Trial Judge Correctly Dismissed Trustee’s Interpleader Complaint.
In Placer Foreclosure, Inc. v. Aflalo, Case No. B268589 (2d Dist., Div. 6 May 30, 2018) (published), a foreclosure trustee foreclosed an owner’s property based on a deed of trust, with the sale resulting in surplus proceeds of $ 974,786.81. The former owner sued trustee and foreclosure buyer for wrongful foreclosure. Trustee brought an interpleader complaint, disavowing any interest in the surplus proceeds, arguing there were conflicting claims between former owner and foreclosure buyer, seeking recovery of interpleader attorney’s fees, seeking a discharge of liability, and seeking a dismissal of the wrongful foreclosure action. The trial judge sustained former owner’s demurrer to the interpleader action.
Trustee lost his appeal of the judgment of dismissal based on the demurrer ruling.
Although trustee and former owner reached a settlement, it did not moot the trustee’s fee reimbursement request, liability discharge request, or wrongful foreclosure dismissal request, which were all at play in the demurrer ruling. The appellate court agreed that trustee was not exposed to double vexation because it had a mandatory duty to distribute the surplus proceeds to former owner, did not face competing claims between lienholders, and only faced the potential that former owner might have to refund surplus proceeds he received to the foreclosure buyer (but that latter point did not really involve trustee). The judgment of dismissal of the interpleader was affirmed, with the surplus proceeds ordered to be distributed to foreclosure buyer under the parties’ settlement agreement.