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 Post subject: FT - Attorney Equity National Corp. v. Chang (5/23/2002)
PostPosted: Tue Feb 24, 2009 12:22 pm 

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Attorney Equity National Corp. v. Chang,
2002.CA.0004682 (Cal.App. Dist.2 05/23/2002)

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
SECOND APPELLATE DISTRICT DIVISION THREE

B145792

2002.CA.0004682

May 23, 2002

ATTORNEY EQUITY NATIONAL CORP., PLAINTIFFS,

v.

YANG MING TSAI CHANG, ET AL., DEFENDANTS.

GRACE TSAI, DEFENDANT AND APPELLANT,

v.

PHILIP TSUI, LINDA TSUI, AND JOHN E, DOUGLASS, RESPONDENTS.

Appeal from an order of the Superior Court of Los Angeles County. John P. Shook, Judge. Affirmed. (Los Angeles County Super. Ct. No. BS061511)

Law Offices of Shun C. Chen and Shun C. Chen for Defendant and Appellant Grace Tsai.

John E. Douglass in pro per for Respondents.

The opinion of the court was delivered by: Croskey, J.

NOT TO BE PUBLISHED IN OFFICIAL REPORTS

California Rules of Court, rule 977(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 977(b). This opinion has not been certified for publication or ordered published for purposes of rule 977.

In this dispute over who has a rightful claim to the excess proceeds of a trustee's non-judicial foreclosure sale of real property, Grace Tsai ("Grace") appeals from an order that awarded the proceeds to John Douglass, as assignee of Philip Tsui, and to Linda Tsui. The proceedings to determine who is entitled to the surplus proceeds were conducted pursuant to Civil Code section 2924j. *fn1

The trial court also had before it competing claims to a judgment that the Tsuis obtained against Grace's sister, Yang Ming Tsai Chang. Chang had legal title to the subject real property before it was sold at foreclosure. We find the court correctly determined that Grace did not have a rightful claim to the judgment and the surplus funds. The order directing the clerk of the court to disburse the funds to the Tsuis and John Douglass will be affirmed.

BACKGROUND OF THE CASE

1. Events Preceding the Non-judicial Foreclosure

In 1991, Philip and Linda Tsui each filed suit against Grace for usury. In December 1992, while those suits were pending, Grace transferred certain assets to her sister Yang Ming Tsai Chang, including real property on Pasqual Avenue in San Gabriel, California, and two deeds of trust together with their promissory notes. In 1995, Philip Tsui and Linda Tsui each received a judgment against Grace in their usury suits; the judgments totaled $117,470.46. *fn2

After these judgments were rendered, and based on the conveyances from Grace to her sister, the Tsuis sued the two sisters for fraudulent conveyance (seeking to set aside the conveyances), and conspiracy to defraud (seeking damages). (LASC No. GC015786.) John Douglass was their attorney. The sisters answered the complaint and then filed chapter 7 bankruptcy petitions. Grace listed the Tsuis as unsecured creditors. Grace was granted a bankruptcy discharge in July 1997. Yang Ming Tsai Chang's petition was dismissed because of her failure to appear at a creditors meeting, and her automatic bankruptcy stay was lifted. *fn3

In January 1998, the Tsuis' initial suit for fraudulent conveyance and conspiracy to defraud (LASC No. GC015786.), came to trial. With Grace's debts having been discharged, only her sister Yang Ming Tsai Chang remained a defendant in that case. When Yang Ming Tsai Chang failed to appear for trial, the Tsuis presented a default prove up. The trial court determined Yang Ming Tsai Chang had participated in a conspiracy to defraud the Tsuis by means of the aforesaid conveyances, and awarded the Tsuis a judgment against her in amount the Tsuis prayed for, plus prejudgment interest ($117,470.46 plus $35,076.79). The Tsuis recorded an abstract of judgment in February 1998. *fn4

On March 31, 1998, any and all claims that Grace's bankruptcy estate might have in LASC No. GC015786 were abandoned to her pursuant to an order of the bankruptcy court made on a motion by Tsai for such relief. The bankruptcy court stated, at the hearing on that motion, that the Tsuis' judgment against Yang Ming Tsai Chang has nothing to do with that hearing. Rather, the hearing addressed whether there should be abandoned to Grace any and all claims that the bankruptcy estate would have in the Tsuis' state fraudulent transfer case against the sisters, the court noting there may not be any claims.

