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Estate of Fetzer v. Fetzer

A-550-99T1 (N.J. Super. App. Div. 2000) (Unpublished)

PARTITION—In a partition action, a court, exercising its equity powers, can order the sharing of expenses even if, absent the partition action, one of the owners could not have recovered those expenses directly from the other owner.

Two sisters-in-law owned a large property that each had inherited from their husbands. The property had originally belonged to their husbands’ family and was augmented by the two late husbands when they purchased an adjacent plot. The husbands, who were brothers to each other, lived on the property together with their parents, wives, and children. The property contained separate homes, a farm business, and a trucking business. It also contained a truck rental business. Even though ownership of the individual businesses was not on a 50/50 basis, all of the businesses appeared to be run as “overall family enterprises” for the benefit of both families. “The brothers ran all of the businesses very informally, paying for everything out of” one of the businesses. Apparently, no one worried about who paid for various items. As loans and mortgages were taken out, the brothers used the funds for their various businesses and paid the loans back from the various businesses. Eventually, the main business ran into financial trouble and stopped making payments on the mortgages. Further, one business stopped remitting tax deductions withheld from its employees. The owners of that business, one of the brothers and his wife, filed bankruptcy, but their trustee in bankruptcy was required to pay the Internal Revenue Service liens. Threatened by foreclosure of the real property, the widow of the other brother paid the delinquent mortgage. Eventually, one sister-in-law successfully obtained an order to partition the real property. The property was then sold to a third party. A dispute arose about division of the proceeds. The lower court found that the sister-in-law who had paid the mortgage was entitled to reimbursement for one-half of the mortgage payments and that the other sister-in-law was entitled to reimbursement for one-half of the IRS tax payment. The lower court declined to award any interest for paying off the mortgage noting that the family history spanned nearly 75 years, was “one of intermingled funds, informal borrowing, ...joint obligations on loans” and so forth. It also noted that the family members had never charged each other interest during the course of their dealings. Consequently, the lower court concluded that assessing interest would be inequitable. The Appellate Division agreed. In doing so, it added the following: “It is irrelevant that the federal tax penalties imposed pursuant to I.R.C. § 6672 were the individual liability of [one of the brothers and his wife]. Although the federal government could not impose such liability on [that brother or his wife], a court of equity can order the sharing of this obligation. Given the history of this family ... it is equitable to make the allocations ordered” by the lower court. In essence, the Court believed that the failure to pay the withheld employment deductions, “wrongful though it was, benefitted all of the parties.”

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