Case Number: BS158717??? Hearing Date: April 25, 2016??? Dept: 78

Superior Court of California
County of Los Angeles
Department 78

TRUSTEE CORPS;

Petitioner,

vs.

ALL CLAIMANTS TO SURPLUS FUNDS AFTER TRUSTEE?S SALE OF REAL PROPERTY LOCATED AT: 5827 CAHILL AVENUE, LOS ANGELES, CA 91356;

Respondents. Case No.: BS158717

Hearing Date: April 25, 2016

[TENTATIVE] RULING RE:

CLAIMANT JPMORGAN CHASE BANK, NATIONAL ASSOCIATION, SUCCESSOR IN INTEREST BY PURCHASED FROM THE FDIC AS RECEIVER OF WASHINGTON MUTUAL BANK F/K/A WASHINGTON MUTUAL BANK, FA?S MOTION FOR DISTRIBUTION OF SURPLUS FUNDS TO JP MORGAN CHASE BANK, N.A.

The court orders the Trustee to deposit the surplus funds with the clerk by ______________, 2016. Thereafter, the court clerk is to set a final hearing date regarding the distribution of the surplus funds at least 20 days after the date of deposit, and serve notice of the new hearing date on all parties listed in Attachment 8 to the Trustee?s Petition. The court will consider any additional claims filed at least 15 days before the final hearing date in making its final ruling.

Assuming the Silver Star entities do not make a superior claim on the funds, the court will grant Chase?s Motion for Distribution of Surplus Funds in the amount of $58,200. Absent any additional claims superior to Fadel?s, the court also will grant Fadel?s Claim on the funds as to the remaining funds of $827.52.

FACTUAL BACKGROUND

The property located at 5827 Cahill Avenue, Los Angeles, CA 91356 (the ?Property?) was subject to a trustee?s sale held on April 10, 2014. (Petition ? 4.) The total sale price was $609,000, and after payments of the amounts required by Civil Code section 2924k(a)(1)?(2), there were surplus proceeds of $67,237.97. (Petition ?? 6, 7.) The Trustee has received two written claims from potential claimants to the surplus proceeds, and has determined that there is a conflict between the potential claimants. (Id. ?? 9?11.) The two junior liens are held by (1) Washington Mutual Bank, and (2) Silver Star Construction, Inc. and Silver Star Construction, Inc., A California Corporation (collectively, the ?Silver Star entities.?) (Attachment 11b at pp. 17?18.) Should any surplus funds remain after satisfaction of the junior liens, Rami R. Fadel (?Fadel?), as prior owner of the Property, is entitled to the remaining surplus funds. (Attachment 11b at p. 18.)

On May 7, 2014, written Notice of Surplus Funds was sent to the potential claims listen on attachment 8 to the Petition. (Attachment 11b at p. 18.) The Trustee received claims from Fadel and JP Morgan Chase Bank, NA, as successor in interest to Washington Mutual Bank (?Chase?). (Id.) Fadel?s claim was made on June 19, 2014 (Attachment 11b Ex. A.) and Chase?s claim was made on December 12, 2014. (Attachment 11b Ex. B.) The Trustee was informed of pending litigation directly concerning the Property related to the validity of the foreclosure sale of the Property, and Fadel has objected to Chase?s claim to the Surplus Funds. (Attachment 11b at p. 18.) Fadel filed his Complaint on February 19, 2015 challenging the Trustee?s sale. (Id. at p. 18, Exs. C, D.) The Trustee therefore states that the outcome of the litigation directly affects the validity of the Surplus Funds, and seeks to deposit the funds with the court clerk. (Id. at pp. 18?19.)

PROCEDURAL HISTORY

The Trustee filed its Petition on November 3, 2015. Chase filed its Claim to the Surplus Funds on November 17, 2015. Fadel filed his Claim on January 26, 2016.
Chase filed its Motion for Distribution on March 23, 2016. Fadel filed his Opposition on April 12, 2016. Chase filed its Reply on April 18, 2016.
On April 19, 2015, Chase and Fadel filed a stipulation to the deposit of $59,027.52 of the Surplus Funds with the court. The court signed this stipulation on April 21, 2016.

