Opposition ObjectionsCal. 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 10/13/2021 12:58 PM Reviewed By: F. Miller Case #21 CV381434 Envelope: 7455654 SUPERIOR COURT OF CALIFORNIA COUNTY OF SANTA CLARA MCPHARLIN SPRINKLES AND THOMAS LLP, Plaintiff, V. VASILI STRATTON, an individual; KATHERINE STRATTON AS TRUSTEE OF STRATTON SURVIVORS TRUST A; KATHERINE STRATTON As TRUSTEE 0F 365mg 1%.”? THE STRATTON BYPASS TRUST; THALIA mil”? ‘me' STRATTON As TRUSTEE 0F THE D g ' .apartment. STRATTON GRANDCHILDREN’S TRUST; SAMOS ENTERPRISES, LLC, a California limited liability company; and DOES 1 through 25, inclusive, Defendants. vvvvvvvvvvvvvvvvvv Case No.2 21CV381434 PLAINTIFF’S OPPOSITION TO DEFENDANT KATHERINE STRATTON’S DEMURRER October 26, 2021 9:00 am. Hon. Drew Takaichi 2 Plaintiff McPharlin Sprinkles and Thomas LLP (“MST” or “Plaintiff”) files this opposition to the demurrer filed by Defendant Katherine Stratton as Trustee of Stratton Survivors Trust A (“KSST”) and as Trustee 0f the Stratton Bypass Trust (“KSBT”) (collectively “KSST/KSBT”) t0 MST’S Interpleader Complaint. Plaintiff’ s Opposition to Defendant Katherine Stratton’s Demurrer F. Miller \DOONQUI-bUJNH NNNNNNNNNr-tr-tr-tr-tr-tr-tr-tr-tr-tr-t OOQQUI-PUJNHOKDOOQQUI-bUJNHO I. INTRODUCTION Defendants’ Demurrer should be overruled for the following reasons: o MST has stated a proper Interpleader Cause of Action. o KSST/KSBT argues facts beyond those alleged in the Complaint in an effort t0 justify her Demurrer. o KSST/KSBT failed to comply With the procedural requirements 0fCRC 3 . 1 320(6). II. FACTS The facts alleged in the Complaint include that in October of 2018 Vasili Stratton (“VS”), KSST/KSBT and Thalia Stratton as Trustee 0f the Stratton Grandchildren’s Trust (“TSGT”) reached an agreement, wherein KSST/ KSBT and TSGT agreed to transfer all of their respective membership interest in Samos, LLC (the “Company”), totaling seventy-five percent (75%) (“Membership Interest”) t0 VS in exchange for a payment 0f Three-Million Dollars ($3,000,000.00) (the “‘Transaction”). Also in October 0f 2018 VS, KSST, KSBT and TSGT approached Daniel J. Mash, a partner in MST and requested that he prepare an agreement t0 facilitate the Transaction. VS, KSST, KSBT and TSGT fithher requested that Daniel J. Mash/MST (collectively “DJM” 0r “MST”) act as the escrow agent for the Transaction. DJM did prepare a Limited Liability Company Membership Purchase Agreement (the “Agreement”) and agreed t0 be the escrow agent for the Transaction. Pursuant t0 the Agreement, VS tendered an initial deposit to MST in the amount 0f $200,000.00, Which MST deposited into its client trust account. Thereafter, pursuant t0 the Agreement 0n April 26, 2019, MST received the balance of the purchase funds on behalf ofVS in the amount of $2,800,000.00 which it also deposited into its client trust account. Therefore, as of April 26, 2019, MST had received $3,000,000.00 on behalf ofVS t0 fund the Transaction (the “Purchase funds”). Plaintiff’ s Opposition to Defendant Katherine Stratton’s Demurrer 2 \DOONQUI-bUJNH NNNNNNNNNr-tr-tr-tr-tr-tr-tr-tr-tr-tr-t OOQQUI-PUJNHOKDOOQQUI-bUJNHO Pursuant to the party’s instructions and agreement on May 1, 2019, payments were issued from the MST client trust account to KSST/KSBT and TSGT. However, KSST/KSBT through her legal counsel and TSGT through her legal counsel each advised MST they would not accept the payments, and each returned the funds. MST retains the purchase fimds in its client trust account. MST has n0 interest in the Purchase funds. On June 11, 2019, KSST and KSBT filed an action in Santa Clara County Superior Court under Case No. 19CV349730 seeking to rescind the Transaction (the “KSST/KSBT Action”). Since the KSST/KSBT Action was filed, MST has been cooperating With various legal counsel for the Parties, in an effort t0 complete a stipulation t0 transfer the funds t0 one of the party’s attorney’s client trust account pending the outcome of the KSST/KSBT Action. Despite numerous drafts, a transfer has not yet occurred. On March 11, 2021, Daniel J. Mash was contacted by email by Jason Skaggs. Mr. Skaggs informed Daniel J. Mash that he now represented KSST /KSBT. In a phone call later that same day, Mr. Skaggs informed Daniel J. Mash that KSST / KSBT now wanted the May 1, 2019 checks reissued to her from the Purchase funds in the amount of $2,200,000.00. Daniel J. Mash Informed Mr. 