Code of Civil Procedure (CCP) Section 872.140 - Compensatory Adjustment

Code of Civil Procedure section 872.140 is an expansion on, and extension of section 872.120, which gives courts in partition actions broad equitable authority to make whatever orders necessary to achieve the purpose of the title. In other words, the court may do what it believes is imperative to accomplishing a fair and equitable partition.

As a result, section 872.140 can find itself taking a back seat to section 872.120, despite the former’s monumental importance to litigants. Put simply, this is the statute that enables parties to a partition to fight over recoupment of costs. Offsets, credits, charges, and contributions all have their basis in this section of the code.

Code of Civil Procedure section 872.140 states

The court may, in all cases, order allowance, accounting, contribution, or other compensatory adjustment among the parties according to the principles of equity.

(Amended by Stats. 1976, c. 73, p. 110, § 6.)

For example, “Alice” and “Joe” owned separate 50 percent interests in a two bedroom single-family home they inherited from their father upon his death in 2022 (the property). The property had plumbing issues from tree roots growing into the clay pipes connected to the home and needed a new appliances.

The property also had not been renovated since the early 1990s. Alice wanted to renovate the property and sell it, hoping that a new appraisal after the renovations would show an increased market value of the property. Joe wanted to reside in the property and only invest the minimum amount of funds necessary to replace the appliances and broken pipes. As a temporary compromise, Alice permitted Joe to reside on the property for a year if he agreed to split the costs to replace the pipes and appliances as well as contribute to a kitchen renovation. Joe agreed to pay half of the costs, but needed a couple months to secure the funds necessary to pay Alice. Alice then paid $50,000 in costs to make the repairs and renovations with the expectation that Joe would provide a $25,000 check. After the repairs and renovations were completed, Joe refused to pay Alice. Joe alleged that Alice spent chose overpriced vendors to complete the work and made unneeded renovations. Alice and Joe continued to dispute over payment.

Frustrated with the conflict, Alice sought an interlocutory judgment from the court seeking a partition by sale of the property. After a hearing and trial, the court granted her petition and ordered a sale of the property with the proceeds to be divided according to the respective 50 percent interest of Alice and Joe. The property eventually sold for $500,000. Pursuant to Code of Civil Procedure section 872.140, the court ordered that $25,000 be deducted from Joe’s share of the sales proceeds as a compensatory adjustment to account for Alice’s expenses to improve the property. As a result, Joe received $225,000 instead of $250,000 for his share of the property sold. In contrast, Alice received $275,000 for her share of the property instead of $250,000.

Section 872.140 continues the substance of the last sentence of former Section 792. It makes clear the court's authority to order compensatory adjustment for such items as common improvements, unaccounted rents and profits, and other matters for which contribution may be required. See, e.g., Hunter v. Schultz, 240 Cal.App.2d 24, 49 Cal.Rptr. 315 (1966) (equitable adjustment offsetting use value of property against expense of improvements). For a provision for payment of owelty in cases of unequal division, see Section 873.250.

As is the case with section 872.120 and 872.130, section 872.140 does not include an “official” Assembly Comment under its wording. This is due, in part, to the Legislature’s overall adoption of the Law Revision Commission’s suggestions. The introduction to Assembly Bill 1671 (which ushered in this statute among others) states that the Commission’s recommendations “reflect the intent of the Assembly Committee… in approving the various provisions of Assembly Bill 1671.”

In practice, though, little guidance has been needed for both attorneys and judges across the state to glean the meaning of section 872.140.

In the seminal case of Wallace v. Daley, the Third District used the statute as its justification for noting that “[e]very partition action includes a final accounting according to the principles of equity for both charges and credits upon each cotenant’s interest. Credits include expenditures in excess of the cotenant’s fractional share for necessary repairs, improvement that enhance the value of the property, taxes, payments of principal and interest on mortgages, and other liens, insurance for the common benefit, and protection and preservation of title.” (Wallace v. Daley (1990) 220 Cal.App.3d 1028, 1035-1036.)

The phrase “every partition action” functions exactly as one would expect; even when the property is sold and the money is ready to be distributed, equity still requires that all parties be credited or charged in accordance with their proportional ownership interests. (see Robinson v. Southwestern Development Co. (1954) 130 Cal.App.2d 1, 5.)

What’s more is that the list in Wallce v. Daley is not exhaustive. This statute (and the equitable principles underlying it) has even been used as the basis for establishing an equitable lien by subrogation between multiple cotenants, so that a co-owner who pays the debt owed by another is not robbed of his rightful recovery. (Caito v. United California Bank (1978) 20 Cal.3d 694, 701.)

In sum, the importance of section 872.140 cannot be understated. The case law that has followed in its wake ensures that all parties to a partition receive their fair share of sales proceeds in the name of equity.