A joint tenancy deed does not always mean a 50/50 split in a California partition action. In Kershman v. Kershman (1961) 192 Cal.App.2d 23, 26–27, the Court of Appeal held that co-owners on a joint tenancy deed can own unequal shares when the evidence shows they agreed their shares would follow what each one paid. The case also teaches a lesson about the math that many courts and lawyers still get wrong: ownership percentages, the property’s increase in value, and money one co-owner owes the other are three separate calculations, and they must be done in the right order. (Kershman, at pp. 29–30.)
Why Kershman v. Kershman Matters
Co-owners often take title as joint tenants without thinking about it, even when one of them paid far more. When the relationship ends, two questions follow. Does the deed lock in equal shares? And if one co-owner also owes the other money for rent, the mortgage, or a loan, how is that debt handled when the house is sold? Kershman answers both, and it is a natural companion to our summary of Milian v. De Leon, which explains when a joint tenancy really does mean equal ownership.
The Facts: A Santa Monica Rental Bought in Joint Tenancy
Sadie and Philip Kershman, a married couple, bought a rental property on Alta Street in Santa Monica in 1955 for $16,209. The deed named them as joint tenants. Philip paid $1,000 in cash. Sadie paid $8,014 from her own separate money. Philip agreed to take over the $7,000 mortgage and pay it from his share of the rents and his earnings. Everyone expected that, once Philip paid off the mortgage, their contributions would be equal. (Kershman, at pp. 24–25.)
The couple later added a $4,000 improvement, financed by a loan secured by Sadie’s stocks. Philip agreed to repay her half, or $2,000. By trial he had repaid $973 and still owed $1,027. (Kershman, at p. 25.)
After the couple separated, Philip stopped paying in early 1959. He lived in the property against Sadie’s wishes from May 1959 until trial, and for part of that time he rented it to others for $160 a month and kept the rent. Sadie covered several mortgage payments he missed. (Kershman, at pp. 25–26.) Sadie sued for partition, the case was tried with the couple’s divorce, and the trial court found that Sadie owned 93.3 percent of the property and Philip owned 6.7 percent. (Kershman, at pp. 24, 26.) Philip appealed.
Philip first argued that because the deed said joint tenancy, the court could only split the sale proceeds equally. The Court of Appeal’s answer was short: “This argument is without merit.” (Kershman, at p. 26.)
The court relied on an earlier partition case between joint tenants, Cosler v. Norwood (1950) 97 Cal.App.2d 665, 666, which upheld a 3/4 to 1/4 split based on what each owner paid. Quoting that decision, the court explained that a co-owner who sues for partition and an accounting puts each owner’s interest in issue, so the deed is not the last word:
“Therefore the deed of joint tenancy was only one item of evidence to be considered by the court in connection with other probative facts produced by plaintiff and defendant.”
Kershman v. Kershman (1961) 192 Cal.App.2d 23, 26 (quoting Cosler v. Norwood (1950) 97 Cal.App.2d 665, 666)
The court added, quoting Thomasset v. Thomasset (1953) 122 Cal.App.2d 116, 133, that ownership may differ from the deed when there is an agreement, spoken or written, or when an agreement can be inferred from how the owners acted and what they said:
“Property may be found to be other than that indicated by the deed when there is an oral or written agreement as to the ownership of the property, or where such understanding may be inferred from the conduct and declarations of the spouses.”
Kershman v. Kershman (1961) 192 Cal.App.2d 23, 26 (quoting Thomasset v. Thomasset (1953) 122 Cal.App.2d 116, 133)
Sadie testified that the plan was for each spouse to put in an equal amount, and that they would have equal interests only “When these things were paid off.” That testimony supported a finding that the couple agreed their interests would not be equal until Philip paid his share, and that “their interests were to represent at any given point of time the contemporaneous proportion of their respective contributions in relation to the total.” (Kershman, at pp. 26–27.) In plain terms, each spouse owned a share equal to what that spouse had paid so far.
