Notice Entry of Order

Cal. Super. - 6th Dist.April 1, 2021

\DOONQUI-bUJNH NNNNNNNNNr-tr-tr-tr-tr-tr-tr-tr-tr-tr-t OOQQUI-PUJNHOKDOOQQUI-bUJNHO 21 CV381434 Santa Clara - Civil DANIEL J. MASH, STATE BAR #123678 McPHARLIN SPRINKLES & THOMAS LLP 160 W. Santa Clara St., Ste. 625 San Jose, California 951 13 Telephone: (408) 293-1900 Facsimile: (408) 709-5409 dmash@mstpartners.com In Pro Per Electronically Filed by Superior Court of CA, County of Santa Clara, on 12/21/2021 12:11 PM Reviewed By: S. Uy Case #21 CV381434 Envelope: 7909304 SUPERIOR COURT OF CALIFORNIA COUNTY OF SANTA CLARA MCPHARLIN SPRINKLES AND THOMAS LLP, Plaintiff, V. ) ) ) ) ) VASILI STRATTON, an individual; i KATHERINE STRATTON AS TRUSTEE OF ) STRATTON SURVIVORS TRUST A; ) KATHERINE STRATTON AS TRUSTEE OF ) THE STRATTON BYPASS TRUST; THALIA ) STRATTON AS TRUSTEE OF THE ) STRATTON GRANDCHILDREN’S TRUST; ) SAMOS ENTERPRISES, LLC, a California ) limited liability company; and DOES 1 through ) 25, inclusive, ) ) ) Defendants. Case No.2 21CV381434 NOTICE OF ENTRY OF ORDER OVERRULING DEMURRER Hearing Date: October 26, 2021 TO EACH PARTY AND TO COUNSEL OF RECORD FOR EACH PARTY: PLEASE TAKE NOTICE that on November 2, 2021, the Court in the above captioned action entered a Minute Order adopting the Tentative Ruling of the Court Which overruled the demurrer 0f defendant Katherine Stratton as Trustee 0f the Stratton Survivors Trust A and as Notice 0f Entry of Order Overruling Demurrer S. Uy \OOOQQUIAUJNH NNNNNNNNNr-tr-tr-tr-tr-tr-tr-tr-tr-tr-t OOQONUIAUJNHOKOOOQQUIAUJNHO Trustee 0f the Stratton Bypas Trust. A true and correct copy 0f this Minute Order is attached hereto as Exhibit A and incorporated herein by reference. DATED: December 21, 2021 MCPHARLIN SPRINKLES & THOMAS LLP \,\\ By: 1' Da ' J. Mash Notice of Entry of Order Overruling Demurrer 2 Exhibit A SUPERIOR COURT OF CALIFORNIA COUNTY OF SANTA CLARA MINUTE ORDER McPharlin Sprinkles & Thomas LLP vs Vasili Stratton et Hearing Start Time; 9:00 AM al 21CV381434 Hearing Type: Hearing: Demurrer Date of Hearing: 10/26/2021 Comments: 1 Heard By: Takaichi, Drew C Location: Department 2 Courtroom Reporter: - No Court Reporter Courtroom Clerk: Farris Bryant Court Interpreter: Court Investigator: Parties Present: Future Hearings: Exhibits: - to the Complaint by Def Katherine Stratton as Trustee of Stratton Servivors Trust A and as Trustee of the Stratton Bypass Trust (Jason M. Skaggs) The following attorney(s) appear via CourtCaII: Daniel J. Mash for Plaintiff(s), McPharlin Sprinkles & Thomas LLP Jason M. Skaggs For: Defendant(s), Vasili Stratton, et al Alexandra Saddik For: Defendant(s), Vasili Stratton Tentative Ruling is contested by Defendant. Matter is heard/argued. The Tentative Ruling is adopted. See below. Calendar line 1 Case Name: McPharlin Sprinkles & Thomas, LLP v. Stratton, et al. Case No.2 21CV381434 According to the allegations ofthe complaint, Vasili Stratton ( Stratton ), Katherine Stratton as trustee of Stratton Survivors Trust A ( KSST ), Katherine Stratton as trustee of the Stratton Bypass Trust ( KSBT ), and Thalia Stratton as trustee of the Stratton Grandchildren s Trust ( TSGT ), were members of Samos Enterprises, LLC ( Samos ). (See complaint, 2-5.) In October 2018, Stratton, KSST, KSBT and TSGT reached an agreement wherein KSST, KSBT and TSGT agreed to transfer all their respective membership interest in Samos 75% in total to Stratton in exchange for $3,000,000. (See complaint, 10.) The parties to this transaction approached Daniel J. Mash ( Mash ) of plaintiff McPharlin Sprinkes and Thomas LLP ( Plaintiff ) to prepare an agreement to facilitate the transaction. (See complaint, 11.) Mash prepared a Limited Liability Company Membership Purchase Agreement and agreed to be the escrow agent for the transaction. (See complaint, 11, exh. A.) On October 21, 2019, Samos recognized Stratton as the sole member in the company. (See Printed: 11/2/2021 10/26/2021 Hearing: Demurrer - 21CV381434 Page 1 of4 SUPERIOR COURT OF CALIFORNIA COUNTY OF SANTA CLARA MINUTE ORDER complaint, 12, exh. B.) Pursuant to the agreement, Stratton tendered an initial deposit to Plaintiff in the amount of $200,000, which was deposited in its client trust