Code of Civil Procedure (CCP) Section 873.760 – Failure of Purchaser to Deliver Proceeds

Code of Civil Procedure section 873.760 outlines the procedure for the rare situation where the buyer at a partition sale backs out after the court confirms the sale. In this instance, the court may instruct the referee to take one of two paths: resale or maintenance of a lawsuit against the purchaser.

Code of Civil Procedure section 873.760 states:

If the purchaser, after the confirmation of the sale, fails to pay the sale price, the purchaser is subject to the court’s jurisdiction and to further proceedings in the action. Upon such failure, a party, or the referee, may upon notice move the court to order either of the following forms of relief:

(a) Resale of the property upon notice as provided in this chapter. If any loss is occasioned thereby, the referee may recover the amount of such loss and costs and expenses incurred, including a reasonable attorney’s fee, from the purchaser who failed to pay.

(b) Maintenance by the referee of an action against the purchaser for the amount of the sale price. If the referee recovers judgment, the referee shall be awarded a reasonable attorney’s fee against the purchaser.

“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.

The court eventually permits Shawn to partition the property by sale. The home is sold to “Bob,” a third-party purchaser. The referee reports the sale to the court, and the court confirms the sale. Both Shawn and Julie are relieved that the end of their litigation is in sight.

However, Bob gets cold feet and backs out of the purchase at the last minute. Under section 873.760, either Shawn or Julie may file a motion asking the court to either (1) re-sell the property to a new buyer, or (2) authorize the referee to begin a lawsuit against the purchaser for the amount of the sale price.

1976 Addition.

Section 873.760 continues the substance of the last sentence of former Section 785 with the added requirement of a court order on noticed motion of either a party or the referee and with the addition of express provisions for recovery of a reasonable attorney’s fee. To facilitate recovery under this section, the defaulting purchaser remains subject to the jurisdiction of the court.

Several of the partition statutes, including section 873.760, do not include an “official” Assembly Committee Comment from the California Legislature. But this is not uncommon. In fact, the Legislature endorsed an overall adoption of the Law Revision Commission suggestions when it passed the new partition statutes in 1976.

Case in point, 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 here, it makes mention that it continues former section 785, which was repealed in 1976. The relevant last sentence of that statute previously read:

“If the purchaser, after the confirmation of the sale, refuses to pay the amount of his bid, the referees may again sell the property at any time to the highest bidder, and if any loss is occasioned thereby the referees may recover the amount of such loss and the cost from the bidder so refusing, or the referees, without making a resale, may maintain an action against the purchaser for the amount of his bid.”

If it isn’t evident, today’s version of the statute is still substantially similar to its prior iteration. As the Revision Commission comment points out, the main difference between former section 785 and section 873.760 is that today’s version requires a re-sale or action against the purchaser to occur only after a noticed motion. In other words, the modern statute has additional procedural safeguards in place.

As to the statute itself, it is unfortunate that both options available to the parties likely involve additional litigation. Even if the referee opts for a re-sale after a buyer backs out, how exactly is the referee to recover any potential losses from the purchaser without a suit? The statute does not provide a clear answer.

Another interesting facet of potential litigation against the purchaser who backs out of the partition sale is that the parties aren’t necessarily involved. In fact, the statute seems to intentionally exclude the parties from seeking relief. While the party may notice the court under section 873.760, it is only the referee who may maintain an action against the purchaser for the sales price and or damages resulting from a re-sale.

Lastly, litigants should take care to notice that section 873.760 applies only after the sale to the buyer has been confirmed. This statute is inapplicable where the buyer backs out before confirmation of the sale by the court.

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 to learn more about Partition Law.