FTR Farms v. Rist Farm

Nebraska Supreme Court Online Library
www.nebraska.gov/apps-courts-epub/
07/17/2020 08:08 AM CDT
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Nebraska Supreme Court Advance Sheets
305 Nebraska Reports
FTR FARMS v. RIST FARM
Cite as 305 Neb. 708
FTR Farms, Inc., a Nebraska corporation,
appellee, v. Rist Farm, Inc., a Nebraska
corporation, appellant, and Eugene
Wesley Dowell and Mary L.
Dowell, husband and wife,
et al., appellees.
___ N.W.2d ___
Filed May 1, 2020. No. S-19-438.
1. Partition: Equity: Appeal and Error. A partition action is an action in
equity and is reviewable by an appellate court de novo on the record.
2. Partition. The purpose of a partition action is to divide a jointly owned
interest in real property so that each owner may enjoy and possess in
severalty.
3. ____. One of several tenants in common has an absolute right to a
partition of their real estate, in the absence of an agreement to, or other
impediments to, the contrary.
4. ____. As between a partition in kind or sale of land for division, the
courts will favor a partition in kind, since this does not disturb the exist-
ing form of inheritance or compel a person to sell his property against
his will, which, it has been said, should not be done except in cases of
imperious necessity.
5. ____. A sale in partition cannot be decreed merely to advance the inter-
ests of one of the owners, but before ordering a sale, the court must
judicially ascertain that the interests of all will be promoted.
6. ____. The generally accepted test of whether a partition in kind would
result in great prejudice to the owners is whether the value of the share
of each in case of a partition would be materially less than the share of
the money equivalent that could probably be obtained for the whole.
7. ____. Owelty addresses a disparity in the value of partitioned parcels
and is the payment of money required when property is not susceptible
of division into exactly equal shares to make the portions of property
respectively assigned to the cotenants of equal value.
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FTR FARMS v. RIST FARM
Cite as 305 Neb. 708
8. Partition: Jurisdiction. A court acquiring jurisdiction of property for
partition acquires complete jurisdiction of the property and affords
complete justice to all parties in that action with respect to the sub-
ject matter.
9. Partition: Equity. In a partition in equity, the court does not act in a
merely ministerial character, in obedience to the call of some or all of
the parties, but administers relief in such manner as to do equal and
exact justice as far as possible.
10. Partition. In a partition in kind, where the premises are incapable of a
fair division, the court has power to award a pecuniary compensation or
charge upon the land.
11. ____. Owelty is predicated upon a division. There can be no owelty in
the absence of a division of property.
12. Partition: Equity. Owelty should be rarely utilized and only when it is
equitably necessary.
13. Equity: Evidence: Appeal and Error. In an appeal of an equity action,
where credible evidence is in conflict on a material question of fact, an
appellate court considers and may give weight to the fact that the trial
court heard and observed the witnesses and their manner of testifying,
and accepted one version of the facts rather than another.
14. Partition: Presumptions. While it is generally true that there is a pre-
sumption in favor of partition in kind, it is likewise true that the charac-
ter and location of the property, or the amount of the interest sought to
be assigned, or both, may be such that it will be presumed that partition
in kind cannot be made.
Appeal from the District Court for Richardson County:
Julie D. Smith, Judge. Affirmed and remanded for further
proceedings.
John Hahn, of Wolfe, Snowden, Hurd, Ahl, Sitzmann,
Tannehill & Hahn, L.L.P., for appellant.
Michael R. Dunn, of Halbert, Dunn & Halbert, L.L.C., for
appellees Eugene Wesley Dowell et al.
Jeffery W. Davis, of Smith, Schafer, Davis & Gaertig,
L.L.C., for appellee FTR Farms, Inc.
Heavican, C.J., Miller-Lerman, Cassel, Stacy, Funke,
Papik, and Freudenberg, JJ.
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FTR FARMS v. RIST FARM
Cite as 305 Neb. 708
Cassel, J.
