Schwartz v. Colonna

CourtSuperior Court of Maine
DecidedMarch 3, 2004
DocketCUMcv-03-106
StatusUnpublished

This text of Schwartz v. Colonna (Schwartz v. Colonna) is published on Counsel Stack Legal Research, covering Superior Court of Maine primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Schwartz v. Colonna, (Me. Super. Ct. 2004).

Opinion

QUATIOOAT MA

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STATE OF MAINE CUMBERLAND, ss.

SUPERIOR COURT aceiss CIVIL ACTION “e"""= DOCKET NO. CV-03-106

p> Don oe FEY 7m CUA” SR eo 0% AoAN 3 Po 25

HERBERT SCHWARTZ and JOHN COLONNA,

Plaintiffs, Vv. DECISION AND ORDER MARK A, COLONNA, DONALD L. e Defendant. “es

MAY 12 2004

This matter was tried before the court on Counts I, II, IV and V of the

plaintiffs’ complaint remaining after the prior entry of summary judgment. BACKGROUND

The plaintiffs, John Colonna and Herbert Schwartz, and the defendant, Mark Colonna formed an oral partnership agreement to purchase and sell real property situated at 926 Forest Avenue, Portland, Maine. Pursuant to the agreement, the plaintiffs were to contribute capital for the purchase price and the defendant was responsible for acquiring, Managing and selling the property. The plaintiffs hoped to resell the property at a favorable price within three to four months. From the net proceeds of an eventual sale, the plaintiffs were to recoup their contributions and any net profit was to be divided equally among the partners.

In early October 2002, the defendant falsely told the plaintiffs that the purchase price for the property was $105,000. In fact, the price was only $97,500. In reliance upon the defendant's representation, the plaintiffs gave

him their capital contributions in the aggregate amount of $105,000. Of this sum, Herbert Schwartz contributed $37,500.00 and John Colonna contributed $67,500.00. On October 11, 2003, the defendant used $98,737.25 of these funds to purchase the Forest Avenue property, taking title in his own name.’

In July 2002, the defendant pledged the property as collateral for a $50,000 personal loan that he obtained from Key Bank. The plaintiffs did not consent to this encumbrance on the partnership’s property and, in fact, were not even aware of it.

In August 2002 or September 2002, Herbert Schwartz contacted the defendant on behalf of both plaintiffs. At the time, John Coronna learned that he had prostate cancer and wanted to recoup his investment. Schwartz informed the defendant that Colonna needed the monies he had contributed. Schwartz offered to purchase the property and said that the defendant could have two-thirds of any profit realized from that buy-out. The defendant did not tell Schwartz that the property was encumbered with a $50,000 mortgage. However, the defendant did say that he had taken a $1,000 deposit from a third-party and the partnership was obligated to sell to that person. In December 2002 or January 2003, Schwartz contacted the defendant to ascertain the status of the pending sale. The defendant reported that no progress had been made.

On January 24, 2003, the defendant sold the property for $118,000 and

incurred closing costs totaling $1,565.50.? The defendant also used

’ This sum is comprised of the purchase price ($97,500.00), plus customary adjustments at the closing for real estate taxes ($459.41), recording fees ($15.34), transfer taxes ($214.50), title insurance ($323.00) and title exam ($225.00). See Def.’s Ex. 1 (although this document is marked as a defendant’s exhibit, it was offered by the plaintiffs and admitted without objection). $50,645.27 of the sale proceeds to pay off his Key Bank mortgage encumbering the property. The defendant did not tell the plaintiffs about the sale. The defendant retained, and continues to retain, all of the proceeds from the sale, as well as the excess contributions advanced to him by the plaintiffs.

Between October 11, 2001 and January 24, 2003, the defendant expended $3,050 of the monies contributed by the plaintiffs for various carrying costs associated with the property.®

Or February 13, 2003, Schwartz again contacted the defendant to find out when the property would be sold. The defendant falsely reported that the sale was delayed because the property appraisal was too low and the buyers’ bank insisted upon a co-signer on the mortgage loan, and because an oil smell on the property had raised concerns as to whether the DEP might become involved. The following day, February 14, 2003, the plaintiffs first learned that the property had been sold. In response, they engaged the services of an

attorney and commenced this lawsuit.

* This sum is comprised of adjustments at the closing for real estate taxes ($1,277.27), sewer ($14.63), water ($14.00) and transfer taxes ($259.60). See Def.’s Ex. 3 (this document is marked as a defendant’s exhibit, but was offered by the plaintiffs and admitted without objection). It does not include expenditures associated with the payoff of the defendant’s mortgage.

* This sum. is comprised of property-related costs for insurance ($1,000.00), oil ($500.00), water and sewer ($300.00), electric ($250.00), an oil tank ($800.00), and inspection ($200.00). See Def.’s Ex. 2 (this document is marked as a defendant’s exhibit, but was offered by the plaintiffs and admitted without objection). Although this hand-written exhibit produced by the defendant reflects an expenditure of $1,000 for an oil tank, Herbert Schwartz testified without contradiction that the defendant represented that the cost was actually $800.00. This exhibit also appears to reflect a claim by the defendant that he paid real estate taxes of $3000.00 over and above any closing adjustments for real estate taxes. Obviously, any such payment had to have occurred between October 11, 2001 and January 24, 2003, when the property was in the defendant's name. However, it is clear from Def.’s Exs.1 & 3 that all of the real estate taxes for that period were fully accounted for, adjusted and paid at the closing transactions. Accordingly, the court finds the $3,000 claim to be incredible. The foregoing reflects that the purchase and sale of the Forest Avenue property generated a net profit of $14,647.25, calculated as follows:

PURCHASE & EXPENSES

Gross Purchase Price 97,500.00 Allowable Closing Costs 1,237.25 Net Purchase Price 98,737.25 Allowable Carrying Costs 3,050.00 NET PURCHASE & EXPENSES (101,787.25)

SALES PRICE

Gross Sales Price 118,000.00

Allowable Closing Costs (1,565.50)

NET SALES PRICE 116,434.50 NET PROFIT 14,647.25

Based on this calculation, each partner’s one-third share of the net profit is $4,882.42. The defendant has not accounted for or provided to the plaintiffs their respective shares of the net profit.

On February 20, 2003, the plaintiffs filed a five-count complaint against the defenclant alleging conversion (Count J), quantum meruit (Count II), unjust enrichment (Count III), fraud and misrepresentation (Count IV), and breach of fiduciary duty based on partnership (Count V). On January 7, 2004, the court granted partial summary judgment to the plaintiffs on Count II for their respective capital contributions, and to the plaintiff John Coronna for one-third of the profits of the sale of the partnership property. The court also granted

summary judgment to the defendant on Count III. DISCUSSION

A. Count I - Conversion

As the court has previously noted, the elements of a claim for conversion

include

(1) a showing that the person claiming that his property was

converted has a property interest in the property; (2) that he

had the right to possession at the time of the alleged

conversion; and (3) that the party with the right to

possession made a demand for its return that was denied by

the holder.

Withers v. Hackett, 1998 ME 164, 1 7, 714 A.2d 798, 800 (citing Leighton v. Fleet Bank of Me., 634 A.2d 453, 457 (Me. 1993)).

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