CALIFORNIA DEPARTMENT OF TAX AND FEE ADMINISTRATION VS ATM PROFESSIONAL, INC., ET AL.

Tentative Rulings

Case Number: 20STCP02749    Hearing Date: April 8, 2021    Dept: 26

California Department of Tax and Fee Administration v. ATM Professional, Inc., et al.

PETITION FOR HEARING ON THIRD PARTY CLAIM

(CCP § 720.310)

TENTATIVE RULING:

PETITIONER CALIFORNIA DEPARTMENT OF TAX AND FEE ADMINISTRATION’S PETITION FOR HEARING ON THIRD PARTY CLAIM CAME BEFORE THE COURT ON APRIL 8, 2021. CLAIMANTS ATM PROFESSIONAL, INC. AND MICHAEL ZARGAR’S THIRD PARTY CLAIM IS DENIED.

PETITIONER TO FILE A PROPOSED ORDER WITHIN TEN (10) DAYS’ SERVICE OF THIS ORDER.

ANALYSIS:

Petitioner California Department of Tax and Fee Administration (“Petitioner’) filed the instant Petition for Determination of Third Party Claim on August 27, 2020 against Respondents ATM Professional, Inc. (“Claimant ATM Pro.”) and Michael Zargar (“Claimant Zargar”) (collectively, “Claimants”). On October 2, 2020, Petitioner filed Notice of Hearing and Proof of Service. On October 29, 2020, Petitioner filed a Notice of Acknowledgment of Receipt.

The Petition initially came for hearing on February 24, 2021, at which time Claimants appeared and the Court did not adopt the tentative ruling. The Court continued the hearing to March 17, 2021 and ruled there would be no further continuances. On February 25, 2021, Petitioner filed a Notice of Continuance of Hearing. Claimants filed a Response to Petition on March 4, 2021 and Petitioner replied on March 11, 2021.

At the second hearing on March 17, 2021, the matter was continued again to allow for additional briefing. Claimants filed a supplemental brief on March 25, 2021 and Petitioner responded on April 5, 2021.

Legal Standard

A third person who has a claim of ownership or a right to possession in property that is superior to a judgment creditor’s lien may file a third party claim. (Code Civ. Proc., § 720.110.) This procedure is also applicable to funds seized by a government agency. (Code Civ. Proc., § 688.030.) The third party claim must contain: (1) the third party’s name and address in California where service by mail may be made; (2) a description of the property involved and the interest claimed, including a statement of facts on which the claim is based; and (3) an estimate of the market value of the interest claimed. (Code Civ. Proc., § 720.130, subd. (a).)

Either the judgment creditor or the third person may petition the court for a hearing to determine the validity of the claim and the proper disposition of the property. (Code Civ. Proc., § 720.310, subd. (a).) The third party claim constitutes the claimant’s pleading, and the judgment creditor’s statement opposing a claim by a secured party constitutes the creditor’s pleading. (Code Civ. Proc., § 720.310, subd. (a).) The third party or the creditor may petition the court for a hearing to determine the validity of the claim no later than 15 days after the claim is filed. (Code Civ. Proc., § 720.310, subd. (a).) The petitioner must then serve the non-petitioner with notice of the time and place of the hearing personally or by mail and file a copy with the levying officer. (Code Civ. Proc., § 720.320, subd. (a).)

Substantively, the burden of proof lies with the party claiming the exemption. (Code Civ. Proc., § 720.360.) At the conclusion of the hearing, the court must give judgment determining the validity of the claim and may order disposition of the property or its proceeds in accordance with the respective interests of the parties. (Code Civ. Proc., § 720.390.) Subject to appeal under Code of Civil Procedure section 720.420, the judgment is conclusive between the parties to the proceedings. (Code Civ. Proc., § 720.390.)

Discussion

David Marlon Garcia doing business as Green Door (“Green Door”) sells cannabis and cannabis related products at 5522 Cahuenga Boulevard, North Hollywood (“the Business Location”). (Pet., Brauer Decl., ¶3.) Green Door previously operated without a license or permit, and even after registering for a seller’s permit, did not file tax returns or remit taxes. (Id. at ¶¶3-6.) Petitioner determined that Green Door owes tax, interest, and penalties in the amount of $257,152.92. (Id. at ¶¶7-8 and Exh. A.) Petitioner issued a till tap warrant that the California Highway Patrol executed, resulting in the seizure of $13,000.00 from the ATM at the Business Location. (Pet., Klomp Decl., ¶¶6-7 and Exh. A-B.)

