Connie McGahey v. James Wilson ( 2001 )

IN THE COURT OF APPEALS OF TENNESSEE
AT NASHVILLE
January 5, 2001 Session
CONNIE L. McGAHEY v. JAMES M. WILSON
Appeal from the Chancery Court for Davidson County
No. 99-2652-II Carol McCoy, Chancellor
No. M2000-01931-COA-R3-CV - Filed July 17, 2001
Upon divorce, the parties entered into an agreement that provided the parties would retain ownership
as the marital residence as tenants in common, but could not sell the property without mutual
consent. Mrs. McGahey now desires to partition the property over her former husband’s objection.
The special master found that the contract provision barring partition was unenforceable. The
chancellor found the provision enforceable but only for a reasonable period of time (sixteen years).
Mr. Wilson now appeals the trial court’s judgment ordering partition by sale. Resolution of this
appeal requires us to examine the effect of a contract barring partition between tenants in common
when no time limitation or purpose for the restriction against sale was stated in the agreement. We
hold the contract provision to be unenforceable.
Tenn. R. App. P. 3 Appeal as of Right ; Judgment of the Chancery Court
Affirmed as Modified
WILLIAM B. CAIN , J., delivered the opinion of the court, in which WILLIAM C. KOCH , JR. and
PATRICIA J. COTTRELL , JJ., joined.
G. Dennis Jinkerson, Goodlettsville, Tennessee, for the appellant, James M. Wilson.
H. E. Miller, Jr., Gallatin, Tennessee, for the appellee, Connie L. McGahey.
OPINION
The parties purchased approximately three acres of land together in 1975 and built a
residence on it during their marriage. In 1984, the parties were divorced and entered into a Property
Settlement Agreement which was incorporated in the final divorce decree. In the Property
Settlement Agreement, the parties agreed to retain ownership of the property and residence as tenants
in common. The pertinent portion of the parties’ agreement provided:
The parties have agreed to retain joint ownership of said property as tenants in
common after the granting of the divorce contemplated herein, with Wife to have
sole right of possession until her remarriage, at which time possession of the property
shall revert to the Husband. The party in possession shall be the party responsible
for the mortgage indebtedness, taxes, insurance, and maintenance on said property
and shall indemnify and hold the other party harmless for same while he or she reside
in said property. The parties further agree that the property cannot be sold unless
agreed to by both parties hereto. Should the property be sold, the proceeds derived
therefrom shall be divided equally between the parties. Both parties further agree not
to encumber their one-half interest in the property at any time without the prior
written consent of the other party.
After the divorce, Mrs. McGahey lived in the house with the three children of the parties
from 1984 through 1993. In 1993, Mr. Wilson took possession of the house.
On September 17, 1999, Mrs. McGahey filed a complaint pursuant to Tenn. Code Ann. 25-
27-101 seeking a partition by sale of the property. The trial court referred the case to a Special
Master over the defendant’s objection.
The Special Master filed her Report of the Master finding in pertinent part as follows:
Answer: The Master finds and recommends to the Court that the 1984 Property
Settlement Agreement between the parties is contractual in nature. The agreement
to divide possession of the marital home retains its contractual status, despite being
incorporated into the circuit court’s order. This is the case because the court does not
have continuing statutory power to modify the terms of ownership and possession of
the real property upon a change of circumstances. Penland v. Penland, 521 S.W.2d
222 (Tenn. 1975).
In the face of a lawsuit to partition the property however, the settlement
agreement provision regarding possession is unenforceable. It illegally restrains the
free alienation of property and is therefore against public policy.
Although there is no Tennessee case directly on point, the Tennessee
Supreme Court has adopted the “. . . time-honored rule that the law favors the free
and untrammeled use of property, and that restrictions in conveyances on the fee are
always regarded unfavorably.” Central Drugstore v. Adams, et al, 201 S.W.2d 682(Tenn. 1947). See also, Wade R. Habeeb, Annotation, Contractual Provisions as
Affecting Right to Judicial Partition, 37 A.L.R. 3d 962 (1971). A study of the cases
collected in the Annotation reflect the majority view that enforceable restrictions
upon the right to partition must be limited in time or have an implied time limitation.