INTRODUCTION
In this appeal from proceedings to partition real estate, the
principal issue is whether partition in kind can be decreed using
“owelty”—that is, a monetary payment to equalize values.
Because the law has long favored partition in kind, it empow-
ers a court of equity to use that device to accomplish full and
complete justice. But the power should be invoked sparingly.
Here, we are not persuaded that owelty would enable division
in kind without great prejudice to the owners. We affirm the
judgment and remand the cause for further proceedings.
BACKGROUND
Property and Owners
FTR Farms, Inc., and Rist Farm, Inc., each own an undi-
vided one-half interest in a 311-acre tract of farmland in
Richardson County, Nebraska. A winding river—which the
record identifies variously as the Nemaha River, Little Nemaha
River, or Big Nemaha River—creates a natural divide through
roughly the middle of the property.
The river separates the property into two tracts: north and
south. The north tract of the property is approximately 135
acres. The south tract is approximately 176 acres. Both tracts
have high quality soil, but the north tract’s soil is marginally
better. A bridge connects both tracts of the property.
In June 2011, FTR Farms and Rist Farm purchased the
property from Eugene Wesley Dowell and Mary L. Dowell
for $1,750,000. The buyers executed a promissory note to the
Dowells for $1,312,500. The difference was paid at or before
closing. The Dowells have a purchase money security interest
secured by a deed of trust. Prior to the partition action, FTR
Farms and Rist Farm each paid half of the annual payment on
the promissory note.
Partition Ownership
In March 2017, FTR Farms filed a complaint for partition
of the property, seeking partition by sale. It alleged that the
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305 Nebraska Reports
FTR FARMS v. RIST FARM
Cite as 305 Neb. 708
property could not be partitioned in kind according to their
respective interests without prejudice to their rights. In Rist
Farm’s answer, it alleged that the property could be physically
partitioned without great prejudice to the parties. The answer
also asserted that partition by sale would be harmful to the par-
ties’ farming operations.
On FTR Farms’ motion for summary judgment regarding
ownership, the district court determined that FTR Farms and
Rist Farm were joint owners of the property as tenants in com-
mon. The court ordered that partition be made and appointed
a referee to recommend whether the property could be parti-
tioned in kind without great prejudice to the owners.
Partition in Kind
The referee inspected the property. He opined that
physical division of the [property] into two separate,
equal tracts would not be possible and would be imprac-
tical and detrimental to the value of [the property], and
actual partition and division of [the property] between the
two owners cannot be made, without great prejudice to
the owners or one of them.
He stated that the property should be sold, so that the sale may
then be evenly divided between the parties.
FTR Farms and the referee moved to confirm the referee’s
report and requested sale of the property. At the hearing, FTR
Farms and Rist Farm submitted appraisals of the property.
FTR Farms’ expert appraised the property as irrigated and Rist
Farm’s expert appraised the property as nonirrigated. This table
summarizes the respective appraisals:
Tract FTR Farms Rist Farm
North $1,084,668 $860,000
South $1,292,925 $1,075,000
Combined $2,367,020 $1,935,000
South - North = $208,257 $215,000
Combined - (North + South) = ($10,573) 0
At the hearing, the referee testified that he recommended
partition by sale because the north and south tracts were not
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FTR FARMS v. RIST FARM
Cite as 305 Neb. 708
equal in size, the south tract was valued $200,000 more than
the north side, and he could not find any other feasible way to
divide the property into equal tracts. He explained that “[his]
report [was] strictly limited to the notion that if the acres are
not exactly the same, it cannot be partitioned.”
FTR Farms’ president testified that the property was pur-
chased as a whole and should be sold as a whole. He stated he
was going through a bankruptcy proceeding and wanted to sell
the property to pay off his debts. He believed that he would
receive more equity from the sale of the whole property, rather
than a sale of half.
At the hearing, Rist Farm argued that the property should
be partitioned in kind. It argued that Rist Farm should receive
the south tract and that FTR Farms should receive the north
tract. Rist Farm indicated that it would be willing “to make up
a difference or a boot to equalize the valuation of the proper-
ties.” Rist Farm’s appraiser testified that if the property were
sold as a whole versus as a separate parcel, it would have a
negative impact. She stated that in her experience, there are
fewer bidders for larger parcels because of financing and cost
restrictions, whereas the smaller parcels bring more bidders.