Today, Code of Civil Procedure section 872.610 (CCP 872.610’s rule on trying the interests of all parties) carries the same idea forward: every party’s interest may be put in issue and decided in the partition action itself. Our post on unequal down payments and ownership interests explains how these claims come up.
But the 93.3 Percent Finding Could Not Stand
Sadie won the argument that shares could be unequal, but she lost the appeal anyway. The Court of Appeal reversed because the numbers did not add up.
Even giving Sadie every benefit, Philip had contributed at least $4,013: half of his $1,000 down payment (the trial court treated it as community property), half of the mortgage payments made from his earnings, about $2,280 in mortgage payments from his share of the rents, and the $973 he repaid on the improvement. Measured against the $16,209 price plus the $4,000 improvement, or $20,209, Philip had paid nearly 20 percent, not 6.7 percent. (Kershman, at pp. 28–29.)
The court concluded that the 6.7 percent figure could only have come from subtracting Sadie’s claims against Philip, such as the rent he kept, his time living there, the mortgage payments she covered, and the $1,027 he still owed on the improvement, from Philip’s contribution before calculating his percentage. The court noted that the $1,027 appeared to have been counted against Philip twice. (Kershman, at pp. 28–29 and fn. 2.) As the court put it: “We have determined that the very process by which the percentage points were determined was erroneous.” (Kershman, at p. 28.)
Ownership Percentages, Appreciation, and Offsets Are Different Calculations
This is the heart of the case. Subtracting what one co-owner owes from that co-owner’s ownership percentage does not just collect the debt. It also takes away part of that co-owner’s share of the property’s increase in value:
“To deduct these amounts from defendant’s contribution is to deprive him of his proper share of the appreciated value of the property.”
Kershman v. Kershman (1961) 192 Cal.App.2d 23, 29
The reason is that each owner’s share of the gain follows that owner’s share of the risk. “That his share of the appreciation is determined by his ownership interest is axiomatic, and founded upon the relative risks undertaken by the parties.” (Kershman, at p. 29.) A debt for rent or an unpaid loan is a fixed dollar amount. It should be paid back in dollars, not by shrinking the debtor’s ownership.
The court then laid out the correct order of operations:
“Such a result cannot be condoned. The proper approach would be to first determine the respective ownership interests of the parties whether equal or otherwise. Upon sale of the property there should be a determination of the share of each in the net proceeds according to those interests.”
Kershman v. Kershman (1961) 192 Cal.App.2d 23, 29
Only after that, the court said, should any claims one owner has against the other be subtracted from the share of the owner who owes them and added to the share of the other. (Kershman, at pp. 29–30, citing Demetris v. Demetris (1954) 125 Cal.App.2d 440.) So the steps are:
- Fix each owner’s percentage, equal or unequal, based on the deed and any agreement about ownership.
- Divide the net sale proceeds by those percentages, so each owner shares in any increase in value according to ownership.
- Settle the debts between the owners by moving dollars from the share of the owner who owes them to the share of the owner who is owed.
The Court’s Own Example
The court illustrated the point with two buyers, A and B, who buy a home for $20,000. A pays $16,000 and B pays $4,000, and they agree their shares follow what each paid, so B owns 20 percent. B lives in the home and agrees to pay A $2,000 in rent. Two years later the home sells for $25,000. (Kershman, at p. 29.)
- The right way: B receives 20 percent of $25,000, or $5,000, and pays A the $2,000 rent from it. B keeps $3,000.
- The trial court’s way: The $2,000 is subtracted from B’s $4,000 contribution, leaving $2,000, or 10 percent. B receives 10 percent of $25,000, or $2,500.
B loses $500 because he receives only 10 percent of the $5,000 increase in value instead of the 20 percent he actually owns. (Kershman, at p. 29.)
The Same Mistake at Today’s Prices
With California home values, the error is no longer $500. Suppose two former partners buy a house for $400,000 and take title as joint tenants. Ana pays $300,000 and Ben pays $100,000, and the court finds they agreed their shares would follow their payments, so Ana owns 75 percent and Ben owns 25 percent. Ben later lives in the house alone, and the court finds he owes Ana $40,000. The house sells for $800,000 after costs.
