Court Opinion

ID: 4104647
Source: CourtListenerOpinion
Date Created: 2016-12-05 22:20:18.844595+00
Date Added: 2024-06-11T14:46:18.133446
License: Public Domain

IN THE COURT OF APPEALS OF THE STATE OF WASHINGTON

OVERLAKE FARMS B.L.K. Ill, LLC, a
Washington limited liability company,             No. 73408-3-1

                      Appellant,                  DIVISION ONE
                                                                                CD

              v.                                  PUBLISHED OPINION             or i   i
                                                                                126 Wash. App. 222, 224-25, 108 P.3d 147 (2005).

The purposes of the doctrine include to "'avoid inconsistency, duplicity, and . . .

6 RP (Mar. 13, 2015) at 31. In their written motion, the Kapelas argued that the referees'
decision put them "at the mercy of the minority interest-holding" Sferras. CP at 826.
No. 73408-3-1 / 6

waste of time.'" Cunningham, 126 Wash. App. at 225 (alteration in original) (internal

quotation marks omitted) (quoting Johnson v. Si-Cor, Inc., 107 Wash. App. 902, 906,

28P.3d832(2001)).

      The main factors for the court to consider are "(1) whether 'a party's later

position' is 'clearly inconsistent with its earlier position'; (2) whether 'judicial

acceptance of an inconsistent position in a later proceeding would create the

perception that either the first or the second court was misled'; and (3) 'whether

the party seeking to assert an inconsistent position would derive an unfair

advantage or impose an unfair detriment on the opposing party if not estopped.'"

Arkisonv. Ethan Allen, Inc.. 160 Wash. 2d 535, 538-39, 160 P.3d 13 (2007) (internal

quotation marks omitted) (quoting New Hampshire v. Maine, 532 U.S. 742, 750-

51, 121 S. Ct. 1808, 149 L. Ed. 2d 968 (2001). The inconsistent positions "must

be diametrically opposed to one another." Kellar v. Estate of Kellar, 172 Wn. App.

562,581,291 P.3d 906 (2012).

       Here, the Kapelas currently argue that, under RCW 7.52.130, the court

cannot order a partition by sale unless a partition in kind would cause great

prejudice to the owners, plural. Below, they acquiesced in both the trial court's

and the Sferras' view that the statute required partition by sale ifthe Sferras could

prove that they would suffer great prejudice from a partition in kind.

       These competing interpretations of the statute are not diametrically

opposed. For example, the Kapelas' main argument at trial was that the trial court

had to order a partition in kind because it would not cause either party great

prejudice. That argument fits within both interpretations.
No. 73408-3-1 / 7

        Additionally, it is not clear that the Kapelas took the position that great

prejudice to the owners meant great prejudice to the Sferras, let alone mislead the

trial court about their position. Both parties started by describing the question of

great prejudice as whether partition in kind would cause "great prejudice to both

parties."7 They discussed "great prejudice" in terms of reduction to the aggregate

value of the properties. In their trial brief, the Kapelas claimed that, "ifthe [pjroperty

were partitioned . . ., the combined value of the two partitioned parcels would

actually exceed the value of the unsegregated [pjroperty."8 The Sferras claimed

that any partition would "result in a material loss of value" to both parcels.9

        The Sferras were the first to narrow the question to whether a partition in

kind would cause great prejudice to them. When addressing the role of owelty,

they stated, "But owelty cannot be used to short circuit the required initial inquiry

into whether partition in kind of the [pjroperty would cause 'great prejudice' to the

Defendants."™ The Sferras applied the same reasoning in their closing argument

at trial.11   The trial court also phrased the question narrowly in its summary

decision, noting that the "primary consideration is the measure of economic loss

to the party objecting to partition."12

7 CP at 8.
8 CP at 19-20.
9 CP at 39.
10 CP at 47 (emphasis added).
11 "There is clearly a material economic harm from the cost of $1.35 million to put in a
sewer for one-fourth of the property." Report of Proceedings (RP) (Feb. 27, 2013) at 107.
"And the sewer is clearly great prejudiceto the one-quarter owner." RP (Feb. 27, 2013) at
109.
12 CP at 195.
No. 73408-3-1 / 8

        In their proposed findings of fact and conclusions of law, and proposed

order appointing referees, the Kapelas framed the question of "great prejudice" as

whether the Sferras would suffer great prejudice.13 But this was after both the

Sferras and the trial court had already framed the question that way. It does not

appear that the Kapelas attempted to mislead the trial court. Overall, the factors

weigh against applying judicial estoppel. Accordingly, we consider the merits of

the Kapelas' argument.

