Nebraska Supremes Nix Forced Sale Of Deceased Owner's Multiple Tracts Of Land Where In-Kind Distribution To Heirs Was Feasible; Cash Equalization Ordered To Reflect Varying Values

From a summary of a recent court decision by the Nebraska Supreme Court: appearing in Justia US Law:

• This was an action for partition of the real property in the estate of Ronald McKillip. At the time of his death, McKillip owned four tracts of land.(1) McKillip's will left the property to his three daughters,(2) "share and share alike."
  
  The probate court confirmed ownership of the real estate to the daughters in equal shares. One daughter brought an action to partition the real estate. A referee appointed by the county court determined that a partition in kind of the real estate was not possible and recommended a public sale.
  
  The court approved the report and concluded that the real estate could not be partitioned in kind "without great prejudice to the owners." The court ordered the referee to sell the real estate, and the personal representative appealed.
  
  The Supreme Court reversed, holding that the real estate should be partitioned in kind.(3) Remanded with directions.

Source: Opinion Summary: In re Estate of McKillip.

For the ruling, see In Re Estate of McKillip (aka Shields v. McConnville), 284 Neb. 367 (Neb. September 21, 2012).

(1) The four tracts of unequal values are described in the ruling as follows:

• Tract 1 is a 5-acre rural residential property with a house on it. The property is close to McCook, Nebraska, and shares a water well with tract 2. Tract 1 was valued at $190,000 by the court. The amended inventory valued the property at $196,000, as adjusted for roof repairs.
  
  Tract 2 consists of pastureland (62.74 acres) and cropland (19.49 acres). It was valued at $102,000. Tract 2 could be developed as a subdivision or rural lots. Tracts 1 and 2 are adjoining, and a well on tract 1 is used to water livestock on tract 2.
  
  Tract 3 is about 6 miles from the Kansas state line. It contains mostly cropland, but also some marginal pastureland. Water for livestock is available from a neighboring property. Tract 3, which consists of approximately 161 acres, was valued at $124,000.
  
  Tract 4 is 2 miles north of the Kansas state line and a few miles southwest of tract 3. Tract 4, which totals approximately 240 acres, consists of dryland fields and pastureland. A windmill and two dams provide water for livestock. It was valued at $143,000.

(2) From the ruling:

• At the time of his death, McKillip was survived by three daughters: Sandra K. McConville, Cinthia S. Shields, and Laura Klaus. McKillip's will left his estate to his daughters "share and share alike." The estate included four tracts of real estate valued at $565,000 in the amended inventory, as well as cash and certificates of deposit in excess of $720,380. McConville was named personal representative of the estate.

(3) The Nebraska high court ruled as follows:

• [14,15] It is generally held that until the contrary is made to appear, the presumption prevails that partition in kind is feasible and should be made, and that the burden is on those who seek a sale of the property in lieu of partition in kind to show the existence of a statutory ground for such sale. See Trowbridge v. Donner, supra. A sale in partition cannot be decreed merely to advance the interests of one of the owners, but before ordering a sale, the court must judicially ascertain that the interests of all will be promoted. See id.
  
  In this case, there was no dispute as to what property constituted the assets in the estate. There was no dispute as to the value of the real estate, and there was no claim that the value of the real estate as one parcel was greater than the value of the sum of the individual tracts. There was evidence that two of the devisees, McConville and Klaus, wanted to retain the real estate for personal and sentimental reasons. Shields requested a partition and testified that she wanted the distribution of the real estate to be fair.
  
  [16] The statutory ground for a sale is a showing that partition cannot be made without great prejudice to the parties. See Neb. Rev. Stat. §§ 25-2181 and 25-2183 (Reissue 2008). The generally accepted test of whether a partition in kind would result in great prejudice to the owners is whether the value of the share of each in case of a partition would be materially less than the share of the money equivalent that could probably be obtained for the whole. Trowbridge v. Donner, 152 Neb. 206, 40 N.W.2d 655 (1950) (citing 40 Am. Jur. Partition § 83 (1942)).
  
  Whether partition in kind will result in great prejudice to the parties requires comparing two amounts. The first is the amount an owner would receive if the property were divided in kind and the owner then sold his portion of the property. The second is the amount each owner would receive if the entire property were sold and the proceeds were divided among the owners. If the first amount is materially less than the second amount, great prejudice has been shown. See id.

The court directed that the four tracts real estate (of unequal values) contained in the estate of the sisters' deceased father to be split up in kind, rather than sold by public sale, stating the following:

• The facts necessary for a partition in kind are not in dispute. The appraiser's valuation of the property is not contested, nor is his testimony that sale of the tracts as a whole would not bring a greater amount than sale of the tracts individually. All the property, both real and personal, is to be divided equally among the sisters.
  
  We reject McConville's proposed distribution in kind for the following reasons: Tracts 1 and 2 should not be separated. Separating 19.49 acres is not practical and would create more problems than it would solve. A well on tract 1 provides water to tract 2, and separating tracts 1 and 2 would require arrangements for tract 2 to continue to utilize the well on tract 1 or would necessitate the expense of drilling a new well on tract 2, which may not be feasible.
  
  Accordingly, tracts 1 and 2 should be awarded to one of the devisees. Tract 3 should be awarded to another devisee along with cash from the estate. Tract 4 should be awarded to the remaining devisee along with cash from the estate. The amended inventory of the estate shows that tracts 1 and 2 are valued at a total of $298,000 ($196,000 and $102,000 respectively). (We employ the figures from the amended inventory to account for $6,000 in roof repair to the house on tract 1 not covered by the appraisal.) Tract 3 is valued at $124,000, and tract 4 is valued at $143,000.
  
  The estate contains cash assets in the amount of $720,380.42, and the will directs that the personal property be divided among the devisees. For purposes of this partition, each sister should receive $298,000 in real estate or a combination of real estate and cash from the estate to equalize the distribution. This is accomplished by awarding one sister tracts 1 and 2, one sister tract 3 and $174,000 in cash assets, and the third sister tract 4 and $155,000 in cash assets. Following these distributions, each sister will have received $298,000 from the estate, either in real estate or real estate and cash. Cash assets of $391,380.42 will remain in the estate for later distribution along with other assets of the estate.
  
  Because the county court did not partition the property in kind, it did not consider which sister should receive which tract. Accordingly, the cause must be remanded to the county court with directions to distribute tract 1 and 2 to one sister, tract 3 and $174,000 to one sister, and tract 4 and $155,000 to one sister in order to equalize the distributions of the real estate using cash from the estate.
  
  If the parties cannot agree as to which distribution should be made to each devisee, the court is directed to have the clerk of the court number the shares and then draw the names of the future owners by lot. See Neb. Rev. Stat. §§ 25-2182 and 25-21,102 (Reissue 2008). Section 25-2182 gives a trial court the power to allot particular portions of the land to particular individuals, and unless so allotted, the shares may be drawn by lot, as provided by § 25-21,102. See Trowbridge v. Donner, 152 Neb. 206, 40 N.W.2d 655 (1950).