Judge: John J. Kralik, Case: 23BBCP00070, Date: 2023-08-18 Tentative Ruling

Case Number: 23BBCP00070    Hearing Date: August 18, 2023    Dept: NCB

Superior Court of California

County of Los Angeles

North Central District

Department B

BACKGROUND

A.    Allegations

Petitioner Quality Loan Service Corp. (“Petitioner”) is the trustee under the Deed of Trust encumbered by the real property located at 8169 Coldwater Canyon Ave., North Hollywood, CA 91605.  Petitioner alleges that the Deed of Trust was executed by Pauline Moreno and Antonio Moreno as trustors on August 25, 2006 and the document was recorded on November 29, 2006.  It alleges that the property was subject to a trustee’s sale held on September 6, 2022 and the sales price of the property was $562,000.  Petitioner alleges that after payment of all amounts required by Civil Code, § 2924k(a)(1)-(2) were made, the surplus proceeds from the trustee’s sale available to potential claimants amounts to $479,734.57.  Petitioner alleges that it has received one written claim from potential claimants and that it has determined that there is a conflict between potential claimants to the surplus proceeds. 

Petitioner alleges that the amount to be deposited is $470,458,35.  This figure was reached by taking the $562,000 trustee’s sales proceeds and subtracting $82,265.43 for debt to foreclosing creditor, $4,549.19 for claims/distribution paid by the trustee to claimant Capital One Bank, N.A., $4,292.03 in trustee’s fees and expenses, and $435 in filing fees.  (Pet., § 16.) 

B.     Motions on Calendar

On March 15, 2023, Petitioner filed the Petition Regarding Unresolved Claims and Deposit of Undistributed Surplus Proceeds of Trustee’s Sale. 

On March 22, 2023, Petitioner filed a motion to deposit surplus funds pursuant to Civil Code, § 2924j and to discharge Petitioner.

The Court is not in receipt of an opposition brief. 

LEGAL STANDARD

            Civil Code, § 2924j states in relevant part:

(c) If, after due diligence, the trustee is unable to determine the priority of the written claims received by the trustee to the trustee's sale surplus of multiple persons or if the trustee determines there is a conflict between potential claimants, the trustee may file a declaration of the unresolved claims and deposit with the clerk of the superior court of the county in which the sale occurred, that portion of the sales proceeds that cannot be distributed, less any fees charged by the clerk pursuant to this subdivision. The declaration shall specify the date of the trustee's sale, a description of the property, the names and addresses of all persons sent notice pursuant to subdivision (a), a statement that the trustee exercised due diligence pursuant to subdivision (b), that the trustee provided written notice as required by subdivisions (a) and (d) and the amount of the sales proceeds deposited by the trustee with the court. Further, the trustee shall submit a copy of the trustee's sales guarantee and any information relevant to the identity, location, and priority of the potential claimants with the court and shall file proof of service of the notice required by subdivision (d) on all persons described in subdivision (a).

The clerk shall deposit the amount with the county treasurer or, if a bank account has been established for moneys held in trust under paragraph (2) of subdivision (a) of Section 77009 of the Government Code, in that account, subject to order of the court upon the application of any interested party. The clerk may charge a reasonable fee for the performance of activities pursuant to this subdivision equal to the fee for filing an interpleader action pursuant to Chapter 5.8 (commencing with Section 70600) of Title 8 of the Government Code. Upon deposit of that portion of the sale proceeds that cannot be distributed by due diligence, the trustee shall be discharged of further responsibility for the disbursement of sale proceeds. A deposit with the clerk of the court pursuant to this subdivision may be either for the total proceeds of the trustee's sale, less any fees charged by the clerk, if a conflict or conflicts exist with respect to the total proceeds, or that portion that cannot be distributed after due diligence, less any fees charged by the clerk.

(d) Before the trustee deposits the funds with the clerk of the court pursuant to subdivision (c), the trustee shall send written notice by first-class mail, postage prepaid, to all persons described in subdivision (a) informing them that the trustee intends to deposit the funds with the clerk of the court and that a claim for the funds must be filed with the court within 30 days from the date of the notice, providing the address of the court in which the funds were deposited, and a telephone number for obtaining further information.

