Briscoe v White

[*1] Briscoe v White 2005 NY Slip Op 52370(U) [20 Misc 3d 1130(A)] Decided on June 14, 2005 Supreme Court, Dutchess County Brands, J. Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431. This opinion is uncorrected and will not be published in the printed Official Reports.

Decided on June 14, 2005
Supreme Court, Dutchess County

Jeannette Briscoe, Plaintiff,

against

Patricia White, Defendant.



1438/00



Percy W. Brisco, Esq.

152 Old Post Road

Wappingers Falls NY 12590

Martin A. Cohen, Esq.

450 Broadway

PO Box 1402

Newburgh NY 12551

James V. Brands, J.

BACKGROUND

This is an action commenced in the year 2000 by Jeanette Brisco (Brisco) against Patricia White (White) in the Supreme of the County of Dutchess, State of New York. At one juncture, this matter was referred by a previous Supreme Court Justice to the City Court of the City of Poughkeepsie, however, for reasons which are not relevant to decision in this matter, the case ultimately came back before the undersigned where it was tried as a non-jury matter due to the mixture of equity and law claims for two days, June 2, 2005 and June 6, 2005.

In her complaint, Briscoe alleges that the parties are owners of property at 10 South Clover Street, Poughkeepsie, New York and in her first cause of action seeks a declaration of partition between the parties. During the time frame that this matter was pending before the court, the subject property was sold by agreement of the parties on September 25, 2001 to a third party thus obviating the necessity of this court addressing the first cause of action.

In the second cause of action, plaintiff alleges that defendant wrested control of the property from her, managed it improperly, never produced a profit except for a nominal amount in one year compelling plaintiff to use her own funds to keep the property going. The third cause of action repeats to a great degree the allegations in the second cause of action. The fourth cause of action alleges that defendant and plaintiff acquired a $7,000.00 loan targeted for repair of the premises, however, defendant has not shared with plaintiff as to how those funds have been used. The fifth and last cause of action alleges that the defendant has refused to share the income or loss with plaintiff from 1997 through 1999 which resulted in plaintiff losing certain benefits which would otherwise be available to her.

In her answer, Patricia White, in addition to denying the allegations and setting forth affirmative defenses, makes a counterclaim asking that this court direct plaintiff to contribute one-half of the expenses incurred for the premises over the period of time it was owned by the parties and further directing plaintiff to provide her with an accounting and supporting documentation regarding her management of the premises.

To some degree, the background in this matter so far as times and dates are not contested by the parties but rather their interpersonal relationship and how the falling apart of their friendship affected the property is the matter before this court. It is undisputed that plaintiff and defendant purchased the property located at 10 South Clover Street, Poughkeepsie, New York in 1984 and apparently each put down an equal amount of monies towards that purchase. At the time of the purchase, plaintiff was and still is, by her testimony, a seasoned real estate owner and investor who has managed buildings of her own and for other people. Her husband who represented her throughout these proceedings is an attorney and also apparently was the owner of the real estate company which handled the transaction when the property was purchased by the parties. At some time shortly after the purchase, the defendant took over management of the building, the parties refinanced the property approximately one year after it was purchased with each person taking out enough money so that plaintiff could buy a Cadillac and the defendant a Mercedes. Thereafter in 1995, approximately 11 years after the purchase, the parties took out a $7,000.00 loan from a credit union so that those monies could be used for repairs and other incidentals regarding the property.

The last time that a partnership return was provided to plaintiff by defendant was in 1996 and for the years 1997 through 2001 when the property was sold, the defendant apparently claimed the losses on her tax return without sharing those losses with plaintiff.

One of the difficulties for this court was that an examination before trial was never held of the parties and although certain documentation was produced, as more fully set forth below, even a forensic accountant could not definitively provide answers to some of the questions posed by the parties or this court.

TESTIMONY

Two minor witness in this matter, Arthur Johnson and Legret Ainworth gave brief testimony to the court about who paid them for work done on the property, however, they were unable to provide the court with much information so far as times, dates, and the like. Lloyd Jackson testified that he lived at the premises for several years and moved out in the year 2000. The rents for the three family building ranged between $400.00 and $500.00. He described some general deterioration of the premises a part of which was addressed by the parties and some of which was not.

