Sunday, April 10, 2011

DIVORCE STORIES -- WHY YOU SHOULD LISTEN TO YOUR LAWYER

The Story About the Contractor, or The Man Who Came to Dinner and Stayed to Remodel the House

The lessons learned from this story: Listen to your lawyer about the value of your case; just because you married the owner, it does not become community property and don’t remodel a house that isn't yours.

Dave loved to remodel houses. He loved high quality materials and foraged construction sites and surplus stores for sinks, unusual woods, windows and other tools of his trade. He had always loved remodeling houses. He remodeled a rather ordinary three bedroom rambler in a run down neighborhood turning it into a House Beautiful in the midst of Hot Rod Haven. They told him he could not sell it for an amount that would cover his costs even though he had done all the work himself and got most materials at bargain prices. He has, as they say, overbuilt for the neighborhood. Dave never got to find out what his house was worth as he lost that house in his first divorce.

After the divorce Dave continued to work odd jobs, Mostly what we call under the table. Cash or checks cashed at the issuing bank. Money that IRS and ex wives wouldn’t find. Dave’s reputation for quality work was impeccable although things didn’t get done on time and he usually forgot to keep financial records. Nonetheless, Dave had plenty of work.

Nadine was recently divorced and wanted to remodel her kitchen. She met Dave through friends. She paid him $20,000 and he did a craftsman like job with which she was pleased. He started hanging around the house more and more and soon they became romantically involved. Soon Dave moved in with Nadine. Dave started some more projects on the house. A sun room would be nice. One with large bay windows of the highest quality and the most energy efficient. The back deck was demolished in preparation for a project some day. Dave asked Nadine if his adult son could move in with them. Dave turned the garage into a separate bedroom with private bath. He found modern fixtures and even some marble countertops. He had enough marble left to refinish the laundry room. The only house in the neighborhood with marble counters in the laundry room. New wainscoting in the downstairs family room and a new fireplace mantle would be nice. Somewhere along the way, Dave and Nadine got married.

Dave and Nadine fell out of love. Or rather Nadine fell out of love with Dave and asked him to move out. Dave couch surfed for a while and his son went back to live with his mother. Dave had a great personality and always could find friends who could provide bed and board in return for some nice carpentry.

Come now the divorce lawyers. Nadine was in no mood for a cooperative divorce. In her mind, there was nothing to cooperate about. It was a short term marriage, they did not have children and, in her opinion, there was no property to divide. They had never comingled their finances or obtained joint bank accounts or credit cards. Nothing to it. Or so she thought.

Dave demanded his “community property” share of the house. Dave had the mistaken notion that because they were married in a community property state the house became community and he wanted Nadine to buy out his share of the equity, at that time about $100,000. Dave was on his third lawyer and he finally recognized that the house remained Nadine’s separate property. However, he was determined to get reimbursed for his expense and effort at remodeling the house.

As I said, Dave did have a disarming charm and I agreed to represent him in negotiating a reasonable settlement. It would be “unjust enrichment” for Nadine to reap the benefit of Dave’s remodeling work without any compensation. Dave had already spent more than fifteen thousand dollars on his previous attorneys and I thought I could resolve the case easily in a few weeks.

Dave had no records of his out of pocket expenditures and, of course, no records or even reasonable calculations as to the number of hours he spent. In his mind, however, he felt entitled to $125,000 reimbursement. Nadine believed he was entitled to nothing and even had some notion that Dave owed her rent for the time he and his son lived in her house.

I often cite the statistic that 95% cases do not go to trial. This was the exception. Despite my best efforts, the case did go to trial. Both Nadine and Dave were determined to spend whatever they needed to in order to be right. Mediation and two fairly amicable lawyers could not convince them otherwise. Each just knew the judge would decide they were right.

Any guess as to the outcome of the trial?

Dave believed he should be compensated for the actual cost for time and materials for the remodel. A legal principle law provides that if Nadine paid nothing she would be unjustly enriched. The law also provides that Dave could only be compensated for the amount he had increased the value of the house.

Nadine’s real estate appraiser testified that Dave had actually decreased the value of the house because the bedroom replaced the garage and a house without a garage was worth less than one with. Also the unfinished deck diminished the value. Nadine’s appraiser had never testified as an expert witness and he contradicted himself several times. Our appraiser had spent hours and countless cases testifying as an expert. His pictures, analysis and testimony convinced the judge that Dave’s work, which was of unquestionable quality made the house worth $60,000 more than if had not been remodeled. Even without a garage. Sound good doesn’t it? Well, remember, Nadine had paid Dave for the kitchen remodel before they were married. That took the value Dave had increased the value of the home by only $50,000. Dave wasn’t happy with that but was willing to settle for $50,000.

But wait, there’s more. Dave performed the work while they were married and his time, skill and effort as well as the money spent on materials was all community property.

Result: Dave was entitled to $25,000 reimbursement from Nadine.

Moral of the story? Listen to your lawyer about the value of you case, Mediation usually costs less and gets better results, and don’t remodel a house that isn't yours.

1 comment:

john said...

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