Robert E. Lee v. Dianne E. Kallas

COURT OF APPEALS
DECISION NOTICE
DATED AND FILED This opinion is subject to further editing. If
published, the official version will appear in
the bound volume of the Official Reports.
April 12, 2023
A party may file with the Supreme Court a
Sheila T. Reiff petition to review an adverse decision by the
Clerk of Court of Appeals Court of Appeals. See WIS. STAT. § 808.10
and RULE 809.62.

Appeal No. 2022AP671 Cir. Ct. No. 2021CV812

STATE OF WISCONSIN IN COURT OF APPEALS
DISTRICT II

ROBERT E. LEE, KATHERINE A. LEE, GARY E. LEE, SPENCER LEE,
NICOLE RAE LEE, SCOTT NIGBOR, JEANETTE F. NIGBOR,
AARON KNOBLOCH, BRIAN LOKER AND MICHELLE A. LOKER,

PLAINTIFFS-RESPONDENTS,

V.

DIANNE E. KALLAS, DANIEL L. KALLAS, MARK A. KALLAS AND
ROBERT J. O’KEEFE,

DEFENDANTS-APPELLANTS,

KIM M. STAPLETON AND PAMER FARMS, LLP,

DEFENDANTS.

APPEAL from an order of the circuit court for Winnebago County:
SCOTT C. WOLDT, Judge. Affirmed.

Before Gundrum, P.J., Grogan and Lazar, JJ.
No. 2022AP671

Per curiam opinions may not be cited in any court of this state as precedent

or authority, except for the limited purposes specified in WIS. STAT. RULE 809.23(3).

¶1 PER CURIAM. In this partition action, Dianne E. Kallas, Daniel L.
Kallas, Mark A. Kallas, and Robert J. O’Keefe (collectively, “the Kallases”)
appeal an order approving a referee’s sale of real property to Michael J. Pamer for
$600,001. The Kallases assert the circuit court, exercising its equitable authority,
erroneously exercised its discretion in three ways: (1) by amending the order
appointing the referee to clarify that the referee could accept bids from parties
lacking an ownership interest during a short window prior to listing with a broker;
(2) by failing to comply with WIS. STAT. § 842.07 (2021-22)1 before ordering that
the property be put up for auction; and (3) by allowing the auction to proceed
without public notice. We reject these arguments and affirm because we conclude
the court acted within the bounds of its discretion.

BACKGROUND

¶2 Robert E. Lee, Katherine A. Lee, Gary E. Lee, Spencer Lee,
Nicole Rae Lee, Scott Nigbor, Jeanette F. Nigbor, Aaron Knobloch, Brian Loker,
and Michelle A. Loker (collectively, “the Lees”) commenced this action to
partition agricultural and recreational land in Winnebago County (“the Property”).
The Property’s ownership is heavily diluted, with fractional shares as little as
1/30th. As an affirmative defense to the Lees’ complaint, the Kallases asserted
that they were “able to purchase the Property at a fair and equitable amount which
would avoid unnecessary broker fees.” By amended complaint, Pamer Farms

1
All references to the Wisconsin Statutes are to the 2021-22 version unless otherwise
noted.

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LLP, which had leased the agricultural portion of the Property until December
2021, was joined as a party.

¶3 Shortly after filing the action, the Lees moved for the appointment of
a referee. As grounds, the Lees asserted that the nature of the Property and the
fractional interests involved made partition impossible as a matter of law. The
Lees also suggested that a judicial sale would be prejudicial to the parties, as a
sheriff’s sale was unlikely to bring the best price. Citing a circuit court’s authority
to fashion an equitable remedy in partition actions, the Lees suggested that the
referee be permitted to market and list the Property for sale using a licensed real
estate broker. The Lees argued that a referee, exercising sound business judgment,
would be able to obtain the best offer for the Property.

¶4 There was no opposition to the motion; the Lees’ attorney
represented at a hearing on the motion that because of the fractional interests “the
parties I think are generally in agreement it should be sold.” He requested that the
referee be permitted to “seek opinions of valuation from realtors, but before he
lists it, he lets the parties know and maybe we’ll get an auction scenario.” The
Kallases’ attorney agreed.

¶5 The circuit court’s December 22, 2021 order authorized the referee
to enter into a listing contract with a disinterested real estate broker, but it stated
that prior to listing the Property with a broker, the referee was to notify the parties
of the proposed listing price and allow for “a short period (in his discretion) during
which the interested parties may come forward with offers at a price which the
referee deems reasonable and acceptable.” Upon receipt of an offer the referee
deemed reasonable and acceptable, he was to move the court for an order
approving the highest and best offer as well as authorization to complete the sale.

