Many deeds convey an interest to three or more co-owners with no indication of the fractional ownership interest of each co-owner. These deeds raise the question of the relative co-ownership, creating complications when legal issues such as partition actions arise. There are several key factors to look at when a deed is unclear that help determine ownership interests.
Examples of Language in Unclear Deeds
Sometimes, the language of a deed can create confusion as to how ownership is intended. Take the following two examples:
- From a third party as 100% owner to “Alice Appleton, an individual, and Bob Johnson and Cathy Johnson, husband and wife.”
- From a third party as 100% owner to “Alice Appleton, an individual, and Bob Johnson and Cathy Johnson, husband and wife, all as joint tenants”
Two conclusions could be drawn from a deed that lists three parties where two are listed as married to each other. The first is that all owners hold equal shares, meaning that Alice, Bob, and Cathy all hold a 1/3rd interest in the property. The second possible interpretation of the deed is that Alice has a 1/2 interest and Bob and Cathy collectively have the other 1/2 interest, meaning that Bob and Cathy each own a 1/4 interest.
Whether co-owners hold their interests as joint tenants or tenants in common, the default assumption is that they hold equal shares.
One of the defining characteristics of a joint tenancy is that all joint tenants have equal interests in the property. Indeed, a special rule applies to joint tenants: “A joint interest is one owned by two or more persons in equal shares….” Civ. Code § 683.
A similar rule exists for tenants in common in that courts have established that “[w]hen two or more persons take as tenants in common under an instrument silent as to their respective shares, a presumption arises their shares are equal.” Yeoman v. Sawyer (1950) 99 Cal. App. 2d 43, 46. In other words, the default rule is that, when ownership interests are not explicitly stated, tenants in common have equal shares.
Tenants in Common Can Be Unequal
However, just because there is a presumption that tenants in common have equal interests does not mean tenants in common always have equal interests. Indeed, the leading treatise on California real estate law, Miller & Starr, provides: “Interests need not be equal. As is the case with joint tenancy, a tenancy in common can exist in any interest in property, but contrary to the requirement in joint tenancy, the interests of cotenants need not be equal. Each tenant in common can own an interest in the property proportionate to his or her unequal contribution to the costs of acquisition.” § 11:35. Creation and characteristics, 4 Cal. Real Est. (4th ed.) § 11:35.
Recitals Can Explain Ownership
Miller & Starr explains California real estate in providing that, “where the granting language is ambiguous, recitals in the deed may be relied on to interpret the grant.” Rules of interpretation; extrinsic evidence, 3 Cal. Real Est. (4th ed.) § 8:2. Civil Code § 1068, further provides: “If the operative words of a grant are doubtful, recourse may be had to its recitals to assist the construction.”
For example, assume the three parties had previously held title by a deed making clear they were each 1/3rd owners. They then transferred their interests by a deed with a recital or property tax declaration stating that the ownership interests did not change by way of that deed. This would now be evidence that the parties are still 1/3rd owners.
Surrounding Facts Can Illustrate the Co-Ownership Interests
It’s also possible that surrounding circumstances can provide clarity as to the ownership interests. One California case provides: “It is the rule that the object in construing a deed is to ascertain the intention of the grantor from words which have been employed and from surrounding circumstances.” Mountain Brow Lodge No. 82, Independent Order of Odd Fellows v. Toscano (1967) 257 Cal.App.2d 22, 25; see Machado v. Southern Pacific Transportation Co. (1991) 233 Cal.App.3d 347, 353 (“If there is some ambiguity in the deed, however, the court may interpret the grant in accordance with the rules of construction codified in the Civil Code.”).
General Rules for Deeds and Evidence Code 662
The relevant law provides: “The owner of the legal title to property is presumed to be the owner of the full beneficial title. This presumption may be rebutted only by clear and convincing proof.” California Evidence Code § 662. This places an extraordinary burden on parties claiming ownership contrary to record title.
Agreements Between the Parties
As one case stated: “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.” Thomasset v. Thomasset (1953) 122 Cal.App.2d 116, 133 (overturned on unrelated grounds).
Unequal Down Payments and the Kershman Formula
The general rule of equal shares can be overcome by evidence of unequal down payments under California law. See Donnelly v. Wetzel (1918) 37 Cal.App. 741, 742 (proceeds of partition sale ordered divided “in the proportion of one–third to her and two–thirds to him” based on unequal down payments”); Cosler v. Norwood (1950) 97 Cal.App.2d 665, 666 (The trial court decreed that plaintiff owned a one-fourth interest in the real property and that defendant owned a three-fourths interest based on their proportional unequal payments toward the purchase of the property); Demetris v. Demetris (1954) 125 Cal.App.2d 440, 444 (partition and deed reformation based on unequal down payments); see also Schuyler v. Broughton (1886) 70 Cal. 282, 283 (“the legal presumption which arises from the face of the deed may be overcome by extrinsic proof that the consideration paid was the separate funds of the wife”).