In July 1998, Grace filed an application with the bankruptcy court asking to have her chapter 7 case reopened for the purpose of allowing her to seek injunctive relief against the Tsuis, who pursuant to their state court judgment, were pursuing Yang Ming Tsai Chang for rents from the transferred property at issue in LASC No. GC015786. The application was denied on the grounds that a bankruptcy discharge precludes a creditor from pursuing the discharged debts of the debtor, but does not affect the liability of a third party on such debt, nor the liability of the property of a third party for the debt, and thus by pursuing Yang Ming Tsai Chang in state court, the Tsuis were not violating Grace's bankruptcy discharge. The denial was affirmed on appeal.

2. The Judicial Foreclosure and Subsequent Events

On November 4, 1999, Attorneys Equity National Corporation ("Attorneys"), conducted a non-judicial foreclosure sale of the property known as 241 Cresta Avenue in San Gabriel, California, on behalf of the holder of the first deed of trust on said property. The foreclosure papers state that as of April 30, 1999, title to the property was vested in Yang Ming Tsai Chang, Grace's sister. After paying off the promissory note on the Cresta property and paying itself its attorney's fees and costs, Attorneys had approximately $126,000 in surplus sale proceeds. Grace made a claim to the surplus funds on October 23, 1999. On November 10, 1999, John Douglass made a claim to the surplus on behalf of his clients, Linda and Philip Tsui. Because Attorneys was unable to determine whose claim should prevail, on February 1, 2000 it filed, in lieu of an interpleader action, a petition for an order directing the clerk of the court to deposit the funds. (§ 2924j, subd. (c).) Thus began the instant action.

Named as respondents in the petition were Philip and Linda Tsui ("the Tsuis"), Grace, and Grace's sister, Yang Ming Tsai Chang. John Douglass was not a named respondent.

One of the issues in this appeal arises from the section 2924j, subdivision (d) notice that Attorneys sent to the named respondents regarding the surplus funds. The notice advises them of Attorneys's "intent to deposit the surplus proceeds" with the court, and it states in part: "Please be . . . advised that a claim for the funds must be filed with the court within thirty (30) days from the date of this notice." The notice was dated January 7, 2000; thus, thirty days from that date was February 6, 2000. *fn5 Grace filed a claim with the court on February 3, 2000, and a verified claim on March 24, 2000. On February 18, 2000, John Douglass, as an assignee of Philip Tsui, filed a claim with the court on behalf of himself and Linda Tsui. *fn6

Grace moved for summary judgment. Her motion was based on the fact that Douglass was not a named respondent in this suit, and that he filed his claim more than 30 days after the notice sent them by Attorneys. Linda Tsui and John Douglass moved for an order denying Attorneys' petition and for an order that funds already on deposit be disbursed to them. The basis of their motion was their having "the only documented and verified claim made to . . . Attorneys." A hearing on the two motions was held on April 4, 2000. Grace's motion for summary judgment was denied on procedural grounds (the 60-day rule in subd. (a) of Code Civ. Proc., § 437c, which we discuss infra). The court continued the other motion for an evidentiary hearing.

The evidentiary hearing was held on May 9, 2000, at which time the court took testimony from Grace, her bankruptcy trustee, Gilbert Vasquez, and John Douglass. The motion to have the funds distributed to Douglass and Linda Tsui was granted on that day, and the court's findings and formal order were signed and filed on May 24, 2000.

The court found that Grace conveyed her assets to her sister and then filed for bankruptcy to avoid paying the usury judgments against her that the Tsuis had received, and it concluded that the transfers were a fraudulent and illegal means of avoiding paying the judgments. The court also found (1) in making a claim for the excess proceeds from the sale of Yang Ming Tsai Chang's property, Grace was attempting to collect on the conspiracy judgment that the Tsuis received against Yang Ming Tsai Chang; (2) when Grace filed for bankruptcy, she had no claims against Yang Ming Tsai Chang; (3) the Tsuis' abstract of judgment was still outstanding; and (4) only Philip and Linda Tsui served Attorneys with a verified claim for the excess proceeds from the sale of Yang Ming Tsai Chang's property, which the trial court found to be "required by Civil Code § 2924k [sic]," (apparently the court meant section 2924j, subd. (a) (4), which we address infra).

