Case Number: BC490286 Hearing Date: January 26, 2015 Dept: 73
1/26/15
Dept. 73
Rafael Ongkeko, Judge presiding

OLD REPUBLIC, etc., vs. GREENER HOMES, etc., et al. and related cross-action (BC490286)

Motion of plaintiff, etc. Old Republic, etc. for order discharging stakeholder from liability, etc. (filed 12/19/14)

Tentative ruling:
The requests for judicial notice are granted.
The motion is granted, together with Plaintiff’s fees and costs in the amount of $9,085.00.
See below for details.

Discussion:
(Please note: Unfortunately, the court’s tentative ruling website, which is the source of this version, is not able to show certain formatting contained in the original, such as the court’s use of boldface, italics, or the underscoring of case citations):

Plaintiff seeks an order: 1) that it deposit with the Clerk the Interpled Funds, consisting of $233,262.50 with accrued interest alleged by Plaintiff in paragraphs 19b and 28 of the First Amended Complaint and the sum of $2,230.00 alleged by Plaintiff in paragraph 21c of the First Amended Complaint; 2) that upon depositing the funds, Plaintiff be discharged from any further liability relating to the Interpled Funds to any party to this action or to any entities owned or controleld by any part ro this action; 3) that any potential claimants to the Interpled Funds who are not presently parties to the action be substituted as defendants; and 4) that all parties to this action and all claimants to the Interpled Funds be restrained from instituting or further prosecuting their cross-complaints against Plaintiff in this action insofar as they may affect the rights and obligations between the parties and other claimants realting to the Interpled Funds.

Merits
If a defendant-stakeholder claims no interest in the funds or property held, the defendant may 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. (CCP §§ 386(a), 386.5.) The motion must be supported by an affidavit by the stakeholder establishing the ground for interpleader. (CCP §§ 386(a), 386.5.) Notice of the motion must be served on each of the adverse claimants to the funds or property. (CCP §§ 386(a), 386.5.)

“A party against whom double or multiple claims are made, or may be made, may bring a separate action compelling the claimants or potential claimants to interplead and litigate their claims inter se.” (Cantu v. Resolution Trust Corp. (1992) 4 Cal.App.4th 857, 874 [italics in original]). “It is the stakeholder’s avowed disinterest in the interpleaded proceeds which gives him the right to interplead.” (Id. at 873 [italics in original]).

A stakeholder may also seek reimbursement of costs and reasonable attorney fees incurred. (UAP-Columbus JV 326132 v. Nesbitt (1991) 234 Cal.App.3d 1028, 1036.) The court may, in its discretion, order payment thereof out of the funds deposited by the stakeholder. (Ultimately, such payment may be charged to one or more of the adverse claimants in the final judgment.) (CCP § 386.6; Wells Fargo Bank, N.A. v. Zinnel (2004) 125 Cal.App.4th 393, 400 [no fee award allowed where no funds deposited]; Canal Ins. Co. v. Tackett (2004) 117 Cal.App.4th 239, 244 [no fee award from interest accrued on interpleaded funds].)

This matter concerns a short sale in which Brian Dror was to sell real property located at 252 South June Street to Greener Homes, LLC. This property was encumbered by three deeds of trust. (SACC ¶17.) Greener Homes indicated it was in the business of conducting short sales, negotiating with lenders to forgive debt on realty with a market value less than the debt. (¶21.) Greener Homes represented that Bank of America would forgive a portion of the debt secured by the first and second deeds of trust on the property. (¶23.) Further, pursuant to Dror’s request, Cross-Complainant Ryzman would fund Greener Home’s purchase in the sum of $950,000 and take first position with a new deed of trust. (¶¶23, 24.)

New Venture Escrow, Inc.(“NVE”) was to act as escrow and under the partly written, partly oral Short Sale Agreement between Dror (allegedly on behalf of himself, Mr. Ryzman, and the Ryzman Foundation) and Greener Homes. (¶12.) Clear Title America, LLC (“Clear Title”) served as the sub-escrow on behalf of NVE. (¶12.)

BOA rejected the short pay tender of $233,262.50 (“Short-Pay Funds”) that Clear Title made pursuant to the Purported Short-Pay Agreement and Statement and refused to re-convey the BOA Trust Deeds. (¶¶37, 40.) BOA contends that the purported Short-Pay Agreement and Statement is forged and/or unauthorized. (¶¶37, 40.) Dror, Ryzman, and Greener Homes contend that it is valid and binding on BOA. (¶37.)

Plaintiff issued an ALTA (1982) Commitment for Title Insurance (“Commitment”) in connection with the Short Sale. Plaintiff agreed in the Commitment to issue an ALTA Owner’s Policy in the amount o f$950,000 to Greener Homes and to issue an ALTA Loan Policy in the amount of $950,000 to the lender to be determined prior to the close of escrow. (FAC ¶13; Appendix, Exs. 15-17.)

