Wed, June 10th, 2009
The Parties to a Partition; Trustees Included.
The headline here is mostly true. Meaning, trustees are and should be included as parties where the trust is an owner or has some beneficial interest in the subject property. There is a statute in California law, Code of Civil Procedure Section 874.240, which clearly states that the trustee of an express trust (not an implied or constructive trust) can be made a party defendant to a partition action.
The rule, California Code of Civil Procedure Section 874.210, is that any ascertainable person with any type of interest or claim, even if it is a contingent or future interest, must be named in the lawsuit in order to be bound by it. This includes an express trust.
What if there are claimants that the plaintiff does not know about when he or she files the partition action? That’s o.k., as long as the complaint contains certain language which allows the plaintiff to amend before judgment to name these persons at that time. Partition actions often need some ”cleaning up” before a trial when it comes to naming defendants, because certain types of property, especially commercial land, often involve several different owners or competing interests.
Posted by Nick Yonano at 05:23
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Labels: land, partition, property value, real estate, title dispute
Tue, June 9th, 2009
A Partition in Kind– A Court’s Kindness?
It’s not what it sounds like, though some property owners believe a partition in kind is much more “kind” than a partition by sale. A partition in kind is essentially a court-order to divide the property, instead of outright selling it and dividing proceeds. This is favored by courts when possible because, unlike partitions by sale, the property will stay with one or more of its current owners who may want to keep it.
There is a big decision handed down many years ago involving two branches of a farming family in the southern San Joaquin Valley, where 4,700 acres of land (and water rights to a water ditch) were involved, and the two sides of the family just didn’t get along. The land was known as the Ward Ranch.
One side sought the partition by sale. The other side wanted it divided. The appellate court upheld a lower court’s ruling that the property could be divided in-kind, meaning divided among the family members. When possible, this will be the direction of every court. But it has to pass the fairness test, meaning this route would be fair and equitable for all parties.
Posted by Nick Yonano at 03:42
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Labels: land, partition, property value, real estate, title dispute
Thu, June 4th, 2009
A Partition in California: Experts in Real Estate are Critical
Many property owners, and yes, this may include owners of personal property as well, resort to the partition process set forth in the Code of Civil Procedure, as a means to part ways with their ownership of property in California. In a partition, one (or more) holder of interest in real estate files an action to start the process. He or she must also file what is called a “lis pendens”, which is a notice to the public that a potential case affecting the property, is in court. This lis pendens is recorded at the county recorder’s office, and puts potential buyers on notice that what they may be purchasing has certain claims involving it.
Once an answer to that complaint is filed, by all those served and named in the lawsuit, the parties will proceed with the process of partitioning the property. If it can be divided, a partition may be handled in that manner, but normally that is not the case when there is a single-family residence involved. A partition in kind normally applies where there are divisible lots owned by multiple persons/entities. If a sale is necessary, one party, often a defendant, will plead to the court to purchase the property. If that’s the case, an appraiser and often a real estate broker or three is brought in, to help determine a figure for the purchase. When a number is arrived at by the experts, if the parties agree, then the sale can take place without a court order. If not, then the battle of experts may begin to take place. Each party may want his/her own expert to testify to the court about the value of the property.
At some point, the property is sold, and in most cases, to a third party on the open market. A partition action usually will include an action for an accounting, where the owners may contend that the other person contributed less than he/she did, or withdrew in profits more than he/she did. This may mean that accountants become involved as well. So the experts have their say in not only how the price gets determined, but in how the money is divided as well.
I make it sound more complicated than it really is. Actually, since there is not too much fact-finding in your typical partition case, there isn’t much of a need for depositions and extensive discovery. The cost can be reduced if that is the case.
Yes, not the ideal way to part with property, but often a necessary solution.
Posted by Nick Yonano at 08:45
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Labels: land, lis pendens, partition, property value, real estate, title dispute
Thu, June 4th, 2009
A Partition Is Often the Best Last Resort
The right to alienation is alive and well as far as courts in California are concerned. Whether real property is held in a joint tenancy or as a tenancy in common, the property owners have a right, with fair limitations, to transfer or sell their interest. One limitation is where the property owners have a written agreement among themselves to NOT sell the property. Unless there is a restriction, the owners usually work together to sell the property, either to one of the owners in full, or to a third party. If this is not feasible, perhaps where there is a dispute as to value or something else, one or more of the parties may resort to filing a court action to “partition” the property. That is, have it sold.
A partition is a civil action to have property sold by court order. A partition action requires a property owner as a plaintiff and all other property owners named as defendants. It can be a costly option, but the filing of this action will often propel the owners to work together to get the property sold. My next few posts will cover a few of the problems that arise in partition actions, as well as a few unique situations where a partition was useful.
Posted by Nick Yonano at 03:16
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Labels: land, lis pendens, partition, real estate, title dispute
Fri, May 22nd, 2009
A Gift is Just That, and Not a Resulting Trust in Property
A gives B money to buy some real estate. A tells B the money is because he really wants her to have an investment, in case they ever lose touch. So he wants to buy her some land. A puts it into escrow on her behalf.
Years later, after they do in fact lose touch, A comes back around and tells B she owes him the money plus interest and that he has a resulting trust in the property, because the law in California says that when one pays for the downpayment on property, he/she has a resulting trust in the property to the extent of the payment.
Will A win this argument? No, not if he told her it was a gift, or said words to that effect. Even if he paid the money into escrow. This is often the case in divorce proceedings where there is a dispute to title to property held by the husband and wife. In most cases, the court will look at two things: was there a gift, and if not, was it a straightforward loan? Either way, the transfer of money probably does not create a resulting trust, as I wrote about in my last post.
