Furlow v. Macdonald (In re)

• Citation: 622 B.R. 837
• Decision Date: 15 September 2020
• Docket Number: Adv. Pro. No. 20-80027-JW,C/A No. 19-06512-JW
• Court: United States Bankruptcy Courts. Fourth Circuit. U.S. Bankruptcy Court — District of South Carolina
• Parties: IN RE, Brian James MACDONALD, Debtor. Michael Furlow, Cathy Furlow, Plaintiffs, v. Brian J. Macdonald, Defendant.

622 B.R. 837

IN RE, Brian James MACDONALD, Debtor.

Michael Furlow, Cathy Furlow, Plaintiffs,

v.Brian J. Macdonald, Defendant.

C/A No. 19-06512-JW

Adv. Pro. No. 20-80027-JW

United States Bankruptcy Court, D. South Carolina.

Signed September 15, 2020

Order Denying Reconsideration October 15, 2020

Sean P. Markham, Markham Law Firm, LLC, Irish Ryan Neville, Spitz & Neville, LLC, Charleston, SC, for Plaintiffs.

Magalie A. Creech, Finkel Law Firm LLC, Columbia, SC, Wendi M. Freeman, Freeman Wine, LLC, Mt. Pleasant, SC, for Defendant.

ORDER

John E. Waites, US Bankruptcy Judge

This matter comes before the Court for trial in the above-captioned adversary proceeding between Michael and Cathy Furlow ("Plaintiffs") and Brian J. Macdonald ("Defendant") regarding a request to partition certain real property better known as 5718 Captain Kidd Road in Hollywood, South Carolina ("Charleston Property") and a claim for unjust enrichment regarding Plaintiffs' payment of taxes, insurances and homeowners' association dues. This adversary proceeding originated in the Court of Common Pleas for the Ninth Circuit ("State Court") before being removed to the Bankruptcy Court through a consent order of the parties as the proceeding relates to matters involving the administration of claims and the confirmation of a chapter 13 plan in Defendant's bankruptcy case (C/A No. 19-06512-jw). The Court has jurisdiction over this proceeding pursuant to 28 U.S.C. §§ 157 and 1334. Further, the parties have consented to the entry of final judgments in this proceeding by the Bankruptcy Court. Pursuant to Fed. R. Civ. P. 52, which is made applicable to this proceeding by Fed. R. Bankr. P. 7052, the Court makes the following findings of fact and conclusions of law.¹

FINDINGS OF FACT

1. Defendant was Plaintiffs' son-in-law by virtue of his marriage to Plaintiff's daughter ("Mrs. Macdonald") prior to her death in February of 2020.

2. It appears that Plaintiffs have significant means and have generously benefitted their children and their families through trust funds, the payment of educational expenses and housing costs. Mr. Furlow spent most of his career as a successful real estate developer. Since 2004, Plaintiffs assisted Defendant and Mrs. Macdonald (collectively the "Macdonalds") with a series of purchases of real estate to be used as the residence for the Macdonalds and their children. Specifically, in 2004, Plaintiffs offered to assist the Macdonalds with the purchase of a new house in Miami, Florida in order to ensure the Macdonalds lived in a bigger and better home in a desirable school district for their children. As a result, Plaintiffs and Macdonalds agreed to purchase an approximately $800,000 home in Miami, Florida ("Miami Property"). According to the testimony of Mr. Furlow, he contributed half of the purchase price for the Miami Property in exchange for a one-half interest, while the Macdonalds received a one-half interest by contributing the remaining portion of the purchase price from their savings and a mortgage loan. Testimony also indicated that Plaintiffs contributed significantly in updating the home, sharing those expenses equally with the Macdonalds. Mr. Furlow testified that a written agreement was entered between the parties which documented the terms of their agreement for the Miami Property; however, a copy of the agreement was not submitted into evidence.

3. During the time that the Macdonald family resided in the Miami Property, Mrs. Macdonald developed substance abuse problems. Defendant testified that in 2008, in an effort to provide Mrs. Macdonald a new environment to better address her problems and because Defendant received a federal contracting job offer, the Macdonalds moved to Virginia. Defendant testified that his new job allowed Mrs. Macdonald to no longer work as an attorney, the pressures from which he believed had been contributing to her substance abuse problems. Again, Plaintiffs assisted with the purchase of a home for the Macdonalds' residence in Virginia ("Virginia Property"). Mr. Furlow testified that the proceeds from the sale of the Miami house were "rolled over" and used for the purchase of the Virginia Property with Mr. Furlow and the Macdonalds each having a one-half interest. Plaintiffs submitted into evidence an unsigned copy of a written agreement regarding the Virginia Property which provided that Mr. Furlow held a 55% interest in the property and would receive that portion of any sale of the Virginia Property if the sale was for a reasonable market value. Mr. Furlow testified that the written agreement was signed by the Macdonalds. While Defendant does not dispute such arrangements for the Miami Property and Virginia Property, he did not recall signing any said agreements.

