Pleasanton Partition Lawyers

Pleasanton is a suburb of the East Bay region. Pleasanton is located on the lands of the Rancho Valle de San Jose and Rancho Santa Rita Mexican Land Grants. According to Redfin, in March 2024, the median sales price was $1,360,000 and homes stay on the market for 9 days. Pleasanton residents who own real estate may face disputes with co-owners. Often, Pleasanton Partition Lawyers find that joint ownership problems fall into four broad categories:

• Father/Mother-Son/Daughter tenants in common in real estate;
• Brother-Sister shared tenants in common in real estate;
• Investor-Investor shared tenants in common in real estate; and
• Non-Married Partners shared tenants in common in real estate;

What is a Partition Action?

Generally, partition is any division of real property between co-owners, where each co-owner obtains an ownership interest. A partition action is the forced sale of real property by a co-owner under the court’s supervision. Partition merely determines and allocates to the parties their respective interests in the property. (Cunha v. Hughes (1898) 122 Cal. 111.)

In the partitioning of property, the common interests in the property are segregated or terminated. (Summers v. Superior Court (Wan Fen Tan) 24 Cal.App.5th 138.) Partitions are generally favored by the and may occur by an agreement between the co-owners or by a judgment in an action. Typically, a partition may be made by either a physical division or sale of the property. in many modern transactions, a partition of the property by sale is preferable since often times, a division of the property will result in parcels that are not equal to the value of the whole property before the division. (Cummings v. Dessel (2017) 13 Cal.App.5th 589, 597.) Also, a “physical division may be impossible due to zoning regulations or may be highly impractical.” (Butte Creek Island Ranch v. Crim (1982) 136 Cal.App.3d 360, 365.) The best Pleasanton Partition Lawyer will be able to share information on this process with you.

What are the steps in a Partition Action?

Under the Partition of Real Property Act, the court instead appoints an appraiser to do the heavy lifting. The new statute states that the court “shall determine the fair market value of the property by ordering an appraisal.” (CCP § 874.316.) The court doesn’t have to be the one to order the appraisal, but this is only if all the co-owners agree to a different method of valuation.

If, however, an appraisal occurs, it shall be conducted by a disinterested third-party real estate appraiser licensed to determine the fair market value of properties. After the appraisal is conducted, parties may file objections to the value and can even offer additional evidence of value to the court.

After the valuation is complete, parties will be introduced to the key feature of the new statute: the buy-out option. If a co-owner requests a partition by sale, then the court will notify the other co-owners that they may buy all the interests of the cotenant that requested the partition. (CCP § 874.317.)

This is, essentially, a right of first refusal. The co-owners who don’t want the property sold now have the option to simply buy out the requesting party. Additionally, the buy-out price will be based on the property’s valuation, determined earlier in the litigation. And if one or more parties exercise the buy-out, then the court will reapportion ownership percentages based on the price paid. A top Pleasanton Partition lawyer will be familiar with the process.

Can You Recover Attorneys’ Fees in a Partition Action?

Code of Civil Procedure, section 874.010 states that “[t]he costs of partition include: (a) [r]easonable attorney’s fees incurred or paid by a party for the common benefit.”

Interestingly, the costs of partition can also include reasonable expenses necessarily incurred by a party for the common benefit in prosecuting or defending other actions or proceedings for the protection, confirmation, or perfection of title, setting the boundaries, or making a survey of the property. (CCP § 874.020.)

That attorney’s fees are considered “costs” associated with a partition action is important because Section 874.040 goes on to state 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.” A knowledgeable Pleasanton 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 Pleasanton Partition Attorney will be intimately familiar with these matters.

A Partition Case Study: Braganti v. Grewal (2023)

When may a partner seek to dissolve the partnership and how is the interest of each partner determined? Generally, this type of action will be governed by the partnership agreement already in place. Upon dissolution of the partnership, each partner is entitled to a settlement of all partnership accounts. (Corp. Code § 16807, subd. (b).) The funds from the liquidation of the partnership assets are distributed in accordance with the charges or credits on each partner’s account. (Id.) The following paragraphs discuss how the court determined the Partners’ ownership interests and distributed the funds upon dissolution of a partnership in Braganti v. Grewal (2023) 2023 WL 6548620.

In Braganti, Kate Braganti (Braganti) brought suit against her partners Ravinder S. Grewal(Grewal) and Harinder Singh Nagpal(Nagpal), seeking to partition the Properties, breach of fiduciary duty, and dissolution of a partnership under Corporations Code Section 16801.

Braganti, Grewal, and Nagpal formed a partnership for real estate investments, where Braganti managed the properties and Grewal with Nagpal provided the financial investment. The partnership was named Arnaa Investments (Arnaa).The parties would divide the partnership profits at 33% each, as also stated in the partnership’s Memorandum of Understanding (MOU). The MOU specified that their interests in the partnership were limited to any profits derived from the sale of the partnership properties after paying off third party brokerage and other incidental expenses. It also provided that Braganti would only be entitled to compensation, in return for her efforts on behalf of the partnership, if the properties generated profits or income: “No salary or commission will be paid to any of the principals without the income generated by the business.” The MOU also required the defendants to maintain a balance of $200,000 in the account for investment purposes and working capital.

