Judge Bruce G. Iwasaki, Case BC373428 2023-05-03 Tentative Ruling

Tentative Ruling: Subject to clarifications, the Court grants confirmation of sale of the Property.

Plaintiff Johnny Michael Taylor sued defendants Raymond and Celia Taylor in 2007 for (1) partition of the real property located at 845, 847, and 847 1/2 West 48th Street, Los Angeles, CA 90037, Assessor Parcel No. 5018-011-006 (“the Property”), and (2) breach of fiduciary duty owed to plaintiff and to his father, the prior owner of the Property.

Defendants purchased the Property with plaintiff’s father in 1979. According to plaintiff, defendants owned a 1/2 interest and plaintiff’s father owned a 1/2 interest in the Property. Plaintiff acquired his father’s interest in 2005. From 1979 on, defendants were to manage the property and distribute rental profits according to the parties’ ownership shares.

In response to plaintiff’s complaint, defendants cross-complained for an accounting.

The court entered judgment on November 23, 2009 after a bench trial. The court found the property had produced a net loss of approximately $40,000 between 1979 and 2009. The court ordered the property sold, with a small portion of the proceeds to go to defendants to compensate them for plaintiff’s share of the net loss.

On June 3, 2021, plaintiff moved for appointment of a partition referee to conduct the sale of the property according to the court’s 2009 order. On October 12, 2021, the court granted plaintiff’s motion and appointed Matthew L. Taylor as partition referee. (Matthew Taylor (the Referee) is not related to any of the parties.)

Partition is the procedure for segregating and terminating common interests in the same parcel of property. (Summers v. Superior Court (2018) 24 Cal.App.5th 138, 142.) The manner of partition may be in kind — i.e. physical division of the property — or by sale. (Id.) If the parties so stipulate, the court shall order a partition by sale with the proceeds divided among the parties in accordance with their interests in the property as determined in an interlocutory judgment. (Code Civ. Proc., §872.820(a).)

The court in its discretion may appoint a referee for sale. (Code Civ. Proc., §873.020.) The referee may perform any acts necessary to exercise the authority conferred by order of the court. (Code Civ. Proc., §873.060.) In selling the property, the referee must post a notice of sale that includes a description of the property, the time and place of sale, and a statement of the principal terms of the sale. (Code Civ. Proc., §§ 873.640(a), 873.650(a).) Upon making a sale of the property, the referee shall report the sale to the court. (Code Civ. Proc., §873.710(a).) The referee’s report shall contain, in addition to such other information as may be appropriate, (1) a description of the property sold to each purchaser, (2) the name of the purchaser, (3) the sale price, and (4) the terms and conditions of the sale and security, if any, taken. (Code Civ. Proc., §873.710(b).) The referee may then move the court to confirm or set aside the sale. (Code Civ. Proc., §873.720(a).)

At a hearing to confirm the sale, the court shall examine the referee’s report and witnesses in relation to the report. (Code Civ. Proc., §873.730(a).) The court may confirm the sale notwithstanding a variance from the prescribed terms of the sale if to do so will be beneficial to the parties and will not result in substantial prejudice to persons interested in the sale. (Code Civ. Proc., §873.730(b).) If at the hearing, a responsible bidder makes a written increased offer that exceeds the sale price by at least 10 percent on the first ten thousand dollars and 5 percent on the amount in excess thereof, the court in its discretion may (1) vacate the sale and direct that a new sale be made or (2) vacate the sale, accept the increased offer, and confirm the sale to the offeror. (Code Civ. Proc., §873.740(a).)

Upon confirmation of a sale, the court shall order the referee to execute a conveyance or other instrument of transfer, to collect the proceeds, take security, and perform other acts required to consummate the sale. (Code Civ. Proc., §873.750(a).)

Referee Taylor moves for an order approving and confirming the sale of the Property to Robert and Raymond Taylor, the adult sons of defendants Raymond and Celia Taylor, for the sum of $635,000.

The Referee states that, in accordance with the terms of the order appointing him to sell the Property, he retained real estate agents Carla Garcia (of Jimmy Espinoza Realty, Inc.) and Gonzalo Aguilar (of Century 21 Realty Masters) to sell the property. (Mot., 4:21-25, Declaration of Matthew Taylor (Decl.), ¶ 3.) Garcia has experience selling real estate in court partition sales, while Aguilar has experience selling real estate in the vicinity of the Property. (Mot., 4:25-5:1; Decl., ¶ 3.)

The Referee states that the agents advertised the Property for sale via industry-standard methods and followed the public notice and posting requirements of Code of Civil Procedure section 873.640 and 873.650. (Mot., 5:13-18; Decl., ¶ 3.) Specifically, the Referee/agents advertised the sale as a legal notice in the Los Angeles Daily Journal on three successive Wednesdays in December 2021 (Decl., ¶ 3(a) and Ex. 4); they mailed a copy of the notice of sale to each of the owners (Decl., ¶ 3(b)); and they posted a sale notice at the Property and two public places adjacent to the Property on December 8, 2021 (Decl., ¶ 3(c) and Ex. 5).

Garcia and Aguilar initially recommended a listing price of between $600,000 and $650,000 for the Property when the Referee placed it on the market. (Mot., 5:1-3.) Plaintiff instead requested a listing price between $875,000 and $1.28 million, so the Referee listed the property initially at $925,000 in May 2022. (Id., 5:4-9.) Receiving no offers, the Referee lowered the listing price four times over the course of the next six months, to a final listing price of $650,000. (Id., 5:8-12.)

