Beach Railport, LLC v. Michels, 20160457

• Decision Date: 17 October 2017
• Docket Number: No. 20160457,20160457
• Parties: BEACH RAILPORT, LLC, Plaintiff and Appellee v. Donnell F. MICHELS and Jeanne Michels, Husband and Wife, Defendants and Appellants Donnell F. Michels and Jeanne Michels, Husband and Wife, Third-Party Plaintiffs and Appellants v. North Dakota Guarantee and Title Company, A North Dakota Corporation, doing business as Dickinson Guarantee and Title Company, Third-Party Defendant
• Court: North Dakota Supreme Court

903 N.W.2d 88

BEACH RAILPORT, LLC, Plaintiff and Appellee

v.Donnell F. MICHELS and Jeanne Michels, Husband and Wife, Defendants and Appellants

Donnell F. Michels and Jeanne Michels, Husband and Wife, Third-Party Plaintiffs and Appellants

v.North Dakota Guarantee and Title Company, A North Dakota Corporation, doing business as Dickinson Guarantee and Title Company, Third-Party Defendant

No. 20160457

Supreme Court of North Dakota.

Filed October 17, 2017

Erin P.B. Zasada (argued) and Cassandra A. Marka (on brief), Grand Forks, ND, for plaintiff and appellee.

Spencer D. Ptacek (argued) and Lawrence Bender (appeared), Bismarck, ND, for defendants, third-party plaintiffs and appellants.

VandeWalle, Chief Justice.

[¶ 1] Donnell and Jeanne Michels appealed from a judgment partitioning real property between the Michels and Beach Railport, LLC. We conclude that the district court erred by applying an incorrect legal standard to review and adopt the partition referee's report and that the court erred by not holding an evidentiary hearing. We reverse and remand for further proceedings.

I

[¶ 2] In 2015, Beach Railport commenced this action against the Michels, who are husband and wife, for the partition of real property in Golden Valley County. Beach Railport and the Michels each own an undivided one-half interest in the subject property, consisting of two tracts of land totaling eighty acres–the "North Forty" acres and the "South Forty" acres. Donnell Michels has used the property for agricultural purposes. Beach Railport acquired its interest in the North Forty and various other tracts of land around the subject property as part of its planned construction of a rail trans-load facility. It also sought and obtained changes in zoning for certain property parcels. Beach Railport's construction plan did not include development on the South Forty acres.

[¶ 3] In January 2016, Beach Railport and the Michels entered into a stipulation agreement to have the district court appoint attorney Steven Wild to serve as the sole referee to partition the real property. The court entered an order based on the stipulation, declaring the Michels and Beach Railport each owned an undivided one-half interest in the property at issue and appointing Wild as the sole referee to partition the property into two parcels between them according to their respective interest in the property. The court ordered the referee to view the real property and partition it in accordance with the law governing partition. If a fair and equitable division of the land could not be made, the court ordered the referee to decide whether the parties' shares could be equalized by payment of owelty and to report the amount to be paid. "Owelty" is defined as "1. Equality 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. 2. The sum of money so paid." Black's Law Dictionary 1279 (10th ed. 2014).

[¶ 4] The Michels and Beach Railport each hired appraisers to appraise the property. The referee subsequently viewed the property and reviewed the parties' appraisals and their written submissions that described their respective positions on how the property should be partitioned. In July 2016, the referee filed his report with the district court. In the report the referee decided that the property should be partitioned along the east-west quarter-quarter line, with Beach Railport receiving the North Forty and the Michels receiving the South Forty of the property. The referee concluded this partition was an equitable division of the property and neither party would be required to pay compensation to the other.

[¶ 5] Beach Railport moved the district court to confirm the referee's report. The Michels responded and objected to Beach Railport's motion for confirmation, submitting various exhibits and affidavits in opposition. The Michels contended that the referee did not make an equitable distribution of the property because the partition was based on erroneous assumptions and not supported by evidence. They claimed that each party should receive equal amounts of property zoned industrial and zoned agricultural; that the court should set aside the referee's report or modify it in an east-west division; and that the matter should be tried in district court.

[¶ 6] In October 2016, the district court held a hearing on Beach Railport's motion to confirm the referee's report. The Michels argued, among other things, that a trial was necessary because of disputed issues of fact about valuation of the property. The court denied the Michels an evidentiary hearing and confirmed the referee's report, adopting the report's findings and conclusions in its findings of fact, conclusions of law, and order for judgment. A judgment of partition was entered.

II

[¶ 7] The Michels argue the district court abused its discretion in allotting the North Forty to Beach Railport and the South Forty to them.

