This opinion will be unpublished and

may not be cited except as provided by

Minn. Stat. § 480A.08, subd. 3 (2004).

 

STATE OF MINNESOTA

IN COURT OF APPEALS

A05-62

 

Robert I. Levorsen, et al.,
Respondents,

vs.

John Fletcher Freeman, et al.,
Appellants,

Alan James Freeman, et al.,
Respondents.

 

Filed September 20, 2005

Affirmed in part, reversed in part, and remanded

Minge, Judge

 

St. Louis County District Court

File No. C1-02-101288

 

 

Patrick J. Roche, Paul D. Cerkvenik, Trenti Law Firm, 1000 Lincoln Building, 225 North First Street, P.O. Box 958, Virginia, MN 55792 (for respondents Levorsen, et al.)

 

Laurence J. Klun, Klun Law Firm, One East Chapman Street, P.O. Box 240, Ely, MN 55731 (for appellants)

 

William E. Defenbaugh, Jr., 107 East Camp Street, P.O. Box 630, Ely, MN 55731 (for respondents Freeman, et al.)

 

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

 

 U N P U B L I S H E D   O P I N I O N

 

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.

D E C I S I O N

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 from the legislative aim to protect shareholders from being penalized for dissenting.  Id.  We decline to hold that as a matter of law such a limit on valuation applies to real-estate-partition proceedings.  Oppressive conduct by the majority often triggers such corporate actions.  Here, there is no evidence that this partition was a result of respondents’ conduct.  Respondents continue as multiple owners and assume the risk that any attempt to further divide the property might result in future litigation. 

            It is commonplace observation that group ownership of an asset results in inherent tension with optimum personal use and enjoyment of the asset, that the marketplace considers individual ownership as advantageous, and that discounts are used in valuing fractional interests.[1]  The referees found that fractional interests are plagued with disagreement, that fractional owners lack control, and that fractional interests are not easily sold.  The report concluded that this analysis applied to Twinflower, and made the 15% discount as an appropriate adjustment.  Based on the record in this proceeding, we conclude that the district court’s conclusion accepting the referees’ decision to discount appellants’ interest by 15% was not clearly erroneous.

B. Different Comparables

The next sub-issue is whether the district court erred in adopting the referees’ report with respect to the different comparables used.  The referees used small-parcel comparables in determining the value of lots A and B and large-parcel comparables in determining the value of the remainder of the property.  This resulted in a higher value for appellants’ lots as compared to the value of the larger Twinflower property.  The district court found that the higher valuation for lots A and B was appropriate because of the nature, character, and quality of the property, the availability of utilities to the lots, and the higher square-foot market price for smaller tracts.  The valuation of the property is a finding of fact, which we review for clear error.  Beebout, 447 N.W.2d at 467. 

Appellants state that the use of different comparables was contrary to law and facts but cite no authority for their contentions.  This court will not consider assignments of error based on mere assertion and unsupported by argument or authority.  State v. Modern Recycling, Inc., 558 N.W.2d 770, 772 (Minn. App. 1997).  Moreover, the use of different comparables is not inconsistent with the referees’ statutory duty to partition property after considering the “quantity and quality” of the respective portions.  See Minn. Stat. § 558.06 (2004).  In any event, all factors relevant to the valuation of property may be considered by the referees and the district court.  See Ramsey County v. Miller, 316 N.W.2d 917, 919 (Minn. 1982) (stating that to determine fair market value of property in a condemnation proceeding, all relevant evidence concerning current real estate practices should be admissible); see also Minn. Stat. § 302A.473, subd. 7 (2004) (“The court . . . shall determine the fair value of the shares, taking into account any and all factors the court finds relevant, computed by any method or combination of methods that the court, in its discretion, sees fit to use, whether or not used by the corporation or by a dissenter.”).  If the referees determined that size was a relevant factor, it certainly was not clear error for the district court to use size-grouped comparables.

C. Valuation Date

The third sub-issue is whether the district court erred in adopting the referees’ report, which established value of the property as of October 23, 2002.[2]  The district court rejected appellants’ argument that the referees should have used the current market value and found that the referees needed a point of reference for the valuations, that no changes were made to the property after October 23, 2002, and that any appreciation in appellants’ portion of the property would parallel appreciation to the entire Twinflower property. 

