WHICH REMEDY, PARTITION BY DIVISION OR PARTITION BY SALE?
(references are to California statutes and caselaw)
Partition plaintiffs may have different motivations for suing their cotenants. However, most partition plaintiffs seek to sever tenancies from co-owners with whom they don’t see eye-to-eye. Such differences range from conflicts over how the property should be used, to unshared desires to liquidate investments, to resentment over unequal financial contributions for ongoing expenses or over unequal distributions of rents, to simple, but deep seated animosity among siblings or other family members or even between former friends or partners. The majority of partitioned co-tenancies are involuntary as, for example, inherited partial interests, dissolved business relationships, or ill considered estate planning. Because a co-tenant’s right to partition is virtually absolute, the court’s primary task is to determine whether partition should be accomplished by physical division or by sale. Traditionally, partition by division has been strongly favored and in most jurisdictions would be ordered absent “extreme prejudice”, a difficult standard to meet for a proponent of a sale. While in the past, the court’s freedom to order partition by division has been essentially unfettered, in more recent times, the court’s ability, if not jurisdiction to order physical division has been constrained by planning and land use legislation. A revision of the California partition statutes in 1976 purportedly retained the preference for physical division, but significantly lowered the standard for partition by sale from “great prejudice” to “more equitable” with little guidance as to what the change meant. (CCP Sec. 872.820) Other land use legislation enacted in the same general time period all but prevents such division even where it was formerly possible. Thus, courts give lip service to the traditional preference in cases involving rural and agricultural properties, but generally order partition by sale where zoning and other planning considerations might otherwise be offended. The enactment of extensive planning legislation, implemented by the adoption of enforceable general plans covering virtually the entire state, and the evolution of the Subdivision Map Act have essentially eliminated the possibility of partition by division in urban and suburban areas. Physical division is more likely to be feasible in rural, agricultural areas or where the case involves a large tract in an undeveloped area of the state. In the early days of the partition remedy and indeed, well into the 20th century, partition by division was the overwhelmingly favored remedy. The party seeking a sale had the burden of proof to show that an equitable division was not practical and that “great prejudice” would result from a physical division. Bartlett v. Mackey (1900) 130 Cal. 181, 183. It was presumed that the court could accomplish an equitable division whereby each severed tract would be equal to the resulting owner’s interest in the whole measured in value. East Shore Co. v. Richmond Belt Railway (1916) 172 Cal. 174, 180. See: Faires v. Pappmeier (1951) 104 Cal App 2d 713. It is to be kept in mind that at the time these cases were decided, most partition disputes involved larger tracts of land, often of a rural or agricultural nature.
Although decided after the 1976 revisions to the partition statutes (see discussion below), the traditional preference was articulated in Richmond v. Dofflemyer (1980) 105 Cal.App.3d 745, 757, which involved the partition of a 4700 acres ranch as follows:
“As a rule, the law favors partition in kind, since this does not disturb the existing form of inheritance or compel a person to sell his property against his will. Forced sales are strongly disfavored”
As will be noted below the court in Richmond probably overstated the case for partition by division, and did not adequately take into account legislative changes to land use laws that had been underway for some time. In Butte Creek Island Ranch v. Crim (1982) 136 Cal App 3d 360, 366 and 367, the court articulated three factors relevant to whether partition by sale is more equitable than partition in kind: (1) whether partition is kind is permissible under applicable subdivision laws; (2) whether the property can be divided into parcels of roughly equal value, such that any differences in value could be balanced by way of compensatory payments; and (3) whether division of the property would substantially diminish the value of each party’s interest. Interestingly, the court did not consider whether a proposed division might offend the applicable general plan and that is possibly explained by the fact that the property