Judge: Melvin D. Sandvig, Case: 22CHCP00160, Date: 2023-01-20 Tentative Ruling

Case Number: 22CHCP00160    Hearing Date: January 20, 2023    Dept: F47

Dept. F47

Date: 1/20/23

Case #22CHCP00160

HEARING ON CLAIMS TO DETERMINE DISBURSEMENT OF SURPLUS FUNDS

SUMMARY OF FACTS & PROCEDURAL HISTORY:

Petitioner National Default Servicing Corporation (Petitioner/Trustee) was the Trustee under a Deed of Trust executed by Victor Avila Cortez and Margarita Avila, husband and wife as joint tenants.  Said Deed of Trust was secured by real property commonly known as 14954 Polk Street, Sylmar, California 91342-5069 which was sold at a non-judicial foreclosure sale on September 23, 2021 as the result of default under the terms of the Deed of Trust.  Said nonjudicial foreclosure sale resulted in the receipt of funds that exceeded the amount of the funds due and owing under the Deed of Trust foreclosed upon and the costs and expenses of such sale.  Petitioner was unable to reasonably determine how said “surplus funds” should be distributed and therefore sought to deposit said surplus funds with the Clerk of the Court pursuant to California Civil Code Section 2924j(c).

On 7/12/22, the Court signed an order to deposit surplus funds in the amount of $93,822.20 and upon such deposit discharged Petitioner of further responsibility for the disbursement of the surplus funds and excused Petitioner from further participation in the case, including attendance at future hearings. 

On 7/27/22, pursuant to Civil Code 2924j(d), the Court sent notice of the hearing on claims to determine surplus funds which was scheduled for 9/28/22 to all claimants identified in the trustee’s declaration at the addresses specified therein.  On 8/24/22, the Court continued the 9/28/22 hearing to 10/3/22 providing notice to Petitioner.  On 8/29/22, Petitioner mailed notice of the continuance to all claimants identified in the trustee’s declaration at the addresses specified therein. 

On 6/29/22, Victor Avila Cortez through a Power of Attorney granted to Christopher Bryan Avila filed a claim for the surplus funds.

The petition explains that Victor Avila Cortez (Victor) and Margarita Avila (Margarita), were the former owners of the subject property and held title to the property as “Victor Avila Cortez and Margarita Avila, Husband and Wife as Joint Tenants.”  Margarita died in 2019, prior to the date of the foreclosure sale.  (See Petition, Attachment 11). 

As the owner of the subject property just prior to the foreclosure sale, Victor would have been entitled to any remaining surplus funds after any liens were satisfied and/or resolved.  On October 22, 2021, the Trustee received a representation letter from Disbursement Group claiming to represent the interests of Chris Avila (Chris), alleged power of attorney to Victor in regard to the disbursement of surplus funds.  Trustee also received a written claim form and copy of Power of Attorney form.  The Trustee hired a private investigator, Howard W. Rhoads, Jr. (Howard) to confirm the photograph on the driver’s license as well as the information provided on the claim submitted by Chris.  (See Petition, Attachment 11).

In his investigation, Howard located a Warranty Deed recorded on February 14, 2020, as Instrument No. 20200187203 conveying the subject property to Polk Palace Trust.  Trustee reached out to the title company, ServiceLink that issued the Trustee’s Sale Guarantee who advised the Warranty Deed was missed.  As the Warranty Deed was properly recorded within the chain of title, the true owner of the subject property at the time of the sale is Polk Palace Trust.  Upon receipt of this information, Trustee mailed a claim form to Polk Palace Trust; however, no claim form was received by Trustee from Polk Palace Trust.  Additionally, Chris Avila, power of attorney to Victor Avila Cortez, stated there was no knowledge of the conveyance to Polk Palace Trust, and still maintains a claim to the surplus funds.  As a result, the Trustee is/was unable to determine how the surplus funds should be distributed.  Therefore, the Trustee filed the instant petition pursuant to California Civil Code 2924j(b).  (See Petition, Attachment 11). 

