Gartner v. Temple

#26950-a-DG
2014 S.D. 74

IN THE SUPREME COURT
OF THE
STATE OF SOUTH DAKOTA

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BRADLEY GARTNER, Plaintiff and Appellee,

v.

MERLE TEMPLE, Defendant and Appellant.

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APPEAL FROM THE CIRCUIT COURT OF
THE SIXTH JUDICIAL CIRCUIT
JACKSON COUNTY, SOUTH DAKOTA

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THE HONORABLE PATRICIA J. DEVANEY
Judge

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HAVEN L. STUCK
Lynn, Jackson, Shultz
& Lebrun, PC
Rapid City, South Dakota Attorneys for plaintiff and
appellee.

JAMES P. HURLEY
Bangs, McCullen, Butler,
Foye & Simmons, LLP
Rapid City, South Dakota Attorneys for defendant and
appellant.

****

CONSIDERED ON BRIEFS
ON OCTOBER 6, 2014
OPINION FILED 10/29/14
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GILBERTSON, Chief Justice

[¶1.] Appellant, Merle Temple (“Temple”), appeals the Sixth Judicial Circuit

Court’s judgment ordering the partition in kind of 3,374.9 acres of land located in

Jackson County, South Dakota, owned with Appellee, Bradley Gartner, as tenants

in common. Temple argues that the property cannot be partitioned without causing

great prejudice, that the circuit court undervalued permanent structures on the

land, and that the court should have reduced the amount of the ordered

compensatory payment in favor of allocating additional land to Temple. We affirm.

Facts and Procedural History

[¶2.] In 2007, Gartner and Doug Temple—Merle Temple’s father—entered

into a joint venture and purchased a ranch (the Ranch) for $788,000 from Barry and

Rita Barber—Gartner’s aunt and uncle. The Ranch consists of 3,374.9 acres located

in Jackson County, South Dakota. Gartner held an undivided one-fourth interest in

the Ranch, and Doug Temple held an undivided three-fourths interest. The Ranch

includes pastures, hay land, and several permanent structures including a house,

machine shop, livestock sheds, calving barn, and corrals. After the purchase of the

Ranch, Gartner and his wife sold their previous residence and moved into the house

on the Ranch. Although Doug Temple and Gartner each kept the same number of

cows on the Ranch, Gartner and his wife served as the Ranch’s caretakers. Gartner

received half of Doug Temple’s calves in exchange for his services.

[¶3.] The White River divides the Ranch. Approximately 60% of the land is

located to the north of the river and the remaining 40% is located to the south. The

Ranch’s headquarters—including the house in which Gartner and his wife reside—

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is located on the southern parcel. Both parcels are accessible by county roads, and

the northern parcel is bordered on the north by a county road located approximately

ten miles from Interstate 90. Electricity and water resources are available on both

parcels, but the northern parcel offers no winter protections for cattle, restricting its

use to fair-weather grazing.

[¶4.] Doug Temple died in May 2009, at which time Temple inherited his

three-fourths undivided interest in the Ranch. At that time, the Ranch was

appraised at a value of $1,130,000. Thereafter, relations between Temple and

Gartner deteriorated. In February 2012, Gartner brought an action for partition

and subsequently asked the circuit court to appoint three referees. The court held

an evidentiary hearing on June 19, 2012, and heard testimony from Temple,

Gartner, and three expert witnesses—Lyndell Peterson and Bryce Nelson for

Temple, and Ronald Ensz for Gartner. The court granted Gartner’s motion and

appointed Peterson, Nelson, and Ensz to prepare a Referee’s Report (the Report).

[¶5.] The referees met with the parties and their attorneys, inspected the

property, viewed aerial photographs, examined the 2009 appraisal, and prepared

the Report on June 25, 2013. The Report recommended dividing the Ranch into two

parcels along the White River, with Temple receiving the northern parcel and

Gartner receiving the southern parcel, including his home and accompanying

structures. The Report resulted in an allocation of 920 acres to Gartner and

2,454.90 acres to Temple. Because Gartner only held a one-fourth interest in the

Ranch, but received almost 40% of the land, the circuit court ordered Gartner to

make a compensatory payment to Temple of $102,337. Temple asked the circuit

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court to increase the value of the permanent structures according to their

replacement cost—rather than their market value—and to award more land to

Temple instead of the large compensatory payment. The circuit court denied

Temple’s request and he now appeals.