The court denied Grace's claim to the surplus sale proceeds and ordered that the surplus funds be transferred to Douglass and the Tsuis, made payable jointly to them. Thereafter, Grace filed this appeal.

CONTENTIONS ON APPEAL

Grace contends the trial court abused its discretion when it denied her motion for summary judgment rather than continuing it as it continued Douglass's and Linda Tsui's motion. She also contends that (a) the court improperly denied Attorney's petition to deposit the surplus funds, (b) John Douglass had no standing to be a claimant in this suit, and (c) the claim filed by him and Linda Tsui was not timely. Additionally, she appears to object to the fact that Attorneys did not send out the notice required by subdivision (a) of section 2924j.

Grace also she asserts that she held a superior claim to the foreclosure sale excess proceeds because her bankruptcy trustee obtained a right to the Tsuis' fraudulent conveyance claim in the following manner: she filed her chapter 7 petition, the Tsuis assigned their right to recover the Cresta property to the bankruptcy trustee, the trustee then abandoned his rights to her, and under federal preemption law, she thus had the superior claim. She asserts the right to the default judgment against her sister Yang Ming Tsai Change was abandoned to her.

DISCUSSION

1. There Was No Abuse of Discretion When the Trial Court Did Not Continue Grace's Motion for Summary Judgment

The trial court denied Grace's motion for summary judgment solely on the basis that it violated the 60-day rule in Code of Civil Procedure section 437c, subdivision (a), which provides in relevant part that a motion for summary judgment may be brought "at any time after 60 days have elapsed since the general appearance in the action or proceeding of each party against whom the motion is directed or at any earlier time after the general appearance that the court, with or without notice and upon good cause shown, may direct." Grace's motion, which was filed on March 2, 2000, was directed at John Douglass, who made his general appearance on February 18, 2000. Clearly she did not meet the sixty day requirement, and she has not cited us to any "good cause shown."

Moreover, section 2924j has no provision for summary judgments. The requirements for how the trustee, court, and claimants are to proceed if the trustee proceeds by declaration, rather than by an interpleader action, appear to be confined to that statute. Thus, after a trustee files his or her declaration respecting the unresolved competing claims, and deposits the surplus funds with the clerk, the court itself schedules a hearing on the various claims and the clerk mails notice of such hearing. (§ 2924j, subd. (d)) The court is directed to consider the claims within 90 days of the funds being deposited with the clerk. (Ibid.) There is no need for additional motions, such as the summary judgment motion filed by Grace, and the motion by John Douglass and Linda Tsui for an order that the excess funds be disbursed to them. Of course written points and authorities would be proper in facilitating the court's decision on who is entitled to the surplus funds.

2. The Trial Court Did Not Improperly Deny the Trustee's Petition

Section 2924j, subdivision (b), provides that if, after acting with due diligence, the trustee is not able to resolve conflicts between claimants or determine the priority of the claims submitted to him or her, then within a specified amount of time, the trustee must either file an interpleader action or deposit the funds with the clerk of the court and file a declaration of unresolved claims. If the trustee chooses the latter avenue, then the clerk "shall deposit the amount with the county treasurer subject to order of the . . . court upon the application of any interested party." (Italics added.) Here, Attorneys made such an application in its petition. In its order on the petition, the trial court denied that application and instead directed that the clerk transfer the surplus funds to John Douglass and the Tsuis. We find nothing wrong with the court's order. Although Grace contends the trial court improperly denied Attorneys its right, as trustee, to deposit the funds, the reality is that Attorneys did deposit the funds with the clerk.

3. Grace Has Not Demonstrated that the Court Erred in Considering John Douglass's Claim

Grace challenges John Douglass's standing to make a claim, on his own behalf, in this suit. It is true that the petition filed by Attorneys did not name Mr. Douglass as a respondent, and it is also true that Douglass did not file a complaint in intervention, pursuant to Code of Civil Procedure section 387. However, those facts do not warrant a conclusion that the trial court erred in granting his request that excess funds be distributed to him.