Julius Robinson testified that from the late 1990s through 1998 he performed certain [*2]plumbing work at the premises and then elected not be involved anymore as it was too great a distance to drive and the payments were not timely to him for the work that he provided.

Jo Relyea, an accountant with Rae & Company, CPA, testified that she reviewed certain documentation for the years 1996 through 2001 including bank statements, stubs and checks which provided a cash flow report. Her testimony as paralleled by her report indicates that some of the documentation was missing which made it difficult for her to render an opinion regarding the accounts maintained by the defendant regarding the premises at 10 South Clover Street. For example, one of the allegations by plaintiff was that the defendant kept multiple accounts in the same bank, one of which is the partnership and several in her own name and there may have been commingling of funds. The report by this witness (Exhibit 1) when addressing the partnership and the documents can best be summed up by her statement in that report where she indicated "Accordingly, we cannot express any formal opinion on them." She also found that although there were excess cash receipts into the bank deposits over and above the income reported by the partnership on the returns, this did not necessarily mean that there was unreported income but rather monies may have been loaned in by either the parties in this action or loans could have come from third persons and those monies put in. She simply was unable to tell from the evidence given to her. The net result was that her report was inconclusive for either party.

Jeannette Briscoe testified that she is a retired teacher and real estate broker who has managed properties for a number of years and that she and the defendant purchased the property in 1984. There never was any written partnership agreement between them and soon after purchase of the property she gave the keys to the defendant for her to manage the building notwithstanding that defendant was merely a retired teacher and that this witness had the real estate experience and her husband was an attorney. From 1984 through 1996 when she received her last partnership return, the property never made a profit with the exception of one year when a nominal amount of $400.00 of income over and above expenses was realized.

In 1985, shortly after purchase of the building, the parties agreed to refinance it in order to reduce their interest rate on the mortgage. Thereafter, notwithstanding any differences, the parties in 1995 jointly borrowed the sum of $7,000.00 from a credit union for work to be done at the premises. This witness testified that she never wrote any checks, saw any statements and was not aware of any renovations that were completed to the property with the exception of some painting which she observed. She further testified as to a deterioration in the relationship between she and the defendant to the point that she was sued in two separate courts by the defendant over repairs which lawsuits were ultimately dismissed.

At the end of 1996, Ms. Brisco went to the bank to take her name off of the joint account but could not get any information as apparently it was closed and that was the last year that a partnership return was filed. She made an application to the Internal Revenue Service on January 31, 2005 several months before the trial in this matter regarding the partnership returns from 1997 forward and received information that none had been filed from 1997 through 2001. There was placed into evidence (Exhibit 14) tax returns by the defendant which showed that for 1997 [*3]there was a loss in the operation of the property of $10,417.00, for 1999 a loss in the operation of the property of $9,123.00 and for the year 2000 a loss of $7,191.00.

This witness acknowledged that on April 5, 1999 she wrote a card to the defendant (Exhibit A) in which she offered to deed the property to the defendant for the sum of $2,000.00 so long as the defendant took over the debt or she would be willing to accept the same offer from the defendant.

Patricia White, the defendant, testified that in 1984 she was a teacher and was interested in real estate as an investment. The plaintiff and her husband were good friends of hers and eventually told her of this investment property. It was her understanding that the plaintiff was acting as a broker for the purchase of the property by the two of them through her husband's real estate office and that the commission they received would go back into the property, however, that never occurred. Further, she testified that on more than one occasion she asked Mr. Briscoe, plaintiff's husband, to prepare a partnership agreement as he was an attorney and it would be easier for him to do so, however, this was never accomplished.

This witness downplayed the concept that she as a teacher could wrest control of the property from the plaintiff, a seasoned real estate broker and her husband an attorney, and exclude them from its operation. According to this witness, the plaintiff and her husband were more than willing to turn over the management of the property to her so that they would not have to bother with it. She confirmed the refinance of the property in 1985 and then a discussion the parties had in 1995 as it was a bad year for the property. The income did not meet the expenses, there were tenant vacancies which indeed occurred throughout the term that they owned the property and this resulted in each of the parties having to put in roughly $100.00 per month to keep the building going. In the years 1996 through the year 2000 she put her own monies into the property with no contributions from the plaintiff or her husband.

