A Partition Action in California Can Include Recovery of Attorney Fees

Two or more parties contributing funds to purchase real property as an informal partnership or joint venture is common in California which has increasing home values, and prudent investors agree in a writing how the parties will support the home and pay the other costs associated with joint ownership.  Such written agreements are essential to clarify the rights and duties of the parties, and if they include an attorney fee provision, it needs to be carefully prepared to include recovery of attorney fees if a partition action is filed.

The recent decision in Orien v. Lutz clarified some of the issues involved in a partition action for the sale of jointly owned real property, and the right to recover attorney fees under the statute providing for partition, or under a contract between the owners.   

The trial court found that an attorney fee provision in an earlier settlement agreement between the owners applied to the partition action, and it awarded all fees to plaintiff under Civil Code § 1717 (contractual attorney fee provision), rather than apportioning the costs of partition under Code of Civil Procedure §§ 874.010 and 874.040 (statutory attorney fee provision).

However, the Court of Appeal in Orien ruled that the partition action did not fall within the terms of the agreement's attorney fee provision because it was limited to the purpose of enforcing or preventing the breach of any provision of the agreement, including but not limited to instituting an action for a declaration of such party's rights or obligations hereunder, or for any other judicial remedy.

Because the agreement provided that the owners may sell the property at any time they agree to do so, and it did not prevent any one or more of the parties from filing a partition action with respect to the property in the event the parties were unable to unanimously agree on whether or not the property should be sold, the Court of Appeal held the partition action did not fall with the agreement's attorney fee provision, and no attorney fees were allowed under the contract.

Code of Civil Procedure § 874.010(a) allows a court in a partition action to order payment of attorney fees prior to final judgment if the fees were incurred for the common benefit, and the court is required to apportion attorney fees among the parties under § 874.040.

The Court of Appeal's goal in interpreting a contract is to give effect to the mutual intention of the contracting parties at the time the contract was formed. (Civil Code § 1636.) It ascertains that intention solely from the written contract if possible, but also considers the circumstances under which the contract was made and the matter to which it relates.  The Court considers the contract as a whole and interprets its language in context so as to give effect to each provision, rather than interpret contractual language in isolation. (Civil Code § 1641.) It interprets words in accordance with their ordinary and popular sense, unless the words are used in a technical sense or a special meaning is given to them by usage. (Civil Code § 1644.) If contractual language is clear and explicit and does not involve an absurdity, the plain meaning governs.

Civil Code § 1717 states that in any action on a contract, where the contract specifically provides that attorney fees and costs that are incurred to enforce the contract shall be awarded either to one of the parties or to the prevailing party, then the party who is determined to be the party prevailing on the contract, whether he or she is the party specified in the contract or not, shall be entitled to reasonable attorney fees in addition to other costs.

In Orien, the defendants disputed that the right to partition is contractual. They argued that the parties had the right to partition independent of the agreement, and the agreement “neither enlarged nor restricted” that right.

As a matter of California law, the parties had the right to seek partition regardless of the agreement and a co-owner of property has an absolute right to partition unless barred by a valid waiver. Given the plain meaning of the language in the agreement, and considering the matter to which it relates, namely the waivable right to partition, the Court of Appeal concluded that the intent of the language concerning partition was to prevent an implied waiver of the parties' existing right to partition, not to bring that right within the terms of the agreement and its attorney fee clause. The right to partition therefore was not a “provision” within the contract that plaintiff enforced, as required to invoke the attorney fee clause.

Attorney fee provisions, if drafted broadly, can encompass noncontractual claims. Courts have found provisions sufficiently broad to reach noncontractual claims when they apply to actions “arising out of” or “relating to” a contract or its subject matter, or to “any dispute under” an agreement.

In contrast, when an attorney fee provision is limited to actions “to enforce the terms of the agreement or declare rights hereunder,” courts have found this language too narrow to encompass noncontractual claims. A tort claim is not an “action to enforce” an agreement such to bring it within attorney fee provision.

Attorney fees may be allowed for services rendered for the common benefit even in contested partition suits. The more just and equitable rule to be applied would require a proper division of the expenditures entailed in the maintenance of such actions for the common benefit among those who shall have been found to be entitled to their respective shares and interests in said property by the ultimate judgment of the court, regardless of whether or not controversies had arisen and been litigated.

Attorney fees incurred by a defendant to a partition action could be for the common benefit, and therefore allocable in part to the plaintiff, despite the fact that the defendant had resisted partition, with the claim that plaintiff had no interest in the subject property, that it belonged to defendant alone, and that plaintiff was a mere volunteer in paying the delinquent taxes. Again, the fact that the partition action is contested is no bar to the proportional allocation of attorney fees, as even fees incurred resolving contested issues can be for the common benefit.

As illustrated in Orien, prudent co-owners of real property should execute a written agreement regarding their respective rights and duties concerning the property, and should include a broad attorney fee provision that includes the right to recover attorney fees in any partition action to the prevailing party.  This will enable the prevailing party to recover all of its reasonable attorney fees under the contract, and will not limit the attorney fees to apportion the fees between the parties based on a finding of "common benefit".