Overlake Farms B.l.k. Iii Llc, App. v. Bellevue-overlake Farm, Llc, Resp.
196 Wash. App. 929
| Wash. Ct. App. | 2016Background
- Two families (Kapela descendants = Overlake Farms B.L.K. III, LLC (Kapelas), 75%; Sferra descendants = Bellevue-Overlake Farm, LLC (Sferras), 25%) own a 39.25-acre parcel in Bellevue as tenants in common; both agree highest and best use is residential subdivision.
- Property lacks sewer; extending sewer estimated at ~$1.4M; on-site septic may be possible but could require city variance and reduce value for high-end development.
- Kapelas sued for partition in kind; Sferras counterclaimed for partition by sale. Referees found physical partition feasible into 38 lots (Kapelas 29 lots; Sferras 9 lots plus owelty) but concluded sewer cost allocation could impose great prejudice on the smaller (Sferras) parcel.
- Referees proposed a cost-sharing covenant but ultimately recommended sale if the parties could not agree; trial court adopted the recommendation and ordered partition by sale.
- Kapelas appealed, arguing RCW 7.52.130 requires a showing of "great prejudice to the owners" (plural) before ordering sale, not merely prejudice to one owner.
Issues
| Issue | Kapelas' Argument | Sferras' Argument | Held |
|---|---|---|---|
| Standard for ordering partition by sale under RCW 7.52.130 | Statute requires great prejudice to the owners (plural) — aggregate diminution in value; sale only if partition in kind materially lessens total value | Showing great prejudice to one owner (e.g., burden of sewer costs) suffices to justify sale | Reversed trial court: statute requires great prejudice to the owners (plural); court erred by basing sale on prejudice to one owner only |
| Preservation / judicial estoppel | Preserved issue below; not estopped despite some shifting phrasing | Argued Kapelas failed to preserve and took inconsistent positions | Kapelas preserved the argument; judicial estoppel not applicable because positions were not diametrically opposed |
| Consideration of sewer cost and development constraints | Sewer cost and future development considerations are relevant to fair market value and whether partition would materially reduce aggregate value | Argued sale appropriate because physical partition would be inequitable given sewer burden | Court: considering sewer costs and development feasibility is proper; referees’ finding that sewer likely needed was supported by evidence |
| Imposing a development/cost-sharing covenant | Court should be able to impose covenant to avoid sale; refusing to do so was an abdication of equity | Sferras argued court lacks authority to force such covenant once prejudice shown | Court held imposition or refusal to impose a covenant is within trial court's equitable discretion; refusal here not an abuse, but court may consider covenant on remand |
Key Cases Cited
- Hegewald v. Neal, 20 Wn. App. 517 (Ct. App. 1978) (upholding sale where partition would "destroy the usefulness" and materially reduce aggregate value)
- Williamson Inv. Co. v. Williamson, 96 Wash. 529 (Wash. 1917) (test for "great prejudice": whether partitioned shares would be materially less than shares of money from sale of whole)
- Huston v. Swanstrom, 168 Wash. 627 (Wash. 1932) (sale affirmed where single building covered entire property and partition would not fairly allocate encumbrances)
- Carson v. Willstadter, 65 Wn. App. 880 (Ct. App. 1992) (fair market value includes present and speculative future uses for partition valuation)
- Arkison v. Ethan Allen, 160 Wn.2d 535 (Wash. 2007) (factors for judicial estoppel analysis)
- Lake v. Woodcreek Homeowners Ass'n, 169 Wn.2d 516 (Wash. 2011) (de novo review of statutory interpretation)
- Friend v. Friend, 92 Wn. App. 799 (Ct. App. 1998) (standard of review for partition decisions)
- Cummings v. Anderson, 94 Wn.2d 135 (Wash. 1980) (broad equitable power and flexibility in fashioning partition remedies)