involved was a 4700 acre ranch consisting of numerous large separate parcels. As noted in the East Shore Co. case, supra, when a property is physically partitioned, the criteria is not proportional acreage, or land area, but rather proportional value. “Quality and quantity are to be considered in the allotments. . . but the determinative factor is that each party shall receive an allotment equal to his interest in the whole of the property.” Ibid at 760. (See: CCP Sec. 873.210) Such an analysis can be very complex and difficult, particularly with larger parcels or parcels where factors such as highway frontage, water rights, utility easements and similar factors are present. Valuations of severed parcels tend to be speculative and often, there are no comparable sales. Ingress and egress considerations are omnipresent. Even before the 1976 revision, such difficulties lead courts to depart from the favored rule by finding that “great prejudice” would be visited on one or more of the parties. The discussions in Doffelmeyer and in Butte Creek Island Ranch v. Crim, supra, touch on these issues. Both cases involve rural lands. What did the historical criteria of “great prejudice” actually mean? The inquiry tended to focus on whether the economic potential of the resulting smaller properties was compromised by the division. For example, in Sting v. Beckham 94 Cal. App. 2d 823 (1949), the critical determinant as to the value and utility of the whole property was the location of a well which serviced the entire parcel. If the parcel had been physically divided, one portion would cease to have water and hence, very limited utility. The court ordered the property sold. In Butte Creek Island Ranch, supra, (decided under the post 1976 relaxed standard of harm) the court was concerned about the differing values of year round pastures as opposed to seasonal pastures in considering the several parcels that comprised the ranch. In Priddel v. Shankie 69 Cal. App. 2nd 319 (1945), a physical division of the property would have required the demolition of an existing structure. In view of the resulting economic waste, the property was ordered to be sold. In Formosa Corp v. Rogers (1952) 108 Cal. App. 2d 387, the court found that a movie production facility with 64 buildings and structures could not be equitably divided without great prejudice. In all these cases, "great prejudice" was measured in economic terms. Disproportionate diminution in the values of proposed smaller parcels has been another point of inquiry under both standards. For example, in the Richmond v. Dofflemeyer case, the 4700 acres of ranch land was shown to have five classifications of value each differing in its economic utility. The court was asked to allot a proportional share of each classification to each of the eight co-tenants (seven individuals and a trust). At 760, the court declined as follows:
“To divide the property in question among seven individuals and the trust in a way that would give each party a proportionate share of each of the five classifications of land would be an almost impossible task. Even if such a feat could be accomplished, it is probable that such a division would result in a patchwork of ownership, with all of the parties owning fairly small disconnected pieces of property rendering highly unlikely the utilization of the land to its greatest potential.”
These cases show that courts have a limited tolerance for complex and speculative valuation determinations, that they want to preserve and not destroy values, and that practical considerations can overcome the preference for physical division. These considerations have applied both before and after the 1976 revision. In 1976, the California partition statutes were substantially revised upon recommendations of the Law Revision Commission. Two critical changes were a relaxation of the preference for division (CCP Sec. 872.820) and a recognition that any division should be consistent with zoning restrictions (See discussion below and CCP Sec. 872.040). The Law Revision Commission set forth its justification for these changes as follows: “. . . In many modern transactions, sale of the property is preferable to physical division since the value of the divided parcels frequently will not equal the value of the whole parcel before division. Moreover, physical division may be impossible due to zoning restrictions or may be highly impractical, particularly in the case of urban property. The Commission recommends that partition by physical division be required unless sale would be “more equitable.” This new standard would in effect preserve the traditional preference for physical division while broadening the use of partition by sale.”
