Levorsen v. Freeman, No. A05-62 (MN 9/20/2005)

Decision Date20 September 2005
Docket NumberNo. A05-62.,A05-62.
PartiesRobert I. Levorsen, et al., Respondents, v. John Fletcher Freeman, et al., Appellants, Alan James Freeman, et al., Respondents.
CourtMinnesota Supreme Court

Appeal from the District Court, St. Louis County, File No. C1-02-101288.

Patrick J. Roche, Paul D. Cerkvenik, Trenti Law Firm, (for respondents Levorsen, et al.)

Laurence J. Klun, Klun Law Firm, (for appellants)

William E. Defenbaugh, Jr., (for respondents Freeman, et al.)

Considered and decided by Kalitowski, Presiding Judge; Shumaker, Judge; and Minge, Judge.

UNPUBLISHED OPINION

MINGE, Judge

Appellants challenge the district court's determinations in a partition proceeding. Because the district court's application of a discount to appellants' interest, use of different comparables for small and large tracts of land, adoption of the referees' report, and order requiring appellants to pay half the costs of the partition proceeding and to pay their traditional portion of maintenance costs were not clearly erroneous or an abuse of discretion, and because the district court's refusal to remove one of the referees is not prejudicial error, we affirm in part. Because the district court erred by not awarding appellants a proper financial adjustment, we reverse in part and remand for modification of this adjustment.

FACTS

The parties are owners of fractional interests in 161.144 acres known as Twinflower, located on Burntside Lake and Little Long Lake, close to Ely. Although mostly unimproved, the land contains a common family compound and miscellaneous smaller buildings. Appellants are John Fletcher Freeman and his wife Pamela Freeman, and Richard Freeman and his wife Monica Freeman. John and Richard are brothers, and each owns a 1/12 interest in Twinflower. Respondents include 14 other co-owners of the property. These respondents have common representation and have taken the same position in this controversy with the exception of Alan Freeman, Cindy Freeman, John C. Freeman, Jean Freeman, and John C. Freeman as a Trustee, who are siblings of appellants. The parties' extended family has owned the property as tenants in common for more than 75 years.

Because appellants John and Pamela Freeman wished to have a personal lake home, they identified a 2.8 acre tract on the northern edge of Twinflower, known as lot A, upon which they built a garage and began construction of a home. Appellants Richard and Monica Freeman also wished to have a personal home and identified an adjacent 3.3 acre tract, known as lot B. They have not started any construction. Several of the respondents (Robert and Arabella Levorsen, Robert and Arabella Levorsen as Trustees, David and Daphne Rippon, Mark and Laura Levorsen, and Kenton and Anne Hammer), commenced an action in June 2002, seeking a temporary restraining order against appellants to enjoin them from further building. Respondents also named the other co-owners of Twinflower, who are siblings of appellants, as additional defendants to ensure that they were included in the proceedings.

In August 2002, respondents filed an amended complaint requesting, in the alternative, that the court order a partition of Twinflower pursuant to Minn. Stat. ch. 558 (2004). The district court granted respondents' motion for injunction and issued an order temporarily restraining appellants from further construction. Subsequently, appellants filed a motion for partition. The district court ordered mediation. When mediation failed, the parties stipulated that partition should proceed.

Pursuant to the parties' stipulation, the district court found that partition-in-kind could be made without great prejudice to the parties; awarded appellants lots A and B, which they had previously selected; ordered that appellants receive additional land, if necessary based on valuation; and entered judgment that partition be made. Pursuant to Minn. Stat. § 558.04 (2004), the district court also appointed three referees. One referee requested removal; appellants urged that an appraiser, rather than an attorney, be selected as a replacement. The district court appointed attorney Mark Weir as the replacement. Appellants initially objected to the appointment of Weir and sought his removal as a matter of right. After that objection was rejected, appellants renewed their objection asserting that their counsel and Weir were opposing counsel in strongly contested cases, and that Weir was a past partner of William Defenbaugh — the attorney in this proceeding for those respondents who are siblings of appellants. The district court determined that the alleged conflict of interest did not warrant removal of the referee and rejected appellants' objection.

