Code of Civil Procedure (CCP) Section 873.960 – Hearing on Referee’s Report

Code of Civil Procedure section 873.960 provides for the hearing procedure after a party moves to confirm a partition buyout through appraisal. Though the statute is lengthy, the important note is that the court will only confirm the buyout if it is not “inequitable.” For those unfamiliar with the concept of equity, this means that the buyout must simply be a “fair” transaction.

Code of Civil Procedure section 873.960 states:

At the hearing, the court shall examine the report and witnesses. If the court determines that the proceedings have been regularly conducted, that transfer of title to the interests may regularly be made, and that no facts appear which would make such transfer inequitable, it shall confirm the report and order the interests transferred to the acquiring parties in proportion to their respective interests, or in such other proportion as is set out in the agreement.

The order shall be conditioned upon payment of the amounts fixed as the purchase price and any other amounts required by the agreement, the giving of any required security, and payment by the parties of the expenses of the procedure authorized by this chapter and of the general costs of the partition or an appropriate share thereof.

Thereafter the court, upon motion of a party to the agreement or of the referee, made upon not less than 10 days’ notice to the parties who have appeared, shall determine whether the conditions have been fulfilled and, if so, shall enter judgment confirming the transfer; otherwise, upon such further proceedings as may be ordered, the action or proceeding shall be ordered terminated.

“Shawn” and “Julie” are siblings who inherit a farm from their grandfather. Eventually, the siblings feud over management of the farm and Shawn sues to partition the property by sale.

During the initial stages of the lawsuit, the parties conduct discovery, take each other’s depositions, and file several competing motions on the pleadings. After each has poured thousands and thousands of dollars into litigation, they realize that it would be best if they worked together for Shawn to simply buy out Julie’s interest in the farm.

They draft up a document relaying to the court that they are in agreement to partition the property through the appraisal process, where Shawn will buy out Julie at an agreed-upon appraisal price, and file it with the court clerk under CCP § 873.920.

After the agreement is filed, Shawn files a motion to approve the partition by appraisal agreement under CCP § 873.930. The court reviews the agreement, finds that it is ultimately fair and equitable, and gives its approval for the property to be partitioned via the appraisal process.

Once this is done, pursuant to CCP § 873.940, the court appoints a partition referee who prepares and files a report on the valuation of the property, while also identifying any outstanding liens.

After the report is prepared, Shawn moves the court to confirm his buyout of Julie. In deciding whether to confirm the buyout, the court will look at all the facts, and if the transaction is fundamentally fair, will confirm the buyout to allow Shawn and Julie to go their separate ways.

Law Revision Commission Comments (CCP § 873.960)

1976 Addition.

Section 873.960 is new. It vests the court with equitable power to refuse to permit consummation of the transaction where it would be inequitable. The parties contract in the light of this power of the court.

As is the case for many of the partition statutes, section 873.950 does not include an “official” Assembly Committee Comment from the California Legislature. But this is the norm. And that’s because the Legislature endorsed an overall adoption of the Law Revision Commission suggestions when it passed the new partition statutes in 1976.

In fact, the introduction to Assembly Bill 1671 (the bill that contained the new partition laws) states that the Revision Commission’s recommendations “reflect the intent of the Assembly Committee… in approving the various provisions of Assembly Bill 1671.” This demonstrates that the intent of the Legislature was essentially in line with that of the Revision Commission.

As to the comment and statute, they are somewhat different from the confirmation procedures for ordinary partition sales outlined in Section 873.730.

With that statute, the rule is as follows: the sale to a third party may be overturned if (1) the proceedings were unfair or notice of sale was not properly given. If there is no finding at the hearing of unfairness or improper notice, the sale may thereafter not be attacked on such grounds; (2) The sale price is disproportionate to the value of the property; or (3) It appears that a new sale will yield a sum that exceeds the sale price by at least 10 percent on the first ten thousand dollars ($10,000) and 5 percent on the amount in excess thereof, determined after a reasonable allowance for the expenses of a new sale. (CCP § 873.730.)

Section 873.960 changes this formula. Instead of giving three separate grounds for potentially vacating the appraised buy out, the court is guided only by the rule that “that no facts appear which would make such transfer inequitable.”

While this may not be much to go on, case law clarifies that an equitable discretionary decision is one that is fundamentally fair. Equity, after all, aims to do right and accomplish justice. (Hirshfield v. Schwartz (2001) 91 Cal.App.4th 749, 770.) “In other words, equity recognizes that we live in a changing world and equitable remedies are flexible, capable of expanding to meet the increasing complexities.” (Lickiss v. Financial Industry Regulatory Authority (2012) 208 Cal.App.4th 1125, 1133.)

Here at Underwood Law Firm, our knowledgeable attorneys are here to help navigate the complex web of case law and statutes surrounding partitions. If you are thinking of filing a partition, are already in the midst of a partition suit, or just have any questions, please do not hesitate to reach out to our office.