In a California partition lawsuit the trial court must determine two things: a determination of the parties’ interests in the property and, secondly, the manner of partition—sale or division.
In a recent lawsuit involving partition, quiet title and accounting among real estate investors, a San Francisco Superior Court judge ordered the property partitioned and sold, with the parties’ ownership to be determined at a later date. In the 2018 California Court of Appeal case Summers v. Superior Court (Tan), the Court of Appeal issued a peremptory writ of mandate directing the court to vacate its order so that it could determine the parties’ ownership interests before it orders the sale of the property. The sale cannot come before the ownership interests are determined.
This real estate lawsuit involved three real estate investors who owned an investment property together. However, the parties could not agree on each parties’ ownership interest and their corresponding rights to receive income and obligations to pay expenses on the property. Owner Wan Fen Tan filed a lawsuit against his co-owners Ricardo Summers and Alejandro Gomez for quiet title, partition and accounting. The co-owners filed cross-complaints that included claims for quiet title, partition and breach of contract.
The attorneys for Tan filed a motion for summary adjudication requesting that since all of the parties had asked for partition, the court should order partition with the sale proceeds to be held in escrow until resolution of the litigation disputes over ownership. Summers and Gomez opposed the motion, arguing that while they wanted partition and sale, the ownership interest dispute must be resolved first. The pointed out that selling the property before resolution of these issues would be a huge waste because the sold property would not generate rental income while the parties’ ownership interests were litigated. The trial court granted the motion and ordered partition by sale with the ownership interest dispute to be determined later.
“Partition is the procedure for segregating and terminating common interests in the same parcel of property. It is a remedy much favored by the law,” noted the Appellate Court. “The original purpose of partition was to permit cotenants to avoid the inconvenience and dissension arising from sharing joint possession of land. An additional reason to favor partition is the policy of facilitating transmission of title, thereby avoiding unreasonable restraints on the use and enjoyment of property.”
“The governing statute is section [California Code of Civil Procedure] 872.720. Subdivision (a) declares that ‘[i]f the court finds that the plaintiff is entitled to partition, it shall make an interlocutory judgment that determines the interests of the parties in the property and orders the partition of the property.’ (§872.720, subd. (a).) The order of partition ‘shall order that the property be divided among the parties in accordance with their interests as determined in the interlocutory judgment.’ (§872.810.) Section 872.720, subdivision (b), allows the court to issue sequential interlocutory judgments for original concurrent and successive owners if the court determines that it ‘is impractical or highly inconvenient to make a single interlocutory judgment that determines, in the first instance, the interest of all the parties in the property.’ (§872.720, subd. (b).)”
“When the trial court ‘determines the interests of the parties in the property and orders the partition of the property,’ it shall decide the manner of partition ‘unless [this] is to be later determined.’ (§872.720, subd. (a).) ‘The manner of partition may be ‘in-kind’—i.e., physical division of the property according to the parties’ interests as determined in the interlocutory judgment. Alternatively, 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.’”
The Court of Appeal found that two points are made clear by these provisions. First, the interlocutory judgment in a partition lawsuit is to include two elements: a determination of the parties’ interests in the property and an order granting the partition. Second, the manner of partition—i.e., a physical division or sale of the property—is to be decided when or after the parties’ ownership interests are determined, but not before.
The Appellate Court noted that the trial court failed to satisfy these elements because it ordered the sale of the property before the parties’ ownership interests were resolved. They found no authority for this approach. The court therefore found that the trial court lacked the authority to order the sale of the property before it determined the parties’ respective ownership interests.
Real Estate Attorney Practice Notes: In many partition actions the ownership interests are not in dispute. Real estate attorneys who are handling partition actions should see if they can get all of the parties to stipulate to the interlocutory judgment establishing undisputed ownership interests and ordering partition.