Judge: Layne H. Melzer, Case: "Inre:1Stonewall,Irvine,CA92620", Date: 2022-08-25 Tentative Ruling

Petitioner National Default Servicing Corporation
Motion - Other (seeks an order to deposit surplus funds)

On 4/12/2022, petitioner National Default Servicing Corporation (“Petitioner”) filed a petition regarding unresolved claims arising out of a trustee’s sale (“Trustee’s Sale”) held on 10/26/2021 of real property located at 1 Stonewall, Irvine, California 92620 (“Subject Property”).

On 6/30/2022, the Court granted Petitioner’s petition to deposit the surplus funds and ordered Petitioner to deposit the surplus funds of $415,563.43 with the Clerk of the Court within 15 days.  The Court also set a hearing on potential claims for 8/25/2022.  Petitioner was ordered to provide notice to all potential claimants.

On 7/29/2022, Petitioner served and filed notice of the Court’s 6/30/2022 ruling and 8/25/2022 hearing date.  It appears Petitioner deposited the surplus funds of $415,563.43 on 4/20/2022.  Petitioner is relieved of further responsibility for the disbursement of sale proceeds.  (Civ. Code, § 2924j, subd. (c).)

Two claims to the surplus funds were filed, one by the State of California Franchise Tax Board (“FTB”) and one by Robert and Susan Carpenter (“Prior Owners”).  The Court notes Prior Owners’ claim was not filed at least 15 days before the continued hearing date.  The Court also notes Prior Owners’ claim does not alter the distribution discussed below.

The court shall distribute the deposited funds to any and all claimants entitled thereto.  Civil Code § 2924jk.  The distribution of the funds shall be made 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.

(Civ. Code, § 2924k.) 

FTB Claim

The FTB showed it is entitled to $2,246.14 plus daily interest of $0.18 from 4/27/2022 to the date of distribution from the community property surplus for the amount owed by Robert Carpenter.  (ROA No. 16, ¶¶ 1, 2, and 4, Exhibit A.)  The California FTB also showed it is entitled to $7,304.63 plus daily interest of $0.60 from 4/27/2022.  (ROA No. 18, ¶¶ 1 and 2, Exhibits A and B.)

Accordingly, the total amount to be distributed to the FTB is $9,644.37.    

Robert and Susan Carpenter’s Claim

Prior Owners filed verified answers to complaint in intervention, although no such complaint was filed.  Prior Owners contend they were the last recorded trustors of the Subject Property and that any competing claims are without foundation and lack merit.

Prior Owners also filed a claim for the surplus funds.  Prior Owners contend Petitioner’s decision to foreclose on the Subject Property was not in conformity with the HBOR.  Prior Owners contend they filed a lawsuit against the lender and Petitioner for wrongful foreclosure.  (See, Robert Carpenter Decl., ¶ 2; Susan Carpenter Decl., ¶ 2.)  Prior Owners also contend on information and belief that the Subject Property is not encumbered by any other claims.  Prior Owners did not submit any evidence to dispute the FTB’s priority claim to the surplus funds. 

Prior Owners have not shown a stay should be imposed pending resolution of their (potential) wrongful foreclosure action. 

Although Prior Owners’ claim is untimely, the Court’s findings remain unchanged.  The balance of the surplus funds in the amount of $405,919.06 shall be distributed to Prior Owners.

Clerk shall give notice.