St. Jean v. State of California, State Controllers Office

Filed 10/9/07 St. Jean v. State of California, State Controllers Office CA2/8

NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS

California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

SECOND APPELLATE DISTRICT

DIVISION EIGHT

APPEAL from a judgment and order of the Superior Court of Los Angeles County. Maureen Duffy-Lewis, Judge. Reversed.

Edmund G. Brown, Jr., Attorney General, Stacy Boulware Eurie, Senior Assistant Attorney General, Christopher E. Krueger, Supervising Deputy Attorney General and Acting Senior Assistant Attorney General, Douglas J. Woods, Acting Supervising Deputy Attorney General, and Susan K. Leach, Deputy Attorney General, for Defendant and Appellant.

Grant & Grant, Richard L. Grant, Gabrielle H. Grant and Mark C. Patlan for Plaintiff and Respondent.

The State Controllers Office (controller) appeals from a judgment and incorporated order, awarding to plaintiff Larry St. Jean $118,301.42, owed to him by Rostane Eddi, but which had escheated to the controller before plaintiff claimed it. The controller contends that plaintiff was not entitled to recover the funds without pursuing an administrative claim before the controller under the Unclaimed Property Law (Code Civ. Proc.,  1500 et seq.; undesignated section references are to that code), that plaintiff was categorically not entitled to the funds, that plaintiffs California, sister-state judgment was improperly obtained, and that the trial court improperly disposed of the case by judgment on the pleadings. We conclude that the latter contention requires reversal, while the remaining contentions may be raised in the trial court on remand.

FACTS

Plaintiffs first amended complaint for declaratory relief (complaint) alleged as follows.^[1] On November 25, 1993, Eddi executed a promissory note to plaintiff for $50,000, with interest at 14 percent per annum, repayable in not later than 10 years. The note also granted plaintiff a security interest in an account of Eddis, at the main Hollywood office of the Bank of America (bank). At the end of 10 years, Eddi breached the note by not paying all amounts due. Plaintiff obtained a judgment in Ohio against Eddi, for $164,903. A few weeks later, plaintiff obtained a sister-state judgment in Los Angeles superior court, for approximately $166,000. The superior court issued writs of execution, respectively for the Los Angeles and Sacramento county sheriffs.

In early 2004, plaintiff had the Los Angeles sheriff levy on Eddis account at the bank. The bank responded that Eddis funds there had been transferred to the controllers abandoned property department. On information and belief, plaintiff alleged that the property, in the amount of approximately $118,000, had so escheated in 2002. Plaintiff also had the Sacramento sheriff serve a writ for Eddis funds on the controllers office. The controller responded that the escheated funds were not subject to a writ of execution, and that they had vested in the state. The complaint disputed these propositions. Plaintiff alleged that through the complaint and other levies, he had given the controller the necessary statutory, regulatory, and/or administrative claim for the escheat property, but the controller refused to tender the funds. An actual controversy existed between plaintiff, the bank, and the controller concerning ownership and transfer of the funds held by the controller. These defendants disputed plaintiffs claims in the complaint. Plaintiff therefore requested a determination of rights and duties, and that defendants be held obligated to pay to plaintiff the funds.

The bank demurred to the complaint, on grounds the controllers taking over the funds relieved the bank of any responsibility to plaintiff. The demurrer was sustained, without leave to amend, in light of section 1560, subdivision (a). The controller then filed a demurrer and a motion to strike. The demurrer was grounded in plaintiff not being the owner of the funds, and his failure to exhaust administrative remedies. The motion to strike was directed at plaintiffs prayer for recovery of interest on the funds.

Before the controllers motions were heard, the court filed a minute order on a case management conference, which plaintiff but not the controller had attended. The order stated in part: The Court and Counsel are in a quandry [sic] as to how get the State of California to release escheated monies to the primary creditor who allegedly has legal third party claim.^[2] A few weeks later, on June 15, 2006, the court overruled the controllers demurrer, while sustaining the motion to strike. During the argument, plaintiff stated that the controllers web site did not have a claim form for creditors, and he requested that the court deem the complaint to constitute his claim. The controllers counsel stated the controller had to satisfy itself of plaintiffs entitlement, to which end the controller would wish to see the original note and judgment. The court stated that plaintiff had made a sufficient showing so that the court would order that plaintiff be allowed to perfect his claim and receive the funds. The minute order recited that the court had found plaintiff entitled to the escheated money, and ordered the controller to transfer it to plaintiffs attorney, within 60 days.