The Referee ultimately received offers from three buyers who, after a series of offers and counter-offers, offered $605,000, $625,000, and $635,000 for the Property, respectively.(Id., 5:18-26; Decl., ¶¶ 5-6.) Robert and Raymond Taylor emerged as the highest bidders at $635,000. (Ibid.) Vicente C. Viera and Gloria Del Carmen Viera made the second-highest offer of $625,000.

In December 2022, the Referee entered into a contract to sell the property to Robert and Raymond Taylor for $635,000, subject to court approval. (Decl. ¶ 7, and Ex. 1.) The Vieras have also submitted the paperwork necessary to purchase the property at a price of $625,000, should the Referee not be able to complete the primary sale. (Decl., ¶ 7 and Ex. 2.)

The Court finds the Referee has complied with the statutory requirements and the Court’s October 12, 2021 order, and the sale price for the Property is fair and reasonable. Code of Civil Procedure section 873.740, subdivision (a) requires the court to reconsider the sale if a responsible bidder appears at the hearing and makes an offer exceeding, in this case, $667,250. No bidder having done so, the court approves the sale of the Property to Raymond and Robert Taylor in the amount of $635,000, in the manner and according to the terms described in the Referee’s moving papers and Proposed Order.

In conjunction with the request for approval of the sale of the Property, the Referee requests orders: (1) permitting “changes to the names under which [the buyers] want the property vested (such as adding middle names, surnames, initials, taking title in a trust, [etc.]) . . . and allow[ing the buyers] to assign their interest in the sale without further order of [the] Court”; (2) empowering the Referee to take any reasonable and necessary steps to enter into the approved sale contract, and confirming steps he has already taken; (3) ordering the Referee to cause escrow to pay, from the proceeds of the sale, unpaid property taxes accrued during escrow, costs of sale (title insurance, etc.), broker commissions, normal and customary charges associated with the sale of real property, and any voluntary or involuntary liens owed by the record owners or encumbering the Property; and (4) ordering the owners and the Referee to provide necessary information and cooperate to complete the proper paperwork for tax purposes related to the sale. (Proposed Order (PO), ¶¶ 2-3.)

Code of Civil Procedure section 873.750 provides that “[u]pon confirmation of a sale, the court shall order the referee to execute a conveyance or other instrument of transfer, to collect the proceeds, take security, and perform other acts required to consummate the sale.” (Code Civ. Proc., § 873.750(a).) Section 873.750 further provides that “[t]he order may direct the referee concerning the distribution, deposit, or securing of sale deposits and sale proceeds.” (Id., § 873.750(b).) Section 873.820 provides that the proceeds of the sale shall be applied in the following order: (1) payment of the expenses of sale, (2) payment of the other costs of partition in whole or in part or to secure any cost of partition later allowed, (3) payment of any liens on the property in their order of priority except liens which under the terms of sale are to remain on the property, and (4) distribution of the residue among the parties in proportion to their shares as determined by the court.

Per the terms of the Referee’s proposed order, he “shall take possession from escrow of the net proceeds . . . of any sale of the Subject Property” after deductions otherwise authorized by the order, charge each indebted party appropriately according to any liens, pay all costs expenses, and disbursements authorized by the Order or the court’s judgment, then hold all funds in trust pending further order of the Court.

The court grants these additional requests as necessary and appropriate measures to facilitate the sale of the Property and distribution of the proceeds pursuant to Code of Civil Procedure sections 873.750 and 873.820.

Certain ambiguities and inconsistencies exist between the moving papers and the Proposed Order. These must be clarified before the Court issues a final order.

The most significant is that the proposed order describes the sale of the Property to “Johnny Taylor and Robert Taylor.” (Proposed Order, p. 2, ¶ 2.) Johnny Taylor is, of course, the Plaintiff. The order should state that the sale is to Robert Taylor and Raymond Taylor, the adult sons of Defendants Raymond Taylor and Celia Taylor. Beyond that, it would be helpful, if purchaser/son Raymond Taylor has a middle name, to include that in the order to distinguish him from the Defendant.

Less significant, but to avoid misunderstanding, the Court asks for clarification concerning the real estate commission. The Proposed Order approves and confirms the payment of real estate sales commission “as described in the moving papers filed by the Referee.” (Id., ¶ 5.) The moving papers describe these amounts as follows: “Agent Commissions [¶] Primary Sale - $38,100. This is 6% of the sale price.” (Mot., 9:24-27.) One can infer that the two brokers involved intend to split a single commission of $38,100. But the percentage of that division should be set forth to avoid future disputes.

As noted by the Referee, Code of Civil Procedure section 873.810 also requires the Court to instruct the Referee on where to disburse or hold funds pending further court order. The Referee suggests his proposed order “authorizes [him] to deposit the funds in a federally-insured bank account or similar financial institution.” (Mot., 12:6-8.) The Referee represents he “has already established a bank account for the case proceeds as allowed by prior court orders, and the order contemplates that the Referee will deposit the sales proceeds into that account.” (Id., 12:8-11.) The order contains no language so specific. The proposed order should authorize deposit only in a federally-insured bank account or similar financial institution, as allowed by prior court orders.

The Court will grant the proposed order with the foregoing modifications, upon clarification and confirmation by the Referee at the hearing, and may request an amended proposed order.

Department 58