4. It appears Plaintiffs had a similar arrangement with Mrs. Macdonald's sister. Specifically, on three occasions, Plaintiffs assisted Mrs. Macdonald's sister and the sister's spouse with the purchase of a series of real properties that were to serve as the residence for the sister's family. On each occasion the sister and her family moved into a better house. Mr. Furlow testified that Plaintiffs would contribute one-half of the purchase price in exchange for a one-half interest in the real property. Ultimately, as to the most recently purchased property, referred to as the "dream house" for that daughter's family, Plaintiffs quitclaimed their interest in the property to Mrs. Macdonald's sister and the sister's spouse without consideration, effectively gifting them total ownership of the property.

5. It appears Mrs. Macdonald's substance abuse problems continued to escalate in Virginia, and she no longer worked as an attorney. In addition, Defendant suffered a work-related injury, resulting in the family's income being limited to his retirement disability benefits, which Defendant testified was approximately $30,000 per year.

6. Defendant testified that despite the Macdonalds' meager resources at that point, Plaintiffs enticed the Macdonalds to move to South Carolina in order to purchase a "dream house" with deep water accessibility in the amount of approximately $1.2 million near Plaintiffs' home in the hope that moving closer to her parents might alleviate some of Mrs. MacDonald's problems.

7. On August 26, 2015, a deed was executed conveying the Charleston Property to Plaintiffs and the Macdonalds as tenants-in-common ("Deed").² The entire purchase price of the Charleston Property (approximately $1.2 million) at the time of the closing was paid by Plaintiffs without a mortgage loan. The Deed provides no further information regarding the co-tenants' share of the Charleston Property, and there was no separate written agreement addressing its purchase and the parties' respective interests.

8. Defendant testified that he never agreed to pay a 25% share of the purchase price nor had any discussions with either of the Plaintiffs regarding payment for this "dream home" prior to the closing of the Charleston Property. Defendant also testified that Plaintiffs had told him to consider it a gift and that at some "magical moment," the Plaintiffs would quitclaim the entire interest of the Charleston Property to the Macdonalds in a similar fashion as they had done with Mrs. Macdonald's sister.

9. Defendant also testified that there was no expectation that the Macdonalds pay one-half of the value of the Charleston Property and that at the time of the closing and when he moved to South Carolina, the Macdonalds did not have the resources and would not have qualified for a mortgage of one-half the value of the Charleston Property, as the family's income was limited to his disability retirement income, which amounted to approximately $30,000 a year, a fact known to the Plaintiffs. Defendant stated that, due to her substance abuse problems, Mrs. MacDonald had not worked since they had moved to Virginia in 2008 and that he had significant difficulty finding a federal contracting job in the Charleston area. As a result, he drove for Uber for income after they had moved to South Carolina.³ Defendant testified that he suggested that he not be included on the Deed, but that Mr. Furlow insisted that he be listed as a tenant-in-common in order to "appreciate the ownership of the property."

10. Conversely, Plaintiffs testified that the parties agreed that Defendant and Mrs. MacDonald would contribute 50% of the purchase price for the Charleston Property in exchange for the deeded interest. Specifically, Mr. Furlow testified that the expectation was that Defendant and Mrs. MacDonald's share ($610,635.50) would be paid from the proceeds of the sale of the Virginia Property, which was anticipated to be approximately $300,000 when the Charleston Property was purchased, and by their obtaining a mortgage loan for the remaining balance of approximately $300,000. Mr. Furlow testified that the parties agreed to abide by a similar arrangement that had been in place for the Virginia Property and Miami Property. However, unlike his testimony regarding the agreements for those properties, Mr. Furlow admitted that no written agreement was drafted or signed between Plaintiffs and the Macdonalds for the Charleston Property.

11. There is no dispute that Plaintiffs had no intention to occupy, use, live in or benefit by the Charleston Property and that the intention upon its purchase was for the property to provide a home for the Macdonalds and their children.

12. There was conflicting testimony from the parties about Plaintiffs' intent regarding the purchase of the Charleston Property. While both Mr. and Mrs. Furlow testified that their contribution to the purchase price was an investment, Mrs. Furlow indicated that she did not ever expect a beneficial interest in the Charleston Property and that there always was a contemplation to eventually gift their interest in the property to Mrs. Macdonald and Defendant but that "they had not reached that point yet."⁴

13. In August 2016, one...