As a post-script, there is much debate over whether a “loan” should lead to a resulting trust. I’ve seen cases going both ways on this issue.
Posted by Nick Yonano at 04:38
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Labels: constructive trust, land, real estate, title dispute
Wed, May 20th, 2009
A Resulting Trust Where an Express Trust is Not There
I’ve written about the “constructive trust” lately, and here I’m switching gears slightly to talk about a resulting trust. I say slightly, because most lawyers still liken a resulting trust to a constructive trust. But the two are different. A constructive trust is a remedy that is put in place to rectify a fraud or other improper act on the part of the “trustee”. A resulting trust, instead, is utilized by the courts as a remedy to enforce the intentions of the parties. Difference? A resulting trust carries out the (somewhat) good intentions of the trustee and requires him/her to hold it as the trustee for the person who should hold title.
There are several old cases dealing with mining claims where the parties had difficultin in transferring title to the property, or the mining claims. One 1800s case sprung from a mining claim in Nevada County (Grass Valley). Many of the cases, whether involving mining claims or not, address the failure of an “express trust”. That is, a trust that was written to transfer property from one person/entity to another. In these cases, the trust may fail for some reason, such as an illegal purpose or an improperly executed document. In order to achieve the transfer where the “trustee” is not cooperating, the beneficiary must bring an action to enforce a “resulting trust”, to carry out what the “result” should have been.
I’ll give an example or two where a court DID NOT allow a resulting trust in my next post.
Posted by Nick Yonano at 04:34
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Labels: constructive trust, fraud, land, real estate, trust
Fri, March 13th, 2009
What’s so Constructive about this Type of Trust?
Unlike the living trust most people are familar with, there is a legal remedy out there which the courts have to declare to be valid. Known as a Constructive Trust, this is a judicial remedy which holds that person A holds title or possession of property that truly belongs to person B, and person A obtained it wrongfully, so person A holds it in trust for person B. It’s known as a “fraud-rectifying” trust, which means that it’s in place only to make up for the fraud that a person commits to get the property in the first place.
Most of the property involved in an action to impose a constructive trust is real property. But the trust could also apply to personal property, such as stock accounts or checking accounts. I’ll present some examples in my next post.
Posted by Nick Yonano at 08:48
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Labels: constructive trust, fraud, land, real estate, title dispute, trust
Wed, March 11th, 2009
Reimbursement of a Down Payment on a Home
Just settled a case involving many real estate and trust issues. Settlors of the trust were quite possibly tenants in common if the trust was properly revoked. Settlors split up and one left the house before the possible revocation. Years before, the mother of one of the settlors allegedly loaned the couple some money to buy the home, but did not ask to have a lien on the property. So does she have a right to get her down payment back?
One argument is that she has what is called a “resulting trust”, which means that the couple holds her interest in trust for her, to be paid back when the property is sold or refinanced. The counter to that is since there never was an agreement to hold the property in trust, no such “lien” exists.
We never tried the case, and there were many more facts which would have complicated the outcome, but you should be aware that there is a common law remedy known as a “resulting trust”, which is there to protect someone who loans money to another to buy property. It is essentially an “intention-enforcing trust”. I’ll write later about a “constructive trust”, which is a “fraud rectifying” trust. Similar to a resulting trust.
Posted by Nick Yonano at 04:30
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Labels: constructive trust, land, revocable trust, trust
Thu, February 26th, 2009
Waste by A Third Party Tortfeasor-A Beneficiary’s Rights
My last post involved “waste” by a landowner that damages a lender’s interest in the property. The question has come up, what if someone OTHER than the landowner causes the damage, can the lender or beneficiary bring an action for waste against that person? Yes and no. No, because it’s not technically considered “waste” since the owner did not do it. But yes because the beneficiary can still sue.
What’s important for a beneficiary to remember is that they can sue the third party without having to foreclose on the property (but they can also do them both at once), and this type of suit does not violate the one-form-of-action rule, which as you may know, limits the ability of a beneficiary in bringing a suit against the landowner.
So yes it is an injury that can be redressed by a lender. But it’s not technically “waste”.
Posted by Nick Yonano at 10:57
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Labels: land, property value
Tue, February 24th, 2009
Your Deed of Trust Makes You the Protector of Your Property
Of course, you’re going to protect your home and your property. It’s where you live, where you sleep, hug your kids. That’s reason enough. But there’s one more reason, and this one you signed up for in writing. That is, if your property is security for a loan you took to buy it.
It’s aptly called “waste”, which is the, yes, legal term, for doing something to damage your lender’s investment in your property. The classic cases center around things such as unreasonably removing timber from the property, or tearing up the land for its minerals. However, there are more subtle versions of waste as well.
The language in the deed of trust usually goes something like this: “keep property in good condition and repair”. What does this mean? It could mean whatever a judge thinks it means. Most likely, it simply holds that the landowner must protect the property from damage, and repair the property if there is damage.
Did you know that failure to make repairs to your property after a fire or an earthquake, or some disaster like that, could be waste? And in today’s economy, be aware of this one: failure to make property insurance payments can constitute waste. It’s always a good thing to make sure your insurance agent is covering every possible loss or damage that could occur at your home or property.
In Turlock, one agent I recommend for this is Jeremy Benjamin, at Winton Ireland Insurance, a reputable firm in the Central Valley. I also recommend a couple of Folsom/El Dorado Hills agents. One is Susan Horn-Deubel.
Posted by Nick Yonano at 11:56
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Labels: el dorado hills, folsom, land, property value, real estate
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