See, e.v., Raisch v. Schuster, 352 N.E.2d 657 (Ohio App. 1975). The facts in the case
before this court reflect an agreement in which the restriction upon partition is in
perpetuity: “. . . The parties further agree that the property cannot be sold unless
agreed to by both parties hereto . . .” The Master finds that such perpetual restriction
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against partition is against the rule adopted in this state and the majority rule
elsewhere, and is unenforceable.
Finally, the Master finds and recommends that the property be sold for
partition as it cannot be partitioned in kind.
Mr. Wilson objected to the Master’s finding.
Mrs. McGahey filed a Motion to Confirm Report of the Master and Response to Objections
to Master’s Report.
On May 17, 2000, the chancellor entered an Order Granting Plaintiff’s Motion to Confirm
Report of the Master and Defendant’s Objections in Part stating:
After hearing argument of counsel and after having reviewed the entire record, the
Court has concluded that the Plaintiff’s Motion should be granted and that the
Defendant should be granted relief in regard to one of his Objections.
....
The Master found that this provision was unenforceable. The Court has determined
that such a bar may be enforced for a reasonable period of time. The Court has
determined that the parties did anticipate that the property would be sold at some
point in time. The parties were divorced in 1984. The Plaintiff resided on the
property for approximately nine years pursuant to the provisions of the Property
Settlement Agreement, and the Defendant has resided on the property for
approximately seven years. A life tenancy was not anticipated by the parties, as the
Defendant only has the right to possess the property. Approximately sixteen years
has passed since the parties were divorced. The Court finds that sixteen years
constitutes a reasonable time. As a reasonable period of time has passed, the Court
finds that the property may now be partitioned and that the partition should be by
auction sale.
This appeal follows.
Mr. Wilson argues that the portion of the Property Settlement Agreement stating that the
“property cannot be sold unless agreed to by both parties hereto” constitutes a bar to partition and
that the agreement is enforceable based upon a logically implied reasonable period of time other than
sixteen years.
This hearing is on appeal from the findings of the Chancellor and the Special Master. A trial
court’s referral of certain matters to a Special Master can affect the standard of review on appeal.
“A concurrent finding of fact by a Master and a trial court is conclusive on appeal, except where it
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is upon an issue not properly to be referred, where it is based on an error of law or a mixed question
of fact and law, or where it is not supported by any material evidence.” Mandrell v. McBee, No.
M2000-00108-COA-R3-CV, 2000 WL 1753070 at * 5 (Nov. 30, 2000 Tenn.Ct.App.); Long v. Long,
957 S.W.2d 825, 828 (Tenn.Ct.App. 1997); Aussenberg v. Kramer, 944 S.W.2d 367, 370
(Tenn.Ct.App. 1996); Archer v. Archer, 907 S.W.2d 412, 415 (Tenn.Ct.App. 1995).
There is no presumption of correctness with the trial court’s conclusions of law. Campbell
v. Florida Steel Corp., 919 S.W.2d 26 (Tenn. 1996).
The central issue on appeal is the review of the Chancellor’s conclusion of law with regard
to the enforceability of the property agreement.
In this case, Mr. Wilson asks us to review the trial court’s finding of law which is contrary
to that of the Special Master’s finding of law. Thus, we review de novo with no presumption of
correctness.
The significant issue on appeal is whether the partition can be had against the will of one of
the tenants in common, Mr. Wilson.
Tennessee Code Annotated section 29-27-101 provides:
Any person having an estate of inheritance, or for life, or for years, in lands, and
holding or being in possession thereof, as tenant in common or otherwise, with
others, is entitled to partition thereof, or sale for partition, under the provisions of this
chapter.
Generally, a tenant in common, is entitled to partition, or sale for partition. Yates v. Yates,
571 S.W.2d 293 (Tenn. 1978); Tenn. Code Ann. § 29-27-101. From the plain language of the
statute, it appears that a tenant in common has a right to withdraw from a co-tenancy at any time for
whatever reason fostering the principal of free alienability of property, although, generally, this right
is not absolute where the parties have contracted otherwise.
“It is the policy of the law to give each person his own severalty and not to force him to
continue in partnership with another.” Nicely v. Nicely, 41 Tenn. App. 179, 293 S.W.2d 30, 32
(1956); see also Bunch v. Bunch, No. 02A01-9705-CH-00106, 1998 WL 46217 at * 3 (Jan. 8, 1998
Tenn.Ct.App.).