She recommended that the land be sold as two parcels to get
the best price.
Rist Farm’s president testified that Rist Farm farmed the
south tract and that FTR Farms farmed the north tract. Each
party kept their own profits, and each paid half of the yearly
payment on the promissory note. He explained that if the
property were sold, he would lose his equity in the land, pay
capital gains tax, lose his pride because he farmed that land
since 1980, and lose a portion of his farming operation, as
well as the profits from it. He stated that if partitioned in
kind, Rist Farm would prefer the south tract and be will-
ing to pay $215,000 to FTR Farms to equalize the value of
the property.
At the hearing, the Dowells stipulated that if the property
were divided and money were to change hands as part of the
division, the funds paid would be given to the Dowells to
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FTR FARMS v. RIST FARM
Cite as 305 Neb. 708
reduce the debt on the less valuable property and new promis-
sory notes would be put in place to protect the Dowells’ first
lien position. Alternatively, if the property were sold by the
referee, the Dowells would be paid in full from the proceeds.
In the district court’s order on the motion to confirm the
referee’s report, it explained that if it were to divide the
property in kind, there would be a significant difference in
size and value between the parcels. It reasoned that the north
tract would be materially less than the money equivalent
that could be obtained for FTR Farms’ share of the whole. It
concluded that “[d]ividing the property in kind would greatly
prejudice [FTR Farms.]” It declined to adopt Rist Farm’s
proposal to award owelty to equalize the difference in value,
because “there is a lack of established authority in Nebraska
to do so in a situation like this, both in terms of statutes and
case law.”
The district court found that physical division “cannot be
made without greatly prejudicing its owners and that this real
estate should be sold at public auction as provided by law.” It
authorized the referee to sell the property “as one tract, as two
separate tracts, or in any manner which might be desirable to
prospective buyers.”
Partition Sale and Confirmation
A public auction followed. The referee first solicited bids
for the north and south tracts separately. Although the precise
high bids for the separate tracts are not in our record, testi-
mony at the confirmation hearing disclosed that the total of
the highest bids for the individual tracts was $1.6 million and
that the high bid for the south side was either $920,000 or
$940,000. The referee then offered the whole property, which
was bid in for $1.62 million.
The referee moved to confirm the sale. A hearing was held,
and the parties adduced evidence. Both FTR Farms and Rist
Farm objected to the confirmation of the sale. They argued
that the sale price was unreasonable and grossly inadequate.
Nonetheless, the district court confirmed the sale.
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305 Nebraska Reports
FTR FARMS v. RIST FARM
Cite as 305 Neb. 708
At the confirmation hearing, the Dowells presented evidence
showing that a notice of default had been given to FTR Farms
and Rist Farm on November 15, 2018, regarding the debt owed
to the Dowells, because FTR Farms had failed to pay its half
of the payment due on November 1.
Appeals
Both FTR Farms and Rist Farm purported to appeal. The
Nebraska Court of Appeals dismissed the appeal for lack of a
final order. The district court then held a hearing to determine
the remaining issues, namely referee’s fees and expenses, attor-
ney fees, supersedeas bond, and oil and gas lease payments.
The district court determined the fees and resolved the remain-
ing issues.
From this judgment, Rist Farm then filed a timely appeal.
We moved the appeal to our docket. 1
ASSIGNMENTS OF ERROR
Rist Farm assigns that the district court erred (1) in deter-
mining that it did not have authority to award owelty to make
partition in kind equitable, (2) in ordering partition by sale
without finding that partition in kind would greatly prejudice
both owners, and (3) by failing to consider options for partition
in kind other than what was proposed by Rist Farm.
STANDARD OF REVIEW
[1] A partition action is an action in equity and is reviewable
by an appellate court de novo on the record. 2
ANALYSIS
We begin with basic, longstanding concepts governing par-
tition actions in Nebraska. Our partition statutes have existed
from statehood. 3
1
See Neb. Rev. Stat. § 24-1106(3) (Cum. Supp. 2018).
