Green v. Shockley

Melvin Green v. Gary Shockley

C. A. No. 2018-0782-PWG

Court of Chancery of Delaware

January 31, 2022

Date Submitted: September 3, 2021

Draft Report: December 8, 2021

Richard E. Berl, Jr., Esquire Hudson, Jones, Jaywork &amp Fisher, LLC

Dear Mr. Berl and Mr. Shockley:

The last stage of a partition proceeding involves the distribution of proceeds from the sale of the partitioned property. This dispute centers around co-owners who were tenants in common, each holding a one-half interest in two pieces of real property devised to them by one of the co-owners' mother. One property was the mother's home, and the other was rental property containing six rental units. This decision resolves the issues concerning the distribution of sale proceeds from the partitioned property, balancing contributions for payments made toward the cost of the properties against rental income received by the co-owners. This is a final report.

I. Background^[1]

This partition action involves two properties, 32790 Bi-State Boulevard, Laurel, Delaware (the "House Property") and 32715 Bi-State Boulevard, Laurel, Delaware (the "Apartments Property") (collectively, the "Properties"), co-owned in equal shares by Petitioner Melvin Green ("Green") and Respondent Gary Shockley ("Shockley").^[2] They inherited the Properties as tenants in common on February 24, 2016, at the death of Margaret R. Taylor ("Decedent") Shockley's mother.^[3]

The House Property was Decedent's residence, and it was subject to a mortgage held by Nationstar Mortgage LLC ("Nationstar").^[4] Green lived in the House Property with Decedent and continued to reside there after Decedent's death.^[5] The Apartments Property had five apartments (Apartments A - E) on the premises and a trailer, which were rented out.^[6] Green, who collected most of the rental income for the Apartments Property, testified that rent collection was not always consistent.^[7]Shockley's brother and agent, Richard Shockley ("Richard"), collected some rental income for the trailer.^[8]

Green filed this partition action on October 29, 2018.^[9] An initial hearing was held on January 7, 2019 and the matter was stayed for the parties to consider whether to pursue a partition in kind or a private sale.^[10] On February 28, 2018, I wrote the parties asking them to submit supplemental evidence regarding whether partition in kind with owelty would be appropriate in this case.^[11] Also on February 28, 2019, Shockley filed a response to the petition for partition ("Petition").^[12] On April 1, 2018, I advised the parties that partition in kind with owelty was not appropriate in this case.^[13] On April 24, 2019, I ordered a partition sale and appointed a trustee (the "Trustee") for purposes of completing that sale.^[14] On April 29, 2019, Shockley filed a motion for a writ of injunction seeking to have rental monies held in escrow until the partition sale process was completed, which was denied on June 26, 2019.^[15]

On October 11, 2019, the Properties were sold at public action.^[16] The House Property, which was subject to a paramount mortgage lien, sold for $10, 000.00.^[17]The Apartments Property sold for $132, 000.00 and proceeded to settlement on November 6, 2019.^[18] The Trustee made his return of sale on November 8, 2019 to confirm the sale of the Apartments Property.^[19] I approved the Trustee's sale of the Apartments Property on November 26, 2019.^[20] The sale of the House Property was not completed by the buyer and the Trustee advised that another partition sale would be futile since Nationstar was foreclosing on the House Property's mortgage.^[21]

Shockley submitted his proposed decree of distribution on October 24, 2019 and again on December 20, 2019.^[22] Green filed his proposed decree of distribution on February 24, 2020.^[23] The decree for distribution hearing was delayed due to the COVID-19 pandemic.^[24] An evidentiary hearing on the decree for distribution was held on September 1, 2021.^[25] The Trustee currently holds $121, 781.58 in escrow from the sale of the Properties.^[26] I reserved my decision following the evidentiary hearing and issued my draft report on December 8, 2021.^[27] Green took exceptions to my draft report, ^[28] which have been fully briefed.^[29] I reviewed the exceptions and believe that they, for the most part, repeat arguments that were adequately addressed in the draft report. Where appropriate, I have addressed the exceptions in this report and made other minor changes. This is my final report.