On April 2, 2012, Plaintiff received a purported title insurance claim from Greener Homes based on BOA’s rejection of the Short-Pay funds and refusal to reconvey the BOA Trust Deeds. At Plaintiff’s request, Clear Title transferred the Short-Pay Funds to Plaintiff on April 9, 2012 to hold in trust pending resolution of the parties’ disputes. Plaintiff claims no interest in, and has interpled, the Short-Pay Funds. (FAC ¶28; Lewis Decl. ¶¶2-3, 9-10.) Plaintiff has also tendered and interpled the $2,230.00 premium payment (“Premium Funds”) it received pursuant to the Commitment. (FAC ¶21c; Lewis Decl. ¶¶8, 10.) (The Short-Pay Funds and the Premium Funds are collectively the “Interpled Funds.”)

Plaintiff contends there are several potential claimants to the Interpled Funds and none of the potential claimants has filed a disclaimer. (See Cantu, 4 Cal.App.4th at 875.) Plaintiff asserts interpleader is the appropriate remedy even though only one person, Zvi Ryzman, has explicitly claimed the Interpled Funds. (Farmers New World Life Insurance Company v. Rees (2013) 219 Cal.App.4th 307, 316-317 [rejecting claimant’s assertion that interpled funds were never “in dispute” under CCP §386.6 because no one other than himself claimed the funds].)

BOA is a potential claimant if the court finds that Dror and Greener Homes are correct that the Short-Pay Agreement and Statement is valid. As the Short Sale purchaser, Greener Home is a potential claimant because the Short-Pay Funds originated from the proceeds of its purchase of the Property and because Greener Homes is the current record owner of the Property. RBABS Investments #2, LLC and RCB Equities #1, LLC are the apparent Short Sale purchase lenders. Presuming they were indeed the purchase lenders, and further assuming that the Short Sale were rescinded, these two entities could be entitled to restitution of their loan proceeds including the Interpled Funds. Zvi Ryzman is a potential claimant because he has already made a claim for the Interpled Funds. (SACC ¶52.)

Notice of Non-Opposition: Defendant/Cross-Complainant BOA filed a notice of non-opposition to Plaintiff’s motion only to the extent Plaintiff seeks a discharge of its liability as a stakeholder of the funds. BOA states it opposes the motion to the extent Plaintiff also seeks to discharge its potential liability to BOA as alleged in BOA’s cross-complaint files January 23, 2013.

Opposition: Defendants and Cross-Complainant Zvi Ryzman argue in opposition that Plaintiff is not a disinterested stakeholder in the Interpled Funds. Plaintiff is subject to various claims by numerous parties in this matter and related actions and has further filed its own Cross-Complaint against Dror for indemnity related to the subject funds. There has been no determination in this action that Plaintiff has no liability. They further argue that conflicting demands have not been made upon Plaintiff. Plaintiff has not been inundated with multiple demands and there is no potential for any claimant other than Zvi Ryzman, the sole member of Lender RBABS 1, to demand that the monies being held by Plaintiff be returned. A defendant in an interpleader action is not required to file a disclaimer discharging its claim to the funds, rather the defendant “could have remained silent and passive” or answer and then do nothing. (Cantu, 4 Cal.App.4th at 875.) RBABS 1 holds the subject Deed of Trust on the Property, making it blatantly clear that RBABS 1 was the lender for the transactions involving the Property. (See RJN, Ex. F.) Although BOA may be held to perform at the conclusion of this suit, no they have made no claim for the Interpled Funds.

Defendants and Cross-Complainant argue that Plaintiff has had the opportunity to interplead these funds previously since Plaintiff has had the funds for over two and a half years. The parties here argue that the granting of this motion would prohibit them from opposing Plaintiff’s Motion for Summary judgment and from conducting discovery on the Second Amended Cross-Complaint filed by Zvi Ryzman. Plaintiff’s motion for summary judgment argues that Plaintiff was unable to identify the Lender and therefore did not have to issue the Lender’s policy. This is inconsistent with the facts of its Complaint referenced herein as it is blatantly clear that the Lender was RBABS 1 based upon the recorded Deed of Trust. (See RJN, Ex. F.) Plaintiff received and kept funds for a title policy and a lender’s policy which it never issued and now seeks to refund the premiums it collected, breaching its commitment to issuing the policies. The only reason Plaintiff would have kept possession of the funds would be to limit its losses should it later be required to issue the Lender’s Policy. This is Plaintiff’s attempt to absolve itself from any liability. Plaintiff’s motion requests that the court limit the Cross-Complainants’ ability to conduct discovery which could ultimately provide the information necessary to compel Plaintiff to perform and to evidence Plaintiff’s liability.

Finally, Defendants and Cross-Complainant Zvi Ryzman assert that Plaintiff failed to follow the required procedure for this motion pursuant to CCP §386.6. Plaintiff did not deposit the Interpled Funds upon filing the instant motion. (See Zinnel, 125 Cal.App.4th 393.) Further, Plaintiff failed to provide an affidavit to the court confirming that conflicting demands were made upon it by parties to the action.