2
Zornes v. Zornes, 292 Neb. 271, 872 N.W.2d 571 (2015).
3
See Rev. Stat. §§ 802 to 844 (1867).
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FTR FARMS v. RIST FARM
Cite as 305 Neb. 708
[2] Recently, we have explained: The purpose of a partition
action is to divide a jointly owned interest in real property
so that each owner may enjoy and possess in severalty. 4 This
articulation differs little from its ancient precedent: The object
of a partition suit is to assign property, the fee simple title to
which is held by two or more persons as joint tenants, or ten-
ants in common, to them in severalty. 5
[3] One of several tenants in common has an absolute right
to a partition of their real estate, in the absence of an agree-
ment to, or other impediments to, the contrary. 6 This also is
not a new concept. 7 Here, the parties agree on the necessity of
partition. They dispute between partition in kind and partition
by sale.
[4] One method is favored over the other. As between a
partition in kind or sale of land for division, the courts will
favor a partition in kind, since this does not disturb the exist-
ing form of inheritance or compel a person to sell his property
against his will, which, it has been said, should not be done
except in cases of imperious necessity. 8 We have often stated
this principle or its equivalent. 9 But we have also acknowl-
edged that the preference can be overcome. 10
[5,6] Finally, we have said that a sale in partition cannot be
decreed merely to advance the interests of one of the owners,
but before ordering a sale, the court must judicially ascertain
4
Zornes v. Zornes, supra note 2.
5
Phillips v. Dorris, 56 Neb. 293, 76 N.W. 555 (1898).
6
Malcom v. White, 210 Neb. 724, 316 N.W.2d 752 (1982).
7
See Windle v. Kelly, 135 Neb. 143, 280 N.W. 445 (1938).
8
In re Estate of McKillip, 284 Neb. 367, 820 N.W.2d 868 (2012).
9
See, Channer v. Cumming, 270 Neb. 231, 699 N.W.2d 831 (2005); Phillips
v. Phillips, 170 Neb. 733, 104 N.W.2d 52 (1960); Cary v. Armbrust, 160
Neb. 392, 70 N.W.2d 427 (1955); Trowbridge v. Donner, 152 Neb. 206, 40
N.W.2d 655 (1950).
10
See Nordhausen v. Christner, 215 Neb. 367, 338 N.W.2d 754 (1983).
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FTR FARMS v. RIST FARM
Cite as 305 Neb. 708
that the interests of all will be promoted. 11 Our statute requires
a court to determine whether “partition cannot be made without
great prejudice to the owners.” 12 The generally accepted test
of whether a partition in kind would result in great prejudice
to the owners is whether the value of the share of each in
case of a partition would be materially less than the share of
the money equivalent that could probably be obtained for the
whole. 13 With these principles in mind, we turn to the specific
arguments here.
Owelty Permissible
Rist Farm’s first assignment of error attacks the district
court’s legal conclusion that “there is a lack of established
authority in Nebraska to [order an award of owelty to offset
the difference in value] in a situation like this, both in terms
of statutes and case law.” Rist Farm argues that the district
court “clearly did have authority to award owelty,” 14 while
FTR Farms characterizes this as an “attempt[] to read into our
statutes and case law a concept that simply does not exist.” 15
Here, it is not clear whether the district court determined that
owelty is never permitted, as FTR Farms argues, or whether
owelty was unsuited to the circumstances here. While the court
spoke of a “lack of established authority,” it also referred to
“a situation like this.” We reject the notion that owelty has no
place in our partition jurisprudence.
[7] Although the term “owelty” appears only once in our
reported decisions, 16 it has ancient roots. Under Roman law,
property owners used full partitioning remedies, including
payments between cotenants to equalize unequal divisions
(owelty) and removing and vesting a cotenant’s interest in
11
In re Estate of McKillip, supra note 8.
12
Neb. Rev. Stat. § 25-2181 (Reissue 2016).