Within 90 days after deposit with the clerk, the court shall consider all claims filed at least 15 days before the date on which the hearing is scheduled by the court, the clerk shall serve written notice of the hearing by first-class mail on all claimants identified in the trustee's declaration at the addresses specified therein. Where the amount of the deposit is twenty-five thousand dollars ($25,000) or less, a proceeding pursuant to this section is a limited civil case. The court shall distribute the deposited funds to any and all claimants entitled thereto.

(Civ. Code, § 2924j(c)-(d).) 

            Civil Code, § 2924k states:

(a) The trustee, or the clerk of the court upon order to the clerk pursuant to subdivision (d) of Section 2924j, shall distribute the proceeds, or a portion of the proceeds, as the case may be, of the trustee's sale conducted pursuant to Section 2924h in the following order of priority:

(1) To the costs and expenses of exercising the power of sale and of sale, including the payment of the trustee's fees and attorney's fees permitted pursuant to subdivision (b) of Section 2924d and subdivision (b) of this section.

(2) To the payment of the obligations secured by the deed of trust or mortgage which is the subject of the trustee's sale.

(3) To satisfy the outstanding balance of obligations secured by any junior liens or encumbrances in the order of their priority.

(4) To the trustor or the trustor's successor in interest. In the event the property is sold or transferred to another, to the vested owner of record at the time of the trustee's sale.

(b) A trustee may charge costs and expenses incurred for such items as mailing and a reasonable fee for services rendered in connection with the distribution of the proceeds from a trustee's sale, including, but not limited to, the investigation of priority and validity of claims and the disbursement of funds. If the fee charged for services rendered pursuant to this subdivision does not exceed one hundred dollars ($100), or one hundred twenty-five dollars ($125) where there are obligations specified in paragraph (3) of subdivision (a), the fee is conclusively presumed to be reasonable.

(Civ. Code, § 2924k.) 

DISCUSSION

            Petitioner moves to deposit the surplus funds and to be discharged.  Petitioner is the trustee under the DOT executed by Pauline Moreno and Antonio Moreno, recorded on November 29, 2006, which was secured by the subject real property that was sole at a non-judicial foreclosure sale on September 6, 2022.  Petitioner states that the sale resulted in a surplus of funds due and owing on the DOT, but Petitioner has been unable to reasonably determine how the surplus funds should be distributed and thus seeks to deposit the funds with the Clerk of the Court. 

Petitioner’s counsel, Deborah Boyd, sent a Notice of Surplus Funds from Trustee’s Sale to all potential claimants at their addresses pursuant to Civil Code, § 2924j(a) on November 14, 2022.  (Boyd Decl., ¶3, Ex. A.)  The Affidavit of Mailing shows that Pauline Moreno and Antonio Moreno were each served at 8169 Coldwater Canyon Ave., North Hollywood, CA 91605, and Capital One Bank (U.S.A.), N.A. was served with the Notice.  Petitioner received a claim and all necessary supporting documents from Capital One Bank, N.A. as a junior lienholder, and accordingly disbursed surplus funds in the amount of $4,549.19 to satisfy that claim in full.  (Id., ¶4.)  However, Petitioner did not receive a claim from Pauline and Antonio Moreno prior to the sale on September 6, 2022, such that Petitioner mailed a Second Notice of Surplus Funds to all persons entitled to notice on December 23, 2022.  (Id., ¶5, Ex. B.)  Ms. Boyd states that Petitioner hired a private investigator, Quality Claims Management Corp., for $500 to locate the Morenos in an effort to obtain their claim, but the private investigator was unable to locate the Morenos.  (Id., ¶6.)  Petitioner states that because it did not receive a claim from Pauline and Antonio Moreno, it cannot adequately determine who is entitled to the surplus funds.  (Id., ¶7.)  Thus, it seeks to move under Civil Code, § 2924j(c) to deposit the $470,458.35 in funds with the Court.  (Id., ¶9.)  As stated in the petition, this surplus fund amount was calculated by taking the $562,000 trustee’s sales proceeds and subtracting $82,265.43 for debt to foreclosing creditor, $4,549.19 for claims/distribution paid by the trustee to claimant Capital One Bank, N.A., $4,292.03 in trustee’s fees and expenses, and $435 in filing fees.  (Pet., § 16.) 

