California Partition Law Blog
Under the Partition Law, “[a] bidder is responsible if it can perform the contract as promised.” (PCC § 20162; Valley Crest Landscape, Inc. v. City Council (1996) 41 Cal.App.4th 1432, 1438.) That means, in essence, that it can be determined from the face of the bid itself that it will be viable, without outside investigation or information. (Taylor Bus Service, Inc. v. San Diego Bd. Of Education (1987) 195 Cal.App.3d 1331, 1342.)
The concept of the “responsible bidder” comes up at the end of partition cases when the court is deciding whether the confirm or vacate the partition sale. Essentially, the law provides that if a “responsible bidder” makes a viable bid above the sales price, then the court may vacate the sale and either sell the property to the bidder, or start a new round of marketing the property.
For parties who were looking forward to a sale, this can be devastating news if the court chooses to send the house back to the market. As such, having the right attorney by your side can make all the difference. At Underwood Law Firm, our attorneys are well versed enough in the practice and procedure of partition actions to help you get the answers and relief you need
What is a partition sale?
The partition sale is one of the final steps that occurs in a partition action. First, the plaintiff has to file a partition lawsuit to get the property sold. Once the initial battles over pleadings and discovery have concluded, the court will then determine whether, based on all the evidence, the plaintiff is entitled to a partition. (CCP § 872.710.)
And second, once the court finds for the plaintiff, it “shall” make an interlocutory judgment that determines the interests of the parties in the property and orders the partition of the property. (CCP § 872.720.)
Of course, the process is much more complicated than the quick summary above implies. And subsequent litigation can occur over who will be authorized to submit bids, whether the property may be purchased on credit, and a plethora of other topics (CCP §§ 873.510 – 873.690.)
At a certain point, though, the partition referee (typically a local broker) charged with making the sale will present a report to the court detailing that a sale of the property has occurred, and including all the details about the buyer, purchase price, and the like.
What happens after the sale has occurred?
Once the property has been sold, and the report has been issued by the referee to the court, any party to the litigation (including the buyer themselves) may file a motion to confirm or set the sale aside. (CCP § 873.720.) And this is where the concept of the “responsible bidder” comes into play.
At this hearing to confirm or set aside the sale, the court will need to examine the report of sale and relevant witnesses. (CCP § 873.730.) Usually, this will result in confirmation if the court finds the sale will be beneficial to the parties.
But, there are some situations where the court will actually vacate the sale. These include where: (1) the proceedings of the sale were unfair or there was no notice of the sale, (2) the sale price is disproportionate to the property’s actual value, and (3) it appears that a new sale will yield a sum that exceeds the sale price by at least 10 percent on the first 10,000 dollars, and 5 percent on the amount in excess. (CCP § 873.730.)
For the third exception to apply, though, the increased offer must be from a “responsible bidder.” (CCP § 873.740.) It should also be noted, in general, that the three situations described above are not some type of veto power that the parties to the litigation have. (Sullivan v. Dorsa (2005) 128 Cal.App.4th 947, 962.) These are grounds to challenge the sale, meaning that, even if the plaintiffs or defendants make an argument, there’s a chance it could fail if they don’t have the evidence to back it up.
Who is a “responsible bidder?”
Interestingly enough, there is nothing within the partition statutes defining a “responsible bidder.” This is frustrating, given that the court’s vacating of the sale is conditioned on the increased bid being from this undefined entity. That said, there is case law out there that can help litigants put the puzzle together on their own.
For example, the term appears in the Public Contract Code (PCC). This set of laws clarifies the rules and regulations with respect to competitive bidding contracts that the government gives out to contractors. (PCC § 100.)
Under that code, “a bidder is responsible if it can perform the contract as promised.” (PCC § 20162; Valley Crest Landscape, Inc. v. City Council (1996) 41 Cal.App.4th 1432, 1438.) That means, in essence, that it can be determined from the face of the bid itself that it will be viable, without outside investigation or information. (Taylor Bus Service, Inc. v. San Diego Bd. Of Education (1987) 195 Cal.App.3d 1331, 1342.)
Next, the Legislative Committee Comment to section 873.740 actually references an old partition case before the law was changed. There, increased bids would be recognized if they were made by a “responsible person.” (Parker v. Owen (1950) 96 Cal.App.2d 78, 80.)
Taken together, it can be safe to assume that “responsible bidder” means someone with enough financial liquidity to make a reasonable bid that’s actually capable of being successful.
What happens if a responsible bidder makes an increased bid at a partition sale?
At the hearing to confirm or vacate the sale, if a responsible bidder makes an offer that complies with the code (10% increase on first 10,000 dollars, etc.) then the court has the discretion to take two courses of action. (CCP § 873.740.)
First, they can vacate the sale and direct a new sale to be made. And second, they can vacate the sale and accept the increased offer directly from the responsible bidder. (Id.)
How the Lawyers at Underwood Law Firm Can Help
For partition litigants, finally achieving the sale of the property can be joyous occasion. It signals that the lawsuit is finally ending, and that the equity will be paid out. Perhaps lost in this euphoria, however, is the possibility that the sale can be vacated, sending the case spiraling into additional litigation.
For the inexperienced litigant, the next steps might seem impossible to determine. Fortunately, the lawyers at Underwood Law Firm specialize in partition actions and solving the difficult problems that can accompany them. If you have found yourself in one of these situations, then please do not hesitate to contact us today.