Case Number: ES016783    Hearing Date: September 05, 2014    Dept: B

ES016783
QUALITY LOAN SERVICE vs ALL CLAIMANTS TO SURPLUS FUNDS
OSC Re: Right of Excess Funds

This controversy arises because a trustee’s sale of real property resulted in a surplus. The property that was encumbered by the deed of trust was owned by at 10711 Mather Ave., Sunland, CA 91040. After a default, a non-judicial foreclosure proceeding occurred and a trustee’s sale was held on September 6, 2012. The property was sold for $328,000. After the debt secured by the deed of trust was satisfied, there was a surplus of $69,687.42.
In addition, the trustee has received fees and expenses of $2,913.91. The amount remaining is $66,338.51.

The trustee, Quality Loan Service, Corp., identified a single junior lien holder: MERS/Bank of America, which holds a deed of trust recorded on June 6, 2007. However, when the trustee contacted Bank of America, it was advised that the deed of trust had been forgiven by the Department of Justice and that no claim would be submitted by Bank of America. This indicates that the prior owner, Anahid Markaryan, is entitled to any funds remaining after the junior lien is paid.

The trustee filed this petition because the prior owner had filed a Complaint and it was unable to determine how to distribute the surplus.

Civil Code section 2924j(c) permits a Trustee unable to determine the priority of claims to the surplus from a trustee’s sale to file a declaration of the unresolved claims and deposit the undistributed proceeds with the clerk of the Superior Court in which the sale occurred. Upon deposit of that portion of the sale proceeds that cannot be distributed by due diligence, the Trustee shall be discharged of further responsibility for the disbursement of sale proceeds. Any amount deposited by the Trustee with the clerk is deposited by the clerk with the County Treasurer subject to order of the Superior Court upon the application of any interested party.
The Petitioner has deposited the remaining funds of $66,338.51 with the Court. On July 18, 2014, the Court found that the Petitioner had properly fulfilled its statutory obligations and discharged it of any further responsibility for the disbursement of the sale proceeds. The Court set a hearing for September 5, 2014 to determine to whom the remaining amount should be disbursed.

At the hearing, the Court will determine the individual to whom the funds should be distributed. Civil Code section 2924k specifies the following order of priority for distribution of the proceeds:

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.

The first and second priorities were satisfied when the obligations secured by the deed of trust were paid and the trustee’s fees and expenses were paid (see paragraph 16 of petition).
The third priority is satisfied because there is no junior lien or encumbrance to satisfy.
This hearing concerns the fourth priority. The remaining funds of $66,338.51 should be distributed to the trustor or the trustor’s successor in interest. As noted above, the trustee sent notice of the surplus funds to the trustor. In addition, the trustee provided notice of the Court’s order that set this hearing to the trustor.

A review of the Court file reveals that no claim has been filed. If the trustor, Anahid Markaryan, appears at the hearing, then the Court will order that the funds be distributed to Anahid Markaryan. If he does not appear, then the funds will be paid to the State of California under the laws regarding unclaimed property, which are enacted in CCP sections 1300 to 1582.