Code of Civil Procedure section 872.730 allows the court to apply the partition statutes to certain partnership proceedings. This statute is important because it provides an alternative avenue for partition dissolution actions, at least where the assets of the partnership are co-owned in some form of cotenancy.
Code of Civil Procedure section 872.730 states
To the extent that the court determines that the provisions of this title are a suitable remedy, such provisions may be applied in a proceeding for partnership accounting and dissolution, or in an action for partition of partnership property, where the rights of unsecured creditors of the partnership will not be prejudiced.
(Amended by Stats. 1976, c. 73, p. 110, § 6.)
What Is an Example?“Shawn” and “Julie” are an unmarried couple who decide to get into business together. They start a partnership and buy several properties as partners to start running their business. They generally split the expenses and costs of the property equally.
Unfortunately, Shawn and Julie’s relationship deteriorates, and they break up. Shawn initiates an action for an accounting and dissolution of the partnership. The parties eventually agree to dissolve the partnership and split the assets equally.
Shawn and Jule cannot agree, however, on what to do with the properties. Shawn wants to partition and sell all of their properties, while Julie wants to partition some of the properties in kind.
The court determines that partition is an appropriate remedy and applies the partition statutes in further proceedings involving the partnership’s properties. This includes determining the plaintiff’s right to partition and issuing an interlocutory judgment.
Law Revision Commission Comments (CCP § 872.730)Section 872.730 is one of the very few statutes to be a creation entirely of the Legislature. As such, there is no Law Revision Comment for this statute.
Assembly Committee CommentsThe Legislature’s comment to this piece of law is as follows:
“Section 872.730 is new; it is an exception to the rule of Section 872.710 that partition as to concurrent interests is a matter of right. Section 872.730 codifies prior case law to the effect that partition is an appropriate remedy where the affairs of the partnership are otherwise sufficiently settled and what remains is the division or sale of the property. See, e.g., Hughes v. Devlin, 23 Cal. 501 (1863); Logoluso v. Logoluso, 233 Cal.App.2d 523, 43 Cal.Rptr. 678 (1965).”
This comment is fairly self-explanatory. It is simply a codification of the principle that the rules of partition may apply to partnerships. The reason for this rule is that, sometimes, partnership assets are co-owned. Once the entity begins winding up, partners with separate interests in one asset will likely want their accounts credited with the equity in the asset to receive the highest distribution possible.
As the court explained in Logoluso, “It is true that the statutes are silent on [whether one can partition partnership property. Furthermore, we have been cited no case that is clear-cut on the question of whether a court can order distribution in kind over the objection of a partner.
By way of solution, we note that an action to dissolve a partnership is an equitable proceeding, and so is an action in partition. Both kinds of cases present similar problems as to whether jointly-owned property should be divided or sold.
Because the circumstances surrounding the two kinds of action in equity are parallel, we apply the long established rules of partition to the property division aspects of a partnership dissolution action. Equity, by its very nature, requires that like principles be applied to like cases.” (Logoluso v. Logoluso (1965) 233 Cal.App.2d 523, 530.)
Thus, section 872.730 was born. Partnership property may be partitioned. That said, it is important to note that the comment restricts the usual rule of partition as a right in partnership proceedings. Instead, partition must not prejudice the rights of unsecured creditors or the other partners.
While this may not be a high bar to clear, it is another procedural hurdle that needs to be addressed, even when the parties may own the property as tenants in common or joint tenants.
As a prime example, a court ordered the partition of partnership property when the partnership asset consisted solely of a hotel, no agreement existed between the partners for the division of the property, and a division would have left the partners as tenants in common. (Jacoby v. Feldman (1978) 81 Cal.App.3d 432.) Given the circumstances, partition would not have prejudiced the partners, and thus a partition was allowed to proceed.