Appellants claim that the referees should have obtained the current market value of the entire property and that failure to do so undervalued appellants’ interests.  The district court is correct that because the valuation date affected all of Twinflower equally, the portion of Twinflower property allotted to appellants is not undervalued vis-à-vis respondents.  But in addition to lots A and B, appellants each received cash payments of $4,250 as part of the judgment because lots and A and B were each worth $272,000 and appellants’ interests equaled $276,250.  The caselaw recognizes that when a “partition cannot be made equal between the owners without prejudice to the rights or interests of some, the court may require compensation to be made (owelty) to equalize partition.”  Anderson v. Anderson, 560 N.W.2d 729, 731 (Minn. App. 1997) (upholding partition in kind with owelty when equal division cannot be made without great prejudice to owners but a sale is likewise disadvantageous), review dismissed (Minn. May 28, 1997). 

Respondents concede that if the Twinflower property value increased by 20% between October 2002, the valuation date, and December 2004, the date that the district court ordered partition, the $4,250 equalizing cash payments awarded to appellants undervalued the aggregate appreciation during that time by $850.  The district court did not adjust the ultimate award for the added incremental value due appellants in that cash award and we conclude that appellants are entitled to an increase in the financial compensation.  Since the cash award reflects the difference in real estate values, the adjustment should reflect the increase in property values.  Therefore, we reverse and remand to the district court to modify the order to grant appellants their appropriate additional compensation from the date of valuation until final partition. 

D. Manifestly Inequitable

The final sub-issue is whether the partition results are manifestly unfair.  Appellants argue that the district court should have set aside the referees’ report because the relative land areas and lake frontage awarded to them are not proportional; that unorthodox, distorting methods of valuation were used; and that as a result the partition is grossly inequitable and unfair.  Pursuant to the partition statute, referees “shall divide the property, and allot the several portions thereof to the respective parties, quantity and quality relatively considered, according to their respective rights.”  Minn. Stat. § 558.06.  The party that objects to the referees’ report has the burden of proving that the report was erroneous, unequal, and unjust.  See DeMarco v. Van Hees, 493 S.W.2d 553, 554 (Tex. Civ. App. 1973). 

The court should set aside the report if there is “gross inequality of partition or where the partition appears to have been made upon wrong principles.”  59A Am. Jur. 2d, Partition § 128; see also Sandoval v. Sandoval, 294 P.2d 278, 279-80 (N.M. 1956); Forest Park Props., Inc. v. Pine, 224 N.E.2d 763, 768 (Ohio Ct. App. 1966); Cooper v. Long, 244 P. 167, 169 (Okla. 1926).  In Feamster v. Feamster, the West Virginia Supreme Court affirmed a partition in which parties with 3/50 property interest in 532.4 acres were allotted 130.5 acres and parties with 47/50 interest in the property received only 401.9 acres.  15 S.E.2d 159, 161 (W. Va. 1941).  The Feamster court noted that the commissioners made the partition according to the monetary value of the property and not according to acreage; and that the 130-acre tract was rough, covered with stumps, and unfit for farming, which contrasted to the other portion.  Id. at 162.  The Feamster court found that “only in extreme cases will [the] Court set aside the allotment of commissioners appointed to partition land, on the ground of inequality.”  Id.  Moreover, “[e]very reasonable presumption is in favor of the fairness of a report of partition made by commissioners, if proper on its face.”  Id.

Appellants point out that for their combined 1/6 interest they received approximately 6.1 acres of Twinflowers’ total land area of 161 acres and approximately 400 feet of shoreline of Twinflowers’ total shoreline of 16,515 feet.  The partition law does not require numerical proportionality.  See id.  The partition statute only requires that the value of the parcels assigned to the parties and any compensation reflect the fractional interest of the parties.  See Minn. Stat. § 558.06 (“[T]he referees shall divide the property, and allot the several portions thereof to the respective parties, quantity and quality relatively considered[.]”); see also La Motte v. Mohr, 78 Minn. 127, 128-29, 80 N.W. 850, 851 (1891).  The district court’s findings and the referees’ report in this case reflect such an effort to fairly partition based on value.  In this process, the district court found that the property allotted to appellants was of a higher quality because utilities are readily available and easily developable in contrast to respondents’ share, which is not easily accessed.  Appellants have not met their burden of proving that the district court’s decision or the referees’ report was clearly erroneous or manifestly unfair or unjust.

