Daily Development for Thursday, November 18, 1999

By: Patrick A. Randolph, Jr.
Professor of Law
UMKC School of Law
Of Counsel: Blackwell Sanders Peper Martin
Kansas City, Missouri
randolphp@umkc.edu

Note the little squib case at the end dealing with another aspect of judicially ordered sales.

MARITAL PROPERTY; DIVISION OF PROPERTY; JUDICIAL SALES: A divorce decree is plainly erroneous and an abuse of discretion when it favors distribution in value rather than in kind, permits one spouse to keep or sell property at her discretion, but denies any control to other spouse, permits sale of property without judicial supervision and denies excluded spouse the right to bid on the property.

Kellner v. Kellner, 593 N.W.2d 1 (Neb. App. 1999).

Former husband and wife owned a home and 120 acres of farmland as joint tenants. As part of their divorce decree the former husband was required to convey all of his interests in the property to his former wife who was to hold title to onehalf of such property as trustee and the other onehalf in her own name. The decree then provided that she should sell all of their property in the manner provided in the decree, divide the net proceeds and pay onehalf of the net proceeds to the clerk of the district court for her former husband's benefit. Furthermore, the decree ruled the former wife could buy, rather than sell, the property for a predetermined value authorized by the trial court. However, the decree prohibited the former husband from having anything to do with the sale, beyond readying the property for sale.

The decree also ordered sold a considerable amount of personal property in roughly the same manner, even though there was ample evidence of the nature and value of this property and even though husband sought to have the some of the property set aside to him with a credit to wife at the value she placed on this property. The personal property and the land consisted of the wherewithal to conduct a farming and breeding operation, which was a career the husband desired to continue to pursue, at least parttime.

The Court of Appeals noted that ordering sale of the property raised two issues. The first was whether the trial court should have ordered the sale of the parties' property as opposed to a distribution in kind. The trial court made no finding to explain its ordering a sale of all the parties' assets. The Court of Appeals first commented that there is a preference for distribution in kind, especially, where, as here, there is adequate evidence of the nature and value of the property to permit equitable distribution.

The Court further noted that generally, when courts force parties to sell their assets, such as in a partition action or a foreclosure action, the parties may protect themselves by being a bidder at the public auction. In this case, the trial court ordered that the former husband could not have any personal involvement in, input into, or control over the sale. That provision coupled with the lack of a requirement that the property be sold at public auction effectively prohibited the former husband, but not the former wife, from buying the property. The Court of Appeals concluded that to force the sale of a farmer's, or other small business person's, property with no chance for that person to buy it is unreasonable, even when the circumstances justify a sale. In addition, it found that for a court to force one or both parties to incur substantial income tax liability by a forced sale is unreasonable, unless the sale is necessary to accomplish a reasonable and necessary division.

The second issue was whether the trial court should have ordered the former wife to be the person to sell the property. In the case at hand, the trial court authorized the former wife to sell the property without court supervision. Her only obligations were to pay half the net proceeds to the clerk of the district court and file an accounting. The Court of Appeals noted that Nebraska's receiver statutes provide that no person shall be appointed a receiver who is a party, solicitor, or in any manner interested in the suit. See Neb.Rev.Stat. § 251086 (Reissue 1995). The Court of Appeals found that to be a sound rule, whatever the name of the person appointed by a court to perform a function for the court. After all, when the law clearly provides that an attorney, an officer of the court, cannot have even the appearance of a conflict of interest, courts should not appoint a layperson with an obvious conflict to perform a function for the court.

Comment 1: Although a marital property case, the decision clearly applies equally to partitions of other commonly held property. Practitioners sometimes lose sight of the strong traditional judicial preference to permit parties to retain their real estate ownership by a partition in kind. Here the trial court not only bypassed that preference, but, for unexplained reasons, prohibited the husband from even offering bids to acquire the property, thus driving him entirely from the land a result clearly unpalatable to this court, which finishes the opinion with language indicating that Nebraska courts ought to recognize and support the desire of parties before them who wish to continue their traditional lives as "family farmers."

Comment 2: Although one might argue that in situations that don't have the traditional farming or homestead values compelling a preference for physical partition, the sale option (with both parties having the right to bid in a court supervised independently conducted sale) might be the best means of realizing highest value for all, the court here notes that the sale option also can lead to a substantial tax burden as a consequence of the partition.

