Agreements must be drafted specifically and if they are not, relief cannot be granted in the manner that the parties thought should have occurred. In Leg Investments v. Boxler, the California Court of Appeals found that a tenancy in common agreement should have been specific
In 1976 Carl and Judith Bumpass and the Boxler family purchased the lakefront property at 4960 North Lake Boulevard, Carnelian Bay, California with an undivided interest of 50% to each couple. In 1993, the Bumpass couple transferred their 50% interest to the Schwerdtfeger couple and five years later LEG Investments purchased their fifty percent share.
The Tenancy in Common Agreement
In 1993, when the Bumpass couple transferred their interest to the Schwerdtfeger couple, the Schwerdtfegers and the Boxlers entered into the Tenancy in Common (“TIC”) agreement “to establish their rights and duties with respect to each other as tenants in common.” In the TIC Agreement there were sections spelling out the specifics of the tenancy. “If and when either Owner decides to sell their Interest in the Property and that Owner receives a bona fide offer for its purchase from any other person or entity, the other Owner shall have the first right of refusal to purchase the selling Owner’s Interest in the Property for the price and on the terms provided for in such bona fide offer” was established in the TIC Agreement and also if the issue arose that the right was refused, “ the selling Owner may enter into an agreement to sell the Interest to the offeror at the price and under terms no less favorable than those set forth in the notice of offer given to the other Owner.” The term of the agreement was thirty years, with five year extensions until termination of the agreement was agreed upon by both parties. Also an integral part of the agreement was that it said that it was to be binding upon and inure to the benefit of the parties hereto, their heirs, devisees, transferees, executors, administrators, successors, assigns, and all other persons hereafter holding an Interest in the Property. Also, the covenants herein shall be deemed to run with the land. Basically this ties the agreement to the land and not only to the signing parties.
LEG Investments, represented by Eppie Johnson, who is a general partner, stated that problems arose between the two parties as soon as LEG Investments purchased. LEG tried to sell their share to the Boxler couple, but the Boxler couple refused. There was also an instance where a buyer had come forth to purchase the share owned by LEG Investments, but the buyer did not approve of the Boxler’s as co-owners because of their lack of wanting to contribute to repairs to the property.
In May of 2006, LEG Investments filed for a complaint to have a partition by sale, which allows a property owned by partners to be sold and proceeds from the sale to be divided among co-owners when a property cannot be physically separated. LEG Investments had filed the complaint because in March 2006 when they had asked the Boxlers to list the property or to buy the interest owned by LEG Investments.
The trial court determined the right of first refusal in the tenancy in common agreement waived the right to partition because the sale of partition would be unfair to the Boxler couple. The court denied LEG’s motion for summary judgment or summary adjudication on the right to partition due to them being able to purchase the interest at a lower than market price, and granted the Boxlers’ motion for summary adjudication on the affirmative defenses of express and implied waiver. The cause of action in their cross-complaint for a judicial declaration that the owners of the property had waived the right to partition was also granted and they received $86,955. LEG Investments appealed the decision thereafter.
The appeal brought by LEG Investments was based on their contending the trial court made a mistake in granting summary adjudication as to the affirmative defenses of waiver. LEG contends the right of first refusal in the Tenancy in Common Agreement is not an absolute waiver of the right to partition, but requires only that the selling cotenant first comply with the right of first refusal by offering its interest to the other cotenant before seeking partition. LEG Investments states that they had complied with all the requirements necessary. LEG also contends the trial court made a mistake in denying summary adjudication on its cause of action for partition. Lastly, LEG contends the award of attorney fees must be reversed because there was a section in the agreement that stated, “any action between the parties seeking enforcement or interpretation of any of the terms and conditions of this Agreement” shall be awarded court costs and reasonable attorney fees.
The court of appeals finds that the right of first refusal in the Tenancy in Common Agreement modifies the statutory right to partition, but does not permanently waive it. Since the Boxlers refused the offered right of first refusal, LEG Investments may proceed with the partition action. Also because the offer of Gibb was deemed a real bona fide offer, the Boxlers failed to dispute LEG’s undisputed fact that the Boxlers declined to exercise their right of first refusal on the bona fide offer. LEG set forth this fact in its separate statement of undisputed facts in support of its motion for summary judgment or summary adjudication.
The judgment was that the awarding of attorney’s fees to the Boxlers was reversed, the trial court was directed to to vacate its orders granting the Boxlers’ motion for summary adjudication and denying LEG’s motion for summary adjudication, to enter a new order granting LEG’s motion for summary adjudication on its first cause of action for partition by sale, and to deny the Boxlers’ motion for summary adjudication on that cause of action and on its first cause of action in its cross-complaint for declaratory relief, and to enter an interlocutory judgment directing partition of the Property by sale. LEG Investments shall also recover its costs on appeal.
This case is important to demonstrate that an agreement should be properly drafted to reflect the intention of the parties. Although the type of agreement for partners who own real estate together is recommended, the terms must be specific to the parties’ desires. Please give Anthony a call at 818-839-5229 for more information.