                      Statutory Requirement for Partition by Sale

       The Kapelas argue that the trial court erred by misinterpreting the statute to

allow a partition by sale upon a showing that a partition in kind would cause great

prejudice to just one of the owners. The Sferras counter that this interpretation

contradicts the equitable purpose of the statute and would produce "nonsensical

results."14 The statute does require a showing of prejudice to all the owners. The

trial court abused its discretion by ordering a sale without that showing.

       We review a trial court's partition decisions for an abuse of discretion.

Friend v. Friend. 92 Wash. App. 799, 803, 964 P.2d 1219 (1998). The trial court

abuses its discretion if it bases its ruling on "an erroneous view of the law." Wash.

State Physicians Ins. Exch. & Ass'n v. Fisons Corp., 122 Wash. 2d 299, 339, 858

13 Conclusion of Law 6: "Defendant did not meet its burden of proof to convince the Court
that it is not possible to carve out an equitable partition without material pecuniary loss to
Defendant—i.e., such that the relative value of the share would be materially less than the
sum Defendant would realize from a one-fourth share of the proceeds of a sale of the
whole." CP at 234 (emphasis added); Order Regarding Appointment of Referees: "[T]he
Referees shall submit a report . . . stating that, under the provisions of RCW 7.52.130,
partition cannot be made without great prejudice to one or both [pjarties." CP at 241
(emphasis added).
14 Br. of Resp't Bellevue-Overlake Farm, LLC at 48.
                                              8
No. 73408-3-1 / 9

P.2d 1054 (1993). In order to determine whether the trial court erred in this case,

this court must conduct a de novo analysis of the statute authorizing partition by

sale. Lake v. Woodcreek Homeowners Ass'n, 169 Wash. 2d 516, 526, 243 P.3d 1283

(2010).

       Statutory analysis begins with the statute's plain meaning. Lake, 169 Wash. 2d

at 526. This court determines plain meaning "'from the ordinary meaning of the

language at issue, the context of the statute in which that provision is found, related

provisions, and the statutory scheme as a whole.'" Lake, 169 Wash. 2d at 526

(quoting State v. Engel, 166 Wash. 2d 572, 578, 210 P.3d 1007 (2009)).

       Here, the trial court ordered a sale of the property under the authority

granted to it by RCW 7.52.130. It authorizes a trial court to order a partition by

sale when there is great prejudice to the owners, plural:

       Ifthe referees report to the court that the property, of which partition
       shall have been decreed, or any separate portion thereof is so
       situated that a partition thereof cannot be made without great
       prejudice to the owners, and the court is satisfied that such report is
       correct, it may thereupon by an order direct the referees to sell the
       property.

RCW 7.52.130 (emphasis added). Other sections of the partition chapter that

contemplate a sale of the property also use the plural "owners."            See RCW

7.52.010, .080.     By contrast, the section of the chapter that authorizes owelty

distinguishes between owners:

       When it appears that partition cannot be made equal between the
       parties according to their respective rights, without prejudice to the
       rights and interests of some of them, the court may adjudge
       compensation to be made by one party to another on account of the
       inequality of partition.

RCW 7.52.440 (emphasis added).
No. 73408-3-1/10

       Thus, there are two kinds of prejudice, but only one kind forces a partition

by sale. First, there is great prejudice to both parties, meaning that a partition in

kind would reduce the value of the whole property. As the Kapelas have argued,

this type of prejudice occurs when the value of the partitioned parcels would be

materially less than the value of the undivided property. Second, there is prejudice

to one party but not the other. In the first case, the court should order a partition

by sale. In the second, the court should order a partition in kind and order the party

who receives a disproportionately high value to compensate the other.

