Allocating attorneys’ fees in partition lawsuits in California has always been somewhat mysterious. In a new published opinion by the California Court of Appeals, the court has not added any certainty to how attorneys’ fees will be allocated among the warring owners. In Lin v. Jeng, the Court of Appeals affirmed the trial court’s order denying the plaintiff’s motion for attorneys’ fees based on equitable considerations while granting the defendants’ motion for attorneys’ fees and allocating the fees based on the proportional ownership interests of each tenant-in-common.
1. Attorneys’ fees in California Partition Lawsuits
California Code of Civil Procedure 874.040 governs the apportionment of costs, including attorneys’ fees, in a partition action. A partition lawsuit is a lawsuit between co-owners (tenants-in-common) in real property to either force a division or sale of the property. The question arises in partition lawsuits: Who will pay all of the attorneys’ fees incurred in fighting this lawsuit?
The Code of Civil Procedure states that “the court shall apportion the costs of partition among the parties in proportion to their interests or make such other apportionment as may be equitable.” While a seemingly simple phrase, the Code does not provide any more guidance as to when a different apportionment is equitable.
Real estate attorneys therefore spend inordinate amounts of time arguing with each other over which co-owner will be responsible for the attorneys’ fees in each partition lawsuit. The problem with this uncertain Code section is that attorneys’ fees can be a decisive factor in how the litigation is resolved. The uncertainty makes it more difficult to resolve partition disputes prior to trial.
2. When Is Equitable Apportionment of Attorneys’ Fees Appropriate?
The Law Revision Commission comments to section 874.040 states that a trial court may make an equitable apportionment where the litigation arises among only some of the parties, or where the interest of the parties in all items, lots, or parcels or property is not identical. The Court of Appeals in Finney v. Gomez (2003) 111 Cal.App.4th 527 held that this language was a limitation on the right of equitable apportionment. However, the Lin court held that this language is not a limitation. The Court held that “there is no ambiguity in the language of section 874.040. It simply states that the trial court must apportion the costs incurred in a partition action based upon either the parties’ interests in the property, or equitable considerations. The statute’s broad language does not limit the trial court’s equitable discretion.”
The Court of Appeals looked at other cases which address the allocation of attorneys’ fees in partition lawsuits in California. The court noted Forrest v. Elam (1979) 88 Cal.App.3d 164, where the trial court concluded that some of the attorneys’ services were expended advancing a meritless contention and therefore were not expended for the common good. The Court of Appeals affirmed this holding.
In Stutz v. Davis (1981) 122 Cal.App.3d 1, the court addressed a mistake in how the attorneys’ fees were divided up, but the court noted that “there was nothing in the record to indicate that the trial court intended to exercise its discretion to apportion the fees other than according to the parties’ interest in the property.” In other words, this case did not address the issue at hand.
3. Plaintiff’s Attorneys’ Fees Motion Was Denied For Equitable Reasons
The attorneys’ fees motion brought by plaintiff was denied in the Lin case. The trial court found that the plaintiff used her experience in real estate to control title to the property in order to prevent her siblings from obtaining their interests, despite their mother’s desire that all of the siblings share in the property. The plaintiff claimed an 85% interest in the property but the trial court found she was entitled to a 15% interest. Moreover, although the plaintiff knew that each of her siblings held an interest in the property, she failed to name them in her lawsuit, forcing them to file their own complaint in order to be heard.
Based on these facts, the trial court denied plaintiff’s motion for attorneys’ fees, meaning that plaintiff would have to bear her own attorneys’ fees. The Court of Appeals found that the trial court did not ‘abuse its discretion’ in placing entire responsibility for plaintiff’s attorneys’ fees on plaintiff.
4. Defendants’ Motion for Attorneys’ Fees Was Granted
The defendant siblings asked that the court award their attorneys’ fees and the trial court found that such fees were reasonable and apportioned them according to each party’s interest in the property. The Court of Appeals upheld this finding.
5. Attorneys’ Fees In Your Case
Real estate litigation attorneys handling partition lawsuits will not gain much certainty from the holding in Lin v. Jeng. While the general rule remains that attorneys’ fees should be apportioned according to each party’s interest in the property, the risk also remains that a court may decide to apportion fees differently based on equitable considerations. The uncertainty makes it more difficult for a party to a partition lawsuit to balance the risks and rewards of litigation.