II.

            The next issue is whether the district court erred in failing to remove a referee and, if so, whether this constitutes reversible error.  According to the partition statute, the district court “shall appoint three disinterested and judicious citizens of the county as referees to make partition.”  Minn. Stat. § 558.04 (2004).  The finding of whether someone is a disinterested citizen is a finding of fact which shall not be set aside unless clearly erroneous.  See Beebout, 447 N.W.2d at 467.

The district court appointed three referees to determine partition.  One referee requested removal, and the district court appointed attorney Mark Weir as the replacement.  Appellants had requested that only appraisers, not attorneys, be appointed. After his appointment, appellants objected to Weir apparently as a matter of right.  After that objection was rejected, appellants asked the court to reconsider on the grounds that appellants’ counsel and Weir were opposing counsel in a strongly contested case and that Weir is a former partner of William Defenbaugh – the attorney for neutral respondents.

            Appellants rely on Minn. Stat. § 484.70 (2004) to argue that the district court should have automatically removed Weir.  That statute does give an objecting party the right to prohibit a referee from hearing “a contested trial.”  Id., subd. 6.  However, the statute in question deals with attorney referees who are appointed by the chief judge of the district to handle cases, essentially in lieu of judges.  Id., subd. 1.  These referees are typically employed for an extended period and their role is similar to magistrates.  In part, the function of the removal provision in subdivision 6 is to preserve the right of the litigants to have a duly-appointed, “constitutional” judge.  The referees in this partition proceeding were appointed pursuant to a special chapter of the statutes regarding partition of real estate which requires three referees.  See Minn. Stat. §§ 558.04, .06, .07 (2004).  Although the role of referees in section 484.70 and chapter 558 have some similarities, the statutory provisions and practical role are different.  Partition is a specialized proceeding and referees are under close supervision of the court.[3]  See Minn. Stat.         §§ 558.07, .11, .14 – .17, .20 – .22, .25 – .27, .31.  Partition referees are not substitute judges or independent fact finders like juries.  We conclude that Minn. Stat. § 484.70, subd. 6, does not apply to partition referees.

            Appellants also point out that litigants have a right to remove a judge without cause.  See Minn. Stat. § 542.16 (2004); Minn. R. Civ. P. 63.03.  This does not mean the parties to a partition have a right to remove a specialized partition referee.   There is not a common-law right to strike or remove a judge or referee that requires reversal.  Appellants do not cite any constitutional provision or caselaw that recognizes such a right generally or in a partition action.  As previously stated, this right exists with respect to judges and referees appointed pursuant to Minn. Stat. § 484.70.  See Minn. R. Civ. P 63.03; Citizens State Bank of Clara City v. Wallace, 477 N.W.2d 741, 742 (Minn. App. 1991) (“A properly filed removal notice divests the trial court of further jurisdiction. . . .  Failure to honor a proper removal notice is reversible error requiring a new hearing.”).  We decline to judicially create an automatic right to remove a referee in a partition hearing.

            Next we consider whether the district court abused its discretion by not removing Weir.  Since we are reviewing a completed district court proceeding, we determine that an abuse of discretion and actual bias or fraud must be established before this court will reverse and remand for the appointment of new partition referees.  See Matson v. Matson, 638 N.W.2d 462, 465, 469 (Minn. App. 2002) (“The district court has broad discretion     . . . in deciding whether to grant recusal motions.”).  Appellants argue that Weir should have been removed because of his prior adversarial relationship between Weir and appellants’ counsel.  Although a contentious adversarial relationship between attorneys may be troublesome, we recognize that it is commonplace in litigation and that removal for that reason is within the discretion of the district court.  There is no showing this was an abuse of discretion in this case. 

