Judge Holly J. Fujie, Case Number: 23STCV29652, Date: 2024-07-09 Tentative Ruling

On December 4, 2023, Plaintiff filed a complaint in interpleader against VST; Awal Investment, LLC (“Awal”); and Yona Investment Group, LLC (“Yona”) (collectively, “Defendants”). This action is related to the escrow transaction opened for the sale of the property at 9635 Cedarbrook Dr., Beverly Hills, CA 90212 (the “Property”). Plaintiff provided escrow services between VST and Awal, while Yona, a third party, contributed funds deposited for the purchase of the Property. Plaintiff holds a total of $63,000.00 as deposited funds for the purchase of the Property. The transaction was eventually canceled. Plaintiff alleges that the Defendants all claim the right to the funds on deposit with Plaintiff, exposing itself to multiple claims.

On April 2, 2024, Plaintiff filed this Motion for Discharge, Dismissal and Deposit of Funds (the “Motion”), seeking an order allowing it to deposit disputed funds, to be discharged from further liability, and to recover attorneys’ fees and costs. On June 25, 2024, VST opposed, and Plaintiff replied on June 28, 2024.

Interpleader is a procedure whereby a person holding money or personal property to which conflicting claims are being made by others, can join the adverse claimants and force them to litigate their claims among themselves. (For example, an escrow holder who receives conflicting demands from the parties to the escrow regarding the funds or documents he or she holds.) (Hancock Oil Co. v. Hopkins (1944) 24 Cal.2d 497, 508; City of Morgan Hill v. Brown (1999) 71 Cal.App.4th 1114, 1122.)

Once the stakeholder’s right to interplead is established, and he or she deposits the money or personal property in court, he or she may be discharged from liability to any of the claimants. This enables the stakeholder to avoid multiplicity of actions, and the risk of inconsistent results if each of the claimants were to sue him or her separately. (Cantu v. Resolution Trust Corp. (1992) 4 Cal.App.4th 857, 874; City of Morgan Hill, supra, 71 Cal.App.4th at 1122.)

“An interpleader action is traditionally viewed as two suits: one between the stakeholder and the claimants to determine the stakeholder's right to interplead, and the other among the claimants to determine who shall receive the funds interpleaded ... As against the stakeholder, claimants may raise only matters which go to whether the suit is properly one for interpleader; i.e., whether the elements of an interpleader action are present.” (State Farm Fire & Cas. Co. v. Pietak (2001) 90 Cal.App.4th 600, 612.)

If the defendant stakeholder claims no interest in the funds or property held, he or she need not file an interpleader cross complaint. He or she may simply apply to the court for permission to deposit the money or property with the court clerk, and for an order discharging him or her from further liability to the adverse claimants. Such order will also substitute the adverse claimants as parties to the action; or, if only money is involved, simply dismiss the stakeholder. (Code Civ. Proc., §§ 386(a), 386.5.) The motion must be supported by an affidavit by the stakeholder establishing the ground for interpleader. (Code Civ. Proc., §§ 386(a), 386.5.) Notice of the motion must be served on each of the adverse claimants to the funds or property. (Code Civ. Proc., §§ 386(a), 386.5.) (Those who are not parties to the action must be served personally.)

The stakeholder may seek reimbursement for his or her costs and reasonable attorneys’ fees incurred. (UAP Columbus JV 326132 v. Nesbitt (1991) 234 Cal.App.3d 1028, 1036.) The court may (discretionary) order payment thereof out of the funds deposited by the stakeholder. (Ultimately, such payment may be charged to one or more of the adverse claimants in the final judgment.) (Code Civ. Proc., § 386.6.)

In its opposition to the Motion (the “Opposition”), VST asserts that the Motion should be denied because the escrow instructions “clearly, specifically, and mutually instructed to immediately release AWAL’s earnest money deposit to VST…should AWAL fail to timely pay the purchase price for the real estate transaction between AWAL and VST.” (Opposition, p. 1, lines 11-14.) In fact, VST’s position is based upon the original escrow agreement, executed on April 12 and 14, 2023. (Opposition, Declaration of Rosty G. Gore, Exhibit 1, ¶ 6.) This agreement was, however, amended and supplemented by the Supplemental Commercial Sale Escrow Instructions dated May 22, 2023, which provided at paragraph 26 that:

MUTUAL CANCELLATION INSTRUCTION REQUIREMENTS: The Parties acknowledge that they are on notice that Escrow Holder shall exercise its discretion to require mutual or matching cancellation instructions instructing Escrow Holder on how the deposit is to be released, signed by all Parties and deposited with Escrow Holder prior to releasing any deposit held by Escrow Holder relative to this escrow transaction. (Declaration of Lauri Shahar, Exh. B.)

As VSP has not established that AWAL has also instructed Plaintiff to release the escrowed funds to VSP, the position asserted in the Opposition has no factual support.

Plaintiff’s Motion is GRANTED. Relief is proper pursuant to Code of Civil Procedure (“CCP”) sections 386 and 386.5. The subject matter of this action is $63,000.00. Plaintiff has no interest in or claim to the funds. (Declaration of Lauri Shahar in Support of the Motion (“Shahar Decl.”), ¶ 3.) Plaintiff asserts that it cannot determine the validity of the conflicting claims against the funds. (Compl., ¶¶ 11-15.) Plaintiff has the discretion to require mutual cancellation instructions prior to the release of the deposit held by Plaintiff. (Shahar Decl., Exh. B, ¶10.) Since no mutual instruction was provided to Plaintiff, it has properly sought to interplead the funds to allow the Court to resolve the dispute.

Upon deposit of the funds with the Court, Plaintiff shall be discharged from further liability pursuant to CCP section 386.5. Plaintiff has provided proper notice to all interested parties. Therefore, Plaintiff is discharged.

Plaintiff seeks attorney’s fees and costs in the total amount of $5,423.98, stating that Plaintiff incurred these fees and costs in bringing this action to protect itself from liability. (Shahar Decl., ¶¶8-9; Exh. A.). These fees and costs are proper pursuant to CCP section 386.6, and are also authorized by the escrow instructions executed by the parties (Exh. B to the Shahar Decl.). As such, Plaintiff’s request for attorney’s fees is granted in the amount of $5,423.98.

For good cause shown, relief is proper per CCP sections 386 and 386.5. Plaintiff is awarded fees and costs in the amount of $5,423.98. (Code Civ. Proc., § 386.6) Plaintiff is to be discharged from liability and dismissed from the action for interpleader upon deposit of $63,000. The funds are to be deposited within 10 days.

A Hearing on Disbursement of Funds is set for August 28, 2024 at 8:30 am. Each claimant must file a written claim within 30 days of this order; the written claim should include a declaration setting forth the basis for the claim of ownership or interest. All claimants must also appear at the disbursement hearing. If no appearances are made, the matter will be set for an OSC re: Escheating Funds. (Code Civ. Proc. § 128; Govt. Code, § 68084.1.)

Parties who intend to submit on this tentative must send an email to the Court at SMC_DEPT56@lacourt.org as directed by the instructions provided on the court website at www.lacourt.org. If the department does not receive an email and there are no appearances at the hearing, the motion will be placed off calendar.

Hon. Holly J. Fujie

Judge of the Superior Court