Judge: Robert S. Draper, Case: 22STCV13440, Date: 2023-04-05 Tentative Ruling

Case Number: 22STCV13440    Hearing Date: April 5, 2023    Dept: 78

Superior Court of California

County of Los Angeles

Department 78

Plaintiff Capital Trust Escrow’s Motion for an Order of Discharge and Dismissal is GRANTED.

Plaintiff Capital Trust Escrow’s Motion for Attorneys’ Fees and Costs is GRANTED in the amount of $9,584.50 in attorneys’ fees, $3,100.00 in escrow fees, and $1,255.79 in costs.

Cross-Complainant Juan Carlos Murillo Garcia’s Application for Default Judgment is CONTINUED for 60 days. Within thirty days, Cross-Complainant is to file supplemental briefing as to why the requested award may be separately entered on the cross-complaint without substantially delaying the final disposition of the action between the parties pursuant to Code of Civil Procedure section 585(e). Any opposition Defendants may have is due nine court days before hearing. Any reply is due five court days before hearing.

FACTUAL BACKGROUND

This is an interpleader action. The Complaint alleges as follows.

On or about July 2, 2021, Defendant Cristian Gomez-Hernandez (“Seller”) agreed to sell to Defendant Juan Carlos Murillo Garcia (“Buyer”) a restaurant business and liquor license. (Compl. ¶ 9.) The transfer was to be made through an escrow agent, Plaintiff Capital Trust Escrow (“Plaintiff”). (Ibid.)

On July 21, 2020, Defendants opened an Escrow with Plaintiff and Buyer deposited $63,700.00 into the escrow account. (Compl. ¶ 9; Ex. A.) Defendant California Department of Tax and Fee Administration (“CDTFA”) served on Plaintiff a notice of lien and other notices. (Compl. ¶ 10; Ex. B.) Defendant California Employment Development Department (“CEDD”) has similarly recorded liens and sent notices of levy to Plaintiff as escrow holder. (Compl. ¶ 12; Ex. C.) Finally, Defendant Merced County (“Merced County”) has recorded liens and sent demand to Plaintiff as escrow holder. (Compl. ¶ 13; Ex. D.)

Plaintiff understands on information and belief that Buyer and Seller have exchanged the restaurant for consideration outside of escrow. (Compl. ¶ 15.) Buyer and Seller have not responded to communication from Plaintiff, and mutual cancellation has not been executed. (Ibid.)

The Escrow Agreement allows Plaintiff to file an interpleader action in the case of conflicting demands to the Escrow. (Compl. ¶ 17; Ex. A.) Plaintiff seeks to deposit the sums with the Court in an interest-bearing account pursuant to the California Code of Civil Procedure. (Compl. ¶ 18.)

PROCEDURAL HISTORY

On April 21, 2022, Plaintiff filed the Complaint asserting a single cause of action for Interpleader.

On June 13, 2022, CDTFA filed an Answer.

On June 14, 2022, Buyer filed an Answer.

On August 15, 2022, Buyer filed a Cross-Complaint against Seller asserting three causes of action:

1.    Breach of Contract;

2.    Breach of Personal Guaranty; and,

3.    Intentional Misrepresentation

On August 16, 2022, Buyer filed a First Amended Cross-Complaint asserting the same three causes of action.

On August 17, 2022, Merced County filed an Answer to the Complaint.

On September 15, 2022, Plaintiff filed the instant Motion to Discharge and Dismiss.

On March 15, 2023, Seller entered default on the Cross-Complaint.

On March 27, 2023, Buyer filed the instant Application for Default Judgment.

No Opposition has been filed as to either the Motion to Dismiss or the Application for Default Judgment.

DISCUSSION

I.                MOTION FOR DISCHARGE AND DISMISSAL OF PLAINTIFF

Plaintiff moves the Court for an Order of Discharge and Dismissal and for Fees and Costs pursuant to CCP section 386.

Interpleader is a procedure whereby a person holding money or personal property to which conflicting claims are being made by others, can join the adverse claimants and force them to litigate their claims among themselves. (For example, an escrowholder who receives conflicting demands from the parties to the escrow regarding the funds or documents he or she holds.) (Hancock Oil Co. v. Hopkins (1944) 24 C2d 497, 508; City of Morgan Hill v. Brown (1999) 71 Cal.App.4th 1114, 1122.) 

Once the stakeholder’s right to interplead is established, and he or she deposits the money or personal property in court, he or she may be discharged from liability to any of the claimants. This enables the stakeholder to avoid a multiplicity of actions, and the risk of inconsistent results if each of the claimants were to sue him or her separately. (Cantu v. Resolution Trust Corp. (1992) 4 Cal.App.4th 857, 874; City of Morgan Hill v. Brown, supra, 71 Cal.App.4th at 1122.) 

“An interpleader action is traditionally viewed as two suits: one between the stakeholder and the claimants to determine the stakeholder's right to interplead, and the other among the claimants to determine who shall receive the funds interpleaded ... As against the stakeholder, claimants may raise only matters which go to whether the suit is properly one for interpleader; i.e., whether the elements of an interpleader action are present.” (State Farm Fire & Cas. Co. v. Pietak (2001) 90 Cal.App.4th 600, 612.) 