“Partition will not be granted in violation of an express or implied agreement not to partition
the property where the agreement covers only a reasonable period of time and is otherwise valid,
binding, and effective.” 68 C.J.S. Partition § 26 (1998). “Courts of other states have denied
partition in cases where a co-tenant has entered into an agreement not to partition.” Bunch at * 3.
(citing Wade R. Habeeb, Annotation, Contractual Provisions as Affecting Right to Judicial Partition,
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37 A.L.R.3d 962 (1971)). In this case, there is an express agreement not to sell unless both parties
agree. The agreement is silent as to its duration and purpose for restraint.
“Where the contract not to partition is silent as to the length of time, it is effective, the courts
do not appear to be entirely consistent as to whether to hold it void as being a perpetual suspension,
or to hold it valid as being a suspension for a limited time.” 37 A.L.R.3d § 8b.
In an analogous context, the Court of Appeals of Ohio delineated the problem.
The present case involves issues sufficiently important to warrant some
preliminary observations on the analytic framework appropriate to cases of the type
sub judice.
Two vigorous, sometimes conflicting policies compete for predominance in
our law. The litigation produced as a consequence is not uncommon, nor are the
legal issues unresolvable, once the nature of the conflict is properly understood.
Fundamentally, the confrontation is not between lender and borrower or between
mortgagee and mortgagor. The apparent antagonism in those relationships is only
a surface manifestation of a deeper, systemic tension. Cf. Dunham v. Ware Sav.
Bank (1981), 384 Mass. 63, 423 N.E.2d 998, 1003-1004. The genuine conflict is
between freedom of alienation and freedom of contract; the ability to transfer
property free from unreasonable restraints thereon versus the liberty of parties to
enter into voluntary, binding agreements and to expect enforcement of bargained-for
rights. It has been suggested that the weight of authority favors freedom of
alienation. See, generally, Annotation (1976), 69 A.L.R.3d 713, 724, 731-737.
As a general matter, of course, the law disfavors restraints on alienation,
unless reasonable, and in close cases that construction will be adopted which most
favors free alienability and the right to convey.
First Fed. Sav. & Loan v. Perry’s Landing, 463 N.E.2d 636 (Ohio App. 1983).
Both parties in this case agree that a perpetual forbearance of the right of a tenant in common
to partition of land even though specifically contracted between the parties cannot prevail as such
would constitute an unreasonable restraint on the alienation of property. Three problems are
immediately apparent from a consideration of this record. (1) In the contract the parties agree not
to sell the property without mutual consent. (2) The contract provides no time limitation on this
agreement. (3) The record provides no evidence as to the reasons prompting the parties to make this
agreement.
The Special Master in holding this provision of the agreement to be void relied on Raisch v.
Schuster, 352 N.E.2d 657 (Ohio App. 1975). In Schuster, the court, after recognizing the universal
rule that perpetual forbearance to partition attempted by contract is void and that such contracts are
enforceable only for a reasonable time held:
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Accordingly, we hold that in order to sustain the validity and enforceability
of an agreement not to sell or partition realty, where no period of duration is
expressly set forth in the writing, the agreement must contain evidence of the purpose
for the restraint against sale or partition sufficient to permit the determination of a
duration reasonably necessary to accomplish such purpose.
Returning to the agreement in the instant cause, it is immediately apparent
that there is no inkling of what the purpose of the restraint might have been. Nor
does the record, such as it is, shed any additional light on the matter. Accordingly,
in the absence of any evidence from which the trier of fact could determine the
purpose of the underlying contract not to sell the realty without majority consent, it
would be impossible for a court to make any decision as to the reasonableness of the
restraint involved. In consequence thereof, the implied covenant not to partition is
indeed void as an unreasonable restraint against alienation.
Raisch v. Schuster, 352 N.E.2d 657, 660 (Ohio App. 1975).
In modifying the Master’s finding and determining that sixteen years was a “reasonable”
time, thus validating the agreement in this case, the chancellor held:
The court has determined that the parties did anticipate that the property
would be sold at some point in time. The parties were divorced in 1984. The
plaintiff resided on the property for approximately nine years pursuant to the
provisions of the Property Settlement Agreement, and the defendant has resided on
the property for approximately seven years. A life tenancy was not anticipated by the
parties, as the defendant had only the right to possess the property. Approximately
sixteen years has passed since the parties were divorced. The court finds that sixteen
years constitutes a reasonable time. As a reasonable period of time has passed the
court finds that the property may now be partitioned and that the partition should be
by auction sale.