13
In re Estate of McKillip, supra note 8; Trowbridge v. Donner, supra note 9.
14
Brief for appellant at 15.
15
Brief for appellee FTR Farms at 7.
16
See Staats v. Wilson, 76 Neb. 204, 107 N.W. 230 (1906).
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the property from a cotenancy (allotment). 17 “Owelty thus
addresses a disparity in the value of partitioned parcels and
is the payment of money required when property is not sus-
ceptible of division into exactly equal shares to make the
portions of property respectively assigned to the cotenants of
equal value.” 18 The modern definition of “owelty” is “[e]qual-
ity as achieved by a compensatory sum of money given after
an exchange of parcels of land having different values or after
an unequal partition of real property” or “[t]he sum of money
so paid.” 19
Most states have recognized or, at one time, employed an
owelty award. 20 States that employ an owelty award authorize
its use either by common law 21 or statute. 22 Several states have
reasoned that the use of an owelty award should be rarely
used and only in cases when it is equitably necessary. 23 Only
17
See John G. Casagrande, Jr., Note, Acquiring Property Through Forced
Partitioning Sales: Abuses and Remedies, 27 B.C. L. Rev. 755 (1986).
18
59A Am. Jur. 2d Partition § 154 (2015).
19
Black’s Law Dictionary 1279 (10th ed. 2014).
20
See, generally, 59A Am. Jur. 2d, supra note 18 (examining cases across
several jurisdictions utilizing owelty award in partition action).
21
See, e.g., Sawin v. Osborn, 87 Kan. 828, 126 P. 1074 (1912); Waller v.
George, 322 Mo. 573, 16 S.W.2d 63 (1929); Chesmore v. Chesmore, 484
P.2d 516 (Okla. 1971); Updike v. Adams, 24 R.I. 220, 52 A. 991 (1902).
22
See, e.g., Ala. Code § 35-6-25 (2014); Cal. Civ. Proc. Code § 873-250
(2015); Idaho Code Ann. § 6-541 (2010); 735 Ill. Comp. Stat. 5/17-105
(2018); Me. Rev. Stat. Ann. tit. 14, § 6515 (2020); Mass. Gen. Laws ch.
241, § 14 (2004); Mich. Comp. Laws § 600.3336 (2013); Minn. Stat.
§ 558.12 (2018); Miss. Code Ann. § 11-21-33 (2019); Mont. Code Ann.
§ 70-29-209 (2019); Nev. Rev. Stat. § 39.440 (2019); N.H. Rev. Stat. Ann.
§ 547-C:22 (2019); N.Y. Real Prop. Acts. Law § 943 (2009); Or. Rev. Stat.
§ 105.250 (2019); 42 Pa. Stat. and Cons. Stat. Ann. § 1562 (West 2014);
Tenn. Code Ann. § 29-27-117 (Supp. 2018); Va. Code Ann. § 8.01-83
(2015); Wash. Rev. Code § 7.52.440 (2017).
23
See, Harris v. Johnson, 42 Ill. App. 3d 751, 356 N.E.2d 1107, 1 Ill. Dec.
825 (1976); Burns v. Ambler, 302 Mich. 526, 5 N.W.2d 451 (1942); Bagg
v. Osborn, 169 Minn. 126, 210 N.W. 862 (1926); Waller v. George, supra
note 21.
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Kentucky has expressly held that an owelty award is in opposi-
tion to its partition statutes and, therefore, is not recognized. 24
[8] Rist Farm concedes that a Nebraska court’s authority
to award owelty “comes not from statute, as in some jurisdic-
tions, but rather is inherent in its broad equitable powers.” 25
In Nebraska, a court acquiring jurisdiction of property for
partition acquires complete jurisdiction of the property and
affords complete justice to all parties in that action with
respect to the subject matter. 26
A brief digression is necessary. For most of Nebraska’s his-
tory, its probate courts lacked jurisdiction of partition actions,
even where the real estate was the property of a decedent’s
estate. 27 For that reason, all of Nebraska’s partition litigation
originated in a district court until relatively recently. 28
We have used the term “owelty” only one time—in Staats
v. Wilson. 29 There, we rejected a collateral attack upon a prior
partition judgment, stating that “[t]he conduct of the widow
and the heirs regarding the homestead amounted to a partial
parol partition of the land with owelty.” 30 Thus, we used the
term consistently with the definition, but as a description and
not as a form of relief.
