Frank Masek v. Barbara Wichelman (2014)

MEMORANDUM OF DECISION ON OBJECTION TO SECTIONS 20a, 20d and 22d OF THE DEFENDANT'S MOTION FOR ORDER TO REVISE ACCOUNTING

After a trial in this action which took place in 2008, the court, M. Taylor, J., ordered an accounting and appointed the firm of Myer, Harrison & Pia, LLC to prepare an accounting of the net proceeds derived by the plaintiff, Frank Masek, from properties owned jointly with the defendant, Barbara Wichelman, located at 1, 13 and 19 Main Street, Essex, Connecticut.   The period of accounting was between the dates of October 2006 through April 2009.

Background

The plaintiff filed an amended complaint on January 8, 2007, which alleged causes of action based upon bailment, conversion, statutory theft, negligent and intentional infliction of emotional distress and violations of the Connecticut Unfair Trade Practice Act. In the defendant's answer, special defenses and counterclaim of December 10, 2007, she alleged, inter alia, that Mr. Masek failed to honor a settlement agreement involving the partition of jointly owned real property located at 1, 2, 3 and 13 Main Street as well as a residence located at 19 Main Street, Essex, Connecticut.   Ms. Wichelman further alleged that Mr. Masek had given her no account or payment of profits from the foregoing jointly owned properties.

In the court's Memorandum of Decision dated January 27, 2009, Judge Taylor described that Mr. Masek and Ms. Wichelman were an unmarried couple for approximately 24.5 years.   They lived in New York City, but spent weekends at the residence located at 19 Main Street, Essex.   In 2004, they separated and in 2005 Wichelman married another man and moved to Colorado.

Mr. Masek filed a partition action with respect to the jointly owned properties.   In 2006 the parties entered into a settlement of that case and the ownership of the properties was not an issue before the court in this case.

After Masek returned to the 19 Main Street property to find that most of his possessions and furniture had been removed, he initiated this lawsuit ․

It is Masek's adamant assertion that Wichelman “stole” his property.   He claims that this property was removed either in her presence or at her direction ․

Memorandum of Decision, January 27, 2009 at pp. 6–7.

Judge Taylor stated the following with respect to the statutory theft allegation:

The plain meaning of General Statutes § 52–564 is clear and unambiguous on its face.   Further, the court finds that the application of a preponderance of evidence standard of proof does not yield an absurd or unworkable result. [fn8] The distinguishing factor between conversion and statutory theft is the intent to deprive another of their property.   Such an intention, if proved, is a sufficiently logical basis to prescribe exemplary damages without requiring a higher standard of proof than would ordinarily apply in other civil cases.

Under this legal standard, the court finds there was a statutory theft committed by Wichelman through the intentional removal of Masek's property from 19 Main Street, to the extent that such personal property is either stipulated or found by the court to belong to Masek.   Although Wichelman did not specifically claim the higher standard of proof in advance of the presentation of evidence at the trial, the court further finds it highly probable that Wichelman intended to deprive Masek of his personal property in this case, notwithstanding the court's reasonable doubts to the contrary, thus meeting the clear and convincing standard of proof as well.

Id. at pp. 19–20.

The entire text of Judge Taylor's ruling concerning Wichelman's counterclaim for an accounting is as follows:

The parties have jointly owned 1, 13 and 19 Main Street for many years.   Masek freely admitted to receiving rents from these properties as well as incurring related expenses.   Masek was unable to conclusively testify to a specific amount of income from the properties, based upon his recollection of these transactions, and there was insufficient evidence presented at trial for the court to reasonably calculate the net income to him from these transactions.

An action for an accounting may be brought between joint tenants pursuant to General Statutes § 52–404. [fn5a] The court finds that an accounting of the net proceeds from these three properties is due to Wichelman pursuant to count two of her counterclaim.   The procedure employed upon judgment is the appointment of auditors. [fn6a] General Statutes § 52–402(a) refers to the appointment of “not more than three disinterested persons to take the account ․” If the parties can agree on the identity of an auditor or auditors, the court will appoint that person(s).  If agreement cannot be reached, the court should be advised within three weeks of the date of judgment, and a hearing will be conducted in order to make the required appointment.   Upon completion of the audit and report, the procedures pursuant to General Statutes § 52–502(d) 1 shall apply.

Id. at p. 42.   Emphasis added.

On May 19, 2009 Judge Taylor appointed the firm of Meyers, Harrison & Pia, LLC to prepare an accounting of the net proceeds derived by Mr. Masek from the jointly owned properties.   The period of accounting was between October 2006 and April 2009.