On August 12, 2020, third party claimants Michael Zargar and ATM Professional, Inc. (“Claimants”) delivered a verified claim to Petitioner, requesting the ATM funds seized from the Business Location. (Pet., Brauer Decl., ¶9 and Exh. B.) In support of the claim delivered to Petitioner, Claimants submitted the following evidence:

· A completed Tax Seizure Tally Receipt itemizing the cash seized from the ATM;

· A letter from Zargar to Petitioner dated August 12, 2020 stating that ATM PRO is the owner of the ATM machine and Funds and requesting that the ATM Funds be refunded to Zargar personally;

· A completed ATM Source of Funds Provider Declaration Agreement indicating that ATM PRO is the source of the funds disbursed by the ATM;

· A copy of an ATM Professional, Inc. Location Agreement between Green Door and ATM PRO dated January 13, 2018, which is signed by Zargar as ATM PRO’s president and “Lisa Woo” as president of Green Door;

· A copy of a purchase invoice indicating that the ATM was jointly purchased by Zargar and ATM PRO;

· An “ATM Monthly Statement” reflecting the daily withdrawal from the ATM for the period of December 2019 to May 2020; and

· A document entitled “Daily Deposits” summarizing the ATM’s daily activity of cash withdrawn from the ATM and related surcharges.

(Pet., Brauer Decl., Exhs. B, D.) The first two documents simply contain allegations in support of the claim made by ATM PRO and Zargar without supporting evidence. The next document, the ATM Source of Funds Provider Declaration Agreement, does not prove that Claimants are the source of the ATM Funds. Rather, the Source of Funds Provider Declaration Agreement is just an application made to MetaBank with respect to the ATM at the Business Location. (Id. at Exh. B.) There is nothing on the document indicating that the application was accepted, who financed the ATM funds, or the amount of funds to be placed in the ATM. (Ibid.) The next document is an ATM location agreement between Green Door and ATM PRO. (Ibid.) Again, the ATM location agreement does not state who is responsible for the funds in the ATM; the terms only to pertain to ATM PRO’s obligation to provide and operate the ATM at the Business Location. (Ibid.)

Following a request for additional documents by Petitioner, Claimants submitted an ATM purchase invoice. (Id. at Exh. D.) Again, this is not relevant to the source of the money in the subject ATM. Similarly, the ATM Monthly Statement and Daily Deposits only shows activity with respect to the ATM funds but offer no information about the source of the funds. (Ibid.) Despite Petitioner’s request, Claimants did not provide copies of bank statements showing that the funds in the ATM were withdrawn from any account belonging to ATM PRO or Zargar. (Id. at ¶¶15, 18.)

The third party claim constitutes Claimants’ pleading on this Petition under Code of Civil Procedures section 720.350, subdivision (a)(1) but the Court retains discretion to permit an amendment to the pleading. (Code Civ. Proc., § 720.350, subd. (a)(1).) Accordingly, the Court will consider the additional documents submitted by Claimants as an amendment to the claim.

In response to the instant Petition, Claimant Zargar submits a declaration stating Claimant ATM Pro contracted with Green Door to install and operate an ATM with cash supplied and replenished by him. (Response, Zargar Decl., ¶3.) In support of this statement, Claimant Zargar cites the Location Agreement with Green Door but does not point to any particular provision of the contract that demonstrates the source of the ATM funds. (Id. at Exh. A.) As discussed above, a copy of the Location Agreement was previously provided to Petitioner as part of the claim to the funds but nothing in the Location Agreement requires Claimants to provide those funds or otherwise demonstrates that Claimants did in fact supply the funds in the ATM.

Claimant Zargar also declares that on January 16, 2018, Claimant ATM Pro completed a set-up form for Automated System America, Inc. (“ASAI”). ASAI acts as an intermediary to process ATM transactions for ATM operators such as ATM Pro. (Response, Cain Decl., ¶1.) ASAI charges the cardholder’s bank account and then deposits that fee into the ATM operator’s bank account. (Ibid.) Pursuant to a 2013 agreement with Claimant ATM Pro, ASAI processed transactions for various ATM Pro ATMs; on January 16, 2018, ATM Pro submitted a set-up form for the Green Door ATM. (Id. at ¶2 and Exh. B.) Pursuant to the January 16, 2018 set-up form, ASAI deposited the amounts from the Green Door ATM to Zargar’s Comerica Bank account. (Id. at ¶¶3-4.) A copy of monthly statements for the Green Door ATM identifies all transactions from December 2019 to June 2020. (Id. at ¶3 and Exh. C.)

