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1 AMY HARRINGTON SBN 237980
HARRINGTON LAW, PC
2 846 BROADWAY
3 SONOMA, CALIFORNIA
TEL: 415-558-7700
4 FAX: 415-558-7701
EMAIL: amy@amyharringtonlaw.com
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Attorneys for Linda Pond, Partition Referee
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SUPERIOR COURT OF THE STATE OF CALIFORNIA
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FOR THE COUNTY OF SONOMA
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- UNLIMITED JURISDICTION -
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SUSAN FOPPIANO VALERA, an individual, Case No.: SCV-269355
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Plaintiff,
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vs. MEMORANDUM OF POINTS AND
13 AUTHORITIES IN SUPPORT OF
MOTION FOR INSTRUCTIONS TO THE
14 LOUIS M. FOPPIANO, an individual and as REFEREE ON ALLOWANCE OF A
Trustee of the Helaine Noreen Foppiano and CREDIT BID BY DEFENDANTS AND
15 Louis Michael Foppiano 1997 Trust dated THE TERMS THEREOF
16 December 23, 1997, HELAINE N. Foppiano, an
individual and as Trustee of the Helaine Noreen Date:
17 Foppiano and Louis Michael Foppiano 1997 Time:
Trust dated December 23, 1997, PAUL Dept.: 18
18 FOPPIANO, an individual and as Trustee of the Judge: Hon. Christopher Honigsberg
Gian Marie Hocker Revocable Trust dated
19 September 25, 2015, all persons unknown
20 claiming any interest in the property, and DOES
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Defendants.
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Partition referee Linda Pond (“Referee”) presents her Memorandum of Points and
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Authorities in Support of Motion for Instructions to the Referee on Allowance of a Credit Bid by
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Defendants and the Terms Thereof (“Motion”).
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Memorandum of Points and Authorities in Support of Motion for Instructions to the Referee on
Allowance of a Credit Bid by Defendants and the Terms Thereof SCV-269355
1 MEMORANDUM OF POINTS AND AUTHORITIES
2 I. INTRODUCTION
3 Defendants and plaintiff are co-owners of the subject real property in this partition action.
4 The Referee has accepted an offer on the property and has filed a Motion to Approve Report of
5 Sale. Defendants have indicated that they intend to make a credit bid on the date of hearing on
6 the Referee’s Motion to Approve Report of Sale. The Referee does not have authority to accept
7 or set the terms for a credit bid and therefore instructions regarding the same are necessary in
8 anticipation of the hearing.
9 II. PROCEDURAL HISTORY/STATEMENT OF FACTS
10 On August 3, 2023 Petitioner published her Notice of Intention to Sell Real Property and
11 indicted that she was taking bids for the sale of the real property located at 12781 Old Redwood
12 Highway, Healdsburg, California on August 10, 2023. On August 10, 2023, she received two
13 offers, one for $850,000 and one for $952,250. The Referee could not accept the high bid
14 because it was made by the Defendant co-owners and included terms related to a “credit bid.”
15 The Referee has no authority to set the terms for a credit bid and was not entitled to
16 accept an offer on the terms presented. The Referee therefore accepted the offer for $850,000
17 made by Michael Barnard and Allison Hargrave.
18 The Referee has filed a Motion to Approve Report of Sale concurrently with this Motion.
19 On the date of the hearing on her motion, any bidder may come to court and “overbid” so long as
20 their bid complies with the terms of Code of Civil Procedure section 873.740. Defendants have
21 indicated they intend to participate in the overbid process and make a credit bid. Plaintiffs have
22 indicated that they will oppose any use of equity or credit by Defendants to purchase the
23 property. Instructions to the Referee regarding the credit bid and its terms are therefore necessary
24 before the hearing on the Referee’s motion.
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Memorandum of Points and Authorities in Support of Motion for Instructions to the Referee on
28 Allowance of a Credit Bid by Defendants and the Terms Thereof SCV-269355
1 III. LEGAL AUTHORITY
2 A. This Court has Legal Authority to Allow a Credit Bid and Set the Terms as
3 Appropriate.
4 The Code of Civil Procedure section CCP 873.600 provides:
5 “(a) The court may, at the time of trial or thereafter, prescribe such manner, terms,
6 and conditions of sale not inconsistent with the provisions of this chapter as it
7 deems proper for the particular property or sale.
8 (b) The court may refer the manner, terms, and conditions of sale to the referee
9 for recommendation but shall not approve the referee’s report except following a
10 hearing upon noticed motion.”