Several things about section 2924j stand out with respect to this issue. The statute requires a verified claim to the surplus funds (subd. (a), part (4)); the court is directed to consider "all claims filed at least 15 days before the date on which the hearing is scheduled by the court" (subd. (d), italics added); and the court is required to distribute "the deposited funds to any and all claimants entitled thereto" (subd. (d), italics added).

Douglass did file a claim on his own behalf (and on behalf of Linda Tsui), after Attorneys filed this suit. In the claim, Douglass stated he is an assignee of Philip Tsui. Philip Tsui is one of the named respondents in this suit, and he filed a verified claim before this suit was filed. Philip Tsui is also a judgment creditor of Yang Ming Tsai Chang, having obtained a judgment against her in the Tsuis' suit for fraudulent conveyance and conspiracy. It is his rights as such judgment creditor that he assigned to Douglass. Under the circumstances of this case, we find no cause to reverse the court's order merely because John Douglass was not a named respondent in this suit.

4. The Timing of the Post-Petition Claim Filed by Douglass and Linda Tsui Does Not Require Reversal of the Court's Order Awarding the Surplus Proceeds

As noted in footnote 5, ante, Attorneys sent an amended section 2924, subdivision (d) notice to the Tsuis and to Grace on January 7, 2000. The claim that John Douglass and Linda Tsui filed with the court was not filed until February 18, which was more than 30 days after January 7. From these facts, Tsai concludes such claim was untimely and therefore could not support the order directing the clerk to distribute the funds to Douglass and the Tsuis. However, given the overall facts respecting the various claims that the parties submitted to Attorneys and the court, we find no cause to reverse the court's order.

The attorneys representing Grace and the Tsuis began sending claims to Attorneys, on behalf of their respective clients, even before Attorneys sold the Cresta Avenue property on November 4, 1999. More claim notices from the attorneys followed the sale, including a verified claim by John Douglass on behalf of the Tsuis, which is dated November 10, 1999. In reality, there are enough claim notices in this case for the Tsuis and Douglass, including verified claims, to satisfy any court. Nevertheless, Grace asks this court to exalt form over substance by requiring that Douglass and Linda Tsui have submitted a claim within 30 days of Attorney's January 7, 2000 notice. We will not do that.

Moreover, although Attorneys' amended subdivision (d) notice is dated January 7, 2000, Attorneys did not file their petition to initiate this suit until February 1, 2000. Had Douglass attempted to file a subdivision (d) claim prior to February 1, there would have been no suit to which it would apply-no file in which the clerk could place the claim. Thus, technically, Douglass had only a few days, after the suit was filed, in which to file a subdivision (d) claim for himself and Linda Tsui. While it was certainly possible to file within that time, those few days are not the substantially more amount of time given a claimant by subdivision (d). Under these circumstances, there was a substantial compliance with subdivision (d), and Grace has not explained how she has been procedurally harmed by the late filing. Her only asserted harm is that Douglass and the Tsuis were able to recover the deposited money despite not making a timely subdivision (d) claim.

We reject her contention that the equities balance in her favor. She contends that whereas "[n]othing on record showed [she] was even aware of the usury law," Douglass and the Tsuis all received timely subdivision (d) notice and Douglass is an experienced attorney familiar with foreclosure law. We do not see where one has anything to do with the other, assuming all of her factual assertions are true. She simply has not demonstrated reversible harm from the late filing of Douglass's and Linda Tsui's subdivision (d) claim. Moreover, her reference to the clean hands doctrine seems strange given that a trial court determined that her conveyances of her assets to her sister were a fraudulent attempt to rid herself of assets and avoid paying the judgments the Tsuis obtained against her.

5. Attorneys' Failure to Send Out Section 2924j, subdivision (a) Notice Is Of No Consequence

Grace asks us to reverse the trial court's order because apparently Attorneys failed to send out the notice required by subdivision (a) of section 2924j. We find the failure to be of no consequence in this case, given the fact that Grace and the Tsuis were all quite aware of their rights under section 2924j. As we noted, their attorneys began making claims for the surplus fund even prior to the foreclosure sale, and continued making them after the sale. The petition states that not only did the attorneys make claims prior to this suit being filed, they "included voluminous documents" to support those claims.