Like the Raisch case, the record discloses absolutely no evidence as to the reasons motivating
these parties to make this agreement.
There is a line of authority led by North Carolina as articulated in Diggs v. Diggs, 446 S.E.2d
873 (N.C.App. 1994) which finds that the length of the life of a party to the agreement implicitly
limits the time of its enforceability and is therefore not an unreasonable restraint on alienation. In
the Diggs’ case, the agreement simply provided that the wife should continue to occupy the marital
home and be responsible for making the mortgage payment while living in the marital home. It did
not purport to deprive the husband co-tenant of the right to sell his undivided interest by voluntary
sale made subject to the agreement. In the case at bar, not only does the agreement have no time
limitation but it also prohibits the non-possessory tenant in common indefinitely from the power
even to encumber his one-half undivided interest in the property.
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The North Carolina rule effectively converts a simple right of possession into a life estate on
a finding that the respondent’s right to occupy the house “can last no longer than his lifetime, thus
implicitly limiting the duration of the waiver of the right to partition. The agreement did not
unreasonably limit the petitioner’s right to partition and was effective to waive that right.” 446
S.E.2d 873, 877 (N.C.App. 1994).
In view of Tennessee’s long standing commitment to the free alienation of property as set
forth in Tennessee Code Annotated Section 29-27-101 and in Nicely v. Nicely, 293 S.W.2d 30, 32
(Tenn.Ct.App. 1956), we believe that Raisch v. Schuster, et al., 352 N.E.2d 657 (Ohio App. 1975)
provides the rule that should control in this case.
In the words of Raisch:
A study of the cases collected under Annotation, 37 A.L.R.3rd 962, suggests
to us, however, that in order for such a covenant barring partition to be valid and
enforceable, certain criteria must be satisfied. These, it would seem to us, consist at
a minimum of certain reasonable temporal limitations on the duration of the
restriction. Thus, it would appear that New Jersey, New Mexico, Illinois, California
and Alabama have arrived at the rule that a covenant not to partition is not void on
its face where it does not, by its terms or construction, require a perpetual
forebearance from the tenant-in-common’s right to partition. The cases of Michalski
v. Michalski (1958), 50 N.J.Super. 454, 142 A.2d 645; Prude v. Lewis (1967), 78
N.M. 256, 430 P.2d 753; Rosenberg v. Rosenberg (1952), 413 Ill. 343, 108 N.E.2d
766; Harrison v. Domergue (1969), Cal.App.2d 19, 78 Cal.Rptr. 797; and Smith v.
Brasseale (1925), 213 Ala. 387, 105 So. 199__ individually and taken as a whole –
stand for the proposition that the covenant not to partition is valid so long as a
reasonable time limitation is stated therein, or may be derived therefrom. The rule
occurs to us as useful and desirable, and we accordingly adopt it. Where, therefore,
an agreement restricting partition or sale contains an express limitation to a term
which is reasonably related to the purposes of the restriction, . . . , the covenant
should not be held contrary to public policy, and will be enforced.
...
Accordingly, we hold that in order to sustain the validity and enforceability
of an agreement not to sell or partition realty, where no period of duration is
expressly set forth in the writing, the agreement must contain evidence of the purpose
for the restraint against sale or partition sufficient to permit the determination of a
duration reasonably necessary to accomplish such purpose.
352 N.E.2d 657, 659-60 (Ohio Ct.App. 1975).
In the case at bar, the agreement provides no time limitation and the record provides no basis
other than speculation and guesswork as to the intention of the parties in making the agreement. As
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a consequence, like in Raisch, the agreement constitutes an unreasonable restraint against alienation
and cannot be upheld.
Since the result of the Chancellor’s decision is to sustain the right of Mrs. McGahey to
immediate partition and our holding that the agreement, under the circumstances, constitutes an
unreasonable restraint on the alienation of property produces the same results, we modify the
judgment of the Chancellor on the basis stated herein and affirm the judgment of partition.
Costs of this cause are assessed against the appellee.
___________________________________
WILLIAM B. CAIN, JUDGE
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