Question
Quiet Title or Partition Action? How to get my partner off title and not lose the property?
Joe and Jane buy the property 10 years ago. Joe chips in 3% of downpymt, Jane the rest. They are joint tenants. Purchase property for 280k + 80k for rehab. The 80k is deposited into Joe's account. Joe uses 30k of rehab $ to cover his living expenses without Jane realizing. 3-plex is finished & rented. They get a 200k loan from Joe's dad to rehab SFD they plan to occupy.
16 mo later, Joe is tired of both Jane and the project and he asks for what's left of the 200k (36k) to buy his own home. Joe leaves Jane with a house that has is still rough-framed, no siding (open to the elements) and no more money to complete the job.
They have an agreement drawn up Jane will continue the rehab on her own & eventually live in SFD, maintain the units & pay all the loans: Joe will be a silent partner. This doc is *not* signed, but confirmed in many emails. Joe takes 50% of tax losses every year for all 10 years, even though he hasn't contributed a dime.
6 yrs later Jane has invested an additional $290k in the property; wants to "buyout" Joe or get the title herself. According to the property accounting, Joe would owe Jane to get out of the Partnership, so is it really a buy out? Is there some other action that could be filed to assert Jane's full right of ownership?
Answer
Any co-owner / partner on title can seek a court order for an accounting and appraisal for determination of the respective interests. They can also seek a court order for either: a sale and split of proceeds; or agree to a buy-out in either direction; all based on the accounting for value of the interests. If you can't agree to a negotiated resolution among the parties, you'll get to present your evidence of contributions and value at trial. If serious about hiring counsel to help in this, and if this is in SoCal courts, feel free to contact me.
Answer
Approaching this as a partnership and seeking remedies under partnership law might work, but I don't think establishing the relationship as a general partnership is a slam dunk, or that partnership remedies are necessarily the best. This offhand guess would be subject to possible change upon careful review of all the facts, including Joe's ability to pay his capital account deficit into the partnership. The market value of the properties in relation to the amount invested and the current debt would be a factor, as would to whom and by whom owed.
Instead, I think I would propose structuring a suit to quiet title in a first cause of action, followed by a partition demand in a second cause of action. The quiet title action would include a claim that, despite legal title being held 50-50 (as is always the case when two parties take title as joint tenants) that Jane is the beneficial owner of 97%, that being her proportion of the purchase money, and that Joe holds the excess 47% as trustee for Jane under a purchase-money resulting trust (PMRT).
A PMRT is an involuntary trust inferred by a court to exist when legal title is taken in different proportions than the parties' contributions to the purchase money (deposits, down payment and some closing costs constitutue the purchase money, but not any loan secured by the real property being acquired). The existence of a PMRT requires clear and convincing evidence of purchase-money contributions that are out of whack with the shares of ownership, and may also require overcoming a presumption that the excess ownership received by one was not a gift from the other. The gift presumption arises when the parties are parent and child, sometimes arises between husband and wife, but generally not between an unrelated Joe and Jane.
Partition law permits partitioning the assets of a partnership in an appropriate case per Code of Civil Procedure section 872.730. Of course, the thrust of a partition action (modernly, at least) is to force a sale to a third party and division of the net proceeds of the sale. However, if the court determines that the equity interests are 97-3, it would be relatively easy for Jane to become the third-party purchaser. Further, most partition suits are settled soon after the defendant sees the inevitability of the outcome and the cost of defense.
I currently have a North Hollywood real-estate partnership dissolution case in the downtown L.A. courthouse, several successful partition and PMRT cases, and many prior real-property matters in counties from Imperial to Siskiyou. I do not charge clients for travel time, and much court filing is electronic and routine appearances are done by telephone. If you would like a no-obligation review of the particulars of your potential case, please contact me directly; probably an e-mail would be best to [email protected]/* */, or phone (707) 878-2230.