In the supplemental opposition, Claimants now produce bank records from the Comerica Bank account showing large daily deposits from DataStream in April and May 2020. (Supp. Response, Zargar Decl., ¶¶9-10 and Exhs. D-E.) According to Claimants, ASAI processes transactions through DataStream for their ATMs at every location. (Supp. Response, p. 2:1-6.) Claimants also contend that DataStream transfers money daily from the cardholders’ banks to Respondents’ bank account to reimburse Respondents for all dispensed funds from all ATM locations. (Id. at p. 2:7-9.) It is not clear what Claimants mean by “reimburse” here and that language is not supported by Claimant Zargar’s declaration. Why would ASAI or DataStream reimburse Claimants the money Claimants purportedly vaulted in the Green Door ATM? Claimants offer no evidence of such an agreement with ASAI or DataStream. Curiously, the new declaration of Kent Cain, Chief Operating Officer of ASAI states that the DataStream deposits are to “reimburse ATM Pro for all dispensed funds from its locations.” (Supp. Response, Cain Decl., ¶2.) Yet in Cain’s first declaration, he specifically attested that ASAI charges the cardholder’s bank account and then deposits that fee into the ATM operator’s bank account. (Response, Cain Decl., ¶1.) So are the deposits a reimbursement of dispensed funds, or a deposit of ATM processing fees? Nothing in the ASAI set-up form suggests the former. Furthermore, the second Cain declaration lacks credibility regarding the statement that the deposits from DataStream are to reimburse Claimants for funds dispensed because no explanation is provided about the difference in the declarations.

It remains that Claimants still have carried their burden on the main issue raised by the Petition: the source of the funds in the Green Door ATM. The transaction history from ASAI and the Comerica Bank Account statements still do not show from where funds vaulted in the Green Door ATM were obtained.

Conclusion

PETITIONER CALIFORNIA DEPARTMENT OF TAX AND FEE ADMINISTRATION’S PETITION FOR HEARING ON THIRD PARTY CLAIM CAME BEFORE THE COURT ON APRIL 8, 2021. CLAIMANTS ATM PROFESSIONAL, INC. AND MICHAEL ZARGAR’S THIRD PARTY CLAIM IS DENIED.

PETITIONER TO FILE A PROPOSED ORDER WITHIN TEN (10) DAYS’ SERVICE OF THIS ORDER.

Petitioner to give notice.

Case Number: 20STCP02749    Hearing Date: March 17, 2021    Dept: 26

California Department of Tax and Fee Administration v. ATM Professional, Inc., et al

PETITION FOR HEARING ON THIRD PARTY CLAIM

(CCP § 720.310)

TENTATIVE RULING:

PETITIONER CALIFORNIA DEPARTMENT OF TAX AND FEE ADMINISTRATION’S PETITION FOR HEARING ON THIRD PARTY CLAIM CAME BEFORE THE COURT ON MARCH 17, 2021. CLAIMANTS ATM PROFESSIONAL, INC. AND MICHAEL ZARGAR’S THIRD PARTY CLAIM IS DENIED.

PETITIONER TO FILE A PROPOSED ORDER WITHIN TEN (10) DAYS’ SERVICE OF THIS ORDER.

ANALYSIS:

Petitioner California Department of Tax and Fee Administration (“Petitioner’) filed the instant Petition for Determination of Third Party Claim on August 27, 2020 against Respondents ATM Professional, Inc. (“Claimant ATM Pro.”) and Michael Zargar (“Claimant Zargar”) (collectively, “Claimants”). On October 2, 2020, Petitioner filed Notice of Hearing and Proof of Service. On October 29, 2020, Petitioner filed a Notice of Acknowledgment of Receipt.

The Petition initially came for hearing on February 24, 2021, at which time Claimants appeared and the Court did not adopt the tentative ruling. The Court continued the hearing to March 17, 2021 and ruled there would be no further continuances. On February 25, 2021, Petitioner filed a Notice of Continuance of Hearing. Claimants filed a Response to Petition on March 4, 2021 and Petitioner replied on March 11, 2021.

Legal Standard

A third person who has a claim of ownership or a right to possession in property that is superior to a judgment creditor’s lien may file a third party claim. (Code Civ. Proc., § 720.110.) This procedure is also applicable to funds seized by a government agency. (Code Civ. Proc., § 688.030.) The third party claim must contain: (1) the third party’s name and address in California where service by mail may be made; (2) a description of the property involved and the interest claimed, including a statement of facts on which the claim is based; and (3) an estimate of the market value of the interest claimed. (Code Civ. Proc., § 720.130, subd. (a).)

