Code of Civil Procedure (CCP) Section 873.150 - Interest on Unpaid Contracts for Services from Third Persons

Code of Civil Procedure section 873.150 allows for an interest rate to be included in the contracts for the services of third persons hired to assist in the partition. The point of this statute is to properly compensate third parties assisting the referee.

Code of Civil Procedure section 873.150 states

A contract for the services of an attorney, surveyor, auctioneer, or other third person may provide for the accrual of interest at a rate not in excess of the legal rate for amounts due under the contract that are not paid within three months after the time they become due and payable.

(Amended by Stats. 1976, c. 73, p. 110, § 6.)

What Is an Example?

“Shawn” and “Julie” are an unmarried couple. They decide to buy a home as joint tenants and move in together.

Unfortunately, Shawn and Julie’s relationship doesn’t work out, and they break up. They cannot agree on what to do with the property. Shawn wants to sell the home and move on, so he sues for partition by sale.

The court orders the property to be sold and the sale proceeds distributed. The court appoints a referee to oversee the sale. The referee wants to hire an attorney and an auctioneer to assist in the partition sale.

The court approves hiring these third persons and their contracts. In the contracts for the services of these third persons, an interest rate was included pursuant to CCP § 873.150. With this, the third persons can be properly compensated.

Law Revision Commission Comments (CCP § 873.150)

1976 Addition

Section 873.150 is new. It is designed to better enable the referee to obtain competent services where the person rendering the service will not be paid until the conclusion of the action.

Assembly Committee Comments

As is the case for most of the partition statutes, section 873.150 does not include a an “official” Assembly Committee Comment from the California Legislature. But this is because the Legislature endorsed an overall adoption of the Law Revision Commission suggestions when it passed the new partition statutes in 1976.

In fact, the introduction to Assembly Bill 1671 (the bill that contained the new partition laws) states that the Revision Commission’s recommendations “reflect the intent of the Assembly Committee… in approving the various provisions of Assembly Bill 1671.” This demonstrates that the intent of the Legislature was substantially in line with that of the Revision Commission.

As to the statute and comment, there is little in the way of guidance because the statute is straightforward. Often, at this stage in the litigation, the parties are tight for cash, and the prospect of taking out a loan or forking over more money to a third party contractor is unappealing.

Section 873.150, though, essentially provides for contracts that pay out from a portion of the sales proceeds. This ensures that the referee can seek the services of competent persons to assist with partitioning the property.

For instance, in a federal case, Kamb v. United States Coast Guard (N.D. Cal. 1994) 869 F.Supp.793, a referee was hired to market and sell the property. The property itself was a former gun-range, and so it was necessary for the referee to seek the services of a consulting firm that performed soil analysis. When the firm relayed that the soil was contaminated with lead from shell casings, the referee had to contract with another consulting firm to do scientific tests and further evaluation of the soil. Finally, the referee then needed to contract with yet another firm to conduct a site cleanup.

In total, the first consulting firm was owed $5,000, the second firm was owed $21,0000, the referee’s fees were $11,000, and the estimated costs of cleanup for the site was at least $122,000. Those amounts would seem staggering to parties months or years deep into a full-blown lawsuit. Allowing these services to defer payment with interest, however, ensures that they provide competent assistance knowing they will eventually be paid.

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