If the defendant stakeholder claims no interest in the funds or property held, he or she need not file an interpleader cross-complaint. He or she may simply apply to the court for permission to deposit the money or property with the court clerk, and for an order discharging him or her from further liability to the adverse claimants. Such order will also substitute the adverse claimants as parties to the action; or, if only money is involved, simply dismiss the stakeholder. (Code Civ. Proc., §§ 386, subd. (a), 386.5.) The motion must be supported by an affidavit by the stakeholder establishing the ground for interpleader. (Code Civ. Proc., § 386, Subd. (a).) The supporting affidavit must also state that the moving party 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…” (Code Civ. Proc., § 386.5.) Notice of the motion must be served on each of the adverse claimants to the funds or property. (Code Civ. Proc., §§ 386, subd. (a), 386.5.) “Where a deposit has been made pursuant to Section 386, the court shall, upon the application of any party to the action, order such deposit to be invested in an insured interest-bearing account.” (Code Civ. Proc., § 386.1.)  

The stakeholder may seek reimbursement for its costs and reasonable attorneys’ fees incurred. (UAPColumbus JV 326132 v. Nesbitt (1991) 234 Cal.App.3d 1028, 1036.) The court may order payment thereof out of the funds deposited by the stakeholder. (Code Civ. Proc., § 386.6.)

Here, Plaintiff notes that buyer and seller deposited $63,700.00 into escrow, of which $61,207.87 remains after deduction for expenditures authorized under the Agreement. (Gambayan Decl. ¶ 5; Ex. B.) The escrow did not close, but it appears Buyer has taken possession of the restaurant. (Gambayan Decl. ¶ 6.) In addition, during the course of escrow Plaintiff discovered that CDTFA, CEDD, and Merced County had recorded liens on the business, which potentially applied to the funds in escrow. (Gambayan Decl. ¶ 7.) Buyer has expressed a desire to close escrow, while Seller has not provided instructions. (Gambayan Decl, ¶ 8.) Additionally, government defendants have all appeared in this action and claimed an interest in the fund. (Ibid.)

Gambayan states that Plaintiff is disinterested as to whom should be paid the subject funds and is a “mere stakeholder and has no other legal relationship any of the Defendants.” (Gambayan Decl. ¶ 9.)

Accordingly, the Court finds that Plaintiff has satisfied the requirements of CCP section 386 and Plaintiff’s Motion for an Order of Discharge and Dismissal is GRANTED. 

In addition, Plaintiff seeks reasonable attorneys’ fees in the amount of $9,584.50, $3,100.00 in escrow fees, and $1,255.79 in costs.

CCP section 386.6 states that a “party to an action who follows the procedure set forth in Section 386 or 386.5 may insert in his motion. . . a request for allowance of his costs and reasonable attorney fees incurred in such action.”

Here, Plaintiff requests $9,584.50 in attorneys’ fees, representing 22.2 hours of attorney time billed at $430 per hour. (Adler Decl ¶ 9; Ex. D.) The Court finds this amount reasonable.

Plaintiff requests $1,255.79 in legal costs related to the instant action. (Adler Decl. ¶ 10; Ex. D.) The Court finds this amount reasonable, and the claimed costs proper.

Plaintiff’s Motion to Discharge and Dismiss is GRANTED. The order is to be entered as proposed.

II.              APPLICATION FOR DEFAULT JUDGMENT

Next, Buyer seeks Default Judgment against Seller as to the Cross-Complaint pursuant to Code of Civil Procedure section 585(c).

Section 585(c) states, in relevant part:

In all actions where the service of the summons was by publication, upon the expiration of the time for answering, and upon proof of the publication and that no answer [or] demurrer . . . has been filed, the clerk, upon written application of the plaintiff, shall enter the default of the defendant. The plaintiff thereafter may apply to the court for the relief demanded in the complaint; and the court shall hear the evidence offered by the plaintiff, and shall render judgment in the plaintiff’s favor for that relief . . . as appears by the evidence to be just.

While Seller has entered Default on the Cross-Complaint and Buyer has submitted the documentation necessary for default judgment, Buyer fails to address whether judgment is appropriately entered separately from the interpleader action pursuant to Code of Civil Procedure section 585(e).

Section 585(e) states, in relevant part:

If a defendant files a cross-complaint against another defendant or the plaintiff, a default may be entered against that party on that cross-complaint if the plaintiff or that cross-defendant has been served with that cross-complaint and has failed to file an answer [or] demurrer . . . within the time specified in the summons, or within another time period as may be allowed. However, no judgment may separately be entered on that cross-complaint unless a separate judgment may, in fact, be properly awarded on that cross-complaint and the court finds that a separate judgment on that cross-complaint would not substantially delay the final disposition of the action between the parties. (Emphasis added.)

Upon review of the Cross-Complaint and Buyer’s Application for Default Judgment, it appears that through the Cross-Complaint, Buyer attempts to assert his entitlement to the escrow amount due to Seller’s alleged breach of contract. As Defendants’ respective entitlements to the escrow amount is precisely the matter to be adjudicated in the initial Complaint, the Court is skeptical as to whether judgment may be properly entered separately in this matter.

However, as Buyer does not address the propriety of separate judgment in his Application, and as no other Defendant has addressed the matter, the Court wishes to hear discussion as to the propriety of separate judgment.

Accordingly, the hearing on Cross-Complainant’s Application for Default Judgment is CONTINUED for 60 days.

Cross-Complainant is to submit supplemental briefing regarding the above matter within thirty days.

Defendants may file any opposition by nine court days before hearing if they so wish.

Cross-Complainant may submit any reply by five court days before hearing if he so wishes.

DATED: April 3, 2023  

          ________________________________ 

Hon. John P. Doyle

Judge of the Superior Court