Judge Mark E. Windham, Case 18STCP00305 2023-03-08 Tentative Ruling

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Respondents Cruz Martinez and Librada Martinez’s Claim to the Surplus Funds is GRANTED. FUNDS IN THE AMOUNT OF $19,178.92 ARE TO BE DISBURSED TO RESPONDENTS BY THE COURT’S REVENUE MANAGEMENT OFFICE AND CIVIL OPERATIONS.

On February 27, 2018, Petitioner filed the instant Petition to Deposit Surplus Funds and be Discharged of Liability, which the Court granted on July 3, 2018. (Minute Order, 07/03/18.) The Court set a hearing regarding disbursement of the surplus funds for August 23, 2018. (Ibid.) No claimants appeared at the hearing on disbursement of funds, so the Court set the matter for an Order to Show Cause Re Escheating Funds. (Minute Order, 08/23/18.) The Order to Show Cause was continued from December 16, 2018 to August 25, 2021. (Minute Order, 12/16/18.)

On August 25, 2021, the Court ruled that three years had passed since the funds were deposited with the Court and no valid claim to the funds had been made. (Minute Order, 08/25/21.) The Court ordered the clerk to notify the Los Angeles Superior Court’s Executive Officer to commence the statutory notice before the funds may escheat to the court and set an Order to Show Cause Re: Compliance with Statutory Notice. (Ibid.) On December 21, 2021, the Court ruled that the 120-day statutory notice period had expired and the surplus funds could escheat to the Los Angeles Superior Court's Trial Court Operations Fund. (Minute Order, 12/21/21 [citing Gov. Code, § 68084.1, subd. (i)].)

On January 27, 2022, Respondents filed a Motion to Disburse Surplus Funds from Trustee’s Sale, or in the alternative, to Order the Revenue Management Department to Process Respondents’ Claim pursuant to Government Code section 68084.1. At the hearing on February 22, 2022, the Court denied the Motion to Disburse Surplus Funds. (Minute Order, 02/22/22.)

In response to the Order to Show Cause, Respondents filed a memorandum of points and authorities on February 27, 2023.

The Court finds that the surplus funds in this action are subject to the Unclaimed Property Law (“UPL”), as set forth in Civil Code section 2924j, subdivision (g) and Code of Civil Procedure section 1519.5. Respondents dispute that the UPL is applicable to this case.

Civil Code section 2924j, subdivision (g) states: “To the extent required by the Unclaimed Property Law, a trustee in possession of surplus proceeds not required to be deposited with the court pursuant to subdivision (b) shall comply with the Unclaimed Property Law (Chapter 7 (commencing with Section 1500) of Title 10 of Part 3 of the Code of Civil Procedure).”

Code of Civil Procedure section 1519.5 states in relevant part: “Subject to Section 1510, any sums held by a business association that have been ordered to be refunded by a court or an administrative agency . . . which have remained unclaimed by the owner for more than one year after becoming payable in accordance with the final determination or order providing for the refund, whether or not the final determination or order requires any person entitled to a refund to make a claim for it, escheats to this state.”

Respondents argue that the UPL creates no express obligations on the Court with respect to unclaimed funds, and the Court agrees. The statute appears only to contemplate a scenario where claimants appear and the Court makes an order determining to whom the funds should be disbursed. However, the practical reality is that trustees often deposit funds with the Court that remain unclaimed for various reasons, and the Court must take steps to dispose of those funds by either (i) declaring them the property of the Court after three (3) years pursuant to Government Code section 68084.1 or (ii) transferring the funds to the State Controller per the UPL as trustees are instructed to do under Civil Code section 2924j, subdivision (g).

Public policy and legislative intent weigh in favor of escheatment to the State under the UPL. (See Coalition of Concerned Communities, Inc. v. City of Los Angeles (2004) 34 Cal.4th 733, 737 [if the statutory language permits more than one reasonable interpretation, courts may consider other aids, such as the statute’s purpose, legislative history, and public policy]; California Teachers Assn. v. Governing Bd. Of Rialto Unified School District. (1997) 14 Cal.4th 627, 632 [purpose of statutory interpretation is to “ascertain the intent of the Legislature so as to effectuate the purpose of the law”].) The legislative intent for the UPL is to reunite property owners with their property. (See Code Civ. Proc., § 1501.5, subd. (c).) “The UPL[’s] dual objectives are ‘to protect unknown owners by locating them and restoring their property to them and to give the state rather than the holders of unclaimed property the benefit of the use of it, most of which experience shows will never be claimed.” (Azure Limited v. I-Flow Corp. (2009) 46 Cal.4th 1323, 1328.)

For these reasons, the Court finds that the surplus funds in this action are subject to the UPL and that the Court should effectuate the purpose of the UPL by considering the merits of Respondents’ claim. The verified and undisputed Petition demonstrates that Respondents executed a deed of trust on the Property, which was recorded on September 28, 2006. (Pet., ¶3 and Attachment 11b.) The only other potential claimant identified by Petitioner was Citifinancial Services, Inc. (“Citifinancial”), which holds a deed of trust recorded on March 7, 2008. (Pet., ¶8 and Attachment 11b.) Despite notice to Respondents and Citifinacial, no claims to the funds were communicated to Petitioner. (Id. at Attachment 11B and 13.) Petitioner concedes Respondents’ entitlement to the funds as owners of record of the Property as the time of the Trustee’s sale. (Ibid.)

Based on the foregoing, the Court finds Respondents are entitled to the unclaimed surplus funds being held by the Court in this action.