DISCUSSION

I. REQUEST FOR JUDICIAL NOTICE

The court may take judicial notice of ?official acts of the legislative, executive, and judicial departments of the United States and of any state of the United States,? ?[r]ecords of (1) any court of this state or (2) any court of record of the United States or of any state of the United States,? and ?[f]acts and propositions that are not reasonably subject to dispute and are capable of immediate and accurate determination by resort to sources of reasonably indisputable accuracy.? (Evid. Code ? 452, subds. (c), (d), and (h).)

Chase requests that the court take judicial notice of the following documents:

1. Claim of Chase filed in the instant matter on November 17, 2015;
2. Declaration in support of Chase?s claim filed in the instant matter on November 17, 2015;
3. Deed of Trust, recorded on January 3, 2008 in the Official Records of the County of Los Angeles as document number 20080010963, in connection with the real property commonly known as 5827 Cahill Aye, Tarzana, CA 91356, in the principal amount of $67,501, with original lender of Washington Mutual and borrower of Rami R. Fadel.

Fadel opposes this request for judicial notice to the extent that Chase requests the court take judicial notice of the truth of content of the documents, specifically, the amount owed under the Note and Deed of Trust.

Chase?s Request for Judicial Notice is GRANTED for the limited purpose set forth in Fontenot v. Wells Fargo Bank, N.A. (2011) 198 Cal.App.4th 256, 264?67: ?[The] court may take judicial notice of the fact of a document’s recordation, the date the document was recorded and executed, the parties to the transaction reflected in a recorded document, and the document’s legally operative language, assuming there is no genuine dispute regarding the document’s authenticity.?

II. OBJECTIONS

Fadel Objections

? Objections No. 1?6 are OVERRULED.

III. MOTION FOR DISTRIBUTION OF SURPLUS FUNDS

Civil Code section 2924j subdivision (c) provides: ?If, after due diligence, the trustee is unable to determine the priority of the written claims received by the trustee to the trustee’s sale surplus of multiple persons or if the trustee determines there is a conflict between potential claimants, the trustee may file a declaration of the unresolved claims and deposit with the clerk of the superior court of the county in which the sale occurred, that portion of the sales proceeds that cannot be distributed, less any fees charged by the clerk pursuant to this subdivision.?

Subdivision (d) provides ?[b]efore the trustee deposits the funds with the clerk of the court pursuant to subdivision (c), the trustee shall send written notice by first-class mail, postage prepaid, to all persons described in subdivision (a) informing them that the trustee intends to deposit the funds with the clerk of the court and that a claim for the funds must be filed with the court within 30 days from the date of the notice, providing the address of the court in which the funds were deposited, and a telephone number for obtaining further information.? Within 90 days after deposit with the clerk, ?the court shall consider all claims filed at least 15 days before the date on which the hearing is scheduled by the court, the clerk shall serve written notice of the hearing by first-class mail on all claimants identified in the trustee’s declaration at the addresses specified therein.?

The Trustee filed its Notice of Petition to Deposit Surplus funds on November 3, 2015, and served it on Chase, Fadel, and the Silver Star entities by mail on November 5, 2015, filing the proof of service of the Notice on November 6, 2015.

On January 27, 2016, this court set the motion for distribution for April 25, 2016 and ordered the parties to meet and confer regarding deposit of funds by the Trustee. On April 21, 2016, the court signed the stipulation by Chase and Fadel that the Surplus Funds should be deposited, although the funds have not actually been deposited to the court. (See Reply at p. 2.)

