Judge Jill Feeney, Case Number: 22STCV13440, Date: 2024-02-02 Tentative Ruling

Defendant Juan Carlos Murillo’s motion for summary judgment is GRANTED as to the following Defendants: (1) Christian Gomez-Hernandez (individually and dba El Campesino Restaurant & Bar); (2) Department of Tax and Fee Administration, California; (3) County of Merced, Tax Collector; and (4) California Employment Development Department.

This is an interpleader action. Plaintiff Capital Trust Escrow alleges that Defendants Garcia and Gomez agreed to the sale, purchase, and transfer of a restaurant business and liquor license from Gomez to Garcia for agreed consideration which would be paid through escrow. The parties opened escrow on July 21, 2020. Garcia deposited $63,700 into escrow. Defendants EDD, CDTFA, and Merced County served a notice of lien and other notices on Plaintiff. After issuing authorized distributions for the payment of finders fees and expenses, $61,202.86 continues to be held in escrow.

On April 21, 2022, Plaintiff Capital Trust Escrow filed its Complaint against Defendants Juan Carlos Murrillo Garcia, Cristian Gomez-Hernandez, the California Department of Tax and Fee Administration (“CDTFA”), the California Employment Development Department (“EDD”), and the Tax Collector of the County of Merced.

A party may move for summary judgment “if it is contended that the action has no merit or that there is no defense to the action or proceeding.” (Code Civ. Proc., section 437c, subd. (a).) “[I]f all the evidence submitted, and all inferences reasonably deducible from the evidence and uncontradicted by other inferences or evidence, show that there is no triable issue as to any material fact and that the moving party is entitled to judgment as a matter of law,” the moving party will be entitled to summary judgment. (Adler v. Manor Healthcare Corp. (1992) 7 Cal.App.4th 1110, 1119.) A motion for summary adjudication may be made by itself or as an alternative to a motion for summary judgment and shall proceed in all procedural respects as a motion for summary judgment. (Code Civ. Proc. § 437c, subd. (f)(2).)

The moving party bears an initial burden of production to make a prima facie showing of the nonexistence of any triable issue of material fact, and if he does so, the burden shifts to the opposing party to make a prima facie showing of the existence of a triable issue of material fact. (Aguilar v. Atlantic Richfield Co. (2001) 25 Cal.4th 826, 850; accord Code Civ. Proc. § 437c, subd. (p)(2).) “Once the defendant . . . has met that burden, the burden shifts to the plaintiff . . . to show that a triable issue of one or more material facts exists as to the cause of action or a defense thereto.” (Ibid.) “If the plaintiff cannot do so, summary judgment should be granted.” (Avivi v. Centro Medico Urgente Med. Ctr. (2008) 159 Cal.App.4th 463, 467.)

“When deciding whether to grant summary judgment, the court must consider all of the evidence set forth in the papers (except evidence to which the court has sustained an objection), as well as all reasonable inferences that may be drawn from that evidence, in the light most favorable to the party opposing summary judgment.” (Avivi, supra, 159 Cal.App.4th at p. 467; see also Code Civ. Proc., section 437c(c).)

When a person may be subject to conflicting claims for money or property, the person may bring an interpleader action to compel the claimants to litigate their claims among themselves. (Code Civ. Proc., section 386(b).) The interpleader proceeding is traditionally viewed as two lawsuits in one. The first dispute is between the stakeholder and the claimants to determine the right to interplead the funds. The second dispute to be resolved is who is to receive the interpleaded funds. (State Farm Fire & Casualty Co. v. Pietak (2001) 90 Cal.App.4th 600, 612; Lincoln Nat. Life Ins. Co. v. Mitchell (1974) 41 Cal.App.3d 16, 19.) In the second step, the court determines the rights of the various claimants to the property that is then in the custody of the court. The defendants named in the interpleader complaint may, in lieu of or in addition to any other pleading, file an answer to the complaint which must contain allegations of fact as to the defendant’s ownership of or other interest in the amount or property, any affirmative defenses, and the relief requested. The allegations in this answer will be deemed denied by all other parties to the action unless otherwise admitted in the pleadings. (Code Civ. Proc., section 386(d).)