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¶6 On February 23, 2022, the referee, by letter, informed the attorneys
for the Lees and the Kallases that, based on various appraisals, he planned to list
the Property for $564,000. Consistent with the circuit court’s order, he requested
that any party interested in purchasing the Property prior to listing should submit
offers of no less than $475,000.2 He received two offers: one from the Kallases
for $478,000, and one from Michael J. Pamer, a principal for Pamer Farms, in the
amount of $530,000. On March 22, 2022, the referee sought court approval to sell
the Property to Pamer for the higher amount.

¶7 Meanwhile, Pamer Farms had failed to answer the amended
complaint and had been defaulted, with the circuit court finding that Pamer Farms
LLP had no lawful interest in the partition action. The Kallases asserted that
Michael Pamer’s bid should therefore be disregarded as inconsistent with the order
appointing the referee, which referred to “interested parties.” As a result, the
Kallases argued they should be entitled to purchase the Property for $478,000.

¶8 The Lees disagreed with the Kallases’ interpretation of the order,
asserting their “narrow reading of ‘interested parties’ impedes the function of the
Referee to strike a bargain to get the best and highest offer for the benefit of all
named parties.” Accordingly, they sought an amendment to the referee
appointment order replacing the “interested parties” language with “potential
buyers.”3

2
The requested offers were required to comply with a set of other conditions, including
that the Property be taken as is with minimal contingencies.
3
The circuit court ultimately entered an order adopting this amendment following a
hearing on the motion.

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¶9 The circuit court held a hearing on the amendment motion, at which
time the Kallases’ attorney suggested an alternative remedy to the interpretation
dispute. He stated his clients were willing to raise their bid to one dollar over the
Pamer offer to keep the Property in their family. In response, the Lees suggested
that an auction would be appropriate. The court remarked that the purpose of the
partition proceedings here, given the context, was “not to keep [the Property] in
the family,” but rather “to sell and obtain the highest price” for all the ownership
interests.

¶10 The circuit court agreed with the Lees’ suggestion of an auction,
explaining: “the whole purpose of this statute is to obtain the highest value for all
of the parties.” The referee noted that there was a hearing scheduled for the
following week regarding the motion for approval to accept the Pamer offer. The
court stated that prior to that hearing, the referee could hold an auction in the
courthouse at which any interested buyers could bid. The Kallases once again
urged the court to accept their $530,001 offer in lieu of the auction, which the
court declined to do. Alternatively, the Kallases’ attorney requested that there be
public notice of the auction. The court stated that it would leave that matter to the
referee’s discretion and handle any objections4 to the manner of the auction at the
time the referee requested approval of the sale.

¶11 At the conclusion of the hearing, the circuit court addressed the
various arguments the Kallases had made regarding fairness. It stated its primary
goal in this situation was to obtain the highest value for the Property to the benefit

4
The circuit court stated that the Kallases could object if the referee failed to “fulfill[]
his obligation to get the highest price[.]”

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of all persons having an ownership interest. While it acknowledged that the
Kallases had a legitimate objection to the Pamer offer under the language of the
referee appointment order, it stated that it would not ignore a higher offer merely
because the offer did not come from a party to the litigation.

¶12 The circuit court noted it was “tak[ing] into consideration in [its]
fairness calculation the fact that family’s involved and this is a family issue.” In
recognition of those matters, it treated the Kallases’ offer of $530,001 as the
current highest offer. The court viewed it as a waste of the referee’s time to bid in
one-dollar increments, so it required Pamer or any other interested bidder to
exceed that offer by $10,000, which each subsequent bid increasing by a minimum
of $10,000.

¶14 At the hearing the next week, the referee stated that he had
conducted an auction in the courthouse just prior to the hearing and Pamer was the
highest bidder at $600,001. The next-highest bid belonged to the Kallases at
$590,001. Pamer and the Kallases were the only bidders, and the referee did not
publish notice of the auction. The Kallases did not object to how the referee
handled the auction. Following the hearing, the circuit court entered an order
granting the referee authority to accept Pamer’s bid and to effectuate the sale of
the Property.