       Washington courts have followed this approach. In Hegewald v. Neal, the

trial court ordered a partition by sale when the referees reported that a partition in

kind would "destroy the usefulness of the property." 20 Wash. App. 517, 522-23, 582

P.2d 529 (1978) (emphasis omitted). The court noted that the aggregate value of

partitioned parcels would be less than ifthe land were sold as a unit. Hegewald,

20 Wash. App. at 526. The Court of Appeals upheld the decision because the

property would have lost one third of its value if partitioned in kind. Hegewald. 20

Wash. App. at 526-27.

       Washington's Supreme Court affirmed an order of partition by sale when an

entire property was covered with one building. Huston v. Swanstrom, 168 Wash.

627,628-30,13P.2d 17(1932). The court also noted that a mortgage encumbered

the entire property and that, if partitioned, "each tract would remain subject to the

entire incumbrance." Huston. 168 Wash, at 631.

       Even when the court orders partition in kind, as it did in Williamson

Investment Co. v. Williamson, it bases its decision on the value of the property if

                                         10
No. 73408-3-1 /11

sold as a whole, compared to the aggregate value of the parcels. 96 Wash. 529,

537-39, 165 P. 385 (1917). There, the court set out the test for great prejudice to

the owners as "'whether 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 for the whole.'" Williamson. 96 Wash. at 536 (emphasis added) (quoting

Idema v. Comstock. 131 Wis. 16, 110 N.W. 786 (1907)).

      Washington's strong policy in favor of partitions in kind supports the

Kapelas' interpretation. See, e.g.., Friend, 92 Wash. App. at 803 ("Partition in kind is

favored wherever practicable."); Williamson, 96 Wash, at 535 ("The power to

convert real estate into money against the will of the owner, is an extraordinary

and dangerous power, and ought never to be exercised unless the necessity

therefor is clearly established.'") (quoting Vesper v. Farnsworth, 40 Wis. 357, 362

(1876)).

       The Sferras argue that partition by sale is appropriate whenever a physical

partition cannot be done equitably. They argue that Hegewald supports their

position because there the court could have avoided prejudice to the majority

tenant by awarding that tenant a parcel containing all the hot springs. Thus, the

court ordered a partition by sale even though a partition in kind would prejudice

only one of the owners. This argument ignores the finding in that case that the hot

springs were "an unusual amenity" with "substantial value if used in connection

with the rest of the land, but not otherwise." Hegewald, 20 Wash. App. at 519. It is

impossible to tell from the case whether dividing the minority tenant's one-fifth of

the land would impact "the rest of the land" enough to diminish the hot springs

                                          11
No. 73408-3-1/12

value. Hegewald. 20 Wash. App. at 519. Instead, the trial court and Court of Appeals

properly found great prejudice to the owners based on the referees' finding that a

partition in kind would "destroy the usefulness of the property." Hegewald, 20 Wn.

App. at 523 (emphasis omitted). We reject the Sferras' interpretation of Hegewald.
      The Sferras also rely on several out of state cases where a partition for sale

was ordered when prejudicewas not shown to all parties. They are not persuasive.

      The Sferras cite Georgian v. Harrington and Sung v. Grover, but the statutes

governing partition by sale in those cases are too dissimilar to Washington's to
support the Sferras' position. 990 So. 2d 813, 816 (Miss. Ct. App. 2008); No.
CV020815521S, 2003 WL1962830, at*3 (Conn. Super. Ct. Mar. 27,2003).15 Both
allow partition by sale under much broader circumstances than Washington does.
       In the two cases the Sferras cite with statutes similar to Washington's, the

parties seeking a partition in kind sought to carve out for themselves the most
valuable portion of the land. Haogertv v. Nobles. 244 Or. 428, 431-34, 419 P.2d 9
(1966) (a cotenant with a one eighth undivided share of a 680-acre farm sought to
set apart the 85 acres that contained the dwellings and otherfarm buildings, "'the
heart'" of the farm, for himself); Keen v. Campbell, 249 S.W.3d 927, 929-30 (2008)

(a cotenant with a onefifth undivided share ofa 41 -acre farm sought to have seven
or eight acres ofthe more valuable farmland set aside for himself).
       In both cases, it is reasonable to assume that partitioning the property in the

15 Georgian relies on Mississippi Code Annotated § 11-21-11 (Rev. 2004), which allows a
partition by sale whenever it would "'better promote the interest of all parties than a
partition in kind.'" 990 So. 2d at 816. Sung relies on Connecticut General Statutes § 52-
500, which also allows the sale of the property when it will "better promote the interests of
the owners." 2003 WL 1962830, at *3 n.8.

