Mcle Self-study Article: Which Remedy: Partition by Division or Partition by Sale?

• Citation: Vol. 32 No. 4
• Publication year: 2014
• Author: By Michael Pecherer

MCLE Self-Study Article: Which Remedy: Partition by Division or Partition by Sale?

(Check the end of this article for information on how to access 1.0 self-study credits.)

By Michael Pecherer

©2014 All Rights Reserved.

I. INTRODUCTION

Partition plaintiffs may have different motivations for suing their co-tenants. These 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 and other family members or even between former friends or partners. Most partition plaintiffs seek to sever tenancies from co-owners with whom they do not see eye to eye. The majority of partitioned co-tenancies are involuntary as, for example, inherited partial interests, dissolved business relationships, or the result of ill-considered estate planning. Because a co-tenant's right to partition is virtually absolute, the court's primary task is to determine whether a partition should be accomplished by physical division or by sale.

Traditionally, partition by division was strongly favored, and in most jurisdictions, would be ordered absent "great 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 that change meant.¹ Other land use legislation enacted in the same general time period all but prevents physical division even where it was formerly possible. 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 Act² have essentially eliminated the possibility of partition by division in urban and suburban areas. Since then, courts have acknowledged the traditional preference of partition by division in cases involving rural and agricultural properties, but have generally ordered partition by sale where zoning and other planning considerations might otherwise be offended.

II. HISTORICAL LOOK AT PARTITION REMEDIES

In the early days of the partition remedy and, indeed, well into the twentieth century, partition by division was the overwhelmingly favored remedy. The party seeking a partition by 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.³ It was presumed that the court could accomplish an equitable division whereby the value of each severed tract would be equal to the resulting owner's proportionate interest in the whole tract.⁴ One must keep in mind that at the time these early 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,⁵ which involved the partition of a 4,700-acre 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."⁶ 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, the court articulated three factors relevant to whether partition by sale is more equitable than partition in kind: (1) whether partition in 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.⁷ Interestingly, the court did not consider whether a proposed division might offend the applicable general plan. This may have been due to the fact that the property involved was a ranch consisting of two large, separate parcels.

As noted in East Shore Co. v. Richmond BeltRailway, when a property is physically partitioned, the criterion is not proportional acreage or land area, but rather, proportional value.⁸ "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."⁹ This type of analysis can be very complex and difficult; particularly with larger parcels or parcels that have features such as highway frontage, water rights, and utility easements. Omnipresent considerations of ingress and egress can further complicate the analysis. In addition, valuations of severed parcels tend to be speculative and often do not have comparable sales. Even before the 1976 revision, these valuation difficulties led courts to depart from the favored rule by finding that "great prejudice" would be visited on one or more of the parties. ¹⁰

What did the historical criterion of "great prejudice" actually mean? The inquiry tended to focus on whether the economic potential of the resulting smaller properties would be compromised by division. For example, in Sting v. Beckham, the critical determinant of the value and utility of the whole property was the location of a well that serviced the entire parcel.¹¹ If the parcel had been physically divided, one portion would have ceased to have water, and hence, very limited utility. The court ordered the property sold.¹² Similarly, in allocating the parcels that comprised a ranch, the Butte Creek Island Ranch court (decided under the post-1976 relaxed standard) was concerned about the dichotomy between the values of year-round pastures as opposed to seasonal pastures.¹³ In Priddel v. Shankie, a physical division of the property would have required the demolition of an existing structure.¹⁴ In view of the resulting economic waste, the court ordered the property sold.¹⁵ In Formosa Corp v. Rogers, the court found that a movie production facility with sixty-four buildings and structures could not be equitably divided without great prejudice.¹⁶ In all these cases, great prejudice was measured in economic terms.

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Disproportionate diminution in the values of proposed smaller parcels has been another point of inquiry under both the pre- and the post-1976 standards (see below). For example, in Richmond, the 4,700 acres of ranch land had 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). 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.¹⁷

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.

III. STATUTORY REVISION IN 1976 FAVORS SALE OVER DIVISION

In 1976, the California partition statutes were substantially revised upon recommendations of the Law Revision Commission. Two critical changes were: (1) a relaxation of the preference for division,¹⁸ and (2) a recognition that any division should be consistent with zoning restrictions (see discussion below).¹⁹

The Law Revision Commission justified these...