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. And if that did not occur the Purchase funds would be deposited with the court by interpleader. On March 15, 2021, Mr. Skaggs on behalf ofKSST/ KSBT sent a written instruction t0 Daniel J. Mash to issue $2,000,000.00 of the Purchase funds t0 KSST /KSBT, n0 later than March 22, 2021. Why Mr. Skaggs’ March 15, 2021 letter demanded a $2,000,000.00 distribution as opposed t0 reissuing the $2,200,000.00 payment is not clear and presents ambiguity in and of itself. The letter was also sent to VS’s attorney Mr. Arellanez. On Marchl 8, 2021 Mr. Arellanez contacted Daniel J. Mash and confirmed he had received Mr. Skaggs letter. Mr. Arellanez told Daniel J. Mash he had to discuss the matter with his client. Plaintiff’ s Opposition to Defendant Katherine Stratton’s Demurrer 3 \DOONQUI-bUJNH NNNNNNNNNr-tr-tr-tr-tr-tr-tr-tr-tr-tr-t OOQQUI-PUJNHOKDOOQQUI-bUJNHO On March 22, 2021, Daniel J. Mash notified Mr. Skaggs and Mr. Arellanez in writing that because he had now received conflicting and uncertain instructions from the parties, he was obligated t0 interplead the conflicting claims and money with the court. In response, 0n March 22, 2021, Mr. Arellanez instructed MST t0 interplead the funds 0r t0 deposit the Funds into a trust account With the law firm of Clapp Moroney. III. ARGUMENT A. Standard/Nature 0f the Demurrer. A general demurrer admits all material facts that are properly pleaded. Material facts alleged in the complaint are treated as true for the purpose 0f ruling 0n the demurrer. (Gruenberg v. Aetna Ins. C0 (1973) 9 Cal.3d 566, 572). Also taken as true are facts that may be implied or inferred from those expressly alleged. (Harvey v. City ofHoltvile (1969) 271 Cal.App.2d 816). An analysis 0f a pleading requires a complaint t0 be construed liberally by drawing reasonable inferences from facts pleaded. [Code CiV. Proc. § 475; Steiner v. Rowley (1950) 35 Cal. 2d 713, 719, 221 P.2d 9]. The ruling 0n a demurrer determines a legal issue 0n the assumed facts, i.e., those properly alleged in the complaint, regardless 0fwhether they ultimately prove to be true. C&HFoods C0. v. Hartford Ins. C0. (1984) 163 Cal. App. 3d 1055, (See Witkin, Cal. Procedure (2d ed. 1971) Pleading §800, p 2413-2414. If 0n consideration of all the facts stated it appears that the plaintiff is entitled t0 any relief, the pleading Will be held good [Salimi v. State Comp. Ins. Fund (1997) 54 Cal.App. 4th 216, 219, 62 Cal.Rptr.2d 640]. Even if the facts are in artfully stated or intermingled, 0n consideration of all the facts stated it is evident that plaintiff is entitled to relief, and therefore the demurrer should be overruled. [Selby Really C0. v. City ofSan Buenaventura (1973) 10 Cal. 3d 110, 123, 109 Ca1.Rptr. 799, 514 P.2d 11. The court in the case ofDoheny Park Terrace Homeowners Assn, Ina, v. Truck Ins. Exchange (2005) 132 Ca1.App.4th 1076; 34 Ca1.Rptr.3d 157, confirmed what is important when addressing the issue of the sufficiency 0f a complaint as follows: Plaintiff’ s Opposition to Defendant Katherine Stratton’s Demurrer 4 \DOONQUI-bUJNH NNNNNNNNNr-tr-tr-tr-tr-tr-tr-tr-tr-tr-t OOQQUI-PUJNHOKDOOQQUI-bUJNHO “It has been consistently held that “a plaintiffis required only t0 set forth the essentialfacts ofhis case with reasonable precision and with particularity sufficient t0 acquaint a defendant with the nature source and extent ofhis cause ofaction. Ifthere is any reasonable possibility that theplaintiffcan state a good cause ofaction, it is error t0 sustain a demurrer without leave t0 amend. The complaint as a whole should contain suflicientfacts t0 apprize the defendant 0f the basis upon which the plaintifl’is seeking relief” Doheny Park Terrace Homeowners Assn ’n, Ina, v Truck Ins. Exch. (2005) 132 CA4th 1076, 1099, 343 CR3d 157, 173-174]. (Emphasis added) B. The Complaint alleges a proper cause 0f action for