[¶6.] Temple raises three issues in this appeal:

1. Whether the circuit court erred in refusing to order a
partition by sale.

2. Whether the circuit court erred in adopting the Referee’s
Report.

3. Whether the circuit court erred in ordering Gartner to
make a compensatory cash payment to Temple instead of
awarding more land to Temple.

Standard of Review

[¶7.] “[P]artition is a proceeding in equity and the court has the inherent

jurisdiction to adjust all the equities in respect to the property.” Eli v. Eli, 1997

S.D. 1, ¶ 8, 557 N.W.2d 405, 408 (quoting Braaten v. Braaten, 278 N.W.2d 448, 450

(S.D. 1979)) (internal quotation marks omitted). “We review equitable actions for

abuse of discretion.” Englehart v. Larson, 1997 S.D. 84, ¶ 12, 566 N.W.2d 152, 155.

See also Eli, 1997 S.D. 1, ¶ 8, 557 N.W.2d at 408. An abuse of discretion “is a

fundamental error of judgment, a choice outside the range of permissible choices, a

decision, which, on full consideration, is arbitrary or unreasonable.” Arneson v.

Arneson, 2003 S.D. 125, ¶ 14, 670 N.W.2d 904, 910. We do not determine whether

we would have made the same decision as the circuit court. Novak v. Novak, 2006

S.D. 34, ¶ 3, 713 N.W.2d 551, 552. Rather, “[o]ur function in reviewing matters

which rest in the discretion of the trial court is to protect litigants from conclusions

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which exceed the bounds of reason.” F.M. Slagle & Co. v. Bushnell, 70 S.D. 250,

254-55, 16 N.W.2d 914, 916 (1944).

[¶8.] “Pursuant to an abuse of discretion standard of review, factual

determinations are subject to a clearly erroneous standard.” State v. Guthrie, 2002

S.D. 138, ¶ 5, 654 N.W.2d 201, 203. In applying this standard:

The question is not whether this Court would have made the
same findings that the trial court did, but whether on the entire
evidence we are left with a definite and firm conviction that a
mistake has been committed. This Court is not free to disturb
the lower court’s findings unless it is satisfied that they are
contrary to a clear preponderance of the evidence. Doubts about
whether the evidence supports the court’s finding of fact are to
be resolved in favor of the successful party’s version of the
evidence and of all inferences fairly deducible therefrom which
are favorable to the court’s action.

Estate of Olson, 2008 S.D. 97, ¶ 9, 757 N.W.2d 219, 222 (quoting Osman v. Karlen &

Assocs., 2008 S.D. 16, ¶ 15, 746 N.W.2d 437, 442-43) (internal quotation marks

omitted). We give no deference to the circuit court’s conclusions of law, however,

and review them under a de novo standard. Guthrie, 2002 S.D. 138, ¶ 5, 654

N.W.2d at 204.

Analysis and Decision

[¶9.] 1. Whether the circuit court erred in refusing to order a partition by
sale.

[¶10.] Temple principally asserts that partition in kind cannot be made

without causing great prejudice because neither resulting property would be

capable of functioning as an economic unit. He further asserts that the referees

incorrectly valued the permanent structures located on land allocated to Gartner,

further prejudicing Temple. Finally, Temple asserts that the circuit court’s order to

Gartner to make a compensatory payment to Temple in the amount of $102,337 is
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evidence that the partition is “grossly unequal.” Consequently, Temple concludes

that the circuit court should have ordered a sale of the entire property, that the

court should have modified the Report to award him a larger compensatory

payment or additional land, and that the court should have converted the

compensatory payment actually awarded into additional acreage taken from

Gartner’s allotment.

