Tennessee Business Litigation Lawyers Blog
In Tennessee partition cases, a court has wide latitude in determining (and ordering) the sale of property. It can order an auction sale or that the property be listed and sold through an agent. What a Tennessee court cannot do is what one did in a recent case decided by the Court of Appeals of Tennessee.
In the case of In Re Estate of Donald Carl Battle, the party who filed the partition action requested that the property be sold and that the proceeds be distributed. In that case, the partitioning party and the other party with an ownership interest agreed that the property could not be partitioned in kind, that the partitioning party had a 25% ownership interest in the property and that the other party owned a 75% interest.
The trial court ordered an appraisal. The appraisal valued the property at $340,000. The trial court then ordered that the 75% owner could pay 25% of the appraised value to the partitioning party and buy out its interest. The partitioning party objected and appealed.
The Court of Appeals reversed the trial court. It did so based on long-standing Tennessee law which prohibits a Tennessee court, in a partition case, from divesting property out of one co-owner and placing it in another. In Tennessee, as the Court of Appeals pointed out, if a co-owner wants the property sold, it is entitled to a sale.
The fact that a co-tenant is entitled to have the property sold does not mean that the co-tenant can choose the manner of sale. How a property is sold is determined by the court.
In my experience, Tennessee courts will look to the parties to determine how a property should be sold. If the parties have agreed on a method of sale, in my experience, a court will approve a sale in the manner agreed to by the parties (unless it is manifestly unreasonable or unjust).
If the parties cannot agree on the method of sale, the court will likely hear from both the parties and then make a decision. For example, in a fairly recent case in which I was involved, one party wanted the property sold by auction. The other party wanted the property listed through a particular agent. The court conducted a hearing at which the proposed real estate agent testified. Not only did that agent testify that he believed that more money would be received for the property if it was listed rather than sold at auction, but also, he testified as to the lowest price at which he thought the property should be listed for 90 days and sold. He also testified as to the incrementally lower prices at which the property should be sold if it was not sold after particular periods of time. After the hearing, the court ordered that the real estate agent who had testified was authorized to list and to sell the property at the prices the agent had proposed.
The fact that each co-owner is entitled to a sale does not foreclose the possibility that the other co-owner or co-owners may buy out the other’s or others’ interest. Regardless of how the court orders the property sold, every co-owner is entitled to make an offer or a bid.
In my experience, it is best for co-owners in Tennessee partition cases to agree on how the property should be sold and on the details of how it should be sold even if they have to bend a little, maybe even a lot. Why? Because it is usually better to have some control over how the property will be sold than to vest a court with the discretion to decide how the property will be sold.