Eli v. Eli

• Decision Date: 21 October 1996
• Docket Number: No. 19463,19463
• Citation: 557 N.W.2d 405,1997 SD 1
• Parties: Chester J. ELI and James M. Eli, Plaintiffs and Appellees, v. Jody L. ELI, Defendant and Appellant, and Hauge Associates; A.Y. McDonald Supply Co.; Credit Collection Service, Inc.; McFarland Supply Co.; Fensel'S Supply Co.; Viborg Coop Oil Co.; and Yankton N.O. Nelson Co., Defendants. . Considered on Briefs
• Court: South Dakota Supreme Court

Page 405

557 N.W.2d 405

1997 SD 1

Chester J. ELI and James M. Eli, Plaintiffs and Appellees, v. Jody L. ELI, Defendant and Appellant and Hauge Associates; A.Y. McDonald Supply Co.; Credit Collection Service, Inc.; McFarland Supply Co. Fensel'S Supply Co.; Viborg Coop Oil Co.; and Yankton N.O. Nelson Co., Defendants.

No. 19463.

Supreme Court of South Dakota.

Considered on Briefs Oct. 21, 1996.

Decided Jan. 8, 1997.

William J. Klimisch, Goetz, Hirsch and Klimisch, Yankton, for plaintiffs and appellees.

Alice L. Rokahr, Doyle and Kennedy, Yankton, for defendant and appellant.

GILBERTSON, Justice

¶1 Jody Eli appeals the trial court's judgment ordering the sale at public auction of property in which she owned an undivided one-third interest. We reverse and remand for further proceedings consistent with this opinion.

FACTS AND PROCEDURE

¶2 The property at issue in this case consists of 112.5 acres in Turner County, South Dakota. This property was formerly owned by Myrtle J. Eli and has been owned by members of Myrtle's family for almost one hundred years. In May 1992, Myrtle deeded 117 acres, which included the subject property, to her three sons: Chester, James and Dale. The deed gave each of the sons a one-third undivided interest. In July 1993, Dale transferred his one-third undivided interest to his daughter, Jody Eli, by quit claim deed.

¶3 This property consists of agricultural land and sits in a backward "L" shape. It is divided into two parcels for tax purposes. In 1995, the eastern strip, containing 74.92 acres, was assessed at $40,565 or $541.44 per acre. The western parcel, containing 37.35 acres, was assessed that same year at $20,790 or $556.63 per acre. A small portion of the original 117 acres is excepted out of the southeastern quarter of the property, leaving the 112.5 acres at issue. This small portion belongs to Dale Eli, by virtue of his receiving the land separately from Myrtle prior to her death, and is not in dispute here. Dale currently resides on this small outlot.

¶4 There are no material improvements on the property. It has no wells and rural water is not available to it at the present time. All parts of the property contain comparable soil type and crop production with an estimated 27 acres of tillable ground on each of three approximately 40-acre parcels. Each tract has approximately 5-10 acres of pasture with a creek running through them. The land has been tested and classified by the Soil Conservation Service as prime farmland, with a lesser quality, rough terrain surrounding the creek bed that runs through all three parcels. The two approximately 40-acre parcels which lie in the bottom portion of the "L" to the south enjoy separate highway access, while the only access to the northern 40 acres, the upper portion of the "L," is through one of the southern two parcels. Currently, access to the northern parcel is through the 40 acres lying directly to the south.

¶5 Until February 1996, the 112.5 acres were farmed as one unit under a cash rent lease. Chester and James Eli's witness, a certified land appraiser and auctioneer, testified that the cash lease value per acre would not change if the land were divided into three separate units rather than kept whole. This witness, with extensive experience in valuing land in the area, opined the value of the subject property would be $50 to $100 less if sold in smaller units rather than as one 112.5-acre unit. He testified the entire 112.5 acres was not large enough to sustain an independent farm operation, and posited the most likely buyers would be neighboring farmers looking to increase the size of their existing operations. The property's distance from any town made it unlikely someone would purchase it as a country residence.

¶6 Following presentation of all the evidence, the trial court determined the ownership interests of the parties and ordered the property sold at public auction. The court further ordered a referee be appointed to oversee the sale. Jody, who had requested the trial court partition the property and order the sale of all but her one-third undivided interest, appeals the judgment raising the following issue:

Whether the Elis established by a preponderance of the evidence that great prejudice would result if the subject property were partitioned rather than sold as a whole unit?

ANALYSIS AND DECISION

¶7 Partition of real property actions are governed by SDCL Ch. 21-45. SDCL 21-45-1 provides cotenants the right to bring a partition action and to have the property, or any part thereof, sold:

When several cotenants hold and are in possession of real property as partners, joint tenants, or tenants in common, in which one or more of them have an estate of inheritance or for life or lives or for years, an action may be brought by one or more of such persons for a partition thereof according to the respective rights of the persons interested therein and for a sale of such property or a part thereof, if it appear that a partition cannot be made without great prejudice to the owners. (emphasis added).