It is true that the Tsuis filed a verified claim prior to the filing of this suit and thus complied with subdivision (a) despite not receiving a subdivision (a) notice from Attorneys to do so. And it is apparently true that Grace did not file a verified pre-suit claim. However, she did file a verified claim after this suit was filed. Given the looseness with which Douglass, Linda Tsui, and Attorneys went about their respective section 2924 obligations, we could hardly excuse their technical noncompliance but fault Grace for not making a verified claim prior to the filing of this suit. Thus, even if there is truth to her claim that Douglass and the Tsuis are seeking to use their "voluntary" compliance with subdivision (a) "as a sword to exclude [her]," the sword will have no harmful effect on her.

6. There Is No Basis for Grace's Substantive Claim to the Surplus Funds

At the evidentiary hearing in the instant case, Grace's bankruptcy trustee, Gilbert Vasquez, testified that Grace did not list any claims against her sister or the Tsuis on her bankruptcy schedules. Thus, she made a judicial admission that when she filed her bankruptcy suit, she had no such claims. A judicial admission " `is not merely evidence of a fact; it is a conclusive concession of the truth of a matter which has the effect of removing it from the issues.' [Citation.]" (Smith v. Walter E. Heller & Co. (1978) 82 Cal.App.3d 259, 269.) A judicial admission can be an allegation in a pleading, or a concession or stipulation to facts. (Ibid.) Grace herself testified at the evidentiary hearing in the instant case that she did not know of any claims she had against her sister.

Because she had no claims against her sister or the Tsuis, Grace must rely on some other theory of why she is entitled to the surplus proceeds of the foreclosure on the Cresta Avenue property. Her theory is that by operation of law, she has a superior claim to the surplus funds. She relies on the following proceedings in her bankruptcy case to support her position.

First, she argues that her and her sister's bankruptcy trustees had the right to avoid any fraudulent transfers of interests in property that the sisters made made, and recover the property from their transferees, or from a subsequent transferee if the property was retransferred. Therefore, Grace asserts, any rights the Tsuis had to have the state court set aside the allegedly fraudulent conveyances addressed in their two state court suits vested in the bankruptcy trustees of the two sisters.

Second, in December 1997, the bankruptcy court denied the Tsuis' motion for an order abandoning to the Tsuis certain property of Grace's bankruptcy estate. Such property was the June 1997 assignment that the Tsuis made to the bankruptcy court. That assignment consisted of the Tsuis' rights in the fraudulent conveyance causes of action in their second suit for fraudulent conveyance and conspiracy (not LASC No. GC015786), together with the lis pendens they filed in that suit. (See fn. 3, ante.) (As noted earlier, the written assignment does not mention which of the two real properties alleged by the second suit to have been fraudulently conveyed [the Pasqual Avenue and Cresta Avenue properties] is the subject of the lis pendens.)

The assignment states the Tsuis were assigning, to the sisters' bankruptcy trustees, "all rights to this litigation and its attendant lis pendens to the . . . trustees in bankruptcy . . . for the duration of the jurisdiction of the bankruptcy court." (Second italics added.) Gilbert Vasquez, Grace's bankruptcy trustee, testified at the hearing in this case that he took no action on the Tsuis' second suit. He testified that instead, he abandoned it and the abandonment terminated the jurisdiction of the bankruptcy court. We observe that on March 9, 1998, shortly after the bankruptcy court denied the Tsuis' motion for abandonment, the superior court dismissed this second suit for lack of prosecution.

Third, on March 31, 1998, the bankruptcy court granted Grace's motion to have abandoned to her, whatever rights that her bankruptcy trustee had in LASC No. GC015786, the Tsuis' first suit for fraudulent conveyance and conspiracy to defraud. (In granting her motion, the court found that this state court action "is burdensome to the estate, [and] is of inconsequential value and benefit to the estate.")

