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Field v. United States

United States District Court, E.D. California

July 13, 2017

KAREN FIELD, TRUSTEE OF THE DESHON REVOCABLE TRUST, Plaintiff,
v.
UNITED STATES OF AMERICA, et al., Defendants.

          ORDER GRANTING MOTION FOR ACCOUNTING AND TO DEPOSIT INTERPLEADER FUNDS

          Troy L. Nunley United States District judge

         This matter is before the Court pursuant to Defendant United States of America's (“Defendant”)[1] Motion for Accounting and to Deposit Interpleader Funds. (ECF No. 67.) Plaintiff Karen Field (“Plaintiff) opposes the motion (ECF No. 71), and Defendant replied (ECF No. 85). For the reasons set forth below, the Court hereby GRANTS Defendant's Motion for Accounting and to Deposit Interpleader Funds.

         I. Factual and Procedural Background

         Plaintiff is the trustee of the Henry DeShon Revocable Trust (“Trust”). (ECF No. 67 at 2.) On January 28, 2015, Plaintiff initiated this interpleader action under 28 U.S.C. § 1335 against many defendants who assert claims on the Trust's funds to determine the order in which the funds should be distributed. (ECF No. 1 ¶ 1; ECF No. 56 ¶ 1; ECF No. 67 at 2.) Plaintiff filed her second amended complaint on September 2, 2015. (ECF No. 56.)

         Henry DeShon (“DeShon”) passed away on March 28, 2009. (ECF No. 67-1 at 2.) In life, DeShon held himself out to be a stockbroker, though he was not licensed in California. (ECF No. 56 ¶ 15.) Following DeShon's death, it was discovered that he had embezzled from his clients, but had not reported the embezzlement income on his tax returns. (ECF No. 71 at 2.) The Trust was funded with life insurance benefits from life insurance policies on the life of DeShon. (ECF No. 56 ¶ 21.) A number of creditors have claims on the Trust's funds, including victims of DeShon's embezzlement, the Internal Revenue Service, and the California Franchise Tax Board. (ECF No. 71 at 2.) Plaintiff initiated this action asking the Court to determine whether the Trust should pay federal and state taxes before compensating DeShon's victims. (ECF No. 67-1 at 2.)

         Plaintiff is a California Licensed Professional Fiduciary. (ECF No. 67-2 at 7.) Prior to her appointment as trustee, Plaintiff prepared two accountings for the Trust. (ECF No. 67-2 at 7.) The first accounting covered the period from October 16, 2009, through December 31, 2010. (ECF No. 67-2 at 7.) The second accounting covered the period from January 1, 2011, through April 30, 2013. (ECF No. 67-2 at 7.) That second accounting showed the Trust's funds on hand as of April 30, 2013, totaled $434, 716.81. (ECF No. 67-2 at 7, 68.)

         Plaintiff was appointed trustee of the DeShon Trust on May 6, 2014, by the Sacramento County Probate Court. (ECF No. 71 at 4.) In both her second amended complaint and her response in opposition, Plaintiff states that the Trust currently holds $379, 287.72. (ECF No. 56 ¶ 21; ECF No. 71 at 5.) On April 29, 2016, Plaintiff deposited $304, 287.32 of the Trust's funds with the Court. (ECF No. 71 at 6.) Plaintiff retained the difference in anticipation of future expenses of up to $5, 000 for the Trust's trustee, $20, 000 for the Trust's attorney, and $50, 000 for the Trust's litigation counsel. (ECF No. 71 at 5-6.)

         Defendant asks the Court to order Plaintiff to produce an accounting for the Trust from February 2014 to present and to deposit all Trust funds with the Court. (ECF No. 67-1 at 6.) Two additional defendants, the California Franchise Tax Board and Gary W. Rogers, trustee of the Ann V. Rogers Trust, join Defendant's motion. (ECF Nos. 68 & 79.)

         II. Standard of Law

         Pursuant to 28 U.S.C. § 1335, district courts have original jurisdiction over interpleader actions where two or more claimants are claiming money or property if, among other requirements, the plaintiff deposits the money, property, or value of loans or other instruments, into the registry of the court, or gives a bond in that amount payable to the clerk of the court. 28 U.S.C. § 1335.

         “Deposit of the disputed funds in the court's registry is a jurisdictional requirement to statutory interpleader under 28 U.S.C. § 1335.” Gelfgren v. Republic Nat. Life Ins. Co., 680 F.2d 79, 81-82 (9th Cir. 1982); see Minnesota Mut. Life Ins. Co. v. Ensley, 174 F.3d 977, 981 (9th Cir. 1999) (finding interpleader plaintiff satisfied the requirements of the interpleader statute by, among other requirements, depositing the full amount of the insurance policy proceeds into the registry of the court); Aetna Life Ins. Co. v. Bayona, 223 F.3d 1030, 1033 (9th Cir. 2000), as amended on denial of reh 'g and reh 'g en banc (Nov. 3, 2000) (awarding interpleader plaintiff attorney's fees deducted from the deposited funds after plaintiff deposited the full amount of the insurance proceeds with the district court).

         III. Analysis

         Plaintiff argues that Defendant's motion to deposit the Trust's funds is moot because Plaintiff has already deposited the funds, minus amounts for anticipated expenses. (ECF No. 71 at 7.) Plaintiff adds that an accounting is unnecessary and that producing one would create an expense for which she would need to be reimbursed, the type of expense for which she set aside money in accounts for the retained funds. (ECF No. 71 at 6-7.)

         A. Deposit of ...


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