This article discusses the procedure and substantive law relating to recovery of real property expenses in a real property partition lawsuit in California. This article follows-up on two prior articles by the same author containing an introduction to the real estate partition process and giving an overview of the process to recover certain costs (such as attorney’s fees) previously published in the journal of the Western San Bernardino County Bar Association.
INTRODUCTION TO PARTITION OF REAL PROPERTY
In California, joint owners to real property may file a lawsuit seeking to have their joint interest in the property partitioned. Code of Civil Procedure section 872.210. Partition actions follow an unusual procedure in that the court conducts an initial trial to determine whether the plaintiff has a right to partition the real property. Code of Civil Procedure section 872.210. If the court determines that there is a right to partition the property, the court enters an interlocutory judgment for partition. Code of Civil Procedure section 872.720. This interlocutory judgment for partition determines the interests of the parties in the property, orders the partition of the property, and determines the method of partition. In this interlocutory judgment for partition, the court is authorized to either divide the property between the joint owners or order its sale. Code of Civil Procedure section 872.810, et seq. Only after the partition is completed and all costs adjudicated is a later final judgment entered by the court.
Once the court has determined that real property is to be partitioned, the court is authorized to appoint a Partition Referee for the purpose of handling the actual partition of the property. Code of Civil Procedure section 873.010. After the Partition Referee has sold the property, the law allows claims for costs, fees, and expense reimbursements by the parties against the sale funds being held by the Partition Referee.
SUMMARY OF RECOVERABLE COMPENSATORY CLAIMS
Code of Civil Procedure section 872.140 allows the court to “order allowance, accounting, contribution, or other compensatory adjustment among the parties in accordance with the principles of equity”. The Law Revision Commission comments to this section specify that its intent is to allow courts to make adjustments among the owners for “such items as common improvements, unaccounted rents and profits, and other matters for which contribution may be required.”
As summarized by the court in Wallace v. Daley, 220 Cal.App.3d 1028, 1036 (1990):
“Every partition action includes a final accounting according to the principles of equity for both charges and credits upon each co-tenant’s interest. Credits include expenditures in excess of the co-tenant’s fractional share for necessary repairs, improvements that enhance the value of the property, taxes, payments of principal and interest on mortgages, and other liens, insurance for the common benefit, and protection and preservation of title.”
This is often a source of bitter dispute in a partition action. These claims often arise when one co-owner claims to have spent more on common costs than the other co-owner. The claims also arise when one co-owner claims that the other co-owner obtained more benefit from the property, such as collecting rent. A large body of decisional law has been generated in California relating to the propriety of compensatory claims and fleshing out the types of claims that are allowable.
As a general rule, improvements to the property are a recoverable expense in an action for partition. Wallace v. Daley, 220 Cal.App.3d 1028, 1036 (1990). Mercola v. Chester, 97 C.A.2d 140, 143 (Cal. Ct. App. 2nd Dist. 1950). Ventre v. Toscornia, 23 C.A.598, 604-605 (Cal. Ct. App. 1st Dist. 1913). Milian v. De Leon, 181 Cal.App.3d 1185(Cal.Ct. App. 4th Dist. 1986). Note, however, that under the case of Gerontopoulos v. Gerontopoulos, 20 Cal.App.2d 261 (1937), the Court is not required in a partition action to compensate for “the ordinary type of repairs and improvements” during the sole tenancy of one owner.
Real property taxes and mortgage deed payments are generally recoverable expenses in a partition action. Milian v. DeLeon, 181 C.A.3d 1185 (1985).
Collected rent is normally a recoverable category of income in a partition action. See, McWhorter v. McWhorter, 99 Cal.App. 293 (1929). Thus, a co-owner can seek to recover for rental income from another co-owner who collected the rent without sharing.
Notably, even though costs may be reimbursed, the value of time or services provided by co-owners is not subject to contribution claims in a partition action. Goodenow v. Ewe, 16 Cal. 461 (1860). Combs v. Ritter, 100 Cal.App.2d 315 (1950).
PROCEDURE FOR MAKING COMPENSATORY CLAIMS
The Code of Civil Procedure gives the trial court jurisdiction to resolve claims for compensatory adjustments after completion of the sale of the real property. See, Code of Civil Procedure section 873.850. The code gives the trial court discretion to assign the matter to the Referee to gather evidence and make a recommendation, or the court may conduct further proceeding including taking further testimony on these subjects.
When a property has been sold through the partition process and the court finds that one party shall be reimbursed from the sale proceeds, the method for reimbursement is that the party is to be paid his or her reimbursement amount before the remaining money is divided in proportion to the ownership interests. Ventre v. Tiscornia, 23 Cal.App. 598 (1913). As stated by the Court in Southern Adjustment Bureau v. Nelson, 230 Cal.app.2d 539, 541 (Cal. Ct. App. 4th District., 1964):
“When a cotenant makes advances from his own pocket to preserve the common estate, his investment in the property increases by the entire amount advanced. Upon sale of the estate, he is entitled to be reimbursed his entire advancement before the balance is equally divided.”
Proceeds of the sale generated by the partition shall be applied in the following order:
- Payment of the expenses of sale
- Payment of the other costs of partition
- Payment of liens on the property in their order of priority except for those liens that are to remain on the property
- Distribution of the residue among the parties in proportion to their share as ordered by the Court
See, C.C.P. section 873.820.
There is no statute of limitation that applies to the apportionment of credits, offsets, and other reimbursements in a partition action. Adams v. Hopkins, 144 Cal. 19 (1904). However, equitable principles of laches can apply to these claims. Akley v. Bassett, 189 Cal. 625 (1922)
In theory, co-owners can make compensatory claims all the way back to the start of the joint ownership period.
Attorney Matthew Taylor has been appointed as a California Partition Referee in numerous cases, you can learn more about him and his partition referee cases here.