[¶ 8] Chapter 32-16, N.D.C.C., provides a special statutory proceeding and governs the partition of real property. See also N.D.R.Civ.P. 81(a), Table A (containing "a nonexclusive list of statutes pertaining to" special statutory procedures). Section 32-16-01, N.D.C.C., authorizes proceedings to partition property "according to the respective rights of the persons interested therein and for a sale of such property or a part thereof, if it appears that a partition cannot be made without great prejudice to the owners." If the property is "so situated that partition cannot be made without great prejudice to the owners, the court may order sale" of the property. N.D.C.C. § 32-16-12. Otherwise, the court must order a partition according to the parties' respective ownership rights and appoint three referees to partition the property. Id.

[¶ 9] "In making the partition, referees must divide the property and allot the several portions thereof to the respective parties, quality and quantity relatively considered, according to the respective rights of the parties as determined by the court." N.D.C.C. § 32-16-13. "The referees must make a report of their proceedings, specifying therein the manner in which they executed their trust, and describing the property divided and the share allotted to each party with a particular description of each share." N.D.C.C. § 32-16-14. "The court may confirm, change, modify, or set aside the report of the referees and, if necessary, may appoint new referees." N.D.C.C. § 32-16-15.

[¶ 10] Under N.D.C.C. § 32-16-01, "[p]artition is a matter of right between cotenants." In re Estate of Loomer, 2010 ND 93, ¶ 17, 782 N.W.2d 648 (quoting First Trust Co. v. Mast, 385 N.W.2d 104, 105 (N.D. 1986) ). "The law favors partition in kind, and there is a presumption that partition in kind should be made unless great prejudice is shown." Loomer, at ¶ 17 (quoting Schmidt v. Wittinger, 2004 ND 189, ¶ 7, 687 N.W.2d 479 ). We have explained that "[p]artition is an equitable remedy governed by equitable principles." Loomer, at ¶ 17. As such, "[d]istrict courts have ‘wide judicial discretion in partition actions to "do equity" and to make a fair and just division of the property or proceeds between the parties,’ and ‘great flexibility in fashioning appropriate relief for the parties.’ " Id. (quoting Eastman v. Nelson, 319 N.W.2d 134, 136 (N.D. 1982) ). All owners of an interest in property require equal consideration for partition in kind, including consideration of sentimental attachment, the situation of the owners, and the location and character of the property. Loomer, at ¶ 17 (discussing Schnell v. Schnell, 346 N.W.2d 713, 716-21 (N.D. 1984) ).

[¶ 11] A district court's decision on the proper division of property or proceeds between the parties and the form of relief granted will not be disturbed on appeal absent an abuse of discretion. Eastman, 319 N.W.2d at 136. A court's findings in a partition action will not be reversed on appeal unless they are clearly erroneous. Loomer, 2010 ND 93, ¶ 18, 782 N.W.2d 648 ; Wenzel Estate v. Wenzel, 2008 ND 68, ¶ 5, 747 N.W.2d 103. A finding of fact is clearly erroneous if it is induced by an erroneous view of the law, if there is no evidence to support it, or if, after reviewing all the evidence, we are left with a definite and firm conviction a mistake has been made. Loomer, at ¶ 18. Questions of law, however, are fully reviewable on appeal. Wenzel, at ¶ 5 ; Kienzle v. Selensky, 2007 ND 167, ¶ 9, 740 N.W.2d 393.

A

[¶ 12] The Michels argue the district court's decision to adopt the referee's findings of fact as its own is clearly erroneous. They contend the court misconstrued its obligations under N.D.C.C. ch. 32-16 in adopting the referee's report, and even if the court applied the proper standard, the court misapplied that standard.

[¶ 13] At the October 2016 hearing, the district court stated it was adopting the findings of the referee's report. In so doing, however, the court explained that it would defer to the referee's findings absent some "glaring error" and that the court found no "glaring error" to either reject or modify the referee's report. The court further explained:

I have reviewed the briefs, I have reviewed the report of the referee. I note that he, in fact, specifies what he reviewed. It included appraisals both from [the Michels] and from [Beach Railport], respective appraisals.... I believe that my role in this instance is more in the nature of determining whether or not there was substantial evidence upon which the referee could make his decisions. I find that there is a substantial basis for him to make the ultimate decision, regardless of whether or not there were substantial bas[e]s for some of the minor aspects of that....

(Emphasis added.)

[¶ 14] The Michels argue the district court erred when it rejected reviewing the referee's report de novo. They assert the report is only a proposal and a court is not bound to accept it. They further contend the...