- Following Kershman: Ben’s 25 percent share is $200,000. He pays Ana $40,000 from it and keeps $160,000. Ana receives $600,000 plus $40,000, or $640,000.
- The error Kershman rejected: Ben’s $100,000 contribution is reduced by $40,000 to $60,000, or 15 percent of $400,000. Ben receives 15 percent of $800,000, or $120,000, and Ana receives $680,000.
The wrong method charges Ben $80,000 for a $40,000 debt. The extra $40,000 is the 10 percent of the $400,000 increase in value that the error moved from Ben to Ana. The same principle runs through our guides to two ways to calculate co-owner reimbursements and Southern Adjustment Bureau v. Nelson: credits are settled in dollars, outside the ownership percentages.
How Kershman Fits With Milian v. De Leon
Kershman does not mean every joint tenancy can be rewritten by whoever paid more. In Milian v. De Leon (1986) 181 Cal.App.3d 1185, 1195, the Court of Appeal held that “by definition joint tenancy ownership means equal ownership,” and that once a court finds a true joint tenancy, it generally may not order reimbursement for unequal payments toward the purchase.
But Milian relied on Kershman for the other side of the rule. In a partition, “the court may consider the fact the parties have contributed different amounts to the purchase price in determining whether a true joint tenancy was intended.” (Milian v. De Leon (1986) 181 Cal.App.3d 1185, 1196.) If the court finds the owners did not intend a true joint tenancy, it may order reimbursement or set ownership in proportion to what each paid, as in Kershman. (Milian v. De Leon (1986) 181 Cal.App.3d 1185, 1196.)
The evidence has to show a shared agreement, not one owner’s private intentions. A joint tenancy deed “cannot be overcome by testimony of the hidden intentions of one of the parties, but only by evidence tending to prove a common understanding or an agreement that the character of the property was to be other than joint tenancy.” (Machado v. Machado (1962) 58 Cal.2d 501, 506.) Under Evidence Code section 662, that proof must also be clear and convincing evidence. In Kershman, the proof was testimony about the agreement the spouses actually made when they bought the property.
One difference for married couples today: in a divorce, Family Code section 2581 provides that property spouses acquired during marriage in joint form, including joint tenancy, “is presumed to be community property,” and that presumption can be overcome only by a clear statement in the deed or a written agreement. Kershman‘s lessons on proving unequal shares apply most directly to co-owners who are not married to each other, such as former partners who bought a home together or family members on the same deed. The order-of-operations rule applies to every partition.
What Kershman Means for Co-Owners Today
- The deed is evidence, not the final answer. Co-owners on a joint tenancy deed can own unequal shares if they agreed, in words or by their conduct, that their shares would follow what each paid.
- Ownership is fixed first. The court decides each owner’s percentage before it looks at what one owner owes the other.
- Appreciation follows ownership. Each owner shares in the increase in value according to that owner’s percentage.
- Debts are paid in dollars. Rent, unpaid mortgage payments, and loans between owners come out of the owing owner’s share of the proceeds, not out of that owner’s percentage.
- Check the math. Mixing these steps can charge a co-owner twice for the same debt, as the trial court apparently did in Kershman.
Code of Civil Procedure section 872.140 (CCP 872.140, the compensatory adjustment statute) gives the court the power to make these adjustments, and our guide to partition offsets, credits, and reimbursements covers the credits co-owners most often claim.
Paid More Than Your Co-Owner on a Joint Tenancy Deed?
Whether your share is half or something different depends on what you and your co-owner agreed, and the final numbers depend on doing the calculations in the right order. A single partition action can decide both and force a sale.
Talkov Law can help. With 12 full-time partition attorneys and experience in over 650 partition actions throughout California, our team handles every step of the process, from proving each owner’s share through the partition sale and the final distribution of proceeds. Call (877) PARTITION (727-8484) today or contact us online to get started.