¶15 Thereafter, the Kallases filed a motion for reconsideration, raising
many of the same arguments they make in this appeal and acknowledging that
they were making an “extraordinary request” in asking that the order entered
following the auction be vacated. As grounds, the Kallases argued they were the
only party to have followed the court’s instructions in the initial order appointing
the referee, and therefore the Property should be sold to them for $478,000 or,

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alternatively for $530,001. The Kallases also asserted the court had erred by
ordering a sale without taking evidence at a trial, claiming the court could not fully
appreciate the equities of the situation without hearing evidence “such as the
nature of the fractional interests of the various property owners, the property’s
history and its uses, the property’s sentimental value to the [Kallases], and other
like considerations.”5 In any event, the Kallases requested that the sale be stayed
pending a trial, or, alternatively, pending appeal. The court rejected these
arguments and declined to enter a stay. The Kallases now appeal.

DISCUSSION

¶16 The Lees first argue that the Kallases’ appeal is moot because the
sale to Pamer has been completed. “A case is moot when a judgment can have no
practical legal effect upon the existing controversy.” State ex rel. Badke v.
Village Bd. of Greendale, 173 Wis. 2d 553, 568, 494 N.W.2d 408 (1993).
Mootness is a question of law that we review de novo. Marathon Cnty. v. D.K.,
2020 WI 8, ¶16, 390 Wis. 2d 50, 937 N.W.2d 901.

¶17 This appeal is not moot because, despite the sale, our decision could
still affect the disposition of the Property. A lis pendens filed early in this case
provided notice that the present litigation may affect the real property. It also
ensured that the Property remains “within the power of the court, so as to enable it
to pronounce judgment upon it.” Gaugert v. Duve, 2001 WI 83, ¶17, 244 Wis. 2d
691, 628 N.W.2d 861. A lis pendens must remain as long as there are pending

5
To this end, the Kallases made an offer of proof that consisted of several affidavits
describing these matters. At a hearing on the motion, the Kallases argued that they would not
have agreed to the order appointing the referee if they knew that outside parties could submit
offers and would instead have insisted that the partition action proceed to trial.

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proceedings in an action, including appellate proceedings.6 Zweber v. Melar Ltd.,
2004 WI App 185, ¶15, 276 Wis. 2d 156, 687 N.W.2d 818. We therefore proceed
to the merits of the appeal.

¶18 The common law of partition, now codified as part of WIS. STAT.
ch. 842, involves the circuit court’s exercise of its equitable authority. Klawitter v.
Klawitter, 2001 WI App 16, ¶7, 240 Wis. 2d 685, 623 N.W.2d 169. The Kallases
arguments are generally framed as though this court is responsible for making an
independent determination of what is equitable under the circumstances. That is
not our standard of review. Rather, we apply the erroneous exercise of discretion
standard when reviewing decisions in equity. Id., ¶8. A court’s discretionary
decisions will be upheld if the court examined the relevant facts, applied a proper
standard of law, and, using a demonstrated rational process, reached a conclusion
that a reasonable judge could reach. Id. Even if this court would have acted
differently, we may only overturn the circuit court’s decisions if it erroneously
exercised discretion.

¶19 The Kallases first argue that the circuit court’s decision to amend the
order appointing the referee was inequitable. They assert that the initial order was
limited to the parties to the litigation for good reason: because the court’s
responsibility is to do equity as to those parties. Further, noting that they
collectively own an approximately forty percent share of the Property, the Kallases
argue the court did not give adequate consideration to the sentimental value of the

6
Additionally, any assertion that this appeal is moot is on its face absurd. It was only
the court order at issue that permitted Pamer to take ownership. If we reversed that order,
naturally the sale would have to be unwound, as there would be no judicial authority supporting
the forced sale of the Kallases’ ownership interests.

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Property to them. They argue that, at a minimum, “in equity and fairness, the
[circuit] court should have provided the parties to the action with an opportunity to
present admissible evidence … such as that set forth in Mark Kallas’ Affidavit,
filed in support of the Kallases[’] Motion for Reconsideration ….”

¶20 As we are limited by our standard of review, we conclude the circuit
court did not erroneously exercise its discretion when it amended the referee
appointment order. To the extent the Kallases argue that the court was required to
limit the referee’s authority to consider only offers from parties with an ownership
interest, they have not established any legal basis for such a requirement. They
appear merely to argue that this is how they construed the initial order, and their
construction is the only plausible interpretation of that order.

