There is nothing more devastating than a divorce. Most of us envision a divorce from the perspective of family law, but there are also situations where a divorce must occur under real estate law as well.
There are many of us which own real estate in Pennsylvania jointly with others. What happens when the relationship sours and you cannot agree on how the property should be used or maintained?
In Pennsylvania, the parties can divorce themselves from the situation through a partition action.
In Kapcsos v. Benshoff, 2018 Pa. Super. LEXIS 846 (Sept. 7, 2018), the Superior Court of Pennsylvania recently set forth a road map which must be followed during the adjudication of a partition action.
In Kapcsos, Adam K. Kapcsos and Malisha J. Benshoff, an unmarried couple at the time, jointly purchased a piece of real estate in Cambria County, Pennsylvania, the opinion said.
When the relationship subsequently soured, litigation ensued between the parties by way of a partition action.
A bench trial occurred where the trial court judge ultimately ruled to equitably carve up the real estate. Under the trial court’s ruling, Kapcsos was awarded an undivided interest in the real estate on the condition that he pay $7,011.33 to Benshoff and have Benshoff removed as a debtor under the mortgage loan encumbering the real estate.
Benshoff appealed the trial court’s ruling to the Superior Court.
A three-judge panel of the Superior Court affirmed in part and revered in part the trial court’s ruling.
The Superior Court subsequently granted reargument en banc.
In a very technically crafted opinion, the Superior Court held that it lacked the jurisdiction to decide the substantive merits of the trial court’s ruling because the trial court had failed to strictly adhere to the Pennsylvania Rules of Civil Procedure for a partition action.
The Superior Court noted that the Pennsylvania Rules of Civil Procedure are split into two, distinct parts—Rules 1551 through 1557 (Part 1) and Rules 1558 through 1574 (Part 2).
In Part 1, the trial court must determine whether the property is partitionable under law.
According to the Superior Court, under Part 1, the trial court must ascertain whether the parties jointly own the real estate in question and, if so, what fractional legal interests in the property does each party hold.
The Superior Court noted that the right to partition of the parties may be established through admissions made by the parties in the pleadings, or by way of evidence submitted during a hearing or trial.
If such a right to partition has been established, according to the Superior Court, Rule 1557 dictates that “the trial court shall enter an order directing partition which shall set forth the names of all the co-tenants and the nature and extent of their interests in the property” and “no exceptions may be filed to an order directing partition.”
Of critical importance, the Superior Court emphasized that the parties to a partition action may immediately appeal an order directing partition under Part 1 under Rule 311(a)(7) of the Pennsylvania Rule of Appellate Procedure 311(a)(7), which permits some interlocutory appeals as of right.
According to the Superior Court, after an order of partition under Part 1 becomes final, either because no one appeals or an appellate court affirms it, “only then may parties proceed to Part 2, where the actual division, award, or sale of the partitioned property occurs.”
The Superior Court then stated that “Part 2 is purely an equitable proceeding where the trial court judge or master balances the equities to decide what form the partitioning will take.”
In its own words, “if the property were a pie, the trial court must decide how best to serve it to the parties” and “there are three ways ‘to slice’ the ‘pie.’”
First, under Rule 1560, “the court may determine that the pie should be cut into several pieces and award the pieces of property to the parties as their severally owned parcels of land.”
As indicated by the Superior Court, “this typically occurs when the pie is so large and the parties so few in number that everyone can receive a fairly sizable and valuable piece.”
In this scenario, the trial “court determines the size and location of each party’s parcel based upon the parties’ interests and what the court deems to be equitable given the facts and circumstances of the case.”
Under Part 2, if the trial court elects to take this course, it will convey ownership to the parties by way of court order which the recorder of deeds will record.
If the trial court determines that “the pie cannot be cut without ruining it,” according to the Superior Court, under Rule 1562, “it may give the whole pie to one party and order that person to pay the other parties for their respective shares.”
According to the Superior Court, “in this scenario, one party gets an order of conveyance granting undivided title to the whole property (which is recorded), and the other party receives a cash buy-out, known as ‘owelty.’”
Under this scenario, “the trial court calculates the owelty based upon the equities of what everyone invested in the land,” by “taking those investments and then divides them by each parties’ fractional interest in the property, as determined in Part 1. In doing so, the trial court will look at the costs and income associated with the property and how much each property owner so contributed or benefited from the property.
If neither of the first two scenarios are possible, the Superior Court stated that “the trial court’s third option is to order a sale of the pie to the general public and divide the proceeds (if any) among the parties.”
Under this scenario, “once all court costs, attorney fees, mortgages, etc. are satisfied from the sale’s proceeds, the court awards any remaining funds to the parties according to their investments in the land, divided by their fractional interests, as determined in Part 1.”
In Kapcsos, the Superior Court emphasized that the parties did not request and, therefore, the trial court never entered an order under Part 1 directing partition under Rule 1557.
Rather, according to the Superior Court, the parties and the trial court “erroneously skipped Part 1 and moved directly to Part 2.”
According to the Superior Court, “if the property is never partitioned via a Part 1 order, the trial court has nothing to divvy-up in Part 2, because the parties still own undivided interests in the whole.”
Procedurally, the Superior Court held that “the failure of the parties to secure and record a Part 1 order partitioning the property deprived the trial court of jurisdiction to conduct Part 2.”
Citing to 42 Pa. C.S. Section 742, the Superior Court quashed the appeal for lack of appellate jurisdiction over the nullified ruling improperly issued by the trial court.
In doing so, the Superior Court directed that the parties in Kapcsos must “retry Part 2 de novo, where both parties may present any evidence of monetary contributions as off-sets toward the owelty.”
Reprinted with permission from the September 14, 2018 edition of The Legal Intelligencer © 2018 ALM Media Properties, LLC. All rights reserved. Further duplication without permission is prohibited. For information, contact 877-257-3382, firstname.lastname@example.org or visit www.almreprints.com.