Judge: Mark E. Windham, Case: 21STLC04659, Date: 2022-09-08 Tentative Ruling

Case Number: 21STLC04659    Hearing Date: September 8, 2022    Dept: 26

DISCHARGE FROM LIABILITY

(CCP § 386.5)

TENTATIVE RULING:

Defendant Betty T. Yee, Controller of the State of California’s Motion For Discharge From Liability, Deposit Funds And Dismissal From Action is DENIED.

SERVICE:

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

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

[X] 16/21 Day Lapse (CCP 12c and 1005(b)) OK

SUMMARY OF COMPLAINT: Action under Code of Civil Procedure section 1541 for recovery of unclaimed property from Plaintiffs’ father’s estate, which is now in Defendant’s control.

MOTION: Defendant asks that the court issue an order that it deposit with the clerk the disputed funds in the amount of $8,952.77. Upon deposit, Defendant should be discharged from liability with respect to the disputed funds and dismissed from this action. In Defendant’s place, the Court should substitute the FDIC.

OPPOSITION: Defendant’s offer to deposit $8,952.77 does not address all the relief sought in the Complaint or the proposed amended Complaint. The interpleader statute does not address the situation in this action, which arises from liabilities to different parties based on different legal violations. Furthermore, the FDIC has relinquished its claim to the funds, so there are no conflicting claims.

REPLY: None filed as of September 6, 2022.

ANALYSIS:

Plaintiffs Don Ramey Logan, Jr. and Gregory Logan (“Plaintiffs”) filed the instant action against Defendant Betty T. Yee, Controller of the State of California (“Defendant”) on June 22, 2021. Plaintiffs bring this action under Code of Civil Procedure section 1541 to recover unclaimed property from their father’s estate, which is now allegedly in Defendant’s control.

Defendant filed its Answer on January 5, 2022 and on June 6, 2022, filed the instant Motion for Discharge from Liability, Deposit of Funds, and Dismissal from Action. Plaintiff filed an untimely opposition on July 25, 2022 and Defendant relied on July 27, 2022.

The Motion initially came for hearing on August 1, 2022, but the Court had not had an opportunity to consider the late-filed opposition. After oral argument by the parties, the Court continued the hearing to September 8, 2022. (Minute Order, 08/01/22.)

Discussion

As an initial matter, the Court notes that Plaintiffs’ opposition was filed and served extremely late with respect to the initial August 1, 2022 hearing date. Defendant objected to the Court’s consideration of the opposition papers on these grounds. (Reply, p. 2:2-6.) Opposition papers are to be filed and personally served at least nine court days in advance of the hearing. (Code Civ. Proc., § 1005, subd. (b).) The opposition was served by electronic mail, which adds two more court days to the notice period. (Code Civ. Proc., § 1010.6, subd. (a)(4)(B).) The opposition, therefore, should have been served by July 15, 2022. Service on July 23, 2022 was six court days late. The Court has discretion to decline consideration of the opposition pursuant to Cal. Rules of Court, Rule 3.1300, subdivision (d). However, Defendants filed a substantive reply and the continuance of the hearing date has provided Defendant with a further opportunity review the opposition. Accordingly, the Court finds no prejudice to the late-filed opposition and will consider it.

Defendant brings the instant Motion pursuant to Code of Civil Procedure section 386.5, which states in relevant part:

Where the only relief sought against one of the defendants is the payment of a stated amount of money alleged to be wrongfully withheld, such defendant may, upon affidavit that he is a mere stakeholder with no interest in the amount or any portion thereof and that conflicting demands have been made upon him for the amount by parties to the action, upon notice to such parties, apply to the court for an order discharging him from liability and dismissing him from the action on his depositing with the clerk of the court the amount in dispute and the court may, in its discretion, make such order.

(Code Civ. Proc., § 386.5.) The only relief sought in the Complaint is return of the funds identified as Property ID: 959627917 in the State Controller’s Unclaimed Property records, in the amount of $8,952.77. (Compl., p. 6.) The Motion is supported by the declaration of staff counsel of the State Controller’s Office, who attests that Defendant received a claim to the funds from Plaintiff Don Logan, Jr. on August 6, 2020, and following the filing of this action, received a claim to the funds from the Federal Deposit Insurance Corporation (“FDIC”) on February 8, 2022. (Motion, Dersch Decl., ¶¶3-4 and Exhs. 2-3.) Defendant itself has no interest in the funds. (Id. at ¶6.) This demonstrates that Defendant is just a disinterested stakeholder of the funds.

The FDIC’s interest in the funds has changed since the Motion was filed. Initially, the FDIC informed Defendant that it relinquished its interest in the funds “solely as a means for the State of California Controller to release the Property to the Claimants in consideration for the dismissal of the lawsuit against the State of California.” (Motion, Dersch Decl., Exh. 3.) Plaintiffs, however, rejected Defendant’s offer to settle this action solely for the funds identified as Property ID: 959627917 in the amount of $8,952.77, plus $800.00 for attorney’s fees. (Motion, Rich Decl., ¶¶2-4.) Plaintiffs demanded $11,232.25 to settle the action, which negated the FDIC’s disclaimer of interest such that it continued to hold an interest in the funds in conflict with the interest asserted by Plaintiffs. (Id. at ¶4.)

On July 29, 2022, however, the FDIC filed a full disclaimer of interest in the funds with the Court. Specifically, the FDIC now “relinquishes and disclaims any and all rights, claims and interest in and to the $8,952.77 . . . .” (Notice of Disclaimer of Interest, filed 07/29/22, p. 1:25-26.) It goes on to state that, in light of this disclaimer, Defendant’s request for interpleader of the funds is not appropriate. (Id. at p. 2:9-10.)

The Court agrees that there are no longer conflicting claims to the funds that are the subject of this action. Relief pursuant to Code of Civil Procedure section 386.5 cannot be granted without conflicting claims that give rise to the possibility of double liability. Also, Plaintiffs correctly point out that the interpleader statute does not apply unless the conflicting claims are held by parties to the action. (Citing Code Civ. Proc., § 386.5.) Defendant cites no authority in support of its request to make the FDIC a party to this action, by substituting the FDIC for Defendant. (Motion, p. 2, ¶4.) 

Therefore, Defendant has not demonstrated that deposit of the funds and its discharge from liability with respect to the funds can be granted.

Conclusion

Defendant Betty T. Yee, Controller of the State of California’s Motion For Discharge From Liability, Deposit Funds And Dismissal From Action is DENIED.

Plaintiffs to give notice.