Interpleader. Interpleader is a remedy, codified in CCP §§386-386.6, that invokes the court's equitable power to dispose 0f a fund 0r property (the “property” or the “‘res”) to which there are conflicting claims. The party in possession of the property (the “stakeholder”) uses interpleader t0 bring claimants before the court, Which can then adjudicate the merits of the competing claims and disburse the property. California Code of Civil Procedure section 386(b) states: “Anyperson,firm, corporation, association 0r other entity against whom double 0r multiple claims are made, 0r may be made, by two 0r morepersons which are such that they may give rise t0 double 0r multiple liability, may bring an action against the claimants t0 compel them t0 interplead and litigate their several claims.” Under current law, the scope of interpleader “has been broadened and enlarged. (Hancock Oil C0. v. Hopkins, supra,” 24 Ca1.2d at p. 508; [71 Cal. App. 4th 1123] Williams v. Gilmore, supra, 51 Ca1.App.2d at p. 688.) The pleading requirements for an Interpleader cause of action are as follows: “A complaint in interpleader must show that “the defendants make conflicting claims t0 [the subject matter], and that the [plaintiffl cannot safely determine which claim is valid and oflers t0 deposit the money in court . ” (4 Witkin, Cal. Procedure, supra, Pleading, § 248, p. 327 [“ ‘the code requires nothing more than t0 show that the parties t0 be called in make claims 0n him for the same thing, that the respective claims are adverse t0 each other, and that he cannot safelv determine for himselfwhich claim is right and Plaintiff’ s Opposition to Defendant Katherine Stratton’s Demurrer 5 \DOONQUI-bUJNH NNNNNNNNNr-tr-tr-tr-tr-tr-tr-tr-tr-tr-t OOQQUI-PUJNHOKDOOQQUI-bUJNHO lawful’ Westamerica Bank v. City ofBerkeley (201 1) 201 201 Cal. App. 4th 598, citing & quoting Fidelity Sav. etc. Assn. v. Rodgers (1919) 180 Cal. 683, 684-685 [182 P. 426].) Southern California Gas C0. v. Flannery (2014) 232 Cal. App. 4th 477. (Emphasis added). In this matter, Plaintiff alleges it acted as an escrow holder of the Purchase Funds 0n behalf of the parties t0 the Transaction. Plaintiff alleges that the defendant KSST/KSBT having received her share of the Purchase Funds, declined to accept the payments issued from the MST client trust account and chose t0 return the funds. Plaintiff alleges that 0n March 15, 2021, Mr. Skaggs on behalf 0fKSST/ KSBT sent a written instruction t0 Daniel J. Mash t0 issue a $2,000,000.00 payment to KSST/KSBT (the “Disputed Funds”), n0 later than March 22, 2021. Plaintiff alleges and that on March 22, 2021, VS attorney, Mr. Arellanez instructed MST t0 interplead the funds 0r deposit them in his firm’s trust account. Consequently, it is clear the defendants have made conflicting claims to the Disputed Funds. KSST/KSBT wants the Disputed Funds to be distributed t0 her now, despite her pending lawsuit seeking to rescind the Transaction, but at the same time VS has instructed Plaintiff not t0 distribute the Disputed Funds to KSST/KSBT, but instead to interplead the fimds 0r deposit them into a trust account with the law firm of Clapp Moroney. KSST/KSBT demurrer is based on the premise that Plaintiff has not received conflicting claims as t0 the Disputed Funds. In order t0 advance this premise KSST/KSBT must reconcile her attorney’s letter ofMarch 15, 2021, attached t0 the Complaint as Exhibit E, instructing Plaintiff t0 immediately release and distribute $2,000,000.00 of the Disputed Funds t0 KSST/KSBT, With Exhibit G t0 the complaint, VS attorney Mr. Arellanez March 22, 2021 email stating in response to KSST/KSBT’S instruction, “... the claims andfunds should be interpleaded with the court. Based 0n Mr. Skaggs unilateral request wefeel this is the best method t0 proceed. In the alternative we would consider having thefunds deposited into a trust account with Clapp Moroney until this matter is resolved.” KSST/KSBT’S attempt t0 reconcile the two claims is to simply conclude that “Vasili never stated and actual claim t0 thefunds” (KSST/KSBT demurrer Points and Authorities Page 5 line 7-8). But KSST/KSBT conclusion