The controller then filed an answer to the complaint, and an attorney declaration stating that there was a contesting claimant to the money, namely the nephew and heir of the presently deceased Eddi.^[3] The controller prayed entitlement to proceed, not only in view of the claimant, but also so that the controller could show, by normal proceedings, that plaintiff was not the owner of the property. The controller alternatively requested that the action be stayed, to permit it to consider the two claims. Plaintiff responded that an heir would take subject to a secured claim, like its own. Counsel for the controller sent the new claimant notice of the next scheduled hearing date.

After that hearing, on October 18, 2005, the court filed an order declaring that plaintiff had satisfied the claim requirements of section 1540 et seq., and was the legal owner of and entitled to the property. The controller was ordered to pay plaintiff $118,301.42 within 30 days. The order also reiterated the orders overruling the controllers demurrer and granting his motion to strike interest, and found that plaintiff had complied with the requirements of a claim by filing with the court an attached, verified creditors claim. A copy of the original note was attached to this claim.

The controller later submitted, and the court on November 17 signed and filed, a judgment and order reciting that judgment had been issued for the awarded sum. The document incorporated the October 18 order. From this judgment the controller appealed.

DISCUSSION

The controller raises several points, but we address only one, which presents essential procedural considerations that undermine the judgment. This dispositive point is that the judgment was rendered without either a trial, or a motion for summary judgment, or any other recognizable procedure. Rather, after overruling the controllers demurrer and before filing of his answer, the court unilaterally announced that plaintiff was entitled to the funds, and that the controller should so pay them. Thereafter, the court rendered judgment to this effect, without any evidentiary proceedings.

The parties now assess this disposition as a judgment on the pleadings ( 438). If that is what the court intended, it was faulty. Although such a judgment may be granted to a plaintiff, on the courts own motion, the preconditions are that the complaint states facts sufficient to constitute a cause or causes of action against the defendant and the answer does not state facts sufficient to constitute a defense to the complaint. ( 438, subd. (c)(3)(a); accord, id., subd. (c)(1)(a).) Moreover, this ground must appear on the face of the challenged the pleading (answer), together with any judicially noticeable matter presented. (Id., subd. (d).)

There was no such matter here.^[4]And the answer, which denied most of the complaints allegations, was not insufficient. Assuming arguendo that the complaint set forth facts constituting a cause of action for recovery of the funds, there yet was no basis for a judgment on the pleadings. Furthermore, there actually occurred no proceeding resembling a motion for judgment on the pleadings: the court resolved to order transfer of the funds immediately after it overruled the controllers demurrer, before an answer was even filed.

This departure from regular procedure requires reversal. Although the controller has raised additional contentions, most significantly failure to exhaust administrative remedies, those claims were not addressed or clearly resolved in the abbreviated proceedings below. Their resolution should occur in orderly proceedings on remand.

DISPOSITION

The judgment and order are reversed. The parties shall bear their own costs.

NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS

COOPER, P.J.

We concur:

RUBIN, J.

FLIER, J.

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Analysis and review provided by La Mesa Property line attorney.

^[1] In addition to respondent controller, the complaint named as defendants Bank of America which was dismissed on demurrer and Eddi, who apparently could not be located or served.

^[2] At a prior hearing, the court had observed, I mean, youve got to love the State of California for looking to fill its deficit by holding onto escheated money.

^[3] This claimant was the nephew of one Edward Rostine, asserted to be the Rostane Eddi who had given plaintiff the note. Plaintiff had previously represented to the court that Eddi was a woman.

^[4] Plaintiff contends that the promissory note and the two judgments on it were subject to judicial notice on motion for judgment on the pleadings. Even if the judgments were abstractly judicially noticeable, they were not so offered.