II. Analysis

A. Ownership Interests of the Parties

Green seeks a distribution of 60% of the sale proceeds for himself and 40% for Shockley, arguing that he "was completely responsible for oversight, repair, and maintenance of the properties."^[30] Shockley asks for contributions for his share of the rental income retained by Green, as well as rent representing Green's exclusive use of the House Property.^[31]

The Last Will and Testament of Margaret R. Taylor (the "Will") devised the Properties to Green and Shockley as tenants in common, giving each a one-half ownership interest in the Properties.^[32] "Tenants in common of the legal title to land are ordinarily entitled to the use, benefit and possession of such land."^[33] In addition to those rights, the tenant in common takes on certain duties with respect to the property in which they have an undivided interest. While Green argues that an uneven distribution scheme is equitable because of the services he provided to the Properties, I find no evidence to rebut the principle that equity compels an equal division based upon each co-tenant's ownership interest. Therefore, I will split the proceeds on an equal basis between the parties, subject to specific contributions and offsets.

B. Claim for Rental Value Benefit Against Green for the House Property

Shockley seeks an offset for the fair rental value of the House Property during the period in which he alleges Green had exclusive possession of the House Property.^[34] "[E]ach co-tenant is entitled to the possession of the property, [and] the mere fact that one is in possession and the other is not 'does not presumptively show an ouster.'"^[35] "A cotenant is generally entitled to make personal use of the property held in common and is not accountable for such use in the absence of ouster."^[36] And, a co-owner residing in the jointly owned property has no obligation to pay rent unless the co-owners agreed that rent would be paid.^[37] "However, if a co-tenant has exclusive possession of the property and ousts other co-tenants, then the rental value (representing the benefit received by the co-tenant having exclusive possession) may be set off against their share of the sale proceeds."^[38]

In this case, there is no evidence that Green agreed to pay rent. And, there is not sufficient evidence that Green had exclusive possession of the House Property or that he ousted Shockley. Although Shockley did not access the House Property, Richard, his agent, had access to the House Property.^[39] And, there is no evidence that Richard was ever excluded from accessing the House Property by Green. Indeed, the evidence suggests that Shockley believed he had the ability to control the House Property - he sent Green a letter on or about June of 2018 stating that Richard will move into the House Property when Green left.^[40] Green testified that, after he moved to Virginia, he did not seek tenants for the House Property because Shockley told him Richard was moving in.^[41] Thus, Shockley has not shown exclusive possession by Green and I decline to offset the fair rental value of the House Property against Green for the period in which he resided in the House Property.^[42]

C. Rental Income from the Apartments Property

Shockley requests that the distribution reflect an accounting for the rental income that Green received from the Apartments Property.^[43] A cotenant "is entitled to an accounting from her cotenants for rents which [another cotenant] has received from third parties for the use of the lot owned in common."^[44] At trial, Green showed that he collected $47, 215.50 in rent on the Apartments Property between November of 2017 and November of 2019.^[45] In addition, the evidence shows that Shockley's agent, Richard, collected $5, 200.00 in rent for the Apartments Property.^[46]

Green and Shockley disagree on the period during which the rental income should be accounted for. Shockley argues that the rental income accrues to both co-tenants beginning at Decedent's death in February of 2016.^[47] Green asserts that Decedent's estate (the "Estate") managed the Apartments Property prior to its closing and that by failing to object to the Estate accountings, Shockley cannot now seek an accounting of those transactions.^[48]

I consider the rental income for the Apartments Property beginning from Decedent's death in February of 2016. Delaware law is well settled that beneficiaries take real property interests under a will "immediately upon the death of the testator subject to be divested if it be necessary to sell it for the payment of debts of the deceased."^[49] Thus, Green and Shockley became tenants in common with respect to the Properties immediately upon Decedent's death. The rental income from the Apartments Property accrued not to the Estate but to Green and Shockley as tenants in common.

Green testified that the attorney for the Estate handled the rental income and payment of expenses for the Apartments Property during the estate administration.^[50]Despite that claim however, the Estate's First and Final Account filed with the Register of Wills shows no income or expenses of the Estate beyond administrative expenses of the Estate and attorneys' fees.^[51] Under Delaware law,...