clearly represents an advocates View 0f the facts and Plaintiff’ s Opposition to Defendant Katherine Stratton’s Demurrer 6 \DOONQUI-bUJNH NNNNNNNNNr-tr-tr-tr-tr-tr-tr-tr-tr-tr-t OOQQUI-PUJNHOKDOOQQUI-bUJNHO ignores the fact that the two options for disbursement 0f the Disputed Funds identified by VS attorney are not consistent With an immediate release and distribution of the $2,000,000.00 Disputed Funds to KSST/KSBT. Plaintiff is not allowed the Viewpoint of an advocate. Because Plaintiff cannot pick a side, it cannot safely determine which claim is valid and therefore has requested t0 deposit the Disputed Funds With the Court. That is precisely the fimction of an interpleader action, to eliminate the risk of incorrectly resolving conflicting claims. “[then a disagreement arises as t0 the ownership ofsaidproperly, the holder thereofhas not obligated himselfto settle said disagreement and deliver theproperty t0 either 0fsaidparties in theface 0fc0nflicting claims thereto.” (Pacific Loan Management Corp. v. Superior Court, supra, 196 Ca1.App.3d at p. 1490. see Cantu v. Resolution Trust Corp. (1992) 4 Cal.App.4th 857, 876 [6 Cal. Rptr. 2d 15 1 .] The fact that MST does not have the authority to make a determination between KSST/KSBT’S instruction t0 release the Disputed Funds to her and VS instruction to either interplead the Disputed Funds 0r release them to VS attorney client trust account, is exactly Why MST informed KSST/KSBT’S attorney in its letter ofMarch 22, 2021, attached as Exhibit F to the complaint that it had t0 interplead the Disputed Funds. “Given your letter and thefact I have not received the consent 0fthe otherparties t0 the escrow, I willfile a Cross-Complaintfor Interpleader in the Action this week, thereby placing theparty’s respective claims before and Purchasefunds in the custody 0fthe court. Ifyou are correct that Purchasefunds monies should now be disbursed t0 your client, it isfor the court t0 decide the issue. ” KSST heavy reliance 0n Placer Foreclosure Inc. v. Aflalo (2018) 23 Cal App. 5th 1109, is misplaced. In Placer Foreclosure Inc. v. Aflalo, Placer was functioning as the trustee in a nonjudicial foreclosure sale. In that circumstance Placer’s role in conducting a nonjudicial foreclosure was specifically controlled by “comprehensive statutory scheme” set forth in Civil Code 2924 et seq. Unlike Placer, MST cannot safely distribute the Disputed Funds as required by statute. The Court stated in Placer in part: The trustee's role in preparingfor and conducting a nonjudicial foreclosure sale is setforth in detail in Civil Code section 2924 et seq., as part 0fa comprehensive statutory scheme. The scope and Plaintiff’ s Opposition to Defendant Katherine Stratton’s Demurrer 7 \DOONQUI-bUJNH NNNNNNNNNr-tr-tr-tr-tr-tr-tr-tr-tr-tr-t OOQQUI-PUJNHOKDOOQQUI-bUJNHO nature 0fthe trustee's duties are exclusively defined by the deed 0f trust and the governing statutes. (Pro Value Properties, Inc. v. Quality Loan Service Corp. (2009) 1 70 Cal.App.4th 579, 583 (Quality Loan Service).) N0 other common law duties exist. (Ibid.) Because Placer was statutorily required under section 2924K t0 disburse surplus fimds to Aflalo, it is inapplicable to this situation. The Placer court went 0n t0 state: “Placer was statutorily required under section 2924k t0 disburse surplus funds to Aflalo. Section 2924k, subdivision (a) provides that a trustee “shall distribute theproceeds” in thefollowing order 0f priority: (1) costs and expenses 0fthe sale, (2) payment 0fthe “obligations secured by the deed 0ftrust, ” (3) payment t0 anyjunior liens 0r encumbrances, and (4) payment “t0 the trustor. ” Placerpaid the costs and expenses 0fthe sale and the encumbrances as directed under section 2924k, subdivision (a)(l) through (3), including payment t0 the lender ofrecord, but did notpay the remainingfunds t0 Aflalo, the trustor (§ 2924k, subd. (a)(4)). Placer was required t0 d0 s0. ” In this matter Plaintiff does not have the benefit nor protection of statutory obligation and/or instruction 0n how and t0 Whom t0 disburse the Disputed Funds, as Placer in Civil Code section 2924(k). Nor is there an agreement