Hadfield v. Kitzmann

266 S.W.2d 801, 223 Ark. 459, 1954 Ark. LEXIS 688
Supreme Court of Arkansas·Decided April 5, 1954·No. 5-292·Published·Cited by 3 cases

Opinion

George Rose Smith, J.

This is a proceeding brought by the appellants, H. P. Hadfield and wife, to obtain partition of certain property that is owned. in equal thirds by the appellants, by the appellees Gus Kitzmann and wife, and by the appellee Ruth McMillen. The property consists of five apartment buildings in Little Rock, the buildings being designated as Units 1 to 5. The complaint asked that Units 1, 2, and 3 be divided in kind among the co-owners and that Units 4 and 5 be sold. The chancellor denied this request and ordered instead that all five buildings be sold in bulk. This appeal questions the correctness of that decree and also attacks the order confirming the sale.

In 1949 the Hadfields, the Kitzmanns, and Verne McMillen formed a corporation for the purpose of constructing these buildings, which are known as the Yorkshire Apartments. The venture was largely financed by a loan from the federal government. Each of the three participating interests contributed $10,000 to the project, and a federal loan of $335,000 supplied the remaining funds. At the time of trial this loan had been reduced to about $311,000, so that the owners’ equity in the property was still relatively small. In the interim Verne Mc-Millen had transferred his stock to his wife Ruth, and the corporation had conveyed the property to the stockholders and had been dissolved.

Most of the testimony at the trial was directed to the issue of whether Units 1, 2, and 3 are of so nearly equal value that a division in kind would be fair. On this issue the weight of the evidence supports the chancellor’s conclusion. The five buildings are situated in a semicircle and are numbered from left to right. The first three buildings contain eight apartments each, while Units 4 and 5 have ten apartments each.

The testimony indicates pretty clearly that Unit 3 is substantially more valuable than Units 1 and 2. It sits in the center of the semicircle and is architecturally more attractive than the other four structures. It cost about $5,000 more to build than did the other two eight-apartment units. The federal loan was divided into five separate loans, and as of April 30, 1953, the owners’ equity in Unit 3 was $13,725.34, while it was only $8,961.76 in Unit 2 and $10,728.19 in Unit 1. Again, during the first four years Unit 2 returned a net profit of $5,130.65, compared to a profit of only $2,558.34 for Unit 1 and $3,955.30 for Unit 3.

Apart from these figures, the various expert opinions offered at the trial are about evenly balanced. There is also much evidence to show that the value of all five buildings would be materially diminished if three were divided in kind and the other two sold. The resulting separate ownerships would entail a loss of economy in management and would leave each proprietor exposed to the threat of rent reductions on the part of someone else. Without reviewing the testimony in greater detail, we think it sufficient to say that the chancellor’s decision on the main issue is not contrary to the preponderance of the evidence.

At the commissioner’s sale the properties were jointly purchased for $60,000, one third by the Kitzmanns, one third by Euth McMillen, and one third by J. B. Murphy. Since the Kitzmanns and Mrs. McMillen already owned a two-thirds interest, the actual result of the sale was that Murphy bought the appellants’ equity for $20,000. It is now insisted that this price is so grossly inadequate that the sale should not have been confirmed.

We hardly think the price even to be inadequate, much less grossly so. As of April 30,1953 — a few months before the sale — the owners’ bookkeeping equity in the five buildings was $61,578.84. The chancellor was scrupulously fair in giving the parties ample opportunity to obtain bids for the property. In taking the case under submission he gave the litigants several months in which to find a buyer. The only offer that was obtained for the entire property was a $65,000 offer made by Murphy. This offer, however, was for an immediate delivery of title, free from further litigation in the trial or appellate court.

After Murphy’s offer was made the Hadfields offered in substance to pay one-fifth thereof, or $13,000, for either Unit 4 or 5. But these are the ten-apartment units and are undoubtedly worth more than the smaller units. Construction costs for Unit 5 were more than $17,000 greater than those for Unit 2. Thus if the Had-fields consider $13,000 to be a fair price for the most valuable of the five buildings, we do not think it can be said that a bid of $60,000 for the whole is grossly inadequate. On this question, too, the opinions of expert witnesses are directly conflicting.

The remaining issue is whether the court erred in directing that the property be offered for sale in bulk rather than first in bulk and then separately, with the better bid to be accepted. The appellants insist that the statute requires distinct buildings to be sold separately. Ark. Stats. 1947, § 34-1829. No request for this procedure was made by anyone before the sale, but the point was relied upon by the Hadfields as an objection to confirmation.

Although it is certainly the better practice for property to be offered alternatively as a whole and in parcels, the objection is not now available to the appellants. The error of offering separate tracts em masse is a mere irregularity which does not avoid the sale. Glasscock v. Glasscock, 98 Ark. 151, 135 S. W. 835. We there held that since the error is not jurisdictional a stranger who purchases under the decree will be protected, even though the decree be subsequently set aside.

Free access — add to your briefcase to read the full text and ask questions with AI

Hadfield v. Kitzmann, 266 S.W.2d 801, 223 Ark. 459, 1954 Ark. LEXIS 688 (Ark. 1954).

266 S.W.2d 801 (Hadfield v. Kitzmann) — published by Counsel Stack Legal Research, free access to 12M+ legal documents.

Related

Supha Xayprasith-Mays v. William R. Wallace
2021 Ark. App. 370 (Court of Appeals of Arkansas, 2021)
Geary v. Kirksey
351 S.W.2d 846 (Supreme Court of Arkansas, 1961)
Orem v. Moore
272 S.W.2d 60 (Supreme Court of Arkansas, 1954)