Under section 2924j, it appears that the court should not have set the motion for distribution on January 27, 2016, because the funds had not actually been deposited with the court clerk. Although the Notice sent to all potential claims is required to inform them that ?a claim for the funds must be filed with the court within 30 days from the date of the notice,? the court must also consider ?all claims filed at least 15 days before the date on which the hearing is scheduled by the court.? Notice of this hearing must be served by ?the clerk? of the court on all parties ?identified in the trustee?s declaration.? Therefore, although the Notice sent out to all potential claimants is required to inform the claimants that they must file their claims within 30 days, the court nevertheless must consider all claims filed with 15 days of the hearing, the notice of which cannot be sent until the court clerk receives the actual deposit of the funds. Therefore, the court must consider claims made more than 30 days after notice of the Petition is served on potential claims. The court also notes that no notice of the April 25, 2016 hearing on Chase?s Motion for Districtuion has been served on the Silver Star entities.

The court clerk is responsible for serving written notice of the hearing. Without this notice, the period for making claims to the Surplus Proceeds has not closed, which occurs only 15 days before the hearing date. Without notice from the clerk to all parties identified by the Trustee of the hearing date, parties may not be aware that they need to file a claim to the Surplus Funds. The court is specifically concerned with Silver Star Construction, Inc. and Silver Star Construction, Inc., a California Corporation, two claimants with junior liens to the funds. Although these two corporations did not make a claim on the funds after being served with the May 7, 2014 Notice of Surplus Funds sent by the Trustee or the November 5, 2015 Notice of Petition to Deposit Surplus Funds, they may wish to now make a claim against the Surplus Funds, and as shown above, the court must consider any Claim filed with 15 days of the hearing date as noticed by the court clerk.

Accordingly, the court orders the Trustee to deposit the surplus funds with the clerk by ______________, 2016. Thereafter, the court clerk is to set a final hearing date regarding the distribution of the surplus funds at least 20 days after the date of deposit, and serve notice of the new hearing date on all parties listed in Attachment 8 to the Trustee?s Petition. The court will consider any additional claims filed at least 15 days before the final hearing date in making its final ruling.

However, the court notes that the Silver Star entities did not make a prior claim, and only two claims have been filed in this action. Additionally, even if the Silver Star entities made a claim, it appears that Chase?s lien would be superior to their lien, and would be entitled to priority. The court will therefore consider both claimants? claims to the Surplus Funds and issue this tentative ruling on those claims. Absent any additional claims being filed after the court clerk sets the final hearing date, this tentative ruling will become the final order of the court.

Civil Code section 2924k provides that:

(a) The trustee, or the clerk of the court upon order to the clerk pursuant to subdivision (d) of Section 2924j, shall distribute the proceeds, or a portion of the proceeds, as the case may be, of the trustee’s sale conducted pursuant to Section 2924h in the following order of priority:
(1) To the costs and expenses of exercising the power of sale and of sale, including the payment of the trustee’s fees and attorney’s fees permitted pursuant to subdivision (b) of Section 2924d and subdivision (b) of this section.
(2) To the payment of the obligations secured by the deed of trust or mortgage which is the subject of the trustee’s sale.
(3) To satisfy the outstanding balance of obligations secured by any junior liens or encumbrances in the order of their priority.
(4) To the trustor or the trustor’s successor in interest. In the event the property is sold or transferred to another, to the vested owner of record at the time of the trustee’s sale.

Chase?s deed of trust was recorded on January 3, 2008. (RJN Ex. 3.) Chase submits the declaration of Myra M. Moore, an employee of Chase who has reviewed Chase?s business records. Chase has submitted its original Note, which was for $67,501.00. (Moore Decl. Ex. 1.) This note was secured by a deed of trust on the Property. (Moore Decl. Ex. 2.) Moore provides documentation that the outstanding balance of the loan is $58,200. (Moore Decl. ? 4, Ex. 3.) Chase has therefore submitted evidence that it has a priority claim to the surplus funds in the amount of $58,200. Although the court cannot take judicial notice of the facts contained within the deed of trust, the court may determine which claimant has priority to the surplus funds based on the evidence submitted to it, which includes the Moore declaration attached to Chase?s Claim. Fadel has not submitted any evidence that the amount owed to Chase has been paid off or is in any lesser amount.

