Fontana Partition Lawyers

Fontana is a city in San Bernardino County, known for the Auto Club Speedway, and was mainly a rural area until Henry J. Kaiser built a large steel mill in 1941. Since then, Fontana has developed as a bedroom community filled with subdivisions. Fontana Partition Attorneys find partition actions to be the best remedy for fighting co-owners in four broad categories:

• Split owned building dispute;
• Brother-Sister building dispute;
• Investor-Investor building dispute; and
• Girlfriend-Boyfriend building dispute

What is a Partition Action in California?

A partition lawsuit requires real estate to be sold regardless of the requests of the other title owners. The purpose of a partition action is to permanently end all disputes and remove all obstacles to the free enjoyment of land by one person. (McGillivray v. Evans (1864) 27 Cal.92.) These types of actions can be brought for all types of real estate from houses to farms to office buildings to apartment buildings. Similarly, partition actions are available all types of ownership situations from joint tenants to tenants-in-common to partnership property to property jointly owned by former spouses.

Historically, the term “partition” comes from the basic word to break into “parts” as in physically dividing real estate in half. For example, if two siblings inherited ten acres of farmland, the property could historically be divided into five acres a piece for each of them. As most people now live in single-family homes, which cannot simply be “split in half,” courts will instead order that the property be sold and the proceeds, or equity, be “split in half.” The best Fontana Partition Lawyer will be able to share information on this process with you.

What Are the Steps in a Partition Action?

First, a partition action is filed. A partition action can be filed if one co-owner of real property or a piece of real estate wishes to sell the property or piece of real estate in question but the other co-owners or co-tenants do not wish to sell their ownership rights.

Second, the court may appoint a court referee to oversee the sale of the property in question. The sales procedure includes that all parties agree to the terms and conditions of the sale in writing. If the parties can not agree, as partition actions are usually very contested issues, then the referee that the court appointed may recommend terms and conditions to the court. Then the court will hold a hearing to decide whether or not to accept those terms and conditions.

Third, in California, the property’s value will be appraised via a third party or another property appraisal with no ties to any of the parties. While this is not required in all states, it is recommended to make sure that all parties are on the same metaphorical page as to the potential sale proceeds of the property in question.

Fourth, the referee will conduct the sale in the method most agreeable to all of the party’s goals. This can be via a public auction or a private sale. Regardless of the specific method of partition by sale, the court will determine if the sale was “fair.” If it is decided that the property’s sale proceeds had a lack of proper notice, the sale amount is not within reasonable the value of the property, or if the proceeds were unfair- the court would rule that the property will be up for sale again.

Lastly, the court will order that the proceeds of the sale, minus any court litigated or approved offsets or costs, will be distributed equitably amongst all of the co-owners or people with interest in the property. A top Fontana Partition lawyer will be familiar with the process.

Can You Mediate a Partition Action?

Generally, anyone considering filing a lawsuit should consider all of their alternatives, including an informal resolution of the problem. This can take the form of a discussion with the other owner or owners about agreeing to sell the property, negotiating with the co-owner to create a formula to divide the proceeds from the sale, or retaining a lawyer to engage in a mediation with the other owners.

Throughout the partition process, and even on the day of trial, any of the owners can make an agreement about the sale of the property. This can happen through a phone call, through negotiations between the parties’ lawyers, or through a mediation session with a retired judge or trained mediator. There are many benefits from a mediation session, including confidentiality provisions contained in the law in Evidence Code sections 1115 through 1129.

Specifically, Evidence Code section 1119, subdivision (a), provides “no evidence of anything said or any admission made for the purpose of, in the course of, or pursuant to, a mediation or a mediation consultation is admissible or subject to discovery, and disclosure of the evidence shall not be compelled in any arbitration, administrative adjudication, civil action, or other noncriminal proceeding in which, pursuant to law, testimony can be compelled to be given.” A knowledgeable Fontana Partition Attorney will be able to give you good advice on these issues.

What Are Claims for “Contribution”?

Code of Civil Procedure section 874.140 states that the “court may, in all cases, order allowance, accounting, contribution, or other compensatory adjustments among the parties according to the principles of equity.”

The court in Hunter v. Schultz (1966) 240 Cal.App.2d 24 stated that the payments for interest, taxes, and insurance made by any co-tenant could be subject to reimbursement. These claims for reimbursement are commonly known as “offsets” in a partition action.

Further, the court under Milian v. De Leon (1986) 181 Cal.App.3d 1185, announced that a co-tenant who expends money for the preservation of the property, or with the [acceptance] of their co-tenant(s), is entitled to reimbursement for those expenditures before the division of the proceeds among the property owners.

That is, the general rule is that compensatory adjustments are appropriate for improvements that enhance the value of the property for all owners’ benefit. (see Wallace v. Daley (1990) 220 Cal.App.3d 1028, 1035-1036.) An experienced Fontana Partition Attorney will be intimately familiar with these matters.