Based on these matters, Grace contends that the order abandoning the trustee's rights in LASC No. GC015786 (1) "established the relative rights between the Tsuis and [her] as to the Cresta Property," and (2) is res judicata in the instant suit, and therefore the trial court erred when it held a hearing to "redetermine the relative rights as to the Cresta Property."

Grace also contends that when the bankruptcy court made the order abandoning the trustee's rights in LASC No. GC015786, "the right to the cause of action for conspiracy to defraud, previously assigned [by the Tsuis] to the trustee . . . was abandoned to [her and t]herefore, as an operation of law, [she] became the assignee of the Default Judgment" that the Tsuis received in that suit.

We reject Grace's theory as to why she is entitled to the excess foreclosure proceeds. Her argument amounts to a slight of hand exercise. Moreover it is an outrageous attempt to help herself to the benefits of a judgment that is based on her own tortious conspiracy with her sister to defraud the Tsuis.

To begin with, the judgment against Yang Ming Tsai Chang that the Tsuis received in LASC No. GC015786 was based on their cause of action for conspiracy to defraud, whereby they sought general damages, not on their cause of action for fraudulent conveyance whereby they sought to have certain conveyances set aside. It is the setting aside of the conveyances made by Grace to her sister that the bankruptcy trustee could have pursued so as to bring more assets into Grace's bankruptcy estate. The trustee would not have pursued the cause of action that alleged the sisters conspired to defraud the Tsuis; that count was personal to the Tsuis. Thus, Grace could claim no right to the Tsuis' judgment in that case since the trustee could make no rightful claim to it. Therefore, the rights that Grace received via the bankruptcy order of abandonment did not include a right to the Tsuis' judgment against Grace's sister. Additionally, by the time the bankruptcy court made its order of abandonment, LASC No. GC015786 was a concluded case and the possibility of proceeding on the fraudulent conveyance cause of action in it no longer existed.

Moreover, the Cresta Avenue property, which produced the surplus proceeds, was not even in issue in LASC No. GC015786. It was a subject of the Tsuis' second fraudulent conveyance/conspiracy to defraud suit, and while the bankruptcy court declined to transfer back to the Tsuis the rights in that suit that they had assigned to the bankruptcy court, eventually the court lost jurisdiction over those rights when the trustee abandoned them; thereafter, the suit was dismissed by the superior court. It was nearly two years later that the surplus proceeds came into existence. Clearly Grace gained nothing from that second suit.

DISPOSITION

The order from which Grace has appealed is affirmed. Costs on appeal to the Tsuis and Douglass.

NOT TO BE PUBLISHED IN OFFICIAL REPORTS

We Concur:

KLEIN, P.J.

ALDRICH, J.


