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Partition – When You Can Partition By Appraisal in California

Co-owners of real estate do not always have the same goals, and when they cannot agree, they may need the court’s help. Such is the case in a Partition action; in its original form, it literally meant dividing the land up into parts, and assigning one part to each individual co-owner. Partitioning the land is still the preferred method under California law, but in most cases real estate attorneys argue that it is impractical, would not result in a fair split, and the property should be sold and the money split. When the property is primarily a building or house, it is usually sold. Either owner is allowed to buy the property, essentially making a credit bid of their own equity in the property, plus additional cash which buys out the other owners. There is a third way to partition- by appraisal, but in an odd recent decision the trial court incorrectly called for appraisal. The court of appeals said this was wrong, and explained the options in an action for Partition.

Sacramento-partition-appraisal-attorneyIn Gayle Cummings v. Jennifer Dessel, the parties agreed to buy a property together east of Arcata, CA. Cummings put $80,000 down, they obtained seller financing, and the others were to make monthly payments and rehab the dilapidated residence. The defendants hit hard times and stopped paying the mortgage and working on the property. Plaintiff filed this action. The trial court ordered partition of the property by appraisal – each owner could bid to buy the other owner’s interest, with the minimum bid set by appraisal.

The court of appeals focused on the statutory language, as partition is governed by the California Code of Civil Procedure. Once the judge determines that a partition is called for, it “shall make an interlocutory judgment that determines the interests of the parties in the property and orders the partition of the property and, unless it is to be later determined, the manner of partition.” (§ 872.720, subd. (a))

The court then addressed the options for the manner of partition. First, it may be in kind”—i.e., physical division of the property according to the parties’ interests as determined in the interlocutory judgment. (§ 872.810; see § 873.210 et seq.) The second option, if the parties agree or the court concludes it “would be more equitable,” the court may order the property sold and the proceeds divided among the parties. (§ 872.820)

The third option, “[w]hen the interests of all parties are undisputed or have been adjudicated,” and the parties agree (§ 873.910), is partition by appraisal. Section 873.920—the next section of the chapter—directs, “[t]he agreement shall be in writing filed with the clerk of court….” Thus, for partition by appraisal, there must be a written agreement between the parties filed in court.

That was not the case here. There was no evidence of an agreement to partition by appraisal in the record, and certainly no such agreement filed with the court. Hence, there should not have been partition by the appraisal method. To avoid this result, the plaintiff argued that it was really a partition by private sale. sacramento-and-Yolo-partition-attorney

Sacramento-partition-appraisal-lawyerThe trial court may compel the sale of a property, and division of the proceeds among the parties, without the parties’ agreement, if it determines this “would be more equitable than division of the property.” In such circumstances, the court may order the property “sold at public auction or private sale,” depending on which will be “more beneficial to the parties.” (§ 873.520.) However, the statutes governing private sales require substantial notice to the public, both posting and publishing. The word “private” applies only to the nature of the bidding – written bids submitted at a designated location. SO this did not qualify as a private sale.
Even though the appraisal sale was wrong, the court did not reverse the judgment. It found that the error was not prejudicial. The plaintiff submitted a bid but the defendants, who had stopped paying the mortgage & fixing up the house, did not. The court said the error “did not affect the result”