Polk Palace Trust was not identified in the trustee’s declaration as a potential claimant and was not listed in the “Certificate of Service” attached to the Petition.  (See Petition, pp.72-74).  Therefore, Polk Palace Trust was also not served by the Court with Notice of Hearing on Claims to Determine Disbursement of Surplus Funds.  (See Notice of Hearing filed 7/27/22). 

The Warranty Deed indicates the Trustee for Polk Palace Trust is Felipe De Jesus Torres Celaya and lists the address where the deed is to be mailed when recorded as the property address.  (Petition, Attachment 11, pp.69-70).

Because the evidence indicated that the owner of the subject property at the time of the trustee’s sale was Polk Palace Trust, it appeared that pursuant to Civil Code 2924k(a) Polk Palace Trust would be entitled to the surplus funds on deposit.

On 10/3/22, the Court continued the hearing to 11/7/22 to allow the Court to mail notice of the continued hearing date and the right to make a claim 15 days before the continued hearing date to Polk Palace Trust, Trustee, Felipe De Jesus Torres Celaya at 14954 Polk Street, Sylmar, CA 91342, which is the address where notice of the recording of the Warranty Deed was to be sent.  (See 10/3/22 Minute Order). Such notice was mailed by the Court on 10/4/22. 

Additionally, the Court ordered that at least 10 court days before the continued hearing date, Christopher B. Avila as Power of Attorney for Victor Avila Cortez must file a brief (limited to 10 pages); and/or a declaration, along with supporting evidence providing authority and evidence to establish how/why Victor Avila Cortez would be entitled to the surplus funds rather than Polk Palace Trust.  (See 10/3/22 Minute Order, p.4).  The Court noted that even if Polk Palace Trust did not file a claim, such information and evidence must be provided by Christopher B. Avila as Power of Attorney for Victor Avila Cortez before the Court could distribute the surplus funds to Christopher B. Avila as Power of Attorney for Victor Avila Cortez.  

On 11/2/22, 3 court days before the continued hearing date, Christopher Avila filed a late “Brief Re: Fraudulent Claims of Polk Palace Trust and Prudential Equity  Group, LLC” (Brief).  Despite the late filing, the Brief was considered by the Court.  See CRC 3.1300(d).

The Brief made claims without any supporting evidence.  For example, the Brief stated:

The California Secretary of State website does not have a current listing for Polk Palace Trust or Prudential Equity Group, LLC. The website reflects entities with the same or similar names have been withdrawn or suspended in the past. But no listing contains both the entity name and the name of either Hector Carillo or Felipe De Jesus Torrez. Neither entity is properly in the chain of title for the Foreclosed Property. No deed appears of record from Mr. Cortez to Prudential Equity Group, LLC.  (See Brief, p.3:2-8).

The Brief further stated:

A search for the identity of Hector Carillo, the signatory for Prudential Equity Group, LLC was unsuccessful due to the lack of a viable address and the commonness of the name. A search for Felipe De Jesus Torrez uncovered only a retired parish priest residing in Sydney, Australia. The Chain of Title Data Sheet from First American Title Company (Exhibit "E") shows no conveyances between the 2004 purchase by Mr. Cortez and the 2021 foreclosure sale.  (See  Brief, p.3:14-21).

Based on the foregoing, the hearing was continued to 12/7/22 to allow Christopher B. Avila as Power of Attorney for Victor Avila Cortez to provide evidence in support of the foregoing statements (i.e., a declaration under penalty of perjury from the person who conducted the above-mentioned searches and any supporting evidence of the results of those searches.  On 11/23/22, Christopher B. Avila’s attorney filed a declaration setting forth efforts made to provide notice and requested a continuance of the hearing for 30 days or more to give an entity recently served time to appear.  (See Greco Decl.).  As a result, the hearing was continued to 1/20/23.

No appearance has been made by the entity attorney Greco indicated was served in his declaration filed on 11/23/22. 

On 1/13/23, another declaration of Christopher Avila was filed indicating his familiarity with the property and his claim that only homeless individuals have occupied the property since his family vacated.

Based on the foregoing, the Court finds that Christopher B. Avila as Power of Attorney for Victor Avila Cortez has made a sufficient showing to the entitlement of the surplus funds deposited with the Court in relation to this matter.  See Civil Code 2924k