¶21 To the contrary, the order was ambiguous about who was an
“interested party” permitted to submit offers. An “interested party” could be
construed as referring only to those having ownership interests; it could also be
construed to include parties who had some legal or pecuniary interest in the
property.7 See Cashin v. Cashin, 2004 WI App 92, ¶11, 273 Wis. 2d 754, 681
N.W.2d 255 (holding that ambiguity exists when the language used gives rise to
two or more reasonable interpretations). When a circuit court is presented with a
request to resolve ambiguity in its orders, we will affirm the court’s clarification if
it was based on a reasonable rationale in light of the court’s experience with the
case. Id., ¶12. Here, the court reasonably determined that the equities favored a
sale at the highest possible price. Once it had made that determination, non-party

7
Regarding the former construction, we note that Pamer Farms remained a party to this
litigation at the time the referee solicited initial offers.

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bidding was a relevant consideration for all parties to the action, as a higher sale
price benefitted all owners.8

¶22 We also reject the Kallases’ assertion that the circuit court failed to
adequately consider their emotional investment in the Property. No one
disputed—or disputes even now—that a sale was the best option for the Property.
The Kallases merely assert that the circuit court should have accepted their lower
offers given their interest in keeping the Property in their family. But the court
was within its discretion to prioritize obtaining the highest sale price versus
ensuring that a sale was made to individuals with longstanding or sentimental ties
to the Property.

¶23 Though the Kallases fault the circuit court for failing to take
additional evidence, we are unpersuaded that testimony or other evidence was
necessary under the circumstances. Prior to the amendment to the referee
appointment order, the Kallases’ attorney had made clear to the court that the
Property had been “in the family for over a hundred years” and that they had a
significant attachment to it. The court explicitly stated that its analysis of the
equities included consideration of these matters. The Kallases did not request an
evidentiary hearing to further establish the point, and they have not established
that such a hearing would have altered in any fashion the court’s weighing of the
equities. See Burkes v. Hales, 165 Wis. 2d 585, 591, 478 N.W.2d 37 (Ct. App.
1991) (noting that because the exercise of discretion is essential to the circuit

8
Given our holding in this regard, we similarly reject the Kallases’ argument that
reversal is warranted because the amended order was “inconsistent” with the original order. The
parties differed in their interpretations of the order, and both interpretations were reasonable. The
amended order was “inconsistent” only in the sense that the court rejected the Kallases’ desired
interpretation based on its determination that the equities favored the highest possible sale price.

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court’s functioning, we generally look for reasons to sustain discretionary
decisions).

¶24 The Kallases also argue that the auction ordered by the circuit court
was inconsistent with the provisions of WIS. STAT. ch. 842, including WIS. STAT.
§ 842.07. To the extent the Kallases focus on § 842.07’s “[o]n default and proof
or after trial of issues” language, we have already concluded that testimony or
other evidence was unnecessary given the agreement by the parties that a sale was
appropriate.

¶25 Otherwise, the Kallases concede that a court sitting in equity may in
the exercise of its discretion order a private sale. That concession is well-taken, as
“the [circuit] court is not restricted to the statutory remedies—partition along
undisputed lines or partition by sheriff’s sale—but it is within the discretion of the
[circuit] court to order any remedy, including a private sale by the parties, that is
equitable.” Schmit v. Klumpyan, 2003 WI App 107, ¶22, 264 Wis. 2d 414, 663
N.W.2d 331. As such, the Kallases have not established that the auction ordered
by the court here violates any provision of WIS. STAT. ch. 842.

¶26 Finally, the Kallases argue the manner of conducting the auction was
inequitable because there was no public notice of the auction. The Kallases
certainly make a compelling argument regarding the equities favoring a public
auction—one that may even have succeeded if we were reviewing this matter de
novo. Having identified the highest and best offer as the predominant goal of the
underlying litigation, the better practice would have been for the circuit court to
order a public auction. However, we agree with the Lees that the lack of public
notice is not a basis for concluding the circuit court erroneously exercised its
discretion under the circumstances here.

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¶13 Specifically, there is no evidence that a higher offer would have
resulted had the auction been publicly noticed. Indeed, Pamer’s winning bid of
$600,001 was well in excess of the referee’s anticipated listing price of
$564,000—even more so when considering that no broker commission was
necessary. The appellate Record reflects that the Property sold at a value
substantially higher than its estimated fair-market value and that the Kallases did
not object during the confirmation-of-sale hearing. In all, we perceive no basis for
overturning the circuit court’s order authorizing the referee to accept Pamer’s bid
and complete the sale of the Property. Accordingly, our standard of review
requires that we affirm.

By the Court.—Order affirmed.

This opinion will not be published. See WIS. STAT.
RULE 809.23(1)(b)5.

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