When presented with certain types of disputes, a court can partition real estate physically or equitably. For example, a physical partition of a ten-acre lot could give five acres to each party. A court deploys an equitable partition when physical partition is impractical or unfair. An equitable partition essentially is a court-ordered and supervised sale. How the real estate is valued, and who gets what are decisions for the judge.
The New Hampshire Supreme Court recently reviewed a superior court partition ruling in Hayes v. Connolly, decided March 29, 2019.
The Hayes and Connolly families had jointly owned a seasonal, lakefront home since 1953. In 1992, the families entered into a contract to address what would happen if a party wanted to sell. The contract stated if they could not agree on a sale price, each would obtain an appraisal. If the appraisals did not match, the appraisers would jointly select a third appraiser, and if that value matched one of the original appraisers, that would be the sale price.
In 2015, the Hayes family wanted out, and the families could not agree on the disposition or valuation methods for the real estate. In light of the absence of a practical way to divide a single home, the superior court ordered an equitable partition. The parties did not object to a partition, but they could not agree on the method.
The Hayes family wanted to have a private auction, while the Connolly family wanted to use the appraisal method from the 1992 contract. The court ruled the contract no longer applied; however, the court also ruled the appraisal method was not unfair. In fact, given the parties had agreed to it, it suggested the families at one time believed the appraisal process from the contract fair and equitable. The Hayes family argued the superior court could not use the sale method prescribed by the contract because the contract no longer applied.
The Supreme Court refused to limit the trial court’s options:
We do not see how a method of partition becomes unfair, unreasonable, or inequitable merely because parties are no longer contractually bound to use that method. To adopt the Hayes Trust’s argument, and conclude that the trial court could not order this method of partition, would in effect preclude a trial court from ordering specific relief merely because the parties once had agreed to those very terms. Such an outcome would be illogical.
In many ways, Hayes v. Connolly simply is another example of a partition dispute, but an interesting take-away is the potential lingering effect of a contract term (here, a valuation method) where the contract itself no longer is enforceable.