Overlake Farms B.l.k. Iii Llc, App. v. Bellevue-overlake Farm, Llc, Resp.

196 Wash. App. 929
CourtCourt of Appeals of Washington
DecidedDecember 5, 2016
Docket73408-3-I
StatusPublished
Cited by2 cases

This text of 196 Wash. App. 929 (Overlake Farms B.l.k. Iii Llc, App. v. Bellevue-overlake Farm, Llc, Resp.) is published on Counsel Stack Legal Research, covering Court of Appeals of Washington primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Overlake Farms B.l.k. Iii Llc, App. v. Bellevue-overlake Farm, Llc, Resp., 196 Wash. App. 929 (Wash. Ct. App. 2016).

Opinion

*932 Trickey, A.C.J.

¶1 Two related families, the Kapelas and the Sferras, own a large undeveloped property in Bellevue, Washington, as tenants in common. The Kapelas, who had sought to partition the property in kind, appeal from the trial court’s order to partition by sale.

¶2 Unless a partition in kind will cause great prejudice to the owners, the court may not order a partition by sale. Because the trial court ordered a partition by sale based on prejudice to one owner, not the owners, we reverse.

FACTS

¶3 Army and Betty Seijas purchased a 60-acre farm in Bellevue in 1947. The Seijases had two daughters, Betty Lou Seijas Kapela and Gloria Seijas Sferra. The Seijases deeded 20 acres of the farm to their daughter Betty Lou Seijas Kapela. They also gave each of their daughters a 25 percent interest in the remaining 40 acres. 1 Betty Lou Seijas Kapela inherited her parents’ remaining 50 percent interest in the 40 acres after her mother’s death. The 40-acre farm is the subject of this appeal.

¶4 Currently, two limited liability companies share ownership of the 40-acre farm (the property). Overlake Farms B.L.K. Ill, LLC, which is beneficially owned by Betty Lou Seijas Kapela’s descendants, owns a 75 percent interest in the 40-acre farm. Bellevue-Overlake Farm, LLC, whose members are Gloria Seijas Sierra’s descendants, holds the remaining 25 percent interest. For clarity, we adopt the parties’ convention of referring to Overlake Farms B.L.K. Ill, LLC as the Kapelas, and Bellevue-Overlake Farm, LLC as the Sferras.

¶5 The property lies in the Bridle Trails area of Bellevue. The Kapelas board horses on their 20-acre farm and use the property for grazing. They also operate a summer camp on the property. The property is zoned for private residences, *933 and both parties agree that the highest and best use of the property is residential subdivision.

¶6 There is currently no sewer serving the property. Extending the sewer to the property would cost approximately $1.4 million. It may be possible, as an alternative, to develop the property with on-site septic systems. Installing septic systems would cost substantially less than extending the sewer but would require the city of Bellevue’s approval. Even if the city would grant a variance authorizing on-site septic systems, the use of septic systems instead of connecting to sewer could lessen the value of the property.

¶7 In 2011, the Kapelas filed an action to partition the property. They sought partition in kind. The Sferras counterclaimed, requesting a partition by sale.

¶8 In early 2013, the case proceeded to a bench trial. The court ruled that the Sferras had not shown that a partition in kind would create great prejudice. The trial court appointed three referees to report on how to partition the property in kind, or to state that “partition cannot be made without great prejudice to one or both [p]arties.” 2

¶9 The parties agreed that the property would yield 38 lots. The referees determined that, if the court ordered a partition in kind, the most reasonable approach would be to award the Sferras a parcel of land capable of subdivision into 9 lots plus an owelty payment equivalent to the value of one-half lot. The court would award the remaining land, capable of subdivision into 29 lots, to the Kapelas. The referees concluded there was “little difference, if any, between the value of a nine-lot short plat and the first nine-lot phase of a broader subdivision of the entire [p]roperty.” 3

¶10 But the referees also concluded that connecting to the sewer was required. They determined that, unless the parties entered into a cost-sharing agreement, whichever *934 property developed first would bear the entire cost of extending the sewer. They assumed the smaller parcel would develop first because the Kapelas expressed no current interest in developing their land. The referees concluded that imposing the entire cost of the sewer extension on the smaller parcel would result in great prejudice to the Sferras.

¶11 In their draft report, the referees outlined provisions of a covenant to share the cost of the sewer development. They solicited responses from the parties to their proposed covenants. But, after receiving the parties’ responses, they were “not persuaded that a combination of owelty and a mandatory agreement between uncooperative parties can or should play a role in addressing the issue of great prejudice.” 4

¶ 12 Accordingly, in their final report, they recommended a partition by sale if the parties could not come to an agreement about the sewer covenant. The Kapelas agreed to pay for their share of the sewer extension, “if it were necessary to develop any portion of the [p]roperty.” 5 The Kapelas moved to confirm in part and set aside in part the referees’ recommendation. The trial court affirmed the referees’ recommendation in all respects relevant to this appeal and ordered the sale of the property. The Kapelas appeal.

ANALYSIS

Prejudice to Owners

¶13 The Kapelas argue that the trial court erred in basing its decision on a showing of prejudice to one owner, rather than all owners. The Sferras respond that a showing of great prejudice to one owner is sufficient to force a *935 partition by sale. We agree with the Kapelas that Washington requires a showing of great prejudice to the owners, rather than just to one owner, before the court can order a partition by sale. Contrary to the Sferras’ assertions, the Kapelas properly preserved this argument below and are not estopped from arguing that there must be great prejudice to the owners.

Preservation of the Issue

¶14 The Sferras maintain that this court should not consider the issue because the Kapelas did not argue it below. Because the Kapelas raised the issue to the trial court, we disagree.

¶15 We generally will not review issues raised for the first time on appeal. RAP 2.5(a). But the Kapelas did make this argument below. The Kapelas articulated this argument best at the hearing on their motion to confirm in part and set aside in part the referees’ final report:

This prospective sewer burden isn’t great prejudice to the owners; it’s prejudice to one owner if they go first and if there’s not some protection for them. So great prejudice legally is a larger concept than great prejudice to their particular interest.
And it’s worth reading the cases. The cases talk about great prejudice to the “owners.” Because the original idea is if you divide property up, are you creating a situation where the sum of the two parts is materially less than the sum of the whole? They’ve never proven it. All they’ve proven is that if they got stuck paying for the entire sewer tab, it would be unfair to them.[ 6 ]

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Bluebook (online)
196 Wash. App. 929, Counsel Stack Legal Research, https://law.counselstack.com/opinion/overlake-farms-blk-iii-llc-app-v-bellevue-overlake-farm-llc-resp-washctapp-2016.