[¶11.] The partition of real estate is authorized and governed by SDCL

chapter 21-45. In particular, SDCL 21-45-1 defines a cotenant’s statutory right to

the partition or sale of jointly owned property.

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.

In an action for partition, a court normally “must order partition of the property in

kind according to the respective rights of the parties[.]” SDCL 21-45-15. “Unless

great prejudice is shown, a presumption prevails that partition in kind should be

made. Forced sales are strongly disfavored.” Eli, 1997 S.D. 1, ¶ 10, 557 N.W.2d at

408 (quoting Schnell v. Schnell, 346 N.W.2d 713, 716 (N.D. 1984)) (internal

quotation marks omitted). Therefore, a party has access to the remedy of partition

by sale only in limited circumstances—when “it appear[s] 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[.]” SDCL 21-45-28. The proponent of a

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forced sale has the burden of proving great prejudice. Eli, 1997 S.D. 1, ¶ 11, 557

N.W.2d at 408.

[¶12.] Temple claims that the circuit court’s order is “grossly unequal, clearly

unfair, contrary to law, and causes great prejudice to Temple[.]” Temple testified

that dividing the Ranch into two units would devalue both because the resulting

northern parcel would not have any buildings or improvements and the southern

parcel would not have enough land to function as an economic unit. However, great

prejudice is not established merely because the resulting post-partition parcels are

less productive than the pre-partition whole, or even because the resulting parcels

function dissimilar to the whole.

In determining if great prejudice would result from a partition,
the question is not which alternative would provide optimal
economic value or maximum functional use. The resultant
parcels need not be the economic, functional or aesthetic
equivalent of the original parcel. Rather, great prejudice exists
when “the value of the share of each in case of a partition would
be materially less than his share of the money equivalent that
could probably be obtained from the whole.”

Schnell, 346 N.W.2d at 716 (quoting Berg v. Kremers, 181 N.W.2d 730, 733 (N.D.

1970)). Thus, the effect of partition in kind “must be weighed against the effect of a

sale of the land as a unit and the effect of a sale of the land in parcels.” Id. at 720.

[¶13.] When properly weighing the effect of partition in this case, it is clear

that Temple has failed to meet his burden of showing great prejudice. Both of

Temple’s experts—Nelson and Peterson—offered testimony that actually tends to

establish the absence of prejudice. Peterson testified that there is a demand for

smaller tracts that do not necessarily constitute economical units in themselves.

Likewise, Nelson also admitted that smaller tracts frequently sell at auction. The

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circuit court noted both of these statements in its findings of fact. Under the

circumstances, we are not presented with any reason to conclude that the circuit

court clearly erred in doing so. Additionally, the circuit court had access to the 2009

appraisal, which also indicated not only that other farmers and ranchers operating

in the area were buying any available expansion land, but also that new families

were moving into the area to establish country residences (as opposed to farming or

ranching units). Consequently, even if Temple and his experts offered testimony

tending to show that the resulting partitions of the Ranch could not independently

function as economic units, they did not offer testimony showing that the amount

Temple would receive from selling his partition—when added to the compensatory

adjustment he would receive of $102,337—is materially less than would be his

share of the proceeds of selling the entire property. In other words, Temple has not

shown that he would suffer serious pecuniary injury as a result of partition, even if

the resulting parcels are not “economic units.”

[¶14.] More importantly, however, we consider more than just the financial

implications of partition. We examine the totality of the circumstances to

determine whether a partition in kind would cause great prejudice to the owners.

Eli, 1997 S.D. 1, ¶ 15, 557 N.W.2d at 410. Although we consider a material

depreciation in value resulting from partition, id. ¶ 15, 557 N.W.2d at 409, the

value of land includes “the full range of the benefit the parties may be expected to

derive from their ownership of their respective shares[,]” id. (quoting Eaton v.

Hackett, 352 A.2d 748, 750 (Me. 1976)) (internal quotation marks omitted).