            Appellants also claim that the district court abused its discretion in failing to remove Weir because Weir had a past partnership and contemporaneous relationship in an unrelated matter with Defenbaugh, the attorney for the neutral respondents.  The past partnership does not require removal; it is within the discretion of the district court.  However, the contemporaneous relationship in which Defenbaugh represented Weir is troublesome.  This was not disclosed to the district court by Weir but only discovered by appellants in reviewing case titles from appellate decisions of this court.  Weir should have disclosed this representational work by Defenbaugh to the district court, and Weir should have either withdrawn as a referee or the district court should have removed Weir as a referee.  Nonetheless, this disclosure and withdrawal/removal did not occur.  In this situation we carefully scrutinize the record to determine whether there is any evidence of prejudice or actual bias.  We conclude that the Weir/Defenbaugh relationship does not warrant reversal at this stage of this case because Defenbaugh’s clients ultimately supported appellants’ objection to the referees’ report by submitting a motion to set aside that report.  The Defenbaugh/Weir relationship was not adverse to appellants.[4]

            Also, appellants have failed to submit any evidence of prejudice aside from the unfavorable decision.  They have not pointed to any incident in the record that indicates actual manifestation of bias in the proceeding.  Although it is difficult to scrutinize the proceedings after the fact, we note that the partition report was recommended by all three referees and reviewed by the district court, and that following this review, the district court adopted the report.  Although it would have been prudent to remove the referee under the circumstances, we find that based on all the facts, the situation does not indicate prejudice or actual bias or otherwise justify reversal of the ultimate partition decision and judgment.[5]

III.

 

            Appellants raise an issue of whether the district court abused its discretion in ordering appellants to pay half of the costs associated with the partition proceeding.  According to Minn. Stat. § 558.10 (2004), the costs and charges of a partition of real property “shall be paid by the parties respectively entitled to share in the land, and the amounts to be paid by each shall be determined by the court.”  Appellants argue that this panel should review the district court’s decision de novo but cite no caselaw or statute for support.  In fact, caselaw indicates that assessment of fees and costs in an action for partition lies within the discretion of the district court and is reviewed under an abuse-of-discretion standard.  Kuller v. Kuller, 260 Minn. 256, 260, 109 N.W.2d 561, 563 (1961). 

            Minn. Stat. § 558.06 states that “expenses and fees of the referees . . . shall be paid by the plaintiff, and may be allowed as part of the charges.”  Although respondents are the nominal plaintiffs in this case, it is not clear who is primarily responsible for the partition action.  Respondents Robert and Arabella Levorsen, Robert and Arabella Levorsen as Trustee, David and Daphne Rippon, Mark and Laura Levorsen, Kenton and Anne Hammer commenced an action to stop appellants’ construction activities and, in an amended complaint, requested partition in the alternative.  Once the district court temporarily enjoined appellants from further construction, the partition part of the proceeding was not pursued until a year later when appellants filed a motion requesting partition.  In fact, all parties requested and ultimately stipulated to partition.  Therefore, Minn. Stat. § 558.06 is not decisive of this issue.  Because the statute is not applicable and appellants, as well as respondents, sought partition, the district court did not abuse its discretion in ordering appellants to pay half of the costs associated with the appointment of the referees. 

IV.

 

            The last issue is whether the district court abused its discretion in charging appellants with their traditional portion of costs for maintaining the property.  The district court order stated “[t]hat the expenses associated with the upkeep of the Twinflower estate incurred prior to the date of this order are split according to the customary procedure the families always followed.” 

            It is a general rule that a tenant in common is entitled to reimbursement from cotenants for their share of expenses paid for the care, repair, protection, and preservation of the common property.  Darling v. Harmon, 47 Minn. 166, 170-71, 49 N.W. 686, 688 (1891).  However, a tenant in common cannot recover the cost of improvements to the property, absent an agreement or understanding with the co-tenant.  Andersen v. Andersen, 376 N.W.2d 711, 715 (Minn. App. 1985).

Appellants argue that they did not authorize these expenses, some costs were for improvements, and the costs constituted a “spending spree.”  The district court did not explicitly determine whether the expenses were associated with the upkeep or constituted improvements.  The district court implicitly found that the expenses were for upkeep, and the evidence in the record indicates that the expenses for 2002 and 2003 were for upkeep and repairs.  Therefore, the district court did not abuse its discretion in ordering appellants to pay their portion of expenses for the Twinflower property.

Appellants argue in their reply brief that they paid their respective shares of the common expenses, and because the district court failed to make specific findings and did not hold a hearing specifically on this issue, we should remand.  Appellants do not cite any facts in the record that support their claims that they paid their fair share; on the contrary the record indicates that appellants have refused to pay their portion of operating expenses from 2002 to 2003.  Therefore, the district court did not err in ordering appellants to pay their traditional portion of operating expenses for the property.

            Affirmed in part, reversed in part, and remanded.