11 Pursuant to Code of Civil Procedure section 873.630, “The court may: (a) Direct the sale
12 on credit for the property or any part thereof. (b) Prescribe such terms as may be appropriate.”
13 B. Credit Bid
14 A credit bid occurs when one or several co-owners bid on the property in a partition sale
15 process and wish to apply their ownership interest to the purchase instead of paying cash for the
16 property. This allows a party to reduce the amount of cash required to purchase the property and
17 instead allows a “credit” for the value of their equity already in place. The purpose of a credit bid
18 is “to avoid the inefficiency of requiring the lender to tender cash which would only be
19 immediately returned to it.” (Alliance Mortgage v. Rothwell (1995) 10 Cal.4th 1226, 1238.)
20 Here, Defendants collectively own a 66.7% interest in the subject property and Plaintiff, 33.3%.
21 Defendants request a credit of 66.7% towards the purchase price with the other 33.3% to be paid
22 in cash.
23 C. Credit Bid Terms
24 Terms are necessary for a credit bid because if a purchasing co-owner contributes their
25 equity to the sales price, then all of the costs of the sale will be paid out of the other non-
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Memorandum of Points and Authorities in Support of Motion for Instructions to the Referee on
28 Allowance of a Credit Bid by Defendants and the Terms Thereof SCV-269355
1 purchasing co-owner’s share of the proceeds. This is illustrated by the following hypothetical in
2 which co-owners share equal ownership:
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Hypothetical Sales Price: $1,000,000
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Co-owner/purchaser applies 50% ownership (credit)
5 to purchase price and deposits 50% of purchase price into escrow: $ 500,000
6 Escrow Fees:
Real Estate Commissions
7 Partition Referee Fees
Inspection Reports
8 Hypothetical total escrow fees: -$75,000
9 Net Proceeds to non-purchasing co-owner: $425,000
Purchasing co-owner receives in equity: $500,000
10 (full value for their share and no expenses paid)
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As illustrated, the co-owner who purchased the property pays none of the expenses out of
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their 50% share because they only put in funds to cover the 50% they do not own. Additionally,
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if the non-purchasing co-owner makes a motion for attorney fees, the only money on hand is the
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non-purchasing owner’s sales proceeds because the purchasing co-owner has already used their
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50% to buy the property and has not added any additional funds.
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Here, the Referee requested that the parties submit any requests for reimbursements,
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attorneys’ fees, or any other costs to be potentially paid out of escrow to provide the court with
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sufficient information necessary to make a determination on allowance of a credit bid.
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i. Plaintiff’s Requests
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Plaintiff is seeking recovery of all attorney fees to date in the amount of $60,390 plus
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further trial expenses and fees, for an additional estimated $50,000. Plaintiff will also seek
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recovery for diminution in value of the property which they claim was caused by Defendants’
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actions in the amount of $300,000. In total, Plaintiff will seek recovery against Defendants in the
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amount of at least $410,000. Accordingly, Plaintiff has indicated that she will oppose any use of
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credit or equity to purchase the subject property because Defendants may no longer have any
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Memorandum of Points and Authorities in Support of Motion for Instructions to the Referee on
28 Allowance of a Credit Bid by Defendants and the Terms Thereof SCV-269355
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equity after trial, and it would be inequitable for Defendants to receive an early distribution of
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equity where Plaintiff does not.
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ii. Defendants’ Requests
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Defendants have indicated that they will not seek reimbursements for attorney fees or
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expenses from the proceeds of sale aside from the escrow fees identified in No. 5 below.
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Defendants have requested confirmation of the following terms:
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1. Defendants own 66.7% and Plaintiff 33.3% of the property.
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2. Defendants’ 66.7% be credited towards the purchase price.
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3. The court approved costs and expenses of the partition be paid 66.7% by
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Defendants, with a check to be issued for such fees and costs “at closing.”
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Plaintiff’s 33.3% of costs and fees be subtracted from her proceeds “at closing.”
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4. The listing agent’s commission be set at 3.5% as Defendants will not be using an
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own agent. Defendants and Plaintiff pay the commission pursuant to their
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respective ownership interests. Defendant to issue a check at closing and
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Plaintiff’s portion be subtracted from her proceeds.
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5. Defendants will pay the escrow fee, but have the seller/Referee reimburse
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Defendants’ 33.3% at closing from proceeds of sale.
