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In re 25 Burnside Avenue, Narragansett

Supreme Court of Rhode Island

April 4, 2019

In re: 25 Burnside Avenue, Narragansett, Rhode Island.

          Washington County Superior Court (WC 16-208) Associate Justice Brian P. Stern

          For Appellant: Eric H. Miller, Esq. Seth A. Perlmutter, Esq.

          For Appellee: Douglas J. Emanuel, Esq.

          Suttell, C.J., Goldberg, Flaherty, Robinson, and Indeglia JJ.


          Paul A. Suttell Chief Justice.

         Kevin Hunt, an interested party in this receivership case, appeals from a Superior Court decision and order authorizing the permanent receiver to distribute the proceeds from the sale of 25 Burnside Avenue in Narragansett in accordance with the receiver's recommendations. On appeal, Kevin argues that the Superior Court justice erred by (1) misreading and misapplying the provisions of a marital settlement agreement in distributing the proceeds from the sale of the property; (2) attributing the entire balance of an outstanding mortgage to Kevin's share of the proceeds; and (3) ordering Kevin to pay rent retroactively. This case came before the Supreme Court pursuant to an order directing the parties to appear and show cause why the issues raised in this appeal should not be summarily decided. After considering the parties' written and oral submissions and reviewing the record, we conclude that cause has not been shown and that this case may be decided without further briefing or argument. For the reasons set forth in this opinion, we affirm in part and vacate in part the order of the Superior Court.


         Facts and Travel

         25 Burnside Avenue in Narragansett, Rhode Island (the property) is an ocean view, single-family home located approximately 200 to 300 yards from Scarborough State Beach. From 2002 to 2006, Kevin Hunt (Kevin) and the petitioner, Alice Hunt (Allie), [1] owned the property as tenants by the entirety and lived there together with their daughter. On June 27, 2006, the Family Court entered a final judgment on the divorce between Kevin and Allie, dissolving their thirteen-year marriage. Kevin and Allie had entered into a marriage settlement agreement (the MSA) on January 20, 2006, which was incorporated but not merged into the final judgment of divorce. Under the terms of the MSA, Kevin and Allie agreed that the property had a fair market value of $900, 000 as of the date of the MSA.[2] The MSA also provided that Kevin would vacate the property and Allie would have its exclusive use no later than April 15, 2006.

         Section 3 of the MSA sets forth Kevin's and Allie's agreement with respect to the ultimate division and distribution of the property. Under Subsection 3(C), Kevin was responsible for certain specified expenses until December 31, 2009, including mortgage payments, taxes, utilities, assessments, and all expenses related to maintenance and repair. In consideration of his making all such payments, contemplated to be approximately $100, 000 per year, Kevin was to purchase Allie's interest in the property for 38 percent of the net equity value as of December 31, 2009 under Subsection 3(D) (the Buyout Provision).[3] In the event, however, that Kevin was "unable to make all payments as set forth [in the MSA]," Subsection 3(D) also provided that the property was to be sold and the net proceeds divided equally (the Sale Provision). Subsection 3(E) clarifies that Allie "shall convey to [Kevin] all right, title, and interest in and to said property contemporaneous with [Kevin's] payment of the net equity percentage due and owing to [Allie] * * *."[4]

         The MSA also states that, at the time of its execution, there was a $360, 000[5] outstanding mortgage to Citizens Bank[6] on the property (the 2004 Mortgage). Both Kevin and Allie signed the 2004 mortgage deed, but only Kevin signed the related promissory note (the 2004 Note). The parties agreed in the MSA, at Subsection 3(A), that, by subtracting the outstanding mortgage amount from the agreed-upon $900, 000 fair market value, the property's "net equity" value was $540, 000 at the time of the MSA's execution. Finally, during the four-year period ending December 31, 2009, neither party was to increase the outstanding mortgage, nor encumber the property with further liens.

         December 31, 2009 came and went. No conveyances were made, nor was the property listed and sold. In fact, Allie continued to live at the property with her and Kevin's daughter until March 2012, when the Family Court granted Allie permission to temporarily relocate to California with the child. The Family Court order included a provision stating that Allie would continue to have exclusive use and possession of the property "to the exclusion of [Kevin]." Nevertheless, in violation of the Family Court order, while Allie was away, Kevin moved in to the property with his two children from another relationship; he remained there for approximately four years.

