Code of Civil Procedure (CCP) Section 874.030 – Interests on Disbursements

Code of Civil Procedure section 874.030 provides for recovering of expenditures with interest in a partition action, provided that expenditure is made at the order of the court. This often occurs when one party is forced to pay for all the costs of a partition because the other party is non-cooperative or is not appearing.

Code of Civil Procedure section 874.030 states:

Where disbursements have been made by a party under the direction of the court, interest at the legal rate shall be allowed thereon from the time of making such disbursements.

“Shawn” and “Julie” are siblings who inherit property from their parents. Even though they own equal shares, Shawn treats the home as his own, and refuses to allow Julie onto the property. Fed up with being denied the benefits of the home, Julie sues for partition.

As part of this process, Julie procures a title report before the Complaint is filed. Later, when the Court allows the partition by sale to proceed, a partition referee is hired to prepare the home for listing on the open market. The referee also contracts with a contractor to fix up the roof so that the home will get a better sales price.

Julie pays for all of these expenses out of pocket.

Eventually, the home is sold. Pursuant to section 874.010, half of Julie’s attorneys fees must be paid out of Shawn’s shares of the proceeds. Julie is also entitled to be reimbursed for half the cost of the title report. Additionally, the fees for the referee and the contractor come out of both parties’ shares of the sales proceeds.

All of the above are considered “costs” of partition under section 874.010. And costs are to be evenly split by the parties to a partition action under section 874.040. As such, Julie must be reimbursed from the sales proceeds.

However, some of those payments accrue interest, such as if Julie paid for the referee on her own. This is a court-ordered disbursement, and thus, Julie’s eventual payout would be for the amount of the referee plus interest at the legal rate.

Law Revision Commission Comments (CCP § 874.030)

1976 Addition.

Section 874.030 continues the substance of former Section 801.

Like with many of the partition statutes, section 874.030 does not include an “official” Assembly Committee Comment from the California Legislature. However, this is standard. 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, it mentions that it continues the substance of now-repealed section 801. That section read, in relevant part:

“Whenever, during the progress of the action for partition, any disbursements shall have been made, under the direction of the Court or Judge thereof, by a party thereto, interest must be allowed thereon from the time of making such disbursements.”

As one can see, the statutes are quite similar. Nevertheless, the presence of interest is inevitably complicated, making this statute somewhat unwieldy, and rarely cited, even by trial courts.

Ultimately, what this statute aims to accomplish is to establish a basis for awarding interest when one party pays money at the order of the court. For example, suppose one party pays for the partition referee out of their own pocket. Section 874.030 would allow that amount to be reimbursed at the legal rate (typically ten-percent per annum) from the proceeds of the sale.

However, this statute does not provide a basis for interest to be accrued on every disbursement. In a family court appeal, section 874.030 was actually discussed by the First District.

There, the wife to a divorce proceeding was awarded $89,000 from the proceeds of the sale of the family residence. (In re Marriage of Teichmann (1984) 157 Cal.App.3d 302, 305.) However, when the property was ordered sold, the market conditions were poor, causing a 19-month delay between the interlocutory order of sale and the actual sale occurring.

Thereafter, the wife argued that she was entitled to some additional $10,000 on account of her monetary award accruing interest. On appeal, the Court of Appeal held this argument to be unsound.

Directly referencing the partition statutes, the Court stated, “In reality, the present circumstances are analogous to a partition proceeding in which the statutory scheme provides for reimbursement of out-of-pocket expenditures plus interest (see Code Civ. Proc., §§ 874.020, 874.030, 874.050) but makes no allowance for an award of post-judgment interest for the intervening period prior to sale. The reason underlying such non-entitlement is apparent: since there exists neither a money judgment nor judgment debtor, no recoverable interest could or did accrue.” (Id. at 307-308.)

In translation, the court awarding one party to a partition a set amount of the sales proceeds does not mean that amount accrues interest over time. Instead, interest accrues where one party makes a court-ordered expenditure, such as paying for a referee or title report.

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.