But without using the term “owelty,” we have implemented
equalization payments in two cases involving partition of real
estate. One case is ancient; the other quite recent.
In Lynch v. Lynch, 31 the heirs of a 66-foot-wide platted lot
in Omaha, Nebraska, sought partition of three undivided inter-
ests: one-sixth, one-third, and one-half. The property was
24
Wrenn v. Gibson, 90 Ky. 189, 13 S.W. 766 (1890).
25
Brief for appellant at 16.
26
See Fairley v. Kemper, 174 Neb. 565, 118 N.W.2d 754 (1962).
27
See In re Estate of Kentopp. Kentopp v. Kentopp, 206 Neb. 776, 295
N.W.2d 275 (1980).
28
See id.
29
Staats v. Wilson, supra note 16.
30
Id. at 210, 107 N.W. at 232 (emphasis supplied).
31
Lynch v. Lynch, 18 Neb. 586, 26 N.W. 390 (1886).
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partitioned in kind: The one-half interest heir received the east
44 feet of the property and the one-third interest heir received
the west 22 feet. The value of the one-sixth interest and one-
half of the property’s rents were charged as a lien upon the east
44 feet. The sole question on appeal was whether the district
court had the power to render the monetary judgment to equal-
ize the division in kind.
[9,10] In holding that it did, we articulated two principles.
First, in a partition in equity, “the court does not act in a
merely ministerial character, in obedience to the call of some
or all of the parties, but administers relief in such manner as
to do equal and exact justice as far as possible.” 32 Second, in a
partition in kind, “where [the] premises are incapable of a fair
division[,] the court has power to award a pecuniary compensa-
tion or charge upon the land.” 33 Thus, without using the term,
we recognized the concept of owelty.
Much more recently, in In re Estate of McKillip, 34 we imple-
mented an owelty award without using the term. Three heirs
inherited four tracts of land and cash. Only two of the four
tracts were contiguous. After a partition by sale, an appeal
was taken. We reversed, holding that the property should be
partitioned in kind by one heir receiving the two contiguous
tracts and each of the other heirs receiving one of the remain-
ing tracts. We granted complete relief by fashioning a remedy
for the unequal division of land using cash from the remaining
estate to equalize the value in the division. This met the defini-
tion of owelty: a pecuniary sum given to a party receiving a
smaller valuation of land to equalize the distribution.
For the sake of completeness, we note that we have imple-
mented a partition in kind of promissory notes. 35 In that case,
we directed the district court upon remand to implement an
equalization payment as necessary.
32
Id. at 592, 26 N.W. at 393.
33
Id.
34
In re Estate of McKillip, supra note 8.
35
See Zornes v. Zornes, supra note 2.
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[11,12] These cases teach that owelty is permitted in parti-
tion cases. But it has been used sparingly and only in particular
circumstances. With respect to real estate, we have employed
the concept only twice in a century and a half. We agree with
a Minnesota court that “[o]welty is predicated upon a divi-
sion. There can be no owelty in the absence of a division of
property.” 36 And we agree with the many states stating that
owelty should be rarely utilized and only when it is equi-
tably necessary. 37 That owelty is permitted does not answer
the question whether it was appropriate here. We now turn to
that question.
Partition in Kind or by Sale
Rist Farm next assigns that the district court erred in order-
ing partition by sale without finding that partition in kind
would greatly prejudice both owners. In making this argument,
Rist Farm relies upon the use of owelty to equalize the differ-
ence in value between the tracts on each side of the river.
