Code of Civil Procedure (CCP) Section 873.810 – Court Order of Disbursement
Code of Civil Procedure section 873.810 concerns what happens with the sales proceeds after the partition sale is complete. Per the code, the proceeds must be placed into trust or invested, pending the court’s final order on distribution. The sales proceeds will not be released until that final order.
Code of Civil Procedure section 873.810 states:
The court shall order the proceeds of sale and any security therefor to be paid, transferred, deposited in court, placed in trust, or invested in State of California or United States government obligations or interest-bearing accounts in an institution whose accounts are insured by an agency of the federal government, to or for the benefit of the persons in interest entitled thereto, as may be appropriate or as specifically provided in this article.What Is an Example?
“Shawn” and “Julie” are an unmarried couple who want to start a life together. They find a nice home in Los Angeles and buy it as joint tenants. They move in and start their new life 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 all the property and move on with his life, so he sues for partition by sale.
Eventually, the court orders the property sold and the sale proceeds distributed. The court concludes that the property will be sold at a private sale. After the sale occurs, the court confirms the sale on noticed motion by the parties. The sale then goes into closing, and property is transferred via deed to the third party buyer.
In accordance with section 873.810, the sales proceeds are deposited into an interest bearing account, pending the resolution of questions on distribution of the proceeds to the parties.Law Revision Commission Comments (CCP § 873.810)
Section 873.810 supersedes former Sections 773 and 788. The portion of former Section 773, providing for deposit of proceeds in court if no other direction is given, is not continued. Under Section 873.810, the court must affirmatively specify the disposition of the proceeds, including proceeds for the shares of unknown owners. See former Section 780 (requiring that the court provide for the protection of unknown parties). It should be noted that amounts invested in interest–bearing accounts under this section may exceed the amount insured by an agency of the federal government provided that the accounts are in an institution which carries such insured accounts.Assembly Committee Comment
Like with many of the partition statutes, section 873.810 does not include an “official” Assembly Committee Comment from the California Legislature. But this is not unusual. And 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 essentially in line with that of the Revision Commission.
As to the comment here, it makes mention of several repealed statutes in the former partition code. Some of these statutes were continued in section 873.810, others were not. Ultimately, though, today’s statute is clear-cut. As the comment points out, once the sales proceeds are received (presumably by the referee), the court must make an order directing the proceeds to be held.
Where they are held doesn’t matter much, as the statute provides several options for the court to use or for the parties to presumably agree upon.
One may wonder, however, why the proceeds must be deposited or held at all. The answer is that “every partition action includes a final accounting according to the principles of equity for both charges and credits upon each cotenant's interest. Credits include expenditures in excess of the cotenant'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. (Wallace v. Daley (1990) 220 Cal.App.3d 1028, 1036.)
Put simply, after the property sells, the parties still need to litigate accounting issues to decide how much their proportional shares of sales proceeds will be impacted. If one party paid the mortgage for 20 years, they will likely want that amount to be compensated.
Naturally, though, this process can take some time. And it is not uncommon for the parties to enter extended periods of discovery to determine whether they have the evidence to back up claimed expenditures that might qualify for a credit against the other party’s interest. As such, it makes sense for the sales proceeds to at least be accruing interest during this period of time.Contact Us
Here at Underwood Law Firm, our knowledgeable attorneys are here to help navigate the complex web of case law and statutes surrounding partitions. If you are thinking of filing a partition, are already in the midst of a partition suit, or just have any questions, please do not hesitate to reach out to our office to learn more about Partition Law.