This witness further testified that at one point Mr. Briscoe told her not to call the house to discuss this matter and this witness was then advised that she could terminate the partnership by the lack of contributions or other help by plaintiff and more particularly as she alone was making contributions to keep the property going. As a matter of fact at the time of the closing on September 25, 2001, there were insufficient funds to pay the debts, each party had to put a certain amount of money up to make the closing take place and indeed as of the time of her testimony on June 6, 2005 she personally was still paying the credit union debt which had approximately $2,500.00 left on it.

DECISION

This case represents a typical unfortunate incident where friends ultimately become adversaries over business decisions and in particular where a business decision does not produce profit for either one of them. [*4]

From 1984 through 1996, a period of 12 years, it is undisputed that defendant was permitted to manage the parties' business. This fact existed notwithstanding plaintiff's apparent superior knowledge of the real estate industry and her husband being a practicing attorney. Also in spite of the fact that the property lost money in each year except for one, there does not appear to have been demands or other actions brought between the parties from 1984 to 1996.

The defendant justifies her exclusion of the plaintiff from any tax write-offs by virtue of her non-involvement in the business, the deterioration in the relationship and the fact that she alone kept putting money into the premises to keep it going. During the trial, she indicated that she sought advice and was informed that under the New York State Partnership Law their unwritten partnership was effectively dissolved by the plaintiff's unwillingness to be associated in the carrying on of the business. It was for this reason that she no longer filed partnership returns so as to include plaintiff in the write-offs and she felt that plaintiff was not entitled to them.

The court notes that Section 60 of the New York State Partnership Law indicates that a dissolution may occur where one partner ceases to be associated in the carrying on of the business.

Plaintiff's position throughout much of the trial was that the defendant commingled funds in various accounts in the same bank where the partnership account had existed and that this indicated monies were coming in which were unaccounted for. As a practical matter, however, the proof indicates that there simply was no room for defendant to have benefitted economically based on the fixed expenses for the property. For example, even assuming the premises were fully rented out at a rate of $450.00 per month, this would result in an annual rent roll without vacancy of $16,200.00. The testimony from all parties involved indicates that it was rare if ever that there was not a vacancy at the premises. Therefore, the actual income per year would have been less.

The parties further acknowledge that the major fixed expense at the premises was the mortgage payment of principal and interest amounting to over $11,000.00 per year. If this were the sole expense, there might be some merit to plaintiff's argument that there is approximately $5,000.00 profit per year. The tax returns submitted to this court, however, even without taking into consideration such items as depreciation and the like, indicate there was no profit. For example, in the year 1999 the fixed expenses for insurance, real estate taxes, sewer charges and utilities add up to approximately $5,000.00. This does not take into consideration any other normal maintenance expenses nor payments being made to the credit union for the monies that were taken out for repairs.

It is axiomatic that the plaintiff has the burden of proof in this matter and the facts before this court simply do not justify any type of recovery against the defendant. On the other hand, so far as the defendant and her counterclaim are concerned, she has been able to take advantage of tax write-offs to her benefit on her state and federal tax returns. This would seem to be ample reward for the efforts that were exercised by her for the period of time, 1997 through 2001 until [*5]the building was sold.

Accordingly, based upon the evidence adduced at trial before the undersigned, it is hereby

ORDERED that the complaint is dismissed; and it is further

ORDERED that the counterclaim is dismissed.

Counsel are directed to pick up any exhibits they want back within thirty (30) days

The foregoing constitutes the decision and order of this court.

Dated:June 14, 2005

Poughkeepsie, New York

ENTER:

_____________________________

JAMES V. BRANDSSUPREME COURT JUSTICE

AN APPEAL FROM THIS ORDER MUST BE TAKEN WITHIN 30 DAYS AFTER SERVICE BY A PARTY UPON THE APPELLANT OF A COPY OF THIS ORDER WITH WRITTEN NOTICE OF ITS ENTRY, OR WITHIN 30 DAYS OF SERVICE BY THE APPELLANT OF A COPY OF THIS ORDER AND NOTICE OF ITS ENTRY, WHICHEVER IS EARLIEST.