Judge: Katherine Chilton, Case: 22STCP03139, Date: 2022-12-22 Tentative Ruling

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Case Number: 22STCP03139     Hearing Date: December 22, 2022    Dept: 25

PROCEEDINGS:      MOTION TO DISCHARGE PETITIONER AND DEPOSIT SURPLUS FUNDS

MOVING PARTY:   Plaintiff Quality Loan Service Corporation

RESP. PARTY:         None

MOTION TO DISCHARGE PETITIONER AND DEPOSIT SURPLUS FUNDS

(Civ. Code § 2924j(b)-(d))

TENTATIVE RULING:

The hearing on the Petition and Declaration Regarding Unresolved Claims and Deposit of Undistributed Surplus Proceeds of Trustee’s Sale filed by Petitioner Quality Loan Service Corp. is CONTINUED to FEBRUARY 16, 2023 at 10:00 a.m. in Department 25 at the SPRING STREET COURTHOUSE.  Petitioner is ordered to file and serve supplemental papers as discussed herein at least 16 court days before the next scheduled hearing.  Failure to do so may result in the Petition being placed off calendar or denied.

SERVICE: 

[X] Proof of Service Timely Filed (CRC, rule 3.1300)                 OK

[X] Correct Address (CCP §§ 1013, 1013a)                                                 OK

[X] 16/21 Court Days Lapsed (CCP §§ 12c, 1005(b))                     OK

OPPOSITION:          None filed as of December 20, 2021.                     [   ] Late                      [X] None

REPLY:                     None filed as of December 20, 2021.                     [   ] Late                      [X] None

ANALYSIS:

I.                Background & Discussion

On August 22, 2022, Petitioner Quality Loan Service Corp. (“Petitioner”) filed the instant Petition and Declaration Regarding Unresolved Claims and Deposit of Undistributed Surplus Proceeds of Trustee’s Sale ( “Petition”).  The gross amount of deposit is $24,094.64, not including attorney’s fees and expenses. (Pet. ¶ 16.)

On November 2, 2022, Plaintiff filed a Motion to Deposit Surplus Funds and Discharge Petitioner (“Motion”).  No opposition has been filed.

II.              Legal Standard

According to Civil Code § 2924j:

(b) The trustee shall exercise due diligence to determine the priority of the written claims received by the trustee to the trustee’s sale surplus proceeds from those persons to whom notice was sent pursuant to subdivision (a)…If the trustee has failed to determine the priority of written claims within 90 days following the 30-day notice period, then within 10 days thereafter the trustee shall deposit the funds with the clerk of the court pursuant to subdivision (c) or file an interpleader action pursuant to subdivision (e). Nothing in this section shall preclude any person from pursuing other remedies or claims as to surplus proceeds.

(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.

III.            Discussion

A.    Discharge Petitioner and Deposit Surplus Funds

Petitioner Quality Service Corp. is the Trustee under Deed of Trust executed by Charlotte M. Holdridge and Jim Holdridge and recorded on June 24, 2013.  (Memorandum p. 1.)  The Deed of Trust was secured by real property commonly known as 10158 E. Avenue S10, Littlerock, CA 93543-2321.  (Ibid.)  The property was sold at a non-judicial foreclosure sale on September 23, 2021, as a result of default, and generated funds exceeding the amount due and owing under the Deed of Trust.  (Ibid.)