between the parties dictating how and t0 Whom the fimds should be disbursed in this situation. T0 the contrary if Plaintiff follows KSST/KSBT instruction to immediately release and distribute $2,000,000.00 t0 KSST / KSBT it will be subj ect t0 a claim from VS for not interpleading the Disputed Funds with the court or alternatively having the Disputed Funds deposited into a trust account With Clapp Moroney. Conversely, if Plaintiff follows VS instruction, it would be subj ect t0 a claim form KSST/KSBT for not following her instructions. Either circumstance may give rise t0 double or multiple liability as to MST. C. KSST/KSBT argues facts bevond the scope 0f the Complaint. A demurrer can be used only t0 challenge defects that appear 0n the face of the pleading, or from matters outside the pleading that are judicially noticeable. Blank v. Kirwan (1985) 39 C3d. 31 1,318, Donabedian v. Mercury Ins. C0. (2004) 116 CA 4th 968, 994. N0 other extrinsic evidence/facts can be considered. Plaintiff’ s Opposition to Defendant Katherine Stratton’s Demurrer 8 \DOONQUI-bUJNH NNNNNNNNNr-tr-tr-tr-tr-tr-tr-tr-tr-tr-t OOQQUI-PUJNHOKDOOQQUI-bUJNHO “Thepurpose ofa general demurrer is t0 determine the sufficiency 0fthe complaint and the court should only rule 0n matters disclosed in thatpleading.” Ion Equip. Corp. v. Nelson (1980) 110 CA 3d. 868, 881. Yet, in in section II of her Points and Authorities (pages 5-7) KSST/KSBT spends significant time and effort arguing facts, scenarios and possible outcomes of the KSST/KSBT Action as justification for sustaining her demurrer. But these arguments are inappropriate and should not be considered by the court because they are based 0n facts outside the complaint and for which judicial notice has not been requested nor is it appropriate. D. KSST/KSBT failed t0 complv with the procedural requirements of CRC 3.1320(e). CRC 3.1320(6) states: A demurrer must state, on the first page immediately below the number 0f the case, the name of the party filing the demurrer and the name of the party whose pleading is the subj ect of the demurrer. CRC 3 . 1 320(6). KSST/KSBT did not submit a demurrer in compliance with this Rule. E. MST’s Opportunitv t0 Amend It is MST position that it has stated a Viable and proper interpleader cause 0f action, but in the event the Court sustains the Demurrer, an opportunity t0 amend is proper. It is an abuse 0f discretion for the Court t0 deny leave t0 amend Where there is any reasonable possibility that plaintiff can state a good cause 0f action. Bounds v. Sup. Ct. (KMA Group) (2014) 229 CA 4th 458, 484. / / / / / / / / / Plaintiff’ s Opposition to Defendant Katherine Stratton’s Demurrer 9 \OOOQQUIAUJNH NNNNNNNNNr-tr-tr-tr-tr-tr-tr-tr-tr-tr-t OOQONUIAUJNHOKOOOQQUIAUJNHO III. CONCLUSION PlaintiffMST is subject to two claims for the same funds. The respective claims are adverse t0 each other, and MST cannot safely determine Which claim is right and lawful. Therefore, the funds should be interplead to allow the decision as to proper disbursement of the funds to be made by the Court. DATED: October 13, 2021 MCPHARLIN SPRINKLES & THOMAS LLP By: Daniel j‘. Mash Plaintiff’ s Opposition to Defendant Katherine Stratton’s Demurrer 10 \OOOQQUIAUJNH NNNNNNNNNr-tr-tr-tr-tr-tr-tr-tr-tr-tr-t OOQONUI-bUJNHOOOOQQLh-bWNHO 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: PLAINTIFF’S OPPOSITION TO DEFENDANT KATHERINE STRATTON’S 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 Katherine Stratton, Trustee Jason M. Skaggs Skaggs Faucette LLP 530 Lytton Ave., 2nd Floor Palo Alto, CA 94103 iason@skaggsfaucette.com [ ] (BY MAIL) I caused such envelope(s) with postage thereon fully prepaid t0 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 t0 be placed in the Federal Express office at San Jose, California. [ X ] (BY ELECTRONIC MAIL) I caused such document(s) to be transmitted by electronic mail through e-filing vendor OneLegal on this date t0 the offices 0f 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 0f a member of the bar of this court at Whose direction the service was made. Executed 0n October 13, 2021, at San Jose, California. Natalie P. Alejandro