Regardless of any disparity between the parties’ respective shares, each co-owner

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has equal property rights including “the right of ownership, the right to preserve

the heritage of [his or] her labors, and the right to pass the property to [his or] her

heirs.” Schnell, 346 N.W.2d at 721. Therefore, in addition to the monetary

implications of partition, we also consider “ownership of agricultural lands by

family members[,]” Eli, 1997 S.D. 1, ¶ 15 n.1, 557 N.W.2d at 409 n.1, “the financial

abilities of the parties to repurchase the land through [a] sale, the location and size

of the property, the use of the property before and after the sale, and the

sentimental value attached to the parcel,” id. ¶ 16, 557 N.W.2d at 410.

[¶15.] Although the parties directly involved in this litigation are not closely

related, they each have a family connection to the Ranch’s previous owners. While

the Barbers are Gartner’s aunt and uncle, Rita Barber and Doug Temple were first

cousins. According to Temple’s testimony, the Ranch has existed as a family

operation for several generations, and the circuit court found that the Barbers were

“happy to see it stay within the family.” Gartner and his wife sold their previous

home and have resided in the house on the Ranch since Gartner and Doug Temple

purchased it in 2007. Since that time, the Gartners have also been the “caretakers

of the ranch and cattle operation[.]” “Given the duration of [Gartner’s] involvement

with the ranch and [his] sentimental attachment to the land, [his] resistance to a

partition and sale is logical.” Cf. Schnell, 346 N.W.2d at 721. As we have

previously noted, South Dakota favors protecting “ownership of agricultural lands

by family members.” Eli, 1997 S.D. 1, ¶ 15 n.1, 557 N.W.2d at 409 n.1. Thus, this

factor weighs against a forced sale and supports the circuit court’s decision to

partition the property in kind.

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[¶16.] Further, the size and use of the property also support the circuit

court’s decision. The court noted that both parties owned other cattle operations

and that all three experts agreed that “[t]he [R]anch at issue in this case may be too

small to constitute a feasible economic unit to support a ranching operation in and

of itself.” This testimony acknowledges the possibility—perhaps the likelihood—

that partitioning the property will not change its nature as supplemental

agricultural land. If Temple cannot establish that the Ranch—in its entirety—is a

feasible economic unit in the first place, then he cannot demonstrate great prejudice

by arguing that the resulting parcels are not feasible economic units. Regardless of

the actual probability that the Ranch is capable of functioning as an economic unit,

we cannot conclude that the circuit court’s finding of fact on this matter, based on

the testimony of three experts, is clearly erroneous.

[¶17.] Based on the totality of the circumstances discussed above, we are not

convinced that the circuit court abused its discretion in ordering a partition in kind.

Temple’s experts established that there was a market for smaller tracts and that

selling the land as smaller tracts could bring the same, a lower, or a higher price

than selling the property as one unit. Similarly, because all three experts also

agreed that even the pre-partition Ranch may not be an economic unit, Temple has

not proven that the use of the property will necessarily change after partition. In

fact, it is possible that the only change that will occur is that one noneconomic unit

will become two noneconomic units. Thus, considering the presumption against

forced sales and the heightened protection afforded to family-owned agricultural

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land, we cannot say that the circuit court abused its discretion in concluding that

Temple failed to show that a partition would result in great prejudice.

[¶18.] 2. Whether the circuit court erred in adopting the Referee’s Report.

[¶19.] Temple also claims the circuit court erred in adopting the referees’

valuation of the permanent structures located on the property allocated to Gartner.

Although the Report estimates the market value of those structures at $48,750,

Ensz testified that the replacement cost of those structures would likely be

$202,120. Consequently, Temple concludes, the partition is a “huge loss to Temple

of $153,370”—the difference between the market value and the replacement cost of

the structures. Citing this Court’s decision in Johnson v. Hendrickson, where we

said that “a sale may be ordered if it appear[s] to the satisfaction of the court that

the value of the share of each cotenant, in case of partition, would be materially less

than his share of the money equivalent that could probably be obtained for the

whole[,]” 71 S.D. 392, 396, 24 N.W.2d 914, 916 (1946), Temple reasons that the

partition and corresponding undervaluation of the permanent structures

demonstrates great prejudice. We disagree.