SDCL 21-45-28 provides the statutory test the court must apply in determining whether partition or a sale is appropriate:

If it appear to the satisfaction of the court that the property, or any part of it, is so situated that partition cannot be made without great prejudice to the owners, the court may order a sale thereof, for which purpose it may appoint one or more, but not exceeding three referees, in its discretion. (emphasis added).

¶8 "The right of a cotenant to partition and sale of real property held and possessed by that cotenant is a statutory right ... subject to the equitable jurisdiction of the court because partition is a proceeding in equity and the court has the inherent jurisdiction to adjust all the equities in respect to the property." Braaten v. Braaten, 278 N.W.2d 448, 450 (S.D.1979) (citations omitted). Equitable actions are reviewed under an abuse of discretion standard. Jensen v. Weyrens, 474 N.W.2d 261, 263 (S.D.1991); Wiggins v. Shewmake, 374 N.W.2d 111 (S.D.1985).

¶9 In Johnson v. Hendrickson, 71 S.D. 392, 396, 24 N.W.2d 914, 916 (1946), we interpreted the predecessor statute to SDCL 21-45-28 to mean that a trial court may order a sale of the property if the court is satisfied that, were the property partitioned, the value of each cotenant's share "would be materially less than his share of the money equivalent that could probably be obtained for the whole." (citing Kluthe v. Hammerquist, 45 S.D. 476, 188 N.W. 749 (1922)). "A sale is justified if it appears to the satisfaction of the court that the value of the land when divided into parcels is substantially less than its value when owned by one person." Id.; Nelson v. Hendricks, 74 S.D. 441, 54 N.W.2d 324, 324 (1952). Accord Swogger v. Taylor, 243 Minn. 458, 68 N.W.2d 376 (1955); Trowbridge v. Donner, 152 Neb. 206, 40 N.W.2d 655 (1950); Berg v. Kremers, 181 N.W.2d 730 (N.D.1970); White v. Tillotson, 256 Wis. 574, 42 N.W.2d 283 (1950).

¶10 When applying the above definition, it is also necessary to heed the following policy considerations. Where it can be had without great prejudice to the owners, the law favors a partition in kind rather than a sale and a division of the proceeds among the owners. Berg, 181 N.W.2d at 735 (applying a statute similar to SDCL 21-45-28 and quoting Swogger, 243 Minn. 458, 68 N.W.2d 376). "Unless great prejudice is shown, a presumption prevails that partition in kind should be made. Forced sales are strongly disfavored." Schnell v. Schnell, 346 N.W.2d 713, 716 (N.D.1984) (citing Berg, 181 N.W.2d at 735 and Richmond v. Dofflemyer, 105 Cal.App.3d 745, 164 Cal.Rptr. 727, 733 (1980)).

¶11 The burden of proof to establish great prejudice such that partition is not feasible rests with the party seeking the sale. Nelson, 74 S.D. at 442, 54 N.W.2d at 324: Kluthe, 45 S.D. at 479, 188 N.W. at 750. The court must decide in a partition action whether the premises can be physically partitioned or whether the parties seeking partition have met their burden of proof that the premises should be sold at a partition sale and the proceeds divided among the tenants in common. Murphy v. Connolly, 81 S.D. 644, 653, 140 N.W.2d 394, 399 (1966).

¶12 The trial court found the subject property would sell for $50-$100 more per acre if sold as a whole 112.5-acre unit rather than as separate parcels. This finding is not clearly erroneous. It was based, in part, on testimony regarding the cost of digging wells that would be required to get water to the property so the individual parcels could be used as pastureland. It was also based on the distance the property lies from any town and the relatively small size of the entire unit. Testimony indicated a potential purchaser of this property might be a neighboring farmer who would wish to add to his own acreage, rather than someone attempting to sustain a farm operation on the 112.5 acres alone or a person looking to reside in the country. Testimony was offered that, considering the greater capabilities of modern farming machinery, smaller tracts of land are not as popular as they once were and the number of potential buyers would be decreased if the property were divided. It was estimated this property, sold as an entire unit, would sell for $400-$500 per acre. Based on these estimates, testimony was offered that the property would be worth 10-20% more if sold as a whole than if divided into smaller units. The land appraiser who testified to these figures characterized this as a "significant" difference.

¶13 Following trial, the court ordered the entire property to be sold at public auction and appointed a referee to oversee the sale. In making this determination, the trial court considered the lesser value of the land if it were partitioned rather than sold as a whole. The trial court further considered the character and location of the land and, noting inaccessibility to the...