equitable distribution provides a judicial division of marital property relative to the contributions of each spouse during the marriage, and is available only upon entry of a judgment of divorce. N.J.S.A. 2A:34-23.1; see also Mendell v. Mendell, 162 N.J. Super. 469, 476 (App. Div. 1978).
Equitable distribution is inapplicable in this matter involving unmarried parties, despite the extent of their cohabitation. Nevertheless, we reject defendant's suggestion of error as we view the court's mention of equitable distribution as merely a gratuitous analogy, not the foundation of its conclusion that both the Clayton and Harrison properties were assets of the parties' joint venture.
"[J]oint venturers . . . are entitled to seek a partition of their property when their joint enterprise comes to an end, irrespective of how title is formally held." Mitchell v. Oksienik, 380 N.J. Super. 119, 127 (App. Div. 2005) (internal citations omitted); see also Swartz v. Becker, 246 N.J. Super. 406, 412 (App. Div. 1991) (stating "[p]artition sales may be ordered if it is found that the property is so situated that it is not suitable for division"). "[F]ormal written agreements are not necessary for a joint enterprise to exist." Mitchell, supra, 380 N.J. Super. at 129.
The equitable remedy of partition provides for equal division of joint property, including assets held by tenants in common. Aronow v. Silver, 223 N.J. Super. 344, 352-53 (Ch. Div. 1987). "Partition is subject to the rule of owelty, which ensures that 'one cotenant receiv[ing] property with a value greater than his proportionate share,  will owe to the other cotenant an amount of money which would equalize the partition.'" Id. at 353 (quoting Leonard v. Leonard, 124 N.J. Super. 439, 442-43 (App. Div. 1973)).
A court has broad discretion in shaping partition relief:
It is an established principle that a court of equity, in decreeing partition, does not act ministerially and in obedience to the call of those who have a right to the partition, but founds itself on its general jurisdiction as a court of equity, and administers its relief . . . according to its own notions of general justice and equity between the parties. [Newman v. Chase, 70 N.J. 254, 263 (1976) (quoting Woolston v. Pullen, 88 N.J. Eq. 35, 40 (Ch. 1917)).]
In Mitchell, supra, long-time unmarried cohabitants used a joint bank account to fund the purchase of land and the construction of a home, but legal title was solely held by the defendant. 380 N.J. Super. at 123-24. Nonetheless, the court granted the plaintiff an equitable interest in the property. Id. at 125. Interestingly, the defendant in that matter also appealed the trial court's determination on the ground that the trial judge applied equitable distribution, rather than the appropriate partition principles, when ordering division. Id. at 126-27. On appeal, we upheld the trial court's order, concluding:
Our review of the trial court's oral opinion discloses that the court did not apply equitable distribution principles to the case at bar. Rather, the court made factual findings and, within its general equity powers, determined, based upon the facts establishing a joint enterprise, that the parties had equal interests in the real property.
Because the parties' relationship had dissolved, the Family Part of the Chancery Division, in response to a request for relief from either or both parties, justifiably applied its authority to order an equitable remedy, including a division of the assets of the joint enterprise, i.e., the net balance after satisfaction of existing debts and costs. [Id. at 129-130.]
The result at hand is much like that in Mitchell. The Chancery judge properly reviewed all documentary evidence, weighed the credibility of the parties and their respective witnesses, and considered the parties' course of conduct. In doing so, the court considered the fact that defendant held exclusive title to the Harrison property, but correctly noted that fact was not determinative of the issue. The court also considered the parties' overall relationship as evidence of their intention when the realty was purchased. Their finances were distinct, yet monies garnered from the separately titled asset of plaintiff (Clayton) were transferred to secure separately titled assets of defendant (Harrison). Further, the court credited the testimony of the independent witnesses, Patel and Sigle, who both related defendant's comments regarding the Harrison joint venture.
We conclude the court's finding that the Harrison property was a joint venture is amply supported by substantial, credible evidence in the record. The court's finding that Harrison, like Clayton, was intended as a joint venture, and its rejection of defendant's assertion of payment for his labor, will not be disturbed.
Defendant also challenges the calculations of the parties' respective interests in the realty, suggesting the methodology employed provides plaintiff a windfall. Additionally, he objects to the remedy of granting a lien on the Clayton property rather than ordering it sold to satisfy his obligation. We are not persuaded.
Defendant's argument that plaintiff received a greater share than was appropriate is premised on his assertion that the Harrison property was his alone and not an asset of the parties' joint venture. As we have rejected the premise underlying this argument, the defendant's conclusion lacks merit.
Finally, the trial court declined defendant's urging to order the sale of the Clayton property, stating:
As I think was suggested to me, I can't order partition in kind, which sounds like the appropriate thing to do, because what purpose would there be in ordering both properties sold and disturbing the people from the residences, especially [plaintiff], who lives [in the Clayton property] with her mother.
Instead, the court offset the parties' respective interests in the two properties and granted defendant a lien on the Clayton property, requiring plaintiff to indemnify him on the outstanding mortgage obligation. As noted, the method of partition is left to the trial court's discretion in order to reach the most equitable allocation. See Newman, supra, 70 N.J. at 263. We do not conclude, as defendant suggests, that this result was "oppressive" or that the trial court abused its discretion in fashioning provisions to preserve and protect defendant's interest in lieu of ordering a sale.
Turning to plaintiff's cross-claim, she argues the trial court erred in crediting defendant for half of the principal, interest, taxes, and insurance expended on the Harrison property from the date of the February 25, 2008 consent order. The order found plaintiff's financial interest in the joint venture must be tempered by the costs to sustain the property pending the litigation. Plaintiff's contention, which claims the benefits but seeks to avoid the burdens of co-ownership, lacks sufficient merit to warrant further discussion in a written opinion. R. 2:11-3(e)(1)(E).