[13] In our de novo review of this question, we accord some
deference to the district court. In an appeal of an equity action,
where credible evidence is in conflict on a material question
of fact, an appellate court considers and may give weight to
the fact that the trial court heard and observed the witnesses
and their manner of testifying, and accepted one version of the
facts rather than another. 38
We also note that we have the advantage of hindsight in that
our record includes the actual sale price and some information
regarding the bidding at the partition sale. In Trowbridge v.
Donner, 39 where we reversed a partition by sale and mandated
partition in kind, we considered the sale results in assess-
ing whether partition in kind would greatly prejudice the
36
Bagg v. Osborn, supra note 23, 169 Minn. at 129, 210 N.W. at 863.
37
See, Harris v. Johnson, supra note 23; Burns v. Ambler, supra note 23;
Bagg v. Osborn, supra note 23; Waller v. George, supra note 21.
38
Siedlik v. Nissen, 303 Neb. 784, 931 N.W.2d 439 (2019).
39
Trowbridge v. Donner, supra note 9.
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owners. We follow that precedent and take the sale results into
consideration.
[14] We have already set forth the governing principles
favoring partition in kind and prohibiting partition by sale to
advance the interests of one owner, and articulating the test for
determining whether a partition in kind would result in great
prejudice to the owners. We do not repeat them here. But we
also recognize that while it is generally true that there is a pre-
sumption in favor of partition in kind, it is likewise true that
the character and location of the property, or the amount of the
interest sought to be assigned, or both, may be such that it will
be presumed that partition in kind cannot be made. 40
Whether partition in kind will result in great prejudice to
the parties requires comparing two amounts. 41 The first is the
amount an owner would receive if the property were divided in
kind and the owner then sold his portion of the property. 42 The
second is the amount each owner would receive if the entire
property were sold and the proceeds were divided among the
owners. 43 If the first amount is materially less than the second
amount, great prejudice has been shown. 44
FTR Farms’ president testified that the sale of the whole
would bring a greater price than the sum of the sales of the
separate tracts. Rist Farm’s appraiser, on the other hand, opined
that sales of the separate tracts would bring more bidders
and “would be the best at trying to get the most for the two
pieces.” We give weight to the district court’s observation of
the witnesses and its implicit credibility assessment in favor
of FTR Farms. Moreover, the sale results support FTR Farms’
president’s opinion. The highest bids for the individual tracts
totaled $1.6 million, but the entire tract sold for $1.62 million.
We cannot characterize this difference as immaterial.
40
Nordhausen v. Christner, supra note 10.
41
In re Estate of McKillip, supra note 8.
42
Id.
43
Id.
44
Id.
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Owelty cannot solve the problem resulting from the whole
property selling for a greater price than the high bids for the
individual tracts. Bearing in mind the In re Estate of McKillip
explanation of the calculations regarding the test to determine
great prejudice, we illustrate the problem. 45 To determine the
first number of the great prejudice test—the amount the owner
of each tract would receive if divided in kind and then sold—
we use the high bids for the individual tracts, which the record
shows totaled $1.6 million. We use the higher number related
by Rist Farm’s president: $940,000 for the south and, by cal-
culating the corresponding amount, $660,000 for the north.
To determine the second number—the amount each would
receive from the sale of the whole and the division of pro-
ceeds—we divide the sale price of $1.62 million equally, which
is $810,000 apiece. Thus, Rist Farm would receive $130,000
more by selling the south tract than its share from the sale of
the total property. FTR Farms, on the other hand would receive
$150,000 less from the sale of the north tract than its share of
the sale of the total. In other words, owelty of $130,000 (Rist
Farm’s “excess” from sale of the south tract) would greatly
prejudice FTR Farms by $20,000—the amount by which the
sale of the whole exceeded the sale of the tracts. Owelty of
$140,000 would prejudice both parties equally, by $10,000.