The referees inspected the property, reviewed two appraisals submitted by the parties, requested additional appraisals, held a hearing at which the parties presented arguments regarding property valuation, and filed their report to the district court. Appellants moved to set aside the referees' report and requested appointment of new referees. Appellants' siblings supported appellants' request that the report be rejected. After a hearing on the referees' report, the district court ordered a supplemental report to clarify certain boundaries and access matters. Following receipt of the supplemental report, the district court adopted the reports, made findings of fact, and ordered physical division of the property.

The district court's partition of the property was based on a monetary division, in which the value of the entire property was determined and appellants were allotted their monetary proportion. The district court found that: (1) the total value of Twinflower was $3.9 million as of October 2002; (2) after a 15% discount for their fractional ownership of Twinflower, appellants' respective 1/12 interests each equaled $276,250; (3) lots A and B (which the parties agreed should be owned by appellants respectively as two couples) were each worth $272,000; and (4) because the difference between the value of these parcels and appellants' interest was so small, appellants should receive cash from respondents to equalize the difference. The district court also ordered that the costs associated with the appointment of the referees be divided equally between appellants and respondents, and ordered appellants to pay their share of the expenses of operating and maintaining Twinflower that were incurred prior to the date of the final partition, according to the families' customary procedure. This appeal followed. Respondents who are siblings of appellants have not made an appearance in this appeal.

After the district court proceedings were complete, appellants noted that in an unrelated matter before this court, attorney Defenbaugh was listed as counsel for referee Weir in Roth v. Weir, 690 N.W.2d 410 (Minn. App. 2005). Appellants raise that relationship as additional grounds for their claim that Weir should have been removed as referee and the matter reversed.

DECISION
I.

The first issue is whether the district court's valuation and division of the property was clearly erroneous. Appellants claim that the district court erred in adopting the referees' report because the report contained the following deficiencies: (1) an improper 15% discount; (2) separate valuation comparables for large parcels and small parcels; (3) an improper valuation date; and (4) manifest inequities. These are sub-issues in the valuation and division question.

In Minnesota, an action for partition of real estate is statutory, and the court is guided by the principles of equity in its decisions. Swogger v. Taylor, 243 Minn. 458, 464-65, 68 N.W.2d 376, 382 (1955). On appeal, findings made by the referees and adopted by the court are considered findings made by the district court. See Robbins v. Hobart, 133 Minn. 49, 51, 157 N.W. 908, 909 (1916). The district court's findings of fact shall not be set aside unless clearly erroneous. Beebout v. Beebout, 447 N.W.2d 465, 467 (Minn. App. 1989). But where the material facts are not in dispute, this court need not defer to the district court's application of the law. Hubred v. Control Data Corp., 442 N.W.2d 308, 310 (Minn. 1989).

A. 15% Discount

The initial sub-issue is whether the district court erred in accepting the referees' report with respect to the discount. The referees determined that the value of the entire property is $3,900,000 and that a 1/12 share of that is $325,000. The referees reduced the value of appellants' interest by 15% because the property was owned by numerous parties. The district court adopted this portion of the referees' report and, after applying the recommended discount, valued appellants' 1/12 monetary interests at $276,250. The parties are part of an extended family who have owned and transferred this property to succeeding generations for 75 years. Contrary to appellants, respondents wish to maintain, use, and preserve the property in its current form of ownership. There is no evidence that respondents have denied appellants reasonable use of the common property, exploited appellants as minority owners, or engaged in overreaching or oppressive conduct toward or discriminated against appellants. On the contrary, appellants took the initiative in seeking separate tracts for their own use. Respondents have accommodated appellants by agreeing to the partition and the designation by appellants of their tracts.

Appellants compare this discount to a minority discount for valuing dissenting shareholder interests in a corporation, which was rejected by this court in MT Props., Inc. v. CMC Real Estate Corp., 481 N.W.2d 383, 388 (Minn. App. 1992) (finding that dissenting shareholders' shares may not be discounted for their minority status when determining fair value). This prohibition arose largely...

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