13 Cal. Law Revision Com. Rep., Reports Recommendations and Studies (1975-1976) 413-414.
During this same era, growing concerns over urban sprawl and uncontrolled development prompted the California legislature to enact comprehensive planning legislation giving local authorities tight control over future land development. The objective was to impose order on what often had been politically favored or uncontrolled development. The incidental consequence was to sharply constrain the ability of courts to partition by division. California law changed dramatically in 1971 when the legislature adopted a series of amendments and additions to the state planning and zoning codes that put legal muscle behind the general or master plans that cities and counties had been required to adopt since 1927 (Stats. 1927, chq. 874, pp 1899-1913.). Previously, such plans were viewed largely as academic exercises, for there existed no mechanism to force local land usage to adhere to the plans. It was not considered unusual from a planning perspective for properties to be developed or subdivided inconsistently with a general plan or for zoning and land use regulations to be similarly inconsistent. Zoning changes and variances were often granted without regard to general plan specifications. The 1971 amendments altered the status of general plans from interesting studies to mandatory guides for zoning, subdivisions, and land use. Cities and counties were now required to adopt general plans stating the local development policies and setting forth objectives, principles, standards, and plan proposals for local land use. Gov. Code Sec. 65302. It became mandatory for zoning and land use regulation to conform to the general plan. The general plan for a locality was elevated to the top of “the hierarchy of local government law regulating land use”. Neighborhood Action Group v. County of Calaveras (1984) 156 Cal App 3d 1176,1183. (See discussion in DeVita v. County of Napa 9 Cal 4th 763, 772.) The 1971 legislation, which ultimately became embodied in Gov. Code Sec 65100 et seq and which has had many subsequent amendments, had as its objective the transformation of general plans into enforceable rules for development by requiring that all land use regulations and approvals be in conformity with a previously adopted plan. With few limited exceptions, a local entity could not adopt a land use regulation or approve a development project unless it was consistent with its general plan. Amendments to general plans are difficult and require careful local legislative consideration and in some jurisdictions, submission to the voters. The same strictures apply to the counties with respect to unincorporated areas. Each locality was required to establish planning review processes that assured compliance with its general plan. These review processes required a detailed application for any proposed development or subdivision and a thorough administrative review process. Since 1893, California has required the recordation of a subdivision map before the subdivided lots could be sold (Stats. 1893, ch. LXXX, Sec. 4, pp. 96-97). It was not until the 1929 Subdivision Map Act that the predecessor to modern land use regulation was enacted. The 1929 legislation constituted the first grant to local authorities of power to regulate the design and improvement of subdivisions within their communities including streets and roads, drainage and other aspects of development. (Stats. 1929, ch. 837, p. 1790 and ch. 838, p. 1805.) Pursuant to Gov. Code Sec. 66411 and its predecessors, local governments have been authorized to adopt local ordinances regulating any and all land subdivision. (Gov. Code Sec. 66424 defines subdivision as meaning, “ . . . the division. . . of any unit or units of improved or unimproved land, or any portion thereof, shown on the latest equalized county assessment roll as a unit or as contiguous units. . .” ). Over the years there have been many substantial substantive expansions of the Subdivision Map Act. While the procedures are more elaborate for subdivisions of five or more parcels, (Gov. Code Sec. 66424), a parcel map is required for smaller subdivisions (Gov. Code Sec. 66426). The scope of regulation includes the design of “. . . (1) street alignment, grades and widths; (2) drainage and sanitary facilities and utilities, including alignments and grades thereof; (3) location and size of all required easements and rights-of-way; (4) fire roads and firebreaks; (5) lot size and configuration; (6) traffic access; (7) grading; (8) land to be dedicated for park or recreational purposes; and (9) other specific physical requirements . . .” necessary to assure compliance with the applicable general plan. (Gov. Code Sec. 66418). See discussion generally in Witt Home Ranch, Inc. v. County of Sonoma, (2008), 165 Cal. App. 4th 543 for a review of the early history of the California Map Acts. The current incarnation of the Subdivision Map Act (Gov. Code Sec 66410, et. seq.) became effective on March 1, 1975. As part of the 1976 partition statute revision, CCP Sec. 872.040 recognized that local land use laws must be considered in partitioning in kind :
“Nothing in this title excuses compliance with any applicable laws, regulations, or ordinances governing the division, sale, or transfer of property.”
