FTR Farms, Inc. v. Rist Farm, Inc.
| Decision Date | 01 May 2020 |
| Docket Number | S-19-438. |
| Parties | 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. |
| Court | Nebraska Supreme Court |
John Hahn, of Wolfe, Snowden, Hurd, Ahl, Sitzmann, Tannehill & Hahn, L.L.P., Lincoln, for appellant.
Michael R. Dunn, of Halbert, Dunn & Halbert, L.L.C., Falls City, 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.
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 empowers 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.
FTR Farms, Inc., and Rist Farm, Inc., each own an undivided 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.
In March 2017, FTR Farms filed a complaint for partition of the property, seeking partition by sale. It alleged that the 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 parties’ 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 common. The court ordered that partition be made and appointed a referee to recommend whether the property could be partitioned in kind without great prejudice to the owners.
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 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 purchased 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 properties." 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 willing 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 reduce the debt on the less valuable property and new promissory 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."
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, testimony 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.
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.
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, attorney fees, supersedeas bond, and oil and gas lease payments. The district court determined the fees and resolved the remaining issues.
From this judgment, Rist Farm then filed a timely appeal. We moved the appeal to our docket.1
Rist Farm assigns that the district court erred (1) in determining 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.
A partition action is an action in equity and is reviewable by an appellate court de novo on the record.2
We begin with basic, longstanding concepts governing partition actions in Nebraska. Our partition statutes have existed from statehood.3
Recently, we have explained: The purpose of a partition action is to divide a jointly owned interest in real property so that each...
To continue reading
Request your trial
-
Dreesen Enters., Inc. v. Dreesen
...v. Marcuzzo , 289 Neb. 301, 854 N.W.2d 774 (2014).2 See Neb. Rev. Stat. § 24-1106(3) (Cum. Supp. 2018).3 See, FTR Farms v. Rist Farm , 305 Neb. 708, 942 N.W.2d 204 (2020) ; Adair Holdings v. Johnson , 304 Neb. 720, 936 N.W.2d 517 (2020) ; Junker v. Carlson , 300 Neb. 423, 915 N.W.2d 542 (20......
-
Clarke v. Gatts
...of the premises would be detrimental to the interests of the parties entitled'") (citation omitted). 9. FTR Farms, Inc. v. Rist Farm, Inc., 942 N.W.2d 204, 214 (Neb. 2020) (citation omitted). 10. Cf. Onderdonk v. Onderdonk, 307 A.2d 710, 712-13 (Md. 1973); Chesmore v. Chesmore, 484 P.2d 516......
-
Smith v. Smith
...given the character and location of the property.STANDARD OF REVIEW A partition action is an action in equity. FTR Farms v. Rist Farm , 305 Neb. 708, 942 N.W.2d 204 (2020). On appeal from an equity action, an appellate court tries factual questions de novo on the record and, as to questions......