The Business Purchase Agreement attached to Plaintiff’s Complaint shows that the total purchase price for the sale of Gomez’s business, a full-service restaurant with a business license, seller’s license, and alcohol license, was $100,000. Garcia agreed to pay a $40,000 down payment and to deposit $60,000 in escrow. The purchase included $40,000 in inventory, as well as machinery, furniture, fixtures, and other equipment. Garcia would enter into a new lease with Gomez’s current landlord upon the close of escrow. The $60,000 balance would also be due the date the alcohol license was signed and transferred.

Garcia provides his declaration in support of this motion. Garcia testifies that when he was negotiating with Gomez, Gomez never disclosed that he had outstanding tax liens or debts, which led Garcia to believe that the business was free of debts or liens. (Garcia Decl., p.2.) Garcia did not discover the debts until after he had paid $40,000 to Gomez and made the $63,700 escrow deposit. (Id.) In December 2020, Garcia discovered that there were liens on Gomez’s business that totaled more than the amount in escrow. (Id at p.3.) Between May and July 2021, Garcia, Plaintiff, and other parties attempted to contact Gomez without success. (Id at p.3-4.) Plaintiff could not disclose the amount Gomez owed and could not pay any of Gomez debts until everyone was paid off. (Id.) Garcia surrendered Gomez’s alcohol license in February 2022 and began the process of withdrawing the money from escrow. (Id.)

Garcia argues that Gomez has no right to the funds in escrow because the sale was contingent on the transfer of the liquor license and Gomez abandoned the transfer process after receiving liens. Garcia cites Bus. & Prof. Code, section 24074, which provides:

“Before the filing of such a transfer application with the department, if the intended transfer of the business or license involves a purchase price or consideration, the licensee and the intended transferee shall establish an escrow with some person, corporation, or association not a party to the transfer acting as escrow holder, and the intended transferee shall deposit with the escrow holder the full amount of the purchase price or consideration.

The licensee and intended transferee shall also enter into an agreement, which agreement shall be deposited with the escrow holder, directing the escrow holder, after the requirements for transfer as provided in Section 24049 are satisfied, to pay out of the purchase price or consideration…the claims of the bona fide creditors of the licensee who file their claims with the escrow holder before the escrow holder is notified by the department of its approval of the transfer of the license…”

Garcia’s evidence shows that the amount deposited in escrow would be due on the date the alcohol license was signed and transferred. However, the license could not be transferred under Bus. & Professions Code, section 24049 because other creditors had placed tax-based liens on the funds arising from Gomez’s failure to pay taxes. Gomez thereafter failed to respond to communications from Garcia, Plaintiff, and others. The funds in escrow were never paid out to Gomez, the business and alcohol licenses were never transferred, and the transaction was never completed. Thus, Gomez has no interest in the funds in escrow because the alcohol license transfer was never completed.

As for the creditor defendants, Plaintiff is not required to disburse the funds because the transfer of Gomez’s alcohol and business licenses never took place. Additionally, the taxes assessed by CDTFA and Merced County were assessed against Gomez and against Gomez doing business as Tacos Campesino. The EDD has already admitted it has no right to the funds in escrow. Because the transfer of Gomez’s alcohol and business licenses was never completed, Plaintiff and Garcia are not required to complete the transaction by transferring the remaining funds in escrow to Gomez. The creditor defendants thus have no right to the escrow funds because Gomez has no right to the funds.

Garcia’s evidence shows that no other party in this action has a right to the funds in escrow. Therefore, Garcia meets his burden he is the only claimant remaining with a right to the money in escrow. No other party opposes this motion. The motion for summary judgment is granted.