The potential conflicts between a proposed division of land by partition and the applicable general plan, and the Subdivision Map Act, is obvious, but neither the courts nor the legislature have candidly addressed this problem. In the partition cases that arose after the 1976 revision, the appellate courts still clung to the traditional preference for division and at the trial level, courts were confronting requests to physically divide suburban and urban properties in ways that often conflicted with local planning regulations. Alarmed by these tendencies, the California Attorney General issued the following opinion in 1981:
“When a court orders the physical division of real property in a partition action, the division must comply with the requirements of the Subdivision Map Act, local ordinances adopted thereunder, zoning ordinances, and the general plan for the area in which the property is located.” 64 OP. Atty. Gen. 762 (1981)
There is a compelling argument that the combination of the General Plan legislation, the Subdivision Map Act, and CCP Sec. 872.040 effectively deprive trial courts of subject matter jurisdiction to effect a partition by division without the proposed division first having received administrative blessing from the local planning departments. In the absence of partition litigation, such divisions generally require formal application to the local planning authorities who have broad administrative authority to determine whether the proposed division complies with the applicable planning or zoning regulations adopted pursuant to the general plan and to impose conditions on the division. Why should a court be able to circumvent these requirements? As a result of various successful local and county initiatives in numerous jurisdictions, certain development projects are subject to voter approval. (See: DeVita v. County of Napa (1995) 9 Cal.4th 763 which confirms the validity of such voter approval requirements and discusses the history of California planning legislation.) Where such a voter approval requirement is applicable to a proposed partition by division, it would seem that the court lacks any power to circumvent that requirement and it is difficult to conceive how a court could subject a proposed partition to ballot review. This principle is also embodied in CCP Sec. 873.080 which in the case of a division in kind deals with the ingress-egress issue by authorizing the referee to designate a portion of land to be partitioned in kind as a public or private way “. . . subject to any necessary action by appropriate public entities.” The corresponding Law Revision Comment states that this “. . . makes clear that the actions of the referee in disposing of the property and of the court must conform to any applicable laws.” Exactly how this conformity is to be realized is left to judicial creativity. There appear to be no cases utilizing or interpreting this section. An example of how it is awkward for a court to decide what are essentially complex planning issues is the unpublished opinion in Bordessa v. Lanker, 3/24/2009, 1st App. Dist. Docket No. A120733, which was resolved almost entirely on procedural grounds. The case involved two anciently deeded parcels within the coastal zone in Sonoma County, jointly owned by two families. The plaintiffs sought partition by sale while the defendants responded with a request for a division in kind. Although absolutely entitled to partition, the plaintiff failed to carry the burden of showing that partition by sale would have been more equitable or that applicable planning limitations would be offended by the defendants’ proposed division and this procedural failure allowed both the trial and the appellate courts to skirt the considerable planning issues implicated by physical division. (The court recognized these planning issues existed, but treated the questions as only raising burden of proof issues.) The Court also was able to avoid many of these regulatory questions because the property consisted of two anciently deeded parcels that had been previously recognized by the County plus a third fragmented parcel that had not been recognized but which under local practices could be annexed to one of the recognized parcels. The court ordered a division along the existing property lines with the annexation of the fragment to one or the other as a lot line adjustment. This result did not require any subdivision or change in usage and was compliant with CCP Sec. 873.240 which favors partition in kind where there is no resulting internal division of existing parcels. The opinion is worth reading as an example of the conflict between partition issues and land use legislation. (One can speculate that publication was withheld due to the unique character of the parcels and the inadequacies of the plaintiff’s trial presentation, which allowed the appellate court to avoid the planning considerations. Had this been a private effort to subdivide presented to Sonoma County planning officials, those planning issues would certainly have impacted the result. Non-publication allowed the court to decide the matter without the risk that its approach would infect differing fact patterns or impinge upon local planning prerogatives.)