As of June 21, 2019, Charlotte M. Holdridge, the owner of the subject property prior to the foreclosure, had passed away, and thus, the Heir(s) of Charlotte M. Holdridge are entitled to the surplus funds.  (Boyd Decl. ¶ 5, Ex. C[1].)  On October 27, 2021, Counsel for Petitioner mailed a Notice of Surplus Funds from Trustee’s Sale to all potential claimants by first class mail.  (Ibid. at ¶ 3, Ex. A.)  Petitioner received a claim from Elizabeth A. Simon, the caregiver of Holdridge prior to her death, but did not receive the necessary supporting documents.  (Pet. ¶ 11, Attach. 11b.)  Petitioner mailed a Second Notice of Surplus Funds by first class mail on December 13, 2021.  (Boyd Decl. ¶ 4, Ex. B.)  Petitioner has not received a claim from the Heir(s) of Charlotte M. Holdridge.  (Ibid. at ¶ 6.)  Petitioner has exercised due diligence in attempting to determine the claims to the surplus funds and “has determined that there is a conflict between potential claimants to the surplus proceeds.”  (Pet. ¶ 11(b), Attach. 11b.)

On August 22, 2022, Petitioner filed a Petition and Declaration Regarding Unresolved Claims and Deposit of Undistributed Surplus Proceeds of Trustee’s Sale.  The Petition states that the property located at 10158 E. Avenue S10, Littlerock, CA 93543-2321, was the subject of a trustee sale held on September 23, 2021.  (Pet. ¶¶ 2, 4.)  The property was sold for $336,000.00 and $24,094.64 in surplus funds remained.  (Ibid. at ¶¶ 6-7.)  A copy of the trustee’s sales guarantee is attached to the Petition.  (Ibid. at ¶ 5, Attach. 5.)  The identity, location, and priority of the potential claimants is discussed in the Petition.  (Pet. ¶¶ 8, 11, Attachs. 8, 11b.)

All claimants have been served with Notice of Petition, Petition, and related documents.  (Boyd Decl. ¶ 7, Ex. D; Pet. pp. 40-41; 8-22-22 Notice of Case Assignment pp. 56-58.)  They have also been served with the Notice of Motion and Motion.  (11-2-22 Proof of Service.)

Petitioner requests permission to deposit the surplus funds with the Court and a court order discharging Petitioner from the matter.  (Boyd Decl. ¶ 8.)

Having reviewed the Petition, the Court finds it satisfies the requirements of Civil Code § 2924j with respect to the trustee’s declaration, trustee’s notice, and service of written notice to all potential claimants to the surplus funds.

B.    Costs and Expenses

Civil Code § 2924k(b) allows the trustee to “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.

Here, Petitioner requests $2,733.80 in attorney’s fees and a filing fee of $370.00.  (Memorandum p. 3; Pet. ¶ 15.)  Petitioner states that these costs and expenses were incurred as follows:

Provide notice of surplus funds to all potential claimants, receive and review claims from potential claimants, determine order of priority of claims received, obtain and/or request all necessary supportive documentation, draft and send second notice of surplus funds, if necessary, to all potential claimants, correspondence with claimants, draft notice of intent to disburse if the Trustee intends to disburse, provide breakdown of costs to claimants, receive and review written disputes from claimants, draft all necessary documentation to deposit surplus funds with the court including cover sheets and attachments, attend any necessary hearings, draft any necessary pleadings associated with depositing funds with the court, and process surplus deposit checks.

(Pet., ¶¶ 15.)

The Court finds that Petitioner has not provided the Court with sufficient evidence to determine whether its request for attorney’s fees and costs is reasonable.

For this reason, the Court CONTINUES the hearing on the Petition to allow Petitioner an opportunity to file supplemental papers explaining how it calculated the attorney’s fees and costs requested.

IV.           Conclusion & Order

For the foregoing reasons,

The hearing on the Petition and Declaration Regarding Unresolved Claims and Deposit of Undistributed Surplus Proceeds of Trustee’s Sale filed by Petitioner Quality Loan Service Corp. is CONTINUED to _FEBRUARY 16, 2023 at 10:00 a.m. in Department 25 at the SPRING STREET COURTHOUSE.  Petitioner is ordered to file and serve supplemental papers as discussed herein at least 16 court days before the next scheduled hearing.  Failure to do so may result in the Petition being placed off calendar or denied.

Moving party is ordered to give notice.