Reply: In reply, Plaintiff asserts it has no intent for this motion to be a disguised motion for summary judgment or to prohibit Defendants form opposing its motion for summary judgment or from conducting discovery on the Second Amended Cross Complaint. The interpleader remedy cannot be defeated by a cross-complainant alleging independent liability on the part of the interpleading plaintiff; the interpleading plaintiff is discharged from liability with respect to the interpled funds, but remains in the action to defend against independent cross-claims. (See Pacific Loan Management Corp. v. Superior Court (1987) 196 Cal.App.3d 1485, 1489.)

As to Defendants and Cross-Complainant Zvi Ryzman’s contention that RBABS 1 is the proper claimant of the Interpled Funds, Plaintiff states such a determination is far from clear and it is not up to Plaintiff to make such a determination. Plaintiff further notes RBABS 1 has not made a demand on the funds and is not a cross-complainant in this action. The party who has made a claim, Zvi Ryzman, testified he has nothing to do with RBABS 1. (See Appendix, Ex. 9.) Finally, the assertion that the purchase lender is RBABS 1 is contradicted by Defendants’ own pleadings, papers, and testimony, which state that the purchase loan proceeds totaling $975,000 originated from RBABS Investments #2 and RCB Equities, #1, LLC. (SACC ¶¶33-35; Appendix, Ex. 4, Dror Depo., Vol. II, 188:13-17.) Interpleader is necessary because Plaintiff “cannot safely determine for [itself] which claim is right and lawful.” (Westamerica Bank v. City of Berkeley (2011) 201 Cal.App.4th 598, 608.)

Plaintiff states it has filed proper interpleader procedure. CCP §386(c) authorizes a deposit at the time of filing of the complaint, but the statute is interpreted to allow the deposit to be made at any time without a prior court order. (Zinnel. 125 Cal.App.4th at 403. Furthermore, although funds may be deposited without a prior court order, it is also appropriate for a party to move the court for an order to deposit the funds, as Plaintiff has done here. (See CCP §§386(a) and (b).)

Plaintiff states it has no interest in the Interpled Funds. Defendants and Cross-Complainant Zvi Ryzman’s arguments, and BOA’s concern, that the instant motion will relieve Plaintiff of liability under other claims is without merit. The statute provides that Plaintiff will be relieved from liability only as to those funds at issue, and bars any claims against Plaintiff only as to its right to those funds. Further, as Plaintiff points out, Defendants and Cross-Complainant Zvi Ryzman’s assertion that RBABS 1 is the only possible claimant of the Interpled Funds is directly conflicted by the FAC and the SACC. Considering the multiple parties here and the possibilities of conflicting claims, granting Plaintiff’s request to turn the Interpled Funds over to the Court is in the interests of justice.

The motion is granted.

Attorney’s Fees
Plaintiff argues it should be awarded its costs and reasonable attorney fees, to be paid from the Interpled Funds after being deposited with the court pursuant to CCP §386.6(a) Plaintiff requests the following:

1. The attorney’s fees billed for this motion: $7,525.00. Counsel has expended 30.1 hours on this motion and his rate is $250/hour. (Buchberg Decl. ¶12.)
2. The filing fee for this motion: $60.00. (Buchberg Decl. ¶15.)
3. Anticipated attorney’s fees for the reply and hearing on this motion: $1,500. Counsel anticipates an additional six hours at $250/hour for the reply and attending the hearing (Buchberg Decl. ¶17.)
4. One-third of all other fees and costs billed in this action. Plaintiff states a portion of its total attorney fees and costs incurred is attributable to the interpleader cause of action. (Buchberg Decl. ¶13.) Counsel estimates that portion to be one-third based on Plaintiff’s First Amended Complaint and Motion for Summary Judgment which both identify the interpleader cause of action as one of three main causes of action. (Id.)
a. The total amount of attorney’s fees incurred by Plaintiff in this action, including those fees billed for this motion, is $74,500. The amount excluding the fees billed for this motion is $66,975. One third of that amount is $22,325. (Buchberg Decl. ¶14.)
b. The total amount of costs incurred by Plaintiff in this action, excluding the $60 filing fee for this motion, is $6,605. One third of that amount is $2,202. (Buchberg Decl. ¶16.)

In total, Plaintiff requests $33,612.00.

Defendants and Cross-Complainant Zvi Ryzman oppose Plaintiff’s request, arguing it is not clear that Plaintiff’s listed costs and fees are related solely to the interpleader cause of action, particularly since Plaintiff is litigating two Cross-Complaints aside from the Complaint. The request for attorney’s fees and costs may only be awarded for work performed and costs “incurred only in pursuit of the stakeholder’s remedy of Code of Civil Procedure section 386 et seq.” (Sweeney v. McClaran (1976) 58 Cal.App.3d 824.) Without further detail, granting Plaintiff’s request would be inappropriate.

The court finds that plaintiff’s request is excessive and without substantial evidence to support it. It is not enough that Plaintiff merely assert that one third of its costs and fees apply to the Interpleader claim. The court awards as and for Plaintiff’s fees and costs the amount of $9,085.00 ($7,525 + $60 + $1,500).

A proposed order with a proof of service thereof dated 12/18/14 has been lodged. The court is prepared to sign and file the proposed order with appropriate modifications to the fees and costs.

Notice of ruling by moving party.