In practice, most partition actions are decided on a motion for an interlocutory judgment and result in a partition by sale. When the market is active, the sales process proceeds quickly and the parties are incentivized to settle any ancillary issues by the availability of the sales proceeds from the escrow. Thus, there is a dearth of appellate guidance on these issues. Pratt v. Adams (1964) 229 Cal App 2d 602 is an interesting 1964 case (arising before general plans became broadly enforceable) in which a group of twelve parties sought to evade the Subdivision Map Act by filing a collaborative partition action to divide a 46,237 acre parcel into twelve separate parcels. Setting up one of their own as a straw man defendant, they obtained a judgment of partition by division, and they then proceeded to divide each parcel into less than five other parcels (seeking thereby to avoid the more arduous subdivision procedures imposed by the Subdivision Map Act, then Bus. & Prof. Code Sec, 11535). This “two step” resulted in a total of 38 parcels. The parties then sought building permits for various of the resulting parcels. The county denied the permits on the grounds that the “subdivision” evaded the requirements of the Subdivision Map Act (which at that time was in the Bus & Prof. Code). The landowners sought a writ of mandamus to compel the county to grant their building permits. The appellate court, in extolling the virtues of the Subdivision Map Act, used a “step transaction” analysis in holding that while each of the elements of the scheme might appear to have been lawful when viewed separately, the partition action was a contrived portion of a larger scheme to develop and divide the land in a manner that circumvented the Act and hence the court would not interfere with the decisions of the planning officials. Another interesting element in this case is that the referee, rather than being an independent and unbiased extension of the court (a “quasi judicial officer”), was deeply involved in the entire scheme and as part of his recommended division of the property, he set up “. . . an elaborate plan for development of the area, with these features: a common roadway. . . to be maintained as a majority of the grantees should decide by vote; easements in favor of certain parcels against others; building restrictions, to be carried out by an architectural control committee; prohibition of signboards, of trailers and of many kinds of animals; and provision for waiver of any of the restrictions by vote of a majority of the parties, their heirs, successors or assigns.” Id at 603, 604. Pratt v. Adams is an example of an ultimately failed attempt to use the partition remedy not to achieve a bona fide severance of tenancies, but rather as a device to achieve an otherwise prohibited end. In citing the Pratt case as a negative example, the Law Revision Comment states that CCP Section 872.040 (discussed above), “…codifies the rule that the partition statutes cannot be used to avoid any applicable laws governing property transactions. . . Whether a particular law, regulation or ordinance is applicable in a partition action is determined by the terms or a construction of that law, regulation or ordinance.” Another example of the attempted misuse of the partition remedy is found in Butte Creek Island Ranch, supra, at 368 where the court ordered partition by division rather than partition by sale as had been urged by the plaintiff for the following reason:
“Plaintiff had and has no intention of yielding up physical possession of the land. It sought a forced sale of the land in order to acquire defendant’s interest which he did not desire to sell. This is nothing short of the private condemnation of private land for private purposes, a result which is abhorrent to the rights of defendant as freeholder.”
There have been instances where a landowner desiring to acquire adjacent lands manages to purchase a fractional tenancy in common interest in the adjacent property and then seeks by partition to acquire the desired portion of the adjacent lands. This tactic is a version of the private condemnation that was discouraged in Butte Creek. In the final analysis, it will be rare if ever for a court to order a partition by division of land located within a municipal entity. For a court or a referee to manage the submission of an application to the local planning body under the direction of the court is thoroughly impractical. In general, most such applications have a specific development objective that goes beyond the simple division of the property and planning bodies are likely to perceive a proposed division isolated from a development objective as a step in a larger development scheme that they must regulate in its entirety. From the landowners’ standpoints, merely dividing the property could well result in the preclusion of future development possibilities that might not have been envisioned when the application was submitted. With larger, rural or agricultural tracts, courts will still look favorably on partition by division where the result is consistent with applicable land use regulations and the resulting parcels are economically viable. Any such division will have to be approved by the local planning authorities using their procedures. In special zones such as along the coast, or in resort or recreation areas, planning limitations will frequently force a partition by sale. The partition remedy can be a powerful and efficient device to settle otherwise intractable disputes among co-owners of real estate. However, in most instances partitioning of real estate results in a sale conducted in a public arena where pricing may not be under the control of the parties. Such sales can trigger tax and other implications that are beyond the scope of this article.
NOTE: While this discussion references California law, the same principles will hold true in most jurisdictions. The extent of the potential conflict between local planning rules and regulations and the court's jurisdiction to order partition in kind must be considered in managing any partition litigation.