account. (See complaint, 13.) On April 26, 2019, Plaintiff received the remaining $2,800,000 which it also deposited into its client trust account. (See complaint, 13.) Pursuant to the agreement, payments were issued from the client trust account to KSST, KSBT and TSGT; however, thereafter, through their counsel, KSST, KSBT and TSGT returned the funds, and Plaintiff retains the purchase funds in its client trust account. (See complaint, 14, exh. C.) On June 11, 2019, KSST and KSBT filed an action in Santa Clara County Superior Court seeking to rescind the transaction. (See complaint, 15.) Plaintiff has sought to transfer the funds to one of the party s client trust accounts pending the outcome of the action, but a transfer has yet to occur despite numerous drafts of stipulations. (See complaint, 15.) On March 11, 2021, Mash was contacted by Jason Skaggs ( Skaggs ), who informed Mash that he now represented KSST and KSBT and that KSST and KSBT now wanted the May 1, 2019 checks reissued to her from the purchase funds. (See complaint, 16.) Mash informed Skaggs that given the return of the checks and the subsequent litigation, all parties to the escrow, including TSGT, would have to have notice of his clients request and consent and/or mutually agree to his check request for a distribution of the purchase funds, or the purchase funds would otherwise be deposited with the court by interpleader. (See complaint, 16, exh. D.) On March 15, 2021, Skaggs sent a written instruction to Mash to reissue a portion ofthe purchase funds to KSST and KSBT no later than March 22, 2021. (See complaint, 17, exh. E.) Stratton s attorney, Mr. Arellanez( Arrellanez ) received the letter and told Mash that he needed to discuss the matter with his client, but Arellanez did not contact Mash by March 22, 2021, so, on March 22, 2021, Mash notified Skaggs and Arellanez that he was obligated to interplead the conflicting claims and money with the court. (See complaint, 18, exh. F.) In response to an email exchange between Skaggs and Mash, Arellanez instructed Plaintiff to interplead the funds. (See complaint, 19, exh. G.) On April 1, 2021, Plaintiff filed a complaint for interpleader against Stratton, KSST, KSBT, TSGT and Samos (collectively, Defendants ), asserting a single cause of action for interpleader. Defendants KSST and KSBT (collectively, demurring defendants ) demur to the complaint for interpleader. DEMURRER TO THE COMPLAINT Demurring defendants argue that the complaint fails to allege that the defendants have made conflicting claims to the $2.2 million belonging to KKST and KSBT reflected in checks that McPharlin already issued to KKST and KSBT. (See Defs. memorandum of points and authorities in support of demurrer ( Defs. memo ), p.4:17-22.) Defendants cite to Placer Foreclosure, Inc. v. Aflalo (2018) 23 Cal.App.5th 1109, which states that [a] party against whom double or multiple claims are made, that may give rise to double or multiple liability, may bring an action against the claimants to compel them to interplead and litigate their claims. (Id. at p.1113.) The complaint must show that the defendants make conflicting claims to the subject matter, and that the plaintiff cannot safely determine which claim is valid and offers to deposit the money in court. (|d., quoting Westamerica Bank v. City of Berkeley (2011) 201 Cal.App.4th 598, 607-608.) But an interpleader action may not be maintained upon the mere pretext or suspicion of double vexation. (|d., quoting Westamerica Bank, supra, 201 Cal.App.4th at p.608.) Demurring defendants contend that Stratton has no Printed: 11/2/2021 10/26/2021 Hearing: Demurrer - 21CV381434 Page 2 of 4 SUPERIOR COURT OF CALIFORNIA COUNTY OF SANTA CLARA MINUTE ORDER claim against McPharlin or any current claim to the $2.2 million; he has only a possible eventual right to the refund of his purchase proceeds from Katherine in the even[t] that she succeeds in her lawsuit. This is insufficient under Placer to provide the basis for an interpleader action. (Defs. memo, p.7:4-7.) However, the Placer court, at length, discussed Placer s statutory obligations under section 2924k to disburse surplus funds to Afalo. (See Placer, supra, 23 