A Partition Case Study: In re Gant (2005)

In a bankruptcy action, the trustee may sell both the bankruptcy estate’s interest, and the interest of any co-owner, in property that the debtor had an undivided interest as a tenant in common, joint tenant, or tenant by the entirety at the time of the commencement of the action if: (1) partition in kind of such property among the estate and such co-owners is impracticable; (2) sale of the estate’s undivided interest in such property would realize significantly less for the estate than sale of such property free of the interests of such co-owners; (3) the benefit to the estate of a sale of such property free of the interests of co-owners outweighs the detriment, if any, to such co-owners; and (4) such property is not used in the production, transmission, or distribution, for sale, of electric energy or of natural or synthetic gas for heat, light, or power. (11 U.S.C. § 363(h).) How does a court determine whether partition is “impracticable?” How does a court determine whether the benefit to the estate outweighs the detriment to the co-owners? The following paragraphs discuss how the court determines such matters in In re Gant (2005) 2005 WL 6960196.

In In re Gant, Kernol and Roberta Gant (“Debtors”), filed for bankruptcy and the bankruptcy court denied the Debtors’ discharge. At the time of the bankruptcy filing, the Debtors co-owned real property with Jeffrey Trudgeon. In the earlier days of the action, the trustee reported that the co-owned property had no value and that his expectation was that the co-owned property would be abandoned pursuant to 11 U.S.C. § 554(c) when the case closed. However, the trustee later changed his mind and commenced an adversary proceeding for authority to sell the estate and Trudgeon’s interest in the co-owned property in accordance with 11 U.S.C. § 363(h).

The parties filed and the bankruptcy court accepted their “Joint Stipulation To Admitted Facts For Use At Trial,” which stipulated among other things that Trudgeon was a party to the stipulation, the costs of partition would total $30,000, the Debtors’ estate was ready to be closed within short order once the sale was completed, and that the requirement that the trustee partition the property would delay the final closing of the estate by 18 months. Further, the parties stipulated that Trudgeon acquired his interest in the property as a long-term investment, and that if he sold his interest as requested by the trustee, Trudgeon would incur capital gains tax liability. The court authorized the trustee to sell both the estates’ and Trudgeon’s interests in the property.

The bankruptcy court held that the partition of property was “impracticable” within the meaning of § 363(h) because the cost of partition would be approximately $30,000 and that the time needed to partition the property under non-bankruptcy law would take 18 months. The timing was an important factor to the court because the partition would have delayed the closing of the case. A motivating factor for the sale of property was the need for the estate to conclude its relationship with the tax creditors. Also, the real estate market was more favorable in favor of a current sale as opposed to a later sale. The court further noted that impracticability was not synonymous with impossibility. In addressing Trudgeon’s capital tax gains liability concern, the court was “impressed by the fact that Trudgeon seemed to be in a tax bracket in which the amount of capital gains posed a real financial threat to him.” The court noted that capital gains tax treatment is now more favorable and that Trudgeon had the opportunity to purchase the estate’s interest if he wanted to. Trudgeon appealed.

The United States Bankruptcy Appellate Panel of the Ninth Circuit affirmed, holding that “the term ‘impracticable’ logically brings within its reach a range of situations in which it is not impossible to partition the property, but in which a sale of the co-owner’s interest in the property is more than merely inconvenient.” Trudgeon argued that the impracticability requirement operated as an independent threshold barrier which required a showing of “impossibility” that can never be based merely on time and expense. The Appellate Court analyzed other contexts in which the term “impracticable” is used. In contract law, “performance may be impracticable due to excessive and unreasonable difficulty, expense, or loss to a party.” As such, the Appellate Court held that such usages of the term all connote the trial court’s exercise of judgment.

The Appellate Court agreed with the bankruptcy court’s holding that partition was impracticable based on the costs and time. In addition to the $30,000, the brokers’ commissions and costs of sale, and capital gains tax liability would have exceeded more than 20% of the anticipated net recover of the estate. Further, the Appellate Court reasoned that if the partition in kind took three months, instead of eighteen, Trudgeon would have had a better argument. The timing was important because the parties stipulated that the estate was ready to close, pending the matters related to the co-owned property. Additionally, a partition might have ultimately resulted in a sale anyway.

In balancing the benefit of the estate, and the detriment of the co-owner, the Appellate Court agreed with the bankruptcy court’s holding that the benefit of the estate outweighed the detriment to Trudgeon. Trudgeon argued that the only detriment to the estate was cost and time, and that holding the estate open for eighteen more months compared to the eight years that it had already been open was not detrimental. He argued that the sale would lead to a substantial capital gains tax liability, and that the sale would prejudice him since he would be forced to sell an asset that he had planned to buy as a long-term investment. However, Trudgeon was balancing the detriment to the estate and the detriment to himself.

The Appellate Court held that the benefits to the estate must outweigh the detriment to the co-owner. The Appellate Court found that the detriment to Trudgeon would be low because he would have ample sale proceeds to pay his capital gain taxes. Further, Trudgeon had the opportunity to purchase the estate’s half-interest if he wanted. Thus, the Appellate Court held that the trial court applied the correct legal standards.

How the Underwood Law Firm Can Help

In determining whether a property should be sold or how it should be sold, whether through a partition action or in a bankruptcy action, the courts use different standards in accordance with the appropriate area of law. If you are considering partition as an option, you may benefit from good legal advice on the topic. If you find yourself contemplating a partition action, or faced with defending one, then please contact Underwood Law Firm, P.C. for an initial consultation.

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