         According to Allie, in 2012, "in connection with an anticipated sale of the [property]," she learned that Kevin had executed an additional mortgage on February 23, 2006 (the 2006 Mortgage) and promissory note (the 2006 Note) in favor of Citizens Bank in the principal amount of $150, 000. Similar to the 2004 Mortgage and the 2004 Note, both Kevin and Allie's signatures appear on the 2006 mortgage deed, but only Kevin's signature appears on the corresponding note. Allie has maintained throughout the receivership proceedings that she did not sign the 2006 mortgage deed. Allie does not dispute, however, that she signed the 2004 mortgage deed.

         In early 2016, Allie learned that Citizens Bank had scheduled a sale of the property to foreclose upon the 2006 Mortgage. On April 25, 2016, Allie filed a petition for receivership to protect her equity interests in the property, which she believed took priority over the 2006 Mortgage.[7]

         On April 26, 2016, the property was placed into temporary judicial receivership, and, on the same day, the Superior Court appointed Stephen Del Sesto as temporary receiver. Later, on May 23, 2016, the Superior Court appointed Del Sesto as permanent receiver (the Receiver). Kevin entered the case as an interested party. At a hearing on his permanency appointment, the Receiver told the court that he hoped to rent the property weekly during the summer months and monthly for the remainder of the year. At that time, Kevin was still living at the property and paying the property-related expenses. He was not, however, paying any rent or apparently making any mortgage payments, given Citizens Bank's initiation of foreclosure proceedings.

         Kevin initially requested an additional thirty days before the Receiver engaged a real estate broker to gather more information on the loans from Citizens Bank. Allie objected to this request at a May 31, 2016 hearing, noting that, as summer quickly approached, "[t]his is the time to be marketing and selling" the property because it is "prime beach-front property[.]" Allie suggested to the court that Kevin pay fair market rent for the valuable summer months if he was going to further delay the property's sale.

         The Superior Court denied Kevin's request for additional time to gather his loan documents. Kevin next filed a Chapter 13 bankruptcy petition on June 7, 2016, which, in effect, allowed him to remain at the property. The petition was eventually dismissed by the Bankruptcy Court on August 25, 2016.

         In September 2016, the Receiver filed a motion for an order directing Kevin to immediately vacate the property, holding Kevin in contempt of court, and imposing sanctions against Kevin. In his motion, the Receiver stated that, at the May 23, 2016 hearing for the appointment of a permanent receiver as well as immediately after that hearing, he had informed Kevin that rent was required in order for Kevin to remain at the property. The Receiver argued that renting the property weekly during the summer season could have substantially contributed to the receivership estate.

         The Superior Court granted the Receiver's motion and ordered Kevin to vacate the property by October 18, 2016. The order provided that, if Kevin did not vacate the property by 11:59 p.m. on October 18, 2016, the court would hold a hearing at 9:30 a.m. on October 19, 2016, to consider whether Kevin should be held in contempt of court. The Superior Court indeed held a hearing on October 19, as Kevin had not yet vacated the property. At that hearing, the Superior Court granted Kevin an additional week to vacate the property; Kevin substantially complied with the order by removing himself and the children and most of his belongings.

         Soon thereafter, the Receiver sold the property for $577, 500. The sale closed on February 1, 2017. Citizens Bank had filed a motion to allow its secured claims related to the 2004 Mortgage and the 2006 Mortgage, which was granted on February 2, 2017. Allie filed a limited objection to the approval of the 2006 Mortgage, arguing that it should not be deducted against her interest because, despite what appears to be her signature on the document, she did not sign the 2006 mortgage deed, nor is her signature or name on the 2006 Note.

         On February 17, 2017, the Receiver filed a First and Final Report (the Final Report) and, on February 19, 2017, he filed a Recommendation on Allowance of Claims (the Recommendation). The Recommendation suggested that Kevin's past-due rent, calculated to be $38, 250, [8] should be added to the receivership estate, bringing the total cash-on-hand amount to $582, 776.97. Next, the Receiver recommended that the receivership estate be ...

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