Judge: Melvin D. Sandvig, Case: 22CHCP00361, Date: 2023-02-09 Tentative Ruling
Case Number: 22CHCP00361 Hearing Date: February 9, 2023 Dept: F47
Dept. F47
Date: 2/9/23
Case #22CHCP00361
HEARING ON CLAIMS
TO DETERMINE DISBURSEMENT OF SURPLUS FUNDS
Petition filed on 10/17/22.
RULING:
Petitioner National Default Servicing Corporation
(Petitioner) was the Trustee under a Deed of Trust executed by Bank Diamonds,
an unmarried man. The Deed of Trust was
secured by real property commonly known as 28870 Woodside Drive, Santa Clarita,
CA 91390 which was sold at a non-judicial foreclosure sale on 12/16/21 after a
default under the terms of the Deed of Trust.
The non-judicial foreclosure sale resulted in the receipt
of $91,390.83 in surplus funds after funds due and
owing under the Deed of Trust and the costs of expenses of the sale were
deducted from the sale price. Petitioner
provided written notice to all persons with a recorded interest in the real
property who would be entitled to notice.
Petitioner received 4 potential claims from potential claimants.
Pursuant to the Trustee Sale Guarantee, Petitioner
identified the following liens on the subject property:
1. A Tax Lien in favor of State of California Board of
Equalization recorded on 02/13/2017 as instrument number 20170175826;
2. A Tax Lien recorded by Franchise Tax Board of the
State of California on 11/29/2017 as instrument number 20171375203;
3. A Mortgage with Power of Sale in favor of The
Secretary of Housing and Urban Development recorded on 06/15/2018 as instrument
number 20180596234;
4. A Tax Lien in favor of State of California Department
of Tax and Fee Administration recorded on 06/18/2018 as instrument number
20180601987;
5. A Tax Lien in favor of State of California Department
of Tax and Fee Administration recorded on 06/18/2018 as instrument number
20180601990; and
6. An Order to Withhold Personal Income Tax by Franchise
Tax Board of the State of California.
On or about March 30, 2022, Franchise Tax Board of the
State of California submitted their claim (2nd in line) in the
amount of $433,836.37 and the Order to Withhold Personal Income Tax (6th
in line) in the amount of $3,354.44.
On or about April 28, 2022, State of California
Department of Tax and Fee Administration submitted their claim (4th
and 5th in line) in the amount of $233,588.87.
On or about May 27, 2022, The Secretary of Housing and
Urban Development submitted their claim (3rd in line) in the amount
of $176,974.58.
On May 26, 2022, Petitioner was informed the State of
California Department of Tax and Fee Administration (4th and 5th
in line) and the State of California Board of Equalization (1st in
line) merged into a single entity: State of California Department of Tax and
Fee Administration. This new entity
submitted only one claim and combined the amounts owed under the 1st,
4th, and 5th liens noted above. However, there are not enough surplus funds
available to pay beyond the lien 2nd in line. Accordingly, the liens of the formerly known
State of California Department of Tax and Fee Administration (4th
and 5th in line) would not be entitled or receive any funds from the
Trustee’s sale. Petitioner reached out
approximately 11 times by phone and email (weekly since May 26, 2022) in
attempt to have this particular claimant separate the amounts owed to the
former named entities. As of the date of
this petition, no response had been received.
(See Petition, Attachment 11a).
As a result, Petitioner was unable to determine how the
surplus funds should be distributed, because without a breakdown as to how much
of the funds are to be paid to the formerly known entity of the State of
California Board of Equalization (1st in line), Petitioner could not
determine what, if any, amounts should be paid to 2nd lienholder to
be paid. Therefore, on 10/17/22,
Petitioner filed a Petition and Declaration Regarding Unresolved Claims and
Deposit of Undistributed Surplus Proceeds of Trustee’s Sale seeking to deposit
$91,390.83 with the Court.
On 10/18/22, this Court signed the order granting the
petition to deposit undistributed surplus proceeds of the trustee’s sale. On 12/6/22, the Court sent notice to all
potential claimants identified in the petition that a hearing on claims to
determine disbursement of surplus funds on deposit was set for 2/9/23 and that
all potential claimants must file and serve their claim to surplus funds within
15 days of the hearing pursuant to Civil Code 2924j(d).
On 1/24/23, California Department of Tax and Fee
Administration (the Department), through the Attorney General of California, filed
a timely Claim to the Surplus funds indicating that as of 12/31/22, Bank
Diamonds is indebted to the Department for delinquent tax, penalties, interest
and collection fees and costs in the amount of $241,501.37. The claim attaches 8 Notices of State Tax
Liens recorded by the Department on various dates beginning on 10/26/16 and
ending on 2/3/22:
10/26/16 - Notice of State Tax Lien recorded in the
amount of $25,426.08
12/14/16 – Notice of State Tax Lien recorded in the
amount of $1,920.09
2/13/17 – Notice of State Tax Lien recorded in the amount
of $23,004.86
10/18/17 – Notice of State Tax Lien recorded in the
amount of $44,717.48
10/18/17 – Notice of State Tax Lien recorded in the
amount of $14,152.25
6/18/18 – Notice of State Tax Lien recorded in the amount
of $25,541.94
6/18/18 – Notice of State Tax Lien recorded in the amount
of $760.00
2/3/22 – Notice of State Tax Lien recorded in the amount
of $70,805.61
(See Department Claim filed 1/24/23 – Ex.1-9).
On 2/7/23, the State of California Franchise Tax Board
(FTB), also through the Attorney General of California, filed a late Claim to
Surplus Funds. In this late claim, FTB
states that as of 2/2/23, the total amount owed to FTB by Bank Diamonds based
on FTB’s recorded liens is $449,412.14 with interest accruing at a daily rate
of $61.56. FTB attaches a copy of the
Certificate of Tax Due and Delinquency dated 2/2/23 but does not attach copies
of the recorded liens. (See FTB
Claim filed 2/7/23. FTB’s claim and the
attached Certificate of Tax Due and Delinquency are inconsistent as to the
dates FTB recorded certain of its tax liens.
FTB’s claim contends that on:
4/26/17 – FTB recorded a Notice of State Tax Lien in the
amount of $27,395.08
4/26/17 – FTB recorded a Notice of State Tax Lien in the
amount of $32,334.56
11/29/17 – FTB recorded a Notice of State Tax Lien in the
amount of $119,554.06
1/24/19 – FTB recorded
a Notice of State Tax Lien in the amount of $188,103.87
However, the Certificate of Tax Due and Delinquency
attached to FTB’s claim as Exhibit A indicates that liens were recorded on
4/26/17, 11/26/17, 10/10/18 and 1/24/19.
Based on the recording dates, the Department has priority
on its liens recorded on 10/26/16, 12/14/16 and 2/13/17 which total
$50,351.03. FTB’s tax lien or liens
recorded on 4/26/17 would have priority over the next tax liens recorded by the
Department on 10/18/17 and later.
However, because of the inconsistency mentioned above in FTB’s claim and
the attached Notice of Delinquency, the Court cannot determine which of FTB’s
liens were recorded on 4/26/17 and/or the amounts. As such, the Court cannot determine how much
of the money on deposit FTB is entitled to receive.
The hearing will be continued to allow FTB to submit
copies of the recorded Notices of Tax Liens so that the Court can determine the
amounts to be distributed to the Department and FTB.