Cal. App.5th at pp.1113-1114 (rejecting Placer s contention that the interpleader complaint was proper because Placer was faced with liability from Pro Value if it distributed the surplus funds to Afalo [since] Placer could safely distribute the surplus funds to Aflalo as required by statute without any risk of multiple liability [t]he trustee s role in preparing for and conducting a nonjudicial foreclosure sale is set forth in detail in Civil Code section 2924 et seq., as part of a comprehensive statutory scheme [t]he scope and nature of the trustee s duties are exclusively defined by the deed of trust and the governing statutes [n]o other common law duties exist Placer was statutorily required under section 2924k to disburse surplus funds to Aflalo Section 2924k, subdivision (a) provides that a trustee shall distribute the proceeds in the following order of priority: (1) costs and expenses of the sale, (2) payment ofthe obligations secured by the deed of trust, (3) payment to any junior liens or encumbrances, and (4) payment [t]o the trustor Placer paid the costs and expenses of the sale and the encumbrances as directed under section 2924k, subdivision (a)(l) through (3), including payment to the lender of record, but did not pay the remaining funds to Aflalo, the trustor Placer was required to do so Placer does not cite to any authority that would prevent it from performing its statutory obligation to disburse the sale proceeds as directed under section 2924k [r]e|ying on section 2924], it argues that it was not required to comply with section 2924k when there are disputed unresolved claims Placer s reliance on section 2924j is misplaced Section 2924j does not apply because the conflicting claims are not between parties who had recorded interests before the sale [t]he conflicting claims at issue here are not between lienholders, and Placer admits that Pro Value has no claim to the sale proceeds under section 2924k [n]othing in section 2924j excuses Placer from carrying out its duty of distributing the surplus proceeds in accordance with section 2924k ).) Unlike Placer, Plaintiff is not under any statutory obligation to disburse the subject funds. As stated above, in Placer, there was no common law duty to distribute the surplus proceeds and the duty was thus defined by statute. The Sixth District has stated that typical situations permitting interpleader include an escrow holder of a fund where one claimant notified the escrow holder that the contract was cancelled and nothing should be paid to the other claimant. (Pac. Loan Management Corp. v. Super. Ct. (Armstrong) (1987) 196 Cal.App.3d 1485, 1490.) Here, the complaint alleges that after receiving the monies for the purchase of all remaining membership interest in Samos from Stratton, Plaintiff deposited those monies into the client trust account and, pursuant to the agreement, issued payments from the client trust account to demurring defendants and TSGT. (See complaint, 13-14.) Thus, Plaintiff fulfilled its obligations as escrow holder pursuant to the term of the escrow and membership purchase agreement. (See complaint, exh. A, 3 ( Purchase Price Allocation ) (stating [u]pon receipt and after the payment of any debt, costs or expenses, the purchase money shall be distributed to member KSST, member KSBT and member TSGT in in [sic] proportion to their respective membership interest in the Company ), 5 (Transfer of Interest ) (stating that [t]he escrow agent, shall hold the membership interest in escrow to be distributed to [Stratton] upon confirmation and verification of [Stratton] funding of the $4,000,000 purchase money to be paid to KSST, KSBT and TSGT ).) However, counsel for demurring parties allegedly then returned the funds and filed an action to rescind the transaction. (See complaint, 14-15.) Counsel for Stratton stated that if Plaintiff did not interplead the funds with the Court, Plaintiff should hav[e] the funds deposited into a trust account with [Stratton s counsel s firm] Clapp Moroney until [demurring defendants action to rescind the transaction] is resolved. (See complaint, 19, exh. G.) Both parties cite to Westamerica Bank, supra, 201 Cal.App.4th 598, which states that "[a] complaint in Printed: 11/2/2021 10/26/2021 Hearing: Demurrer - 21CV381434 Page 3 of 4 SUPERIOR COURT OF CALIFORNIA COUNTY OF SANTA CLARA MINUTE ORDER interpleader must show that the defendants make conflicting claims to [the subject matter], and that the [plaintiff] cannot safely determine which claim is valid and offers to deposit the money in court. (Id. at pp. 607-608.) Demurring defendants contend that [t]he lawsuit is not relevant to the payment by McPharlin of the $2.2 million it is holding for KKST and KSBT. (Defs. memo, p.625-6.) However, in their lawsuit, demurring defendants are seeking to rescind the Membership Purchase Agreement that contained the subject escrow instructions. It is difficult to understand demurring defendants assertion that the filing of their lawsuit is not relevant to the escrow holder s duties. (See Virtanen v. O'Connell (2006) 140 Cal.App.4th 688, 703 (stating that it is the duty of an escrow holder to comply strictly with the instructions of his principal and if he disposes of the property of his principal in violation of these instructions, or otherwise breaches that duty, he will be responsible for any loss occasioned thereby [t]he rule continues to apply when the escrow holder in question is an attorney ).) Whether the monies are deposited with counsel for demurring defendants or counsel for Stratton, Plaintiff is subject to claims from either party. Demurring defendants also argue that the instructions from Stratton s attorney were not certain enough so as to state a conflicting claim. (See Defs. Memo, p.521-14.) The Court disagrees. Stratton s attorney stated that if the funds were not interplead with the Court, they would hav[e] the funds deposited into a trust account with Clapp Moroney until this matter is resolved. This is certainly in conflict with demurring defendants claim to have the funds deposited in an account oftheir attorney. The demurrer to the complaint is OVERRULED. The Court will prepare the Order. Printed: 11/2/2021 10/26/2021 Hearing: Demurrer - 21CV381434 Page 4 of 4 \DOOQQUIAUJNH NNNNNNNNNr-tr-tr-tr-tr-tr-tr-tr-tr-tr-t OOQONUI-bUJNHOOOOflONUI-hkNNHO McPharlin Sprinkles & Thomas V. Stratton et a1. Case N0. 21CV381434 PROOF OF SERVICE I am a citizen 0f the United States and a citizen of Santa Clara County; I am over the age 0f eighteen years and not a party t0 the Within action; my business address is 160 W. Santa Clara, Suite 625, San Jose CA 951 13. On the date set forth below I served the documents described as: NOTICE OF ENTRY OF ORDER OVERRULING DEMURRER on the following parties in this action by placing a true copy thereof enclosed in a sealed envelope addressed as follows: Attornev for Defendant Attorneys for Defendant Katherine Stratton, Trustee Vasili Stratton Jason M. Skaggs Matthew S. Constantino Skaggs Faucette LLP Alexandra P. Saddik 530 Lytton Ave., 2nd Floor Clapp, Moroney, Vucinich, Palo Alto, CA 94103 Beeman+Scheley iason@skaggsfaucette.com 5860 Owens Drive, Suite 410 Pleasanton, CA 94588 Attornevs for Defendant mconstantin0@clappmoronev.com Vasili Stratton asaddik@clappmoroney.com Marc L. Shea Shea & McIntyre, APC 2166 The Alameda San Jose, CA 95126 mshea@sheamcintvre.com [ ] (BY MAIL) I caused such envelope(s) With postage thereon fully prepaid to be placed in the United States mail at San Jose, California. [ ] (BY PERSONAL SERVICE) I caused such envelope(s) to be delivered by hand this date to the offices of the addressee(s). [ ] (BY FEDERAL EXPRESS) I caused such document(s) With postage thereon fully prepaid to be placed in the Federal Express office at San Jose, California. [X ] (BY ELECTRONIC MAIL) I caused such document(s) t0 be transmitted by electronic mail through e-filing vendor OneLegal 0n this date to the offices of addressee(s). [ X ] (STATE) I declare under penalty of perjury under the laws 0f the State 0f California that the foregoing is true and correct. [ ] (FEDERAL) I declare that I am employed in the office of a member of the bar of this court at whose direction the service was made. \Ooouoxm-bwww NNNNNNNNNr-tr-tr-tr-tr-tr-tr-tr-tr-tr-t OOQONUIAUJNHOKOOOQQUIAUJNHO Executed 0n December 21, 2021, at San Jose, California. MomfiW Natalie P. Alejandro