Code of Civil Procedure (CCP) Section 873.740 – Increased Offers

Code of Civil Procedure section 873.740 outlines the requirements for an overbid to successfully vacate a partition sale. An overbid occurs when a responsible bidder submits a written bid compliant with the code above the current sales price reported by the referee under section 873.710. This section is important because it highlights how and when the court can actually accept an overbid. Unless the provisions below are followed to the letter, the acceptance of a non-compliant overbid may constitute an abuse of discretion.

Code of Civil Procedure section 873.740 states:

1. If at the hearing under Section 873.730 a responsible bidder makes a written increased offer that exceeds the sale price by at least 10 percent on the first ten thousand dollars ($10,000) and five percent on the amount in excess thereof, the court in its discretion may do either of the following:
   1. Vacate the sale and direct that a new sale be made.
   2. Vacate the sale, accept the increased offer, and confirm the sale to the offeror.
   3. Except as provided in subdivision (c), the amount by which an increased offer exceeds the sale price is determined on the basis of the gross amount of the increased offer including any commission on the increased offer to which an agent may be entitled.
2. Where in advance of sale the court has so ordered or the parties have so agreed, if an increased offer is made by a party to the action who is not represented by an agent, the amount by which an increased offer of a non-party exceeds the sale price is determined on the basis of the net amount of the increased offer excluding any commission on the increased offer to which an agent may be entitled.

“Shawn” and “Julie” are an unmarried couple who want to start a life together. They find a nice home in Los Angeles and buy it as joint tenants. They move in and start their new life together.

Unfortunately, Shawn and Julie’s relationship doesn’t work out, and they break up. They cannot agree on what to do with the property. Shawn wants to sell all the property and move on with his life, so he sues for partition by sale.

Eventually, the court orders the property sold and the sale proceeds distributed. The court concludes that the property will be sold at a private sale. A referee is assigned, who negotiates a purchase agreement with a buyer. At the hearing to have this sale confirmed, another buyer appears who offers 15% more than the original buyer in a written bid. Pursuant to CCP § 873.740, the court determines that this new offer serves both parties’ interests better. The court then sets aside the original sale and confirms a sale to the new buyer at their offered price.

1976 Addition

Section 873.740 supersedes the last sentence of former Section 784. The increased offer criterion of subdivision (a) is changed from the straight 10-5-percent formula of Section 784 to a 10-5 percent formula derived from Probate Code Section 785. Subdivision (b) is new; the gross overbidding criterion is adopted from the Probate Code. Subdivision (c) codifies the existing authority of the court sitting as a court of equity to accept increased offers on a “net overbid” basis. See generally Estate of Cole, 124 Cal. App.2d 615, 269 P.2d 73 (1954).

Like almost every other partition statute, section 873.740 does not include an “official” Assembly Committee Comment from the California Legislature. But this is primarily due to the Legislature’s overall endorsement and 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 signals that the intent of the Legislature was substantially in line with that of the Revision Commission.

Legislative intent aside, this statute is commonly referred to as the “overbid” provision. It has two key requirements. First, the “overbid” (one complying with CCP § 873.740 (a)) needs to be written. And second, the overbid must be from a responsible bidder.

The first requirement should not be overlooked. In an unpublished 2019 case out of the Third District Court of Appeal called Vaughn v. Heer, a probate court handling a partition approved the sale of the property to a third party. Heer, one of the co-owners, appealed on the grounds that the court did not acknowledge his overbid.

The Court of Appeal dismissed this argument because Heer’s supposed overbid was an oral objection, not a bid in writing as required. By its express terms, Code of Civil Procedure section 873.740 requires a written offer to purchase the property that exceeds the current offer by a specified amount. In the Heer case, no written offer appeared in the record on appeal. Thus, the terms of the relevant code section were not met. (See Protect Our Water v. County of Merced (2003) 110 Cal.App.4th 362, 364.)

The second key aspect of this statute is the requirement that the overbid come from a “responsible bidder.” This phrase is troublesome because it is not defined anywhere in the partition statutes.

That said, the term appears in other areas of the law, such as the Public Contract Code. And under the relevant provisions there, “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.)

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 for partition, in the middle of litigating a partition action, or just have any questions, please do not hesitate to reach out to our office.