Petitioner also seeks to recover the costs, expenses, and attorney’s fees it incurred in the amount of $4,292.03 in connection with the distribution of proceeds from the trustee’s sale, pursuant to Civil Code, § 2924k(b). 

            Petitioner states that pursuant to Civil Code, § 2924j(d), it has served the petition on all interested parties by first class mail, advising them that they must file a claim with the Court within 30 days.  Petitioner served the Notice of Petition on all claimants of record on March 15, 2023.  (Boyd Decl., ¶8, Ex. C.)  The Service List shows that Pauline Moreno and Antonio Moreno were each served at the subject property and at 6343 Coldwater Canyon Ave Apt 5 and 8169 Coldwater Canyon Ave Unit A, and Capital One Bank (U.S.A.), N.A. was served with the Notice.  Petitioner argues that since it has performed its duty, it seeks to be discharged from the action pursuant to section 2924j(c). 

Here, it appears that based on Petitioner’s papers, Petitioner has made efforts to inform the Morenos and any other lienholders of the surplus funds.  While Petitioner was able to establish and pay out the claim to the junior lienholder, Capital One Bank, it appears that that the Morenos have not come forward as a potential claimant though Petitioner provided them with notices of surplus funds twice and served with the petition papers.  Petitioner has also made efforts to locate the Morenos by hiring a private investigator, but such efforts were unsuccessful in locating the Morenos.  The declaration of Ms. Boyd and the exhibits attached sufficiently specify the date of the trustee’s sale, a description of the property, the names and addresses to all persons sent the notice, a statement that the trustee exercised due diligence to determine the priority of written claims, that the trustee provided written notice as required, and the amount of sale proceeds to be deposited with the Court.  A copy of the Trustee’s Sale Guarantee is attached to the petition as Attachment 5.  (Civ. Code, § 2924j(c).)  Further, Petitioner has sent written notice of the Petition by mail on Pauline Moreno, Antonio Moreno, and Capital One Bank to inform them that the trustee intends to deposit the funds with the Court and that they have 30 days from the notice to file a claim.  (Civ. Code, § 2924j(d).) 

As Petitioner has satisfied these requirements, the Court grants the motion and petition to deposit the surplus funds with the Court.  

CONCLUSION AND ORDER

Petitioner Quality Loan Service Corp.’s motion to deposit surplus funds pursuant to Civil Code, § 2924j and to discharge Petitioner is granted.  In light of the order on the motion, Petitioner’s petition regarding unresolved claims and deposit of undistributed surplus proceeds of trustee’s sale is granted.

 “Upon deposit of that portion of the sale proceeds that cannot be distributed by due diligence, the trustee shall be discharged of further responsibility for the disbursement of sale proceeds. A deposit with the clerk of the court pursuant to this subdivision may be either for the total proceeds of the trustee's sale, less any fees charged by the clerk, if a conflict or conflicts exist with respect to the total proceeds, or that portion that cannot be distributed after due diligence, less any fees charged by the clerk.”  (Civ. Code, § 2924j(c).)  Upon Petitioner’s deposit of the $470,458,35 surplus funds, Petitioner shall be discharged from the action. 

“Within 90 days after deposit with the clerk, the court shall consider all claims filed at least 15 days before the date on which the hearing is scheduled by the court, the clerk shall serve written notice of the hearing by first-class mail on all claimants identified in the trustee's declaration at the addresses specified therein. Where the amount of the deposit is twenty-five thousand dollars ($25,000) or less, a proceeding pursuant to this section is a limited civil case. The court shall distribute the deposited funds to any and all claimants entitled thereto.”  (Civ. Code, § 2924j(d).)  Upon Petitioner’s deposit of the surplus funds, the Court will set an OSC re Distribution of Surplus Funds for 90 days from the date of the deposit.  If no claimants step forward to claim the surplus funds, the surplus funds may be subject to the Unclaimed Property Law.  (See Civil Code, § 2924j(g); CCP § 1500 et seq.) 

            Petitioner shall provide notice of this order.