Opinion Footnotes

*fn1 Civil Code section 2924j (§ 2924j") states in relevant part: "(a) 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. The notice shall be sent by first- class mail in the manner provided in paragraph (1) of subdivision (c) of Section 2924b and inform each entitled person of each of the following: "(1) That there has been a trustee's sale of the described real property. "(2) That the noticed person may have a claim to all or a portion of the sale proceeds remaining after payment of the amounts required by paragraphs (1) and (2) of subdivision (a) of Section 2924k. "(3) The noticed person may contact the trustee at the address provided in the notice to pursue any potential claim. "(4) That before the trustee can act, the noticed person may be required to present proof that the person holds the beneficial interest in the obligation and the security interest therefore. In the case of a promissory note secured by a deed of trust, proof that the person holds the beneficial interest may include the original promissory note and assignment of beneficial interests related thereto. The noticed person shall also submit a written claim to the trustee, executed under penalty of perjury, stating the following: "(A) The amount of the claim to the date of trustee's sale. "(B) An itemized statement of the principal, interest, and other charges. "(C) That claims must be received by the trustee at the address stated in the notice no later than 30 days after the date the trustee sends notice to the potential claimant. "(b) The trustee shall exercise due diligence to determine the priority of the written claims received by the trustee to the trustee's sale surplus proceeds from those persons to whom notice was sent pursuant to subdivision (a). In 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). Nothing in this section shall preclude any person from pursuing other remedies or claims as to surplus proceeds. "(c) 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 or municipal court, as applicable, 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. The declaration shall specify the date of the trustee's sale, a description of the property, the names and addresses of all persons sent notice pursuant to subdivision (a), a statement that the trustee exercised due diligence pursuant to subdivision (b), that the trustee provided written notice as required by subdivisions (a) and (d) and the amount of the sales proceeds deposited by the trustee with the superior or municipal court. Further, the trustee shall submit a copy of the trustee's sales guarantee and any information relevant to the identity, location, and priority of the potential claimants with the superior or municipal court and shall file proof of service of the notice required by subdivision (d) on all persons described in subdivision (a). "The clerk shall deposit the amount with the county treasurer subject to order of the superior or municipal court upon the application of any interested party. The clerk may charge a reasonable fee for the performance of activities pursuant to this subdivision equal to the fee for filing an interpleader action pursuant to Article 2 (commencing with Section 26820) of Division 2 of Title 3 of the Government Code. 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. A deposit with the clerk of the superior or municipal court pursuant to this subdivision may be either for the total proceeds of the trustee's sale, less any fees charged by the clerk, if a conflict or conflicts exist with respect to the total proceeds, or that portion that cannot be distributed after due diligence, less any fees charged by the clerk. "(d) Before 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 superior or municipal court, as applicable, 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 phone 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 trustees' declaration at the addresses specified therein. The court shall distribute the deposited funds to any and all claimants entitled thereto. "(e) Nothing in this section restricts the ability of a trustee to file an interpleader action in order to resolve a dispute about the proceeds of a trustee's sale. Once an interpleader action has been filed, thereafter the provisions of this section shall not apply. "(f) `Due diligence,' for the purposes of this section means that the trustee researched the written claims submitted or other evidence of conflicts and determined that a conflict of priorities exists between two or more claimants which the trustee is unable to resolve.

*fn2 According to Grace Tsai's appellate brief, the usury rate of interest that supports the judgments against her was "purely statutory," and not reflective of the market interest rate which was "well above the usury limit." (Apparently she means the market interest rate on loans.) She states that she is "an immigrant housewife [who was just] seeking to earn some interest above the bank passbook rate" when she loaned money to the Tsuis. (She also stated that she "routinely invested other people's money.") She described the Tsuis as licensed real estate brokers who "cleverly manipulated [her] to use her money for free during the high interest rate period" by suing her for a statutory recovery of the interest they paid her.

*fn3 On March 28, 1997, after the sisters filed their bankruptcy petitions, the Tsuis filed a second suit seeking to set aside the same conveyances, and for damages for conspiracy to defraud. This time they did not name the sisters as defendants (except by accident in the body of the complaint). However, they made new allegations against Yang Ming Tsai Chang, namely, that she transferred property at 241 Cresta Avenue in San Gabriel to her husband, Ching Ming Chang, that the conveyance was fraudulent, made without fair compensation, and made for the purpose of hindering, delaying and defrauding creditors, including the Tsuis. (This North Cresta Avenue property is the subject foreclosed- on property.) In June 1997, the Tsuis assigned to the bankruptcy court (in both the sisters' cases), for the duration of the bankruptcy court's jurisdiction, their (the Tsuis') rights in (1) this second litigation and (2) the lis pendens they placed on property that was the subject of the suit (it is not clear which property the lis pendens addressed, there apparently not being a copy of the lis pendens in the appellate record). Neither of the sisters' bankruptcy trustees pursued this second suit; nevertheless, the bankruptcy court denied the Tsuis' motion to abandon the case to them. The superior court dismissed the suit on March 9, 1998, for failure to prosecute.

*fn4 The Tsuis' judgment against Yang Ming Tsai Chang was affirmed by Division One of this court in November 1998. Also in November 1998, Philip Tsui assigned his interest in the judgment to his and Linda Tsui's attorney, John Douglass.

*fn5 This January 7, 2000 notice from Attorneys states it is an amended notice. The original notice was sent out by Attorneys on December 3, 1999. The amended notice differs from the original notice only in that the amended notice has an advisement saying that it is an amended notice and the recipient "may disregard any previous notice sent to you."

*fn6 Philip Tsui filed a joinder in the claims and other papers of John Douglass, and Grace's sister joined in her claim.


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