                                             12
No. 73408-3-1/13

way suggested by the minority cotenants would have greatly diminished the value

of the majority cotenants' parcels. We cannot tell whether that would have meant

that the aggregate value of the parcels would have been materially less than the

value of the whole property. Also, neither case discusses what role owelty could

have played. These cases are not persuasive enough to dictate a broader

interpretation of Washington's partition by sale statute.

         In short, RCW 7.52.130 requires a showing of great prejudice to the owners,

plural, before the court may order a sale. Here, the trial court adopted the referees'

conclusion "that a partition-in-kind would cause great prejudice to the one-fourth

owner."16 It did not evaluate how the need for a sewer extension would impact the

value of the entire property or the value of the Kapelas' property.17 This was an

error.    The trial court, and the referees, should have determined whether

partitioning the property would create two parcels whose aggregate value was

materially less than the value of the whole property.

         We remand to the trial court to consider the facts under the correct legal

standard and take any further action necessary to achieve an equitable result. But

we reach the Kapelas' remaining arguments to a limited extent because they are

likely to recur on remand.

                                  Sewer Extension

         The Kapelas argue that the court abused its discretion by considering the

impact of the need for sewer once it had determined that the property is physically

16 CP at 1008.
17 The Sferras concede in their brief that the court did not make any findings about
prejudice to the Kapelas.
                                          13
No. 73408-3-1 /14

capable of division. This was not error.

      As discussed above, the test for when a partition in kind causes great

prejudice is "'whether 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 for the whole.'" Williamson. 96 Wash, at 536 (quoting Idema, 131 Wis.

at 16). The "value of a piece of property is its fair market value: 'Fair market value

has been defined as the price [that] a well-informed buyer would pay to a well-

informed seller, where neither is obliged to enter into the transaction.'" Carson v.

Willstadter, 65 Wash. App. 880, 884, 830 P.2d 676 (1992) (internal quotation marks

omitted) (quoting State v. Sherrill, 13 Wash. App. 250, 255, 534 P.2d 598 (1975)).

"[F]air market value necessarily takes into consideration present uses and

speculativefuture uses." Carson. 65 Wash. App. at 886. Awell-informed buyer may

consider the development potential of the property. Carson, 65 Wash. App. at 884-

86 (in that case, the development depended on whether the parcel could be

subdivided and whether a sewer district would serve the area in the future).

       Here, extending the sewer line to the property would cost approximately

$1.4 million. The possibility of having to pay over a million dollars in order to

develop land might impact a well-informed buyer's valuation of the property. The

trial court did not abuse its discretion by considering the needs of future

developers.

       The Kapelas also argue that, even assuming the need for a sewer extension

is a proper consideration, the trial court erred by relying on the referees'
speculation that a sewer extension would be necessary. We reject this argument

                                           14
No. 73408-3-1/15

because the referees' finding was supported by facts, not mere speculation.

       "A presumption exists in favor of trial court's findings of fact [in partition

action], and the party claiming error has the burden of showing findings are not

supported by substantial evidence." Carson, 65 Wash. App. at 883.

       The referees concluded that the sewer extension would be necessary for

two reasons. First, they did not believe that the city of Bellevue would allow the

parties to develop the land with an on-site septic system instead of a sewer.

Second, they believed that on-site septic systems were incompatible with high-end

residential development. The Kapelas do not challenge the referees' basis for the

second reason:

       [T]he use of on-site septic systems is inconsistent with high-end,
       large lot development as would be proposed with development of the
       [property. On-site systems can interfere with an owner's desire to
       locate patios, sports courts, pools, and other site amenities typically
       associated with this type of development. Furthermore, on-site
       disposal of domestic sewage may be perceived as inconsistent with
       the high-end nature of any proposed development.1181

       Regardless of whether the referees' conclusion that the city of Bellevue

would require a variance is correct, it was appropriate for the referees to determine

that a sewer extension would be necessary to develop the property according to

its highest and best use. And it was not an abuse of discretion for the trial court to

rely on that determination.

