The court rules as follows on the claim regarding undistributed surplus proceeds –

This matter is set for judicial resolution of claims to, or disposition of, funds in the amount of $50,769.21 from a trustee’s sale of the real property located at 2700 Hartford Ave, Fullerton, CA 92835 deposited by Petitioner Old Republic Default Management Services  pursuant to Civ. Code § 2924j.

Facts/Overview:

The property located at 2700 Hartford Ave, Fullerton, CA 92835 was the subject of a trustee’s sale on 10/22/10.  The former owners of the property were Andrew C. Van Cleve and Sandra Kay Van Cleve.  After payment of the amount required by Civ. Code § 2924(a)(1)-(2), the surplus proceeds available to potential claimants was $54,053.86.  Following payment of the trustee’s fees and costs, and the court filing fee, there remained $50,274.21 to be deposited with the court pursuant to Civ. Code § 2924j(c).  Petitioner Old Republic Default Management Services sought to deposit this amount with the court.

 

The court ordered the deposit of surplus funds on 10/9/13. Thereafter, the court clerk mailed notice of a claims hearing.  So did Petitioner.  No claims have been filed, though it does appear that Andrew Van Cleve attempted to file something because the court file includes a notice of rejection of electronic filing for something submitted by Andrew Van Cleve on 11/21/13.

 

Analysis:

 

Following a foreclosure, if the trustee has failed, after due diligence, to determine the priority of the claims within 90 days following the 30–day notice period, the trustee must deposit the funds with the court clerk or file an interpleader action. Civ. Code §2924j(b)-(d). Once the funds are deposited with the court, the court clerk gives notice to the claimants and must “serve written notice of the hearing by first-class mail on all claimants identified in the trustee’s declaration at the addresses specified.” The hearing date must take place within 90 days. The court must consider claims filed at least 15 days before the scheduled hearing date. At the hearing, the court orders distribution of the deposited funds. Civ. Code § 2924j(d).

 

Here, the court granted Old Republic’s petition to deposit the funds with the court, set a date for hearing within 90 days, and the court clerk served notice on potential claimants – all as required by Civ. Code § 2924(d).  No claims have been received.  It does appear, however, that the prior owner, Andrew C. Van Cleve may have attempted to file a claim.

 

Mr. Van Cleve may appear at the hearing to assert a claim, or the court may otherwise decide to continue the hearing to permit him to file a written claim.

 

While section 2924j(d) sets a particular time line for the court’s hearing of claims, and when the claims should be made in relation to that hearing, the statute does not establish that no claims or distributions can be made after that time.  Civil Code §2924j(a)(4) requires claims to be filed not as a method for perfecting the claim, but rather as a “safe harbor” in which the trustee can safely distribute without fear of litigation.  See Banc of America Leasing & Capital, LLC vs. 3 Arch Trustee Services, Inc. (2009), 180 Cal.App.4th 1090, 1101-04.  Moreover, cases have held that those with vested rights recorded within the chain of title are not required to file claims in order to be considered “claimants” to the surplus funds.  See Quality Loan Service Corp. vs. All Claimants To Surplus Funds (C.D. Cal. 2008) WL 4260861 at *6 (finding IRS had vested right and did not need to file claim).

 

Where there are surplus proceeds, the statute sets the priority for distribution. It is undisputed that under Civil Code § 2924k(a)(4), after the outstanding balance of obligations secured by any junior liens or encumbrances in the order of priority are satisfied, the remainder of any surplus proceeds must be disbursed to the trustor or the trustor’s successor in interest.  Here, that is Mr. Cleve and his wife Sandra Kay Van Cleve.

 

Accordingly, if either of the Van Cleve’s wishes to assert a claim the court will afford them an opportunity to do so. Thereafter, the court will order distribution of the funds pursuant to statute.

 

If no claims are made, the funds will remain on deposit for three years and thereafter will escheat to the State.  Code Civ. Proc. § 1519. The court will issue an order that the funds are to escheat to the State three years from now.