On March 24, 2010, John DelGrego, CPA, of Meyers, Harrison & Pia issued a preliminary report to Attorney Bruce MacDermid, who represented Ms. Wichelman, and Attorney Ann Monaghan, who represented Mr. Masek.   He indicated that he had certain leases for properties located at 1, 13 and 19 Main Street, Essex (the “Properties”).   He asked the attorneys to provide him with additional information.   Nothing in this report mentioned fair rental value of 19 Main Street.

On October 26, 2011, Mark Harrison, CPA and Mr. DelGrego of Meyers, Harrison & Pia, sent a more detailed report to Attorney Christopher Morano, who represented Mr. Masek, and Attorney Michael Albano, who represented Ms. Wichelman.   In that report the accountants analyzed rents collected as compared with lease agreements, rents collected as compared with Mr. Masek's federal income tax returns, rents collected as compared with rents deposited as well as expenses relating to the Properties.   In the conclusion of the report the accountants stated:

We have been requested by the Court to determine the net proceeds derived by Mr. Masek from the jointly owned property located at 1, 13, and 19 Main Street in Essex, Connecticut ․ based on the information that has been provided, we have not been able to accurately determine the net proceeds derived by Mr. Masek from the Properties during the requested time period.   In order to do so, additional financial information that has not been provided would be required ․

After the foregoing report was received, counsel for Mr. Masek provided the accounting firm with additional information and by report dated January 31, 2012, Mr. Harrison and Mr. DelGrego concluded:

[T]otal rent collected for the Properties for the Time Period was $207,700.   Total expenses of the Properties for the Time Period were $89,176.   As such, we have concluded the net income derived from the Properties for the Time Period was $118,524.   Accordingly, the net proceeds derive by Frank Masek, as a 50% owner, was $59,262.

In February 2012, Attorney Albano advised the accountants that he took issue with certain conclusions in the January 31, 2012 report.   In an e-mail dated March 22, 2012, Attorney Albano outlined Ms. Wichelman's disagreements with the aforementioned report.

A hearing occurred on November 7, 2012 at which time counsel for both parties questioned Mr. DelGrego about the substance of his opinions expressed in the January 31, 2012 report.   Mr. DelGrego testified that even after additional information had been supplied to him concerning the leases, rents and expenses for the three properties, some information was still missing.   After discussion with counsel it was agreed that when information was ambiguous or missing, he would err in a manner which favored Ms. Wichelman.

On July 19, 2013 Wichelman filed a Motion for Order to Revise Accounting, Establish Escrow Account, and Award Attorneys Fees. After meeting with the court concerning the foregoing motion, the parties agreed that they required a ruling on paragraphs 20a, 20d and 22d of that motion, which stated:

20a.  Because the accounting was to be undertaken pursuant to CGS § 52–404(b), the Second Report was defective due to its failure to account for the fair market rental value of the portion of the jointly-owned property located at 19 Main that Mr. Masek admittedly occupied as a residence and/or a business for the entire period covered by the accounting, which is October 2006 through April 2009.

20d. Although Ms. Wichelman is charged in the Second Report with half the expense of all insurance costs, she was apparently not included as a beneficiary on any of the policies.   Because she would not stand to benefit from any payment on the policies, she should not be responsible for any of the costs.   Thus, the revised report should not deduct from gross revenue the cost of any policies that did not name Ms. Wichelman as a beneficiary.

22d. Ms. (sic) Masek should pay interest on Ms. Wichelman's share of the net income from the Properties.

Discussion of the Law and Ruling

Ms. Wichelman is not entitled to recover for the fair rental value of portions of the property occupied by Mr. Masek because she made no claim for them in the Counterclaim of December 10, 2007 and Judge Taylor ordered an accounting only for “net proceeds” from the properties.   During the trial Ms. Wichelman had ample opportunity to introduce evidence regarding the benefit derived by the plaintiff from his use and occupancy of a portion of 19 Main Street.   She failed to do so.

During final argument before Judge Taylor, when the court specifically asked Ms. Wichelman's attorney what damages his client was seeking, the attorney replied, “Mr. Masek testified that he grosses $100,000 a year.”   The court then asked, “Your basic claim is net 70?”   The attorney replied, “Right he grosses 100.   He has about 30 in expenses.   And then there's a 70 a year I submit is profit.   And I think she's entitled to a share of it.”   Transcript, October 1, 2008, p. 18.   The foregoing colloquy shows that Ms. Wichelman was seeking a share of the net profits from the rental properties, not the value of Mr. Masek's use and occupancy.   Moreover, during the lengthy period in which the accountants collected information from counsel, Ms. Wichelman never requested that the accountants calculate the fair rental value of 19 Main Street.²

The issue of whether or not Ms. Wichelman was a “beneficiary” of the casualty insurance policies covering the Properties was never raised by Ms. Wichelman until 2013 and was not addressed by Judge Taylor.   The accountants obviously believed that insurance expenses were valid expenses to take into account when determining net profits from rental properties.   Ms. Wichelman is entitled to net profits because she was the joint owner of the properties.   As such, whether or not she was listed as a “beneficiary” she would have benefitted from any insurance proceeds used to restore the properties had they suffered damage.