                      Eguitable Power to Impose a Covenant

       The Kapelas argue that the trial court abused its discretion by relying on the

parties' inability to cooperate as a basis for refusing to impose a detailed covenant

18 CP at 933.

                                         15
No. 73408-3-1/16

for future development of the sewer. They also argue that the trial court's decision

not to impose the covenant was an abdication of its equitable powers, and thus,

an abuse of discretion. We reject both of these arguments and hold that the

decision whether to impose the covenant was within the trial court's discretion.

       Partition "'contemplates an absolute severance of the individual interests of

each joint owner, and, after partition, each has the right to enjoy his estate without

supervision, let, or hindrance from the other. Unless this can be accomplished,

then the joint estate ought to be sold, and the proceeds divided.'" Hegewald, 20

Wash. App. at 523 (quoting Brown v. Cooper. 98 Iowa 444,454, 67 N.W. 378 (1896)).

In Hegewald. one reason that the court found that a partition in kind was not

feasible was because it would have required retaining the hot springs in common,

assessing the costs of improvements to the owners proportionately, and then
distributing the waters and charging for them on a monthly basis. 20 Wash. App. at

523.

       Here, the covenant, as drafted by the referees, required both parties to

place funds for sewerdevelopment into an escrow account, and then contemplated
the parties working together on developing the sewer line over years. While the
covenant would not require the permanent entanglement described in Hegewald,

it would still require substantial cooperation in the future. The referees concluded
thatthe parties had difficulty cooperating and that"[predicating a solution on such
cooperation would only place [the trial court] in the position of having to police a
difficult process of partition and land development over a long period of time."19

  CP at 947.

                                          16
No. 73408-3-1/17

Because of the nature of the proposed covenant, the parties' ability to cooperate

was a proper consideration.

      The Kapelas cite several out-of-state cases in which an appellate court

reversed a trial court's decision when the trial court relied on adversarial parties'

disagreements or hostility. These cases are not persuasive because none of them

involve a decision to force the parties to cooperate in the future. Myers v. Myers,

176 W. Va. 326, 329, 342 S.E.2d 294 (1986) (partition of two parcels); Brown v.

Brown. 402 S.C. 202, 209, 740 S.E.2d 507 (S.C. Ct. App. 2013) (partition of two

parcels); Dewrell v. Lawrence, 58 P.3d 223, 227 (Okla. Civ. App. 2002) (amount

and propriety of owelty in partition action); In re Estate of McKillip, 284 Neb. 367,

378, 820 N.W.2d 868 (2012) (partition).

       We also reject the Kapelas' argument that the trial court abdicated its

equitable powers. The record demonstrates that the trial court and the referees

considered the propriety and effectiveness of ordering the development covenant

sought by the Kapelas and decided against it.

       The Sferras, on the other hand, argue that, once the trial court determined

that they would suffer great prejudice, it lacked the authority to impose a

development covenant. The Sferras' position is inconsistent with the broad scope

of the court's equitable power.

       It is well established that the trial court has "great flexibility in fashioning

relief" in partition proceedings. Cummings v. Anderson, 94 Wash. 2d 135, 143, 614

P.2d 1283 (1980). "[A] court in the exercise of its equitable powers may fashion

remedies to address the particular facts of each case, even if the partition statute

                                          17
No. 73408-3-1/18

does not strictly provide for such a remedy." Kelsev v. Kelsev. 179 Wash. App. 360,

369, 317 P.3d 1096, review denied. 180 Wash. 2d 1017, 327 P.3d 54, cert, denied.

135 S. Ct. 451, 190 L. Ed. 2d 330 (2014).

      As just explained, the trial court did not abuse its discretion by failing to

impose a development covenant. But it has the power to impose one. On remand,

the trial court may consider whether a development covenant would be appropriate

and what the terms of that covenant might be.

      We reverse and remand for further proceedings consistent with this opinion.

                                                    -T^c/Klur            A^O"

WE CONCUR:

                                                       Cok.^-

                                        18