In the case of Kershman v. Kershman (1961) 192 Cal.App.2d 23, 27: “[T]estimony amply support[ed] the implied finding that the plaintiff and defendant had agreed that their interests were not to be equal until defendant had 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.”
Describing this case as having laid down the “Kershman formula,” another court found that “[m]any cases have held that where cotenants unequally contribute to the purchase price of real property, that a presumption arises that the cotenants intended to share in proportion to the amount contributed by each to the purchase price.” Sack v. Tomlin (1994) 110 Nev. 204, 210 (citing Kershman and Millian). Sack explained: “In Kershman, the court described its approach to situations where cotenants contribute unequally to the purchase price of real property: ‘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. Then any claims that one party may have against the other should be deducted from the share of the party to be charged and that of the other party should be increased accordingly.’” Sack v. Tomlin (1994) 110 Nev. 204, 211.
Another court described this remedy from Kershman as a method to “determine the ownership interests in the property in proportion to the amounts contributed.” Milian v. De Leon (1986) 181 Cal.App.3d 1185, 1196.
Does Joint Tenancy Change the Analysis?
While the Kershman formula may apply when it is not clear how title is held, issues may arise when a married couple and at least one other owner are all on title as joint tenants. More precisely, is the married couple a joint tenant with the other owner, or are all three owners joint tenants?
In one case, a deed stated: “To [Husband] And [Wife], Husband And Wife And [Daughter], An Unmarried Woman, All As Joint Tenants.” In re Summers (9th Cir. 2003) 332 F.3d 1240, 1242.
“In this case, the deed specifically conveyed the property to [Husband], [Wife], and [Daughter] as joint tenants. Although the deed described [Husband] and [Wife] as ‘Husband and Wife,’ it simultaneously specified that they were acquiring the property as joint tenants. This specific conveyance bestowed joint tenant status upon the [co-owners], irrespective of the ‘Husband and Wife’ verbiage.” In re Summers (9th Cir. 2003) 332 F.3d 1240, 1244.
In a case with similar circumstances, the court found that: “[I]t is currently held so that [Husband] has a third, [Wife] has a third, and the [third entity] has a third. That’s the finding of the court.” In re Marriage of Williams, No. D037536 (Cal. Ct. App. June 6, 2002).
Do Ownership Interests Matter if Offsets Are Allowed?
One court discussed the method of awarding credits and making adjustments, stating “[w]hen a cotenant makes advances from his own pocket to preserve the common estate, his investment in the property increases by the entire amount advanced. Upon sale of the estate he is entitled to be reimbursed his entire advancement before the balance is equally divided.” Southern Adjustment Bureau, Inc. v. Nelson (1964) 230 Cal. App. 2d 539, 541. Therefore, a cotenant will be entitled to reimbursement for any credits or adjustments before the balance of any proceeds is divided between the two cotenants.
Many times, once these offsets are included, there is nothing left for “[d]istribution of the residue among the parties in proportion to their shares as determined by the court.” Code of Civil Procedure 873.820(d).
Exception to Offsets for True Joint Tenancy
As explained above, the ownership may not matter if the offsets consume all of the equity, such as when the parties purchased the property in cash, but decided shortly thereafter that co-ownership wasn’t working out.
As Milian explained, a true joint tenancy may be found where an unmarried couple “both contributed significant financial resources and nonfinancial efforts to the acquisition of the home, furnishings, appliances, improvements, decoration and landscaping.” Milian v. De Leon (1986) 181 Cal.App.3d 1185, 1195-1198.
“[B]y definition joint tenancy ownership means equal ownership (see Civ. Code, § 683), and in the absence of an agreement for reimbursement we are unaware of any authority which authorizes reimbursement on account of unequal contributions to the down payment.” Milian v. De Leon (1986) 181 Cal.App.3d 1185, 1195.
Talkov Law Can Help
The rules as to the ownership interests of parties on a deed that is silent as to those ownership interests can be complex. It is important to hire a partition attorney with experience with quiet title disputes to understand the relative strengths and weaknesses of various arguments, including the monetary effect of the ultimate distribution of the proceeds of sale or sum needed to buy out the co-owner. For a free consultation, (844) 4-TALKOV (825568) or online today.