In support of her argument that insurance expenses were not validly deducted from rental income, Ms. Wichelman argues that the leases on the properties were “triple net,” meaning that the tenant was responsible for paying taxes and insurance.   The accountants reviewed all available leases in connection with their court-ordered report.   None of their reports makes any reference to any lease requiring the tenant to maintain insurance for the premises.   There is simply no evidence that any lease was triple net.   The defendant's argument that insurance expenses should not be factored into determining net profits of rental properties is simply ludicrous.

The defendant argues that she is entitled to prejudgment and postjudgment interest pursuant to Connecticut General Statutes § 37–3a because of the plaintiff's failure to produce the documents required by Mr. DelGrego resulted in inordinate delay in the resolution of this matter.   The plaintiff argues that the final report from Mr. DelGrego was issued two years ago.   Under the terms of that report, the plaintiff owes the defendant $59,262.   The plaintiff has been prepared to pay that amount since January 31, 2012 when the report was issued.

The plaintiff admits that his lax record keeping was largely responsible for the delay in the accountants' ability to calculate net profits.   However, he argues that Mr. Masek should not pay prejudgment interest because the defendant's theft of his personal property originally led to this lawsuit being filed.   Mr. Masek expended a significant amount in legal fees in complying with the court's ordered accounting.   He further argues that he has always remained ready to pay Ms. Wichelman the amount found to be due to her by the accountants.   Moreover, Mr. Masek has had to incur additional legal fees to respond to the baseless objections that the defendant has raised to that accounting since January 31, 2012.

The court is mindful that Ms. Wichelman previously sought interest on the amount of the unpaid stipulated judgment.   Notwithstanding that Mr. Masek had clearly failed to honor his agreement to pay the judgment, Judge Taylor declined to order him to pay any prejudgment interest, stating, “The court will not exercise its discretion and award interest in this case.   Furthermore, the court highlights the conclusion reached in this case;  namely, that defendant intentionally removed Mr. Masek's personal property, despite a representation to the contrary made by the defendant at deposition prior to the settlement agreement and upon which he relied.”   Memorandum of Decision, January 27, 2009 at p. 41.   This court also chooses to exercise its discretion and refrain from awarding any prejudgment interest to Ms. Wichelman based on the totality of the circumstances in this case.

For the foregoing reasons, judgment enters against the plaintiff on the defendant's counterclaim in the amount of $59,262.

By the court,

Aurigemma, J.

FOOTNOTES

FN1. This appears to be a typographical error.  Connecticut General Statutes § 52–502(d) does not exist.   However, Connecticut General Statutes § 52–402(d) provides that “After hearing, the auditors shall adjust the accounts, find the balance due and immediately report to the court.   The fees and expenses of the auditors, as fixed and allowed by the court, shall be paid by the party in whose favor the report is made and the court shall render judgment that the party in whose favor it was made shall recover the sum found to be due, with costs including the fees and expenses of the auditors.”.  FN1. This appears to be a typographical error.  Connecticut General Statutes § 52–502(d) does not exist.   However, Connecticut General Statutes § 52–402(d) provides that “After hearing, the auditors shall adjust the accounts, find the balance due and immediately report to the court.   The fees and expenses of the auditors, as fixed and allowed by the court, shall be paid by the party in whose favor the report is made and the court shall render judgment that the party in whose favor it was made shall recover the sum found to be due, with costs including the fees and expenses of the auditors.”

FN2. The court notes that the January 31, 2012 report of Meyers, Harrison & Pia indicates that the accountants used the affidavit of Rick Weiner, a licensed real estate agent, in determining vacancy rates.   They could have used Mr. Weiner's opinion to determine fair rental value.   They did not because it was not an issue they were tasked with determining..  FN2. The court notes that the January 31, 2012 report of Meyers, Harrison & Pia indicates that the accountants used the affidavit of Rick Weiner, a licensed real estate agent, in determining vacancy rates.   They could have used Mr. Weiner's opinion to determine fair rental value.   They did not because it was not an issue they were tasked with determining.

Aurigemma, Julia L., J.