In his Claim, Fadel argues that he is entitled to the entirety of the surplus funds because the Trustee failed to timely process and pay the proceeds to Fadel within 30 days of the statutory non-judicial notice period in Civil Code section 2924j, subdivision (a). (Fadel Claim at pp. 3?6.)

Subdivision (b) provides that ?Unless an interpleader action has been filed, within 30 days of the execution of the trustee’s deed resulting from a sale in which there are proceeds remaining after payment of the amounts required by paragraphs (1) and (2) of subdivision (a) of Section 2924k, the trustee shall send written notice to all persons with recorded interests in the real property as of the date immediately prior to the trustee’s sale who would be entitled to notice pursuant to subdivisions (b) and (c) of Section 2924b.? Claims must be received by the Trustee no later than 30 days after the date the trustee sends notice to the potential claimant. (Id. subd. (a)(4)(C).)

Section 2924j, subdivision (b) then provides that ?[i]n the event there is no dispute as to the priority of the written claims submitted to the trustee, proceeds shall be paid within 30 days after the conclusion of the notice period. If the trustee has failed to determine the priority of written claims within 90 days following the 30-day notice period, then within 10 days thereafter the trustee shall deposit the funds with the clerk of the court pursuant to subdivision (c) or file an interpleader action pursuant to subdivision (e).?

Fadel claims that the Trustee sent its Notice to potential claimants on May 7, 2014, and Fadel filed his claim on June 19, 2014. Chase did not file its claim until December 12, 2014. Fadel argues that ?because no other claims for the surplus funds were made to [the Trustee] 30 following the Notice date of May 7, 2014 . . . [the Trustee] should have immediately paid the surplus funds to Mr. Fadel no later than June 6, 2014.? (Fadel Claim at p. 4.)
However, as Fadel himself admits, Fadel did not file his claim until June 19, 2014, after the date he claims the Trustee was required to pay his claim. Regardless, the code sections Fadel relies on are applicable only ?in the event there is no dispute as to the priority of the written claims submitted to the trustee.? The Trustee determined that there was a dispute regarding priority, and therefore had no responsibility to simply pay the funds to Fadel. The fact that these claims were made more than 30 days after the Notice was sent, and therefore ?untimely,? is not relevant to their determination that there was a dispute. Fadel himself filed a Complaint on September 24, 2014 regarding the legality of the trustee?s sale. (See Petition Ex. C.) Although Fadel is correct that this Complaint sought only damages, and did not seek to set aside the trustee?s sale, the Trustee knew at this time that there was a dispute as to the surplus funds.

Because the Trustee determined that after due diligence it was unable to determine the priority of the written claims received by the trustee, including the two claims by Chase and Fadel, it exercised its rights under section 2924j, subd. (c) to file a declaration of unresolved claims and deposit the funds with the court. The Trustee was not obligated to pay the claims to Fadel himself simply because Chase did not made its claims within 30 days of the Trustee?s original May 7, 2014 notice. If Fadel?s arguments were correct, than Fadel?s claim to the funds would also be untimely as he himself made his claim more than 30 days after receiving notice of the surplus funds from the Trustee.

Chase has supported its Claim for $58,200 of the $59,027.52 of the Surplus Funds to be deposited with the court with evidence of its junior lien. Fadel has failed to show that he, as vested owner of the property at the time of the trustee?s sale, has a priority claim to surplus funds simply because Chase?s non-judicial claim on the funds was made more than 30 days after the Trustee?s May 7, 2014 notice. Assuming the Silver Star entities do not make a superior claim on the funds, the court will grant Chase?s Motion for Distribution of Surplus Funds in the amount of $58,200. Absent any additional claims superior to Fadel?s, the court also will grant Fadel?s Claim on the funds as to the remaining funds of $827.52.

Respondent Chase to give notice.

DATED: April 25, 2016 ________________________________
Hon. Gail Ruderman Feuer
Judge of the Superior Court