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6. Transfer taxes and recording fees be pro-rated as of the date of closing.
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iii. Referee’s Recommendations
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If this court finds a credit bid appropriate, the Referee recommends as follows with
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respect to Defendants’ requested terms:
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Defendants’ Request No. 3. The Referee does not recommend having court approved
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costs and expenses of partition be paid “at closing” according to parties’ respective ownership
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interests. Since the costs and expenses of partition have not been allocated, and allocation can be
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determined at a later date, the question at hand is how much needs to be put into escrow.
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Memorandum of Points and Authorities in Support of Motion for Instructions to the Referee on
28 Allowance of a Credit Bid by Defendants and the Terms Thereof SCV-269355
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Defendants’ Request No. 4. The Referee finds no issue with this request; however, the
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funds must be put into escrow before it can close (not “at closing”).
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Defendants’ Request No. 5. The Referee does not recommend having Defendants pay the
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escrow fee and have the seller reimburse Defendants 33.3% from proceeds of sale. There should
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be estimated escrow costs and Defendants should pay in an amount over their credit to cover the
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costs.
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Defendants’ Request No. 6. Proration of transfer taxes and recordings fees is irrelevant to
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the credit bid issue.
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The Referee additionally recommends that Defendants be required to deposit their share
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of the estimated sale expenses plus an additional 15% of the total estimated expenses to cover
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potentially unknown additional costs. The deposit should be made on the date of the hearing on
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the Referee’s Motion to Approve Report of Sale. Estimated expenses of sale are as follows:
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a. 66.7% Real Estate Commission: TBD based on sales price
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b. 66.7% Escrow Fees: $2,000
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c. Partition Referee Fees: Court has not yet allocated referee fees. Current requested
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fees are $ 91,000
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d. Partition Referee Attorney Fees: $9,000
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e. Claim for Diminution in Value: $300,000
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f. Request for Attorneys’ Fees by Plaintiff: $110,390
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g. 66.7% Property Taxes: TBD depends on date of sale. Taxes are prorated.
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h. Reserve for Referee Fees: $30,000
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i. Reserve for Referee Attorney Fees: $30,000
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j. 15% of total fees for unknown additional costs.
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An Order must be entered indicated how much above their 66.7% equity interest must be
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put into escrow if the Defendants are the successful purchasers at the sale hearing.
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Memorandum of Points and Authorities in Support of Motion for Instructions to the Referee on
28 Allowance of a Credit Bid by Defendants and the Terms Thereof SCV-269355
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iii. Credit for Buyer Side Real Estate Commission. Defendants have indicated that
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they will make an overbid without the use of a realtor or
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broker. Code of Civil Procedure section 873.740(c) states, “Where in advance of sale the court
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has so ordered or the parties have so agreed, if an increased offer is made by a party to the action
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who is not represented by an agent, the amount by which an increased offer of a nonparty
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exceeds the sale price is determined on the basis of the net amount of the increased offer
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excluding any commission on the increased offer to which an agent may be entitled.” If the
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Court wishes to allow a co-owner bidding without an agent to receive additional credit for their
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bid amount, an Order must be issued prior to the hearing on the motion to confirm the report of
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sale.
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IV. CONCLUSION
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In anticipation of Defendants’ credit bid at the hearing on the Referee’s Motion to
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Approve Report of Sale, the Referee respectfully requests that this court instruct the Referee as
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follows:
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1. Is a credit bid allowed where a co-owner applies their equity in the property in lieu of
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cash.
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2. If a credit bid is allowed, how much equity can each co-owner who is purchasing the
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property apply to the sales price? If they may apply 100% of their equity how much
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cash, in addition to their equity, must they put into escrow to cover their share of the
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costs of the sale and the partition action.
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Memorandum of Points and Authorities in Support of Motion for Instructions to the Referee on
28 Allowance of a Credit Bid by Defendants and the Terms Thereof SCV-269355
1 3. If a co-owner bids on the property at the sale hearing and they do not have a real
2 estate agent or broker, shall their bid be credited with the value of the real estate
3 commission which will not be paid.
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5 DATED: August 23, 2023
Respectfully Submitted,
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7 HARRINGTON LAW, PC
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By:
Amy Harringt
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Attorneys for Partition Referee
10 Linda Pond
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Memorandum of Points and Authorities in Support of Motion for Instructions to the Referee on
28 Allowance of a Credit Bid by Defendants and the Terms Thereof SCV-269355