The partnership Properties in argument were (a) The Fullerton condominium and (b) Valencia Properties that included the Blacksmith home and the Steel Lane home. The Fullerton condominium, purchased for $230,000 was sold for $235,000 due to default on its payments.

Among the Valencia Properties, the partnership bought Blacksmith home and the Steel Lane Home, for which Grewal paid the down payments and Braganti contributed to the deposits, paid mortgage for 10 months and HOA fees for 20 months. Later, Grewal paid the delinquent HOA fees and loan on the Properties. Braganti and Singh, lived in the Valencia home for 39 months. There was no rental agreement authorizing Barganti and Singh to reside at Blacksmith.

At trial, the defendants filed a cross-complaint against the Braganti and Singh for breach of contract, breach of fiduciary duty, fraud, and intentional infliction of emotional distress.

The trial court held that Braganti had the right to seek partition in the Property owing to her interest in one-third of the sale profits. It also determined that the defendants failed to fulfill their obligation to keep the mandatory $200,000 in the partnership account, which impacted the partnership’s success and its capacity to acquire and upkeep the properties owned by the partnership. Additionally, it held that the Defendants used partnership funds for non-partnership investments, including $125,000 for Grewal’s solely owned hotel in Wisconsin.

It consequently held that Braganti had established fraud, waste, and misappropriation by the defendants warranting partnership dissolution under Corporations Code section 17707.03. The court therefore ordered full accounting to determine allocation of funds. It further held that Braganti was entitled to damages, as well as offset of money she may owe defendants against amounts defendants owed to her. Furthermore, it found that she was entitled to credit for all HOA and mortgage payments she paid on Valencia properties and reimbursement for her expenses for the partnership properties. However, the court held that she was not entitled to salary for her work performed on behalf of the partnership.

The court found that the claims in defendants’ Cross- Complaint was unfounded. However, it held that Braganti and Singh had improperly moved into the property as their residence, and they owed the partnership total of $123,000 in back rent ordered them to vacate the property within 60 days.

During the accounting phase, the trial court issued a minute order holding that the defendants’ capital contributions should be considered as part of the accounting and the management contributions, down payments and expenses for the Valencia properties, and expenses for the partnership office should also be considered. In its amended final statement of decision, the court held that from the $1,533,066 trust from Valencia property sales, Grewal should be reimbursed $1,210,196 for loan payoffs. the court then accounted for each partner’s capital input: Grewal at $723,509, Nagpal at $125,000, and Braganti, after adjustments, at $27,338.

The adjustments for Braganti’s contributions included her $150,338 contribution to the property in down payments, mortgage payments, HOA payments and office expenses reduced by $123,000 in back rent for the Blacksmith property. The court refused to offset the commissions Braganti had earned against her capital contributions. The remaining proceeds were apportioned according to these contributions, resulting in final awards of $1,467,558 for Grewal, $53,752 for Nagpal, and $11,756 for Braganti. Braganti appealed from the accounting portion of the judgment.

The Second District Court of Appeal affirmed the trial court’s decision. Braganti alleged that the trial court, during funds allocation, did not account for the parties’ capital contributions, sweat equity and reimbursement for property improvements. The court found the contention meritless as the trial court made findings about each party’s capital contributions once all the Properties were sold. Furthermore, Braganti’s argument that she was entitled to a salary or commission in addition to one third interest in the property was rejected because the partnership agreement provided that no such entitlements existed unless the partnership was profitable or generated income, neither of which occurred. Braganti also argued that she should have been reimbursed for sums she expended on improvements to Valencia properties before any return of the partner’s capital contributions as mandated by California Civ Pro Code section 873.220.

The court determined that section 873.220 doesn’t stipulate pre-distribution payments or restrict judicial discretion in equitable division of proceeds. Similarly, the court also found the trial court’s accounting approach acceptable as it made no determinations related to capital contributions for accounting during its initial ruling on plaintiff’s right to partition. Further, the court remarked that the partnership did not have enough cash to make each partner whole before distributing the remaining partnership assets, leading to its decision to return capital contributions first. The court also held that the trial court did not abuse its discretion in its accounting method.

Regarding the cross- complaint from the Defendants, the court held that the trial court was within its authority to limit the experts’ testimony, as it lacked proper procedure. The court dismissed the defendant’s argument that the trial court misinterpreted the partnership’s MOU about maintaining $200,000 in the account, as Grewal admitted during the trial that this sum was intended for operating expenses as per the MOU, with additional funds to be provided if necessary.

The court also decided that considering both the monetary and non-monetary outcomes of the case, there was no clear prevailing party and therefore, neither party was entitled to costs. The judgment of the trial court was therefore, affirmed and the parties were to bear their own costs on appeal.

How the Underwood Law Firm Can Help

The case addresses complex issues related to real estate transactions within a partnership, the duties owed between partners, and the partition of property when a partnership dissolves. Factors such as the agreements between partners and who pays for certain expenses for the property can ultimately affect the outcome of a partition case. If you are considering partition as an option, or find yourself defending one, then please contact Underwood Law Firm, P.C. for an initial consultation.