Comment 3: On another issue unrelated to property, but demonstrating how far away Nebraska is from, say L.A. or New York, here are some other issues in the case: The parties had been married for 23 years, raising a family and operating a farm, but in later years scaling down their farm operations due to the unprofitability of farming. Thereafter they separated and lived apart for several years before this dissolution matter came to court. During that time, each worked simple jobs she as a waitress and he as a handyman (although for a time he tried to maintain the farm operation to at a loss) earning about $800 a month each. The net worth of their real and personal property during this period was in excess of a half million dollars. The trial court awarded the wife $200 per month alimony for ten years, but the appeals court reversed, holding that to pay that amount the husband likely would have to give up farming and work full time as a handyman, something that the court refused to require him to do.

LIFE ESTATE; SALE BY PERSONAL REPRESENTATIVE: Where an individual dies and leaves a life estate in his homestead to his widow, with the remainder to his children by a previous marriage, the property cannot be sold to meet expenses of the estate without the approval of both the widow and the children.

In Re Estate of Van Den Boom. 590 N.W.2d 350 (Minn. App. 1999).

Readers are urged to respond, comment, and argue with the daily development or the editor's comments about it.

Items in the Daily Development section generally are extracted from the Quarterly Report on Developments in Real Estate Law, published by the ABA Section on Real Property, Probate & Trust Law. Subscriptions to the Quarterly Report are available to Section members only. The cost is nominal. For the last six years, these Reports have been collated, updated, indexed and bound into an Annual Survey of Developments in Real Estate Law, volumes 1‑6, published by the ABA Press. The Annual Survey volumes are available for sale to the public. For the Report or the Survey, contact Maria Tabor at the ABA. (312) 988 5590 or mtabor@staff.abanet.org

Items reported here and in the ABA publications are for general information purposes only and should not be relied upon in the course of representation or in the forming of decisions in legal matters. The same is true of all commentary provided by contributors to the DIRT list. Accuracy of data and opinions expressed are the sole responsibility of the DIRT editor and are in no sense the publication of the ABA.

Parties posting messages to DIRT are posting to a source that is readily accessible by members of the general public, and should take that fact into account in evaluating confidentiality issues.

ABOUT DIRT:

DIRT is an Internet discussion group for serious real estate professionals. Message volume varies, but commonly runs 5 ‑ 10 messages per workday.

Daily Developments are posted every workday.

To subscribe to Dirt, send an e-mail to:

To:	ListServ@listserv.umkc.edu
Subject:	[Does not matter]
Text in body of message	Subscribe Dirt [your name]

To cancel your subscription to Dirt, send an e-mail to:

To:	ListServ@listserv.umkc.edu
Subject:	[Does not matter]
Text in body of message	Signoff Dirt

For information on other commands, send the message Help to the listserv address.

DIRT has an alternate, more extensive coverage that includes not only commercial and general real estate matters but also focuses specifically upon residential real estate matters. Because real estate brokers generally find this service more valuable, it is named “Brokerdirt.” But residential specialist attorneys, title insurers, lenders and others interested in the residential market will want to subscribe to this alternative list. If you subscribe to Brokerdirt, it is not necessary also to subscribe to DIRT, as Brokerdirt carries all DIRT traffic in addition to the residential discussions.

To subscribe to Brokerdirt, send an e-mail to:

To:	ListServ@listserv.umkc.edu
Subject:	[Does not matter]
Text in body of message	Subscribe Brokerdirt [your name]

To cancel your subscription to Brokerdirt, send an e-mail to:

To:	ListServ@listserv.umkc.edu
Subject:	[Does not matter]
Text in body of message	Signoff Brokerdirt

DIRT is a service of the American Bar Association Section on Real Property, Probate & Trust Law and the University of Missouri, Kansas City, School of Law. Daily Developments are copyrighted by Patrick A. Randolph, Jr., Professor of Law, UMKC School of Law, but Professor Randolph grants permission for copying or distribution of Daily Developments for educational purposes, including professional continuing education, provided that no charge is imposed for such distribution and that appropriate credit is given to Professor Randolph, DIRT, and its sponsors.

DIRT has a WebPage at: http://www.umkc.edu/dirt/