The great prejudice to FTR Farms can be eliminated, but only
if the owelty is $150,000. This, however, would greatly preju-
dice Rist Farm by $20,000—again, the amount by which the
sale of the whole exceeded the sale of the tracts. This table
shows the calculations:
Whole South North
Individual tract high bids $1,600,000 $940,000 $660,000
Equal division of whole $1,620,000 $810,000 $810,000
Excess or shortage --- $130,000 ($150,000)
Owelty of $130,000 $1,600,000 $810,000 $790,000
Owelty of $140,000 $1,600,000 $800,000 $800,000
Owelty of $150,000 $1,600,000 $790,000 $810,000
45
See id.
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If we use Rist Farm’s president’s alternative amount of
$920,000, the prejudice remains with slightly different num-
bers. This table shows those calculations:
Whole South North
Individual tract high bids $1,600,000 $920,000 $680,000
Equal division of whole $1,620,000 $810,000 $810,000
Excess or shortage --- $110,000 ($130,000)
Owelty of $110,000 $1,600,000 $810,000 $790,000
Owelty of $120,000 $1,600,000 $800,000 $800,000
Owelty of $130,000 $1,600,000 $790,000 $810,000
No matter what owelty payment is used, great prejudice results
to either one or both of the parties.
And we cannot disregard the effect of the default by FTR
Farms and Rist Farm regarding the 2018 payment due to the
Dowells. The default apparently places both tracts at risk of a
trustee’s sale, making it quite difficult to retroactively mandate
a partition in kind. The bankruptcy proceeding, which, in some
way not clear from the record, relates to FTR Farms, intro-
duces more uncertainty into the partition action.
Ultimately, we are not persuaded that this is a rare cir-
cumstance where owelty should be utilized and is equita-
bly required. It differs from the situation in In re Estate of
McKillip in important ways. 46 In that case, “[t]here was no
dispute as to the value of the real estate, and there was no
claim that the value of the real estate as one parcel was greater
than the value of the sum of the individual tracts.” 47 Here,
the values were disputed and there was a claim that the value
of the whole exceeded the sum of the parts. There, the tracts
were not all contiguous. Here, both were. Here, the disparity
in the sizes of the tracts made conflict over the amount of
owelty inevitable. There, the differences in undisputed values
could be equalized from the balance of the inherited estate.
Here, owelty would require a payment from one owner to the
46
See id.
47
Id. at 376, 820 N.W.2d at 877.
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other, placing them in irreconcilably conflicting positions,
particularly where one owner was somehow involved with
a bankruptcy.
In the district court, Rist Farm did not contend that an equal
division without owelty was possible. And the record makes it
clear that even with owelty, partition in kind could not be made
without great prejudice to one or both of the owners.
Upon our de novo review, we conclude that FTR Farms sus-
tained its burden to establish that partition in kind could not be
had without great prejudice. It follows that a partition in kind
was not feasible and that the district court did not err in accept-
ing the referee’s report and ordering partition by sale.
Partition in Kind Alternatives
Rist Farm argues that the district court erred by failing to
consider all reasonable options for partition in kind before
partition by sale. It contends that the district court only consid-
ered the options it proposed to the court and did not consider
alternative options to partition that property into equal tracts.
Rist Farm relies upon In re Estate of McKillip for the propo-
sition that the court must consider all alternative methods to
partition in kind before partition by sale can be ordered. 48 This
argument is flawed. In In re Estate of McKillip, we reversed
the district court’s order to partition by sale, because the party
seeking the sale did not prove that partition in kind would
greatly prejudice the owners. Here, FTR Farms satisfied its
burden of proof.
Moreover, neither party presented evidence regarding a divi-
sion other than one based on the Nemaha River. At this point,
an argument for an alternative division in kind rests upon pure
speculation. This assignment also lacks merit.
CONCLUSION
The district court did not err in rejecting the owelty award
and finding that partition in kind would cause great prejudice
48
See In re Estate of McKillip, supra note 8.
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to the owners. Accordingly, we affirm the district court’s order
imposing partition by sale. We recognize that the default of
the 2018 payment to the Dowells and the effect of other pay-
ments or defaults regarding that indebtedness not shown in our
record may affect the ultimate distributions to the parties. Upon
remand, the district court may make the adjustments necessary
to achieve complete justice to the parties.
Affirmed and remanded for
further proceedings.