[¶20.] When a court determines that partition in kind is appropriate, it “must

appoint three referees unless the parties file written consent for one, in which case

one only shall be appointed[.]” SDCL 21-45-15. The appointed 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.” SDCL 21-45-20. In response to this

report, “[t]he court may confirm, change, modify, or set aside the report, and if

necessary, appoint new referees.” SDCL 21-45-22 (emphasis added). Thus, a
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referees’ report constitutes only a “proposal for the court’s consideration.”

Englehart, 1997 S.D. 84, ¶ 23, 566 N.W.2d at 157.

[¶21.] In essence, Temple argues that because the court had the power to

modify the Report, and because the Report—according to Temple—undervalued the

permanent structures on the Ranch, “[t]he trial court . . . clearly made reversible

error in adopting the Referee’s Report without adjustment or change.” However,

Temple does not cite any authority to support his use of the replacement cost of the

permanent structures awarded to Gartner, rather than their market value. Indeed,

the use of such a value would make little sense and would be contrary to prior

procedure. See Englehart, 1997 S.D. 84, ¶ 23, 566 N.W.2d at 157 (discussing a

court’s review of the referees’ “methods used to arrive at the fair market value” of

parcels). Even if Temple were able to muster such support, however, a party

demanding the sale of property must demonstrate the “effect [of a partition in kind]

upon all parties involved, not just those advocating a sale.” See Eli, 1997 S.D. 1, ¶

15, 557 N.W.2d at 410; Hendrickson, 71 S.D. at 396, 24 N.W.2d at 916; Schnell, 346

N.W.2d at 717 (“[T]he question in a partition action is whether or not partition can

be accomplished without great prejudice to the owners; not to one of the owners, but

to all of them.”). Even if Temple’s argument had merit, the undervaluation of

permanent structures on the partitioned property affects only him. Thus, such an

undervaluation could potentially affect only the amount of property distributed to

him under the partition, not militate against a partition in kind.

[¶22.] 3. Whether the circuit court erred in ordering Gartner to make a
compensatory cash payment to Temple instead of awarding more
land to Temple.

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[¶23.] Finally, Temple argues that the circuit court should have awarded him

more land in order to minimize the compensatory payment. Temple asserts that

the compensatory payment constitutes a forced sale of approximately 200 additional

acres of land. In support of his theory, Temple cites Englehart for the proposition

that a compensatory payment should be kept to a minimum. However, in

Englehart, we made no such conclusion; rather, we simply held that the circuit

court did not abuse its discretion in approving a referees’ recommendation that

“equally divided the property with respect to the quality and quantity of the

property with a minimum amount of owelty.” 1997 S.D. 84, ¶ 23, 566 N.W.2d at

157. While minimizing a compensatory payment may be preferable when possible,

“a trial court has broad discretion in fashioning an equitable remedy[.]” Lien v.

Lien, 2004 S.D. 8, ¶ 27 n.3, 674 N.W.2d 816, 825 n.3. Temple has the burden of

showing that the circuit court abused its discretion in adopting the partition

recommendation of the referees—who, collectively, determined that the most

reasonable division of the property at issue should follow the natural boundary of

the White River. Temple has not met his burden, and we cannot say that the circuit

court’s decision lies outside the range of permissible choices.

Conclusion

[¶24.] “[A]lthough a court must occasionally order a sale in an appropriate

case, it is obnoxious to compel a person to sell his property.” Eli, 1997 S.D. 1, ¶ 16,

557 N.W.2d at 410 (quoting Schnell, 346 N.W.2d at 721) (internal quotation marks

omitted). This is not one of those occasional cases when an order to sell is

appropriate. After reviewing the record, we are not convinced that the circuit court

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clearly erred in its relevant factual findings. Nor are we convinced that the court

abused its discretion in ordering a partition of the Ranch according to the referees’

recommendation outlined in the Report. Consequently, we affirm.

[¶25.] KONENKAMP, ZINTER, SEVERSON, and WILBUR, Justices, concur.

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