Either the judgment creditor or the third person may petition the court for a hearing to determine the validity of the claim and the proper disposition of the property. (Code Civ. Proc., § 720.310, subd. (a).) The third party claim constitutes the claimant’s pleading, and the judgment creditor’s statement opposing a claim by a secured party constitutes the creditor’s pleading. (Code Civ. Proc., § 720.310, subd. (a).) The third party or the creditor may petition the court for a hearing to determine the validity of the claim no later than 15 days after the claim is filed. (Code Civ. Proc., § 720.310, subd. (a).) The petitioner must then serve the non-petitioner with notice of the time and place of the hearing personally or by mail, and file a copy with the levying officer. (Code Civ. Proc., § 720.320, subd. (a).)

Substantively, the burden of proof lies with the party claiming the exemption. (Code Civ. Proc., § 720.360.) At the conclusion of the hearing, the court must give judgment determining the validity of the claim and may order disposition of the property or its proceeds in accordance with the respective interests of the parties. (Code Civ. Proc., § 720.390.) Subject to appeal under Code of Civil Procedure section 720.420, the judgment is conclusive between the parties to the proceedings. (Code Civ. Proc., § 720.390.)

Discussion

David Marlon Garcia doing business as Green Door (“Green Door”) sells cannabis and cannabis related products at 5522 Cahuenga Boulevard, North Hollywood (“the Business Location”). (Pet., Brauer Decl., ¶3.) Green Door previously operated without a license or permit, and even after registering for a seller’s permit, did not file tax returns or remit taxes. (Id. at ¶¶3-6.) Petitioner determined that Green Door owes tax, interest, and penalties in the amount of $257,152.92. (Id. at ¶¶7-8 and Exh. A.) Petitioner issued a till tap warrant that the California Highway Patrol executed, resulting in the seizure of $13,000.00 from the ATM at the Business Location. (Pet., Klomp Decl., ¶¶6-7 and Exh. A-B.)

On August 12, 2020, third party claimants Michael Zargar and ATM Professional, Inc. (“Claimants”) delivered a verified claim to Petitioner, requesting the ATM funds seized from the Business Location. (Pet., Brauer Decl., ¶9 and Exh. B.) In support of the claim delivered to Petitioner, Claimants submitted the following evidence:

· A completed Tax Seizure Tally Receipt itemizing the cash seized from the ATM;

· A letter from Zargar to Petitioner dated August 12, 2020 stating that ATM PRO is the owner of the ATM machine and Funds and requesting that the ATM Funds be refunded to Zargar personally;

· A completed ATM Source of Funds Provider Declaration Agreement indicating that ATM PRO is the source of the funds disbursed by the ATM;

· A copy of an ATM Professional, Inc. Location Agreement between Green Door and ATM PRO dated January 13, 2018, which is signed by Zargar as ATM PRO’s president and “Lisa Woo” as president of Green Door;

· A copy of a purchase invoice indicating that the ATM was jointly purchased by Zargar and ATM PRO;

· An “ATM Monthly Statement” reflecting the daily withdrawal from the ATM for the period of December 2019 to May 2020; and

· A document entitled “Daily Deposits” summarizing the ATM’s daily activity of cash withdrawn from the ATM and related surcharges.

(Pet., Brauer Decl., Exhs. B, D.) The first two documents simply contain allegations in support of the claim made by ATM PRO and Zargar without supporting evidence. The next document, the ATM Source of Funds Provider Declaration Agreement, does not prove that Claimants are the source of the ATM Funds. Rather, the Source of Funds Provider Declaration Agreement is just an application made to MetaBank with respect to the ATM at the Business Location. (Id. at Exh. B.) There is nothing on the document indicating that the application was accepted, who financed the ATM funds, or the amount of funds to be placed in the ATM. (Ibid.) The next document is an ATM location agreement between Green Door and ATM PRO. (Ibid.) Again, the ATM location agreement does not state who is responsible for the funds in the ATM; the terms only to pertain to ATM PRO’s obligation to provide and operate the ATM at the Business Location. (Ibid.)

Following a request for additional documents by Petitioner, Claimants submitted an ATM purchase invoice. (Id. at Exh. D.) Again, this is not relevant to the source of the money in the subject ATM. Similarly, the ATM Monthly Statement and Daily Deposits only shows activity with respect to the ATM funds but offer no information about the source of the funds. (Ibid.) Despite Petitioner’s request, Claimants did not provide copies of bank statements showing that the funds in the ATM were withdrawn from any account belonging to ATM PRO or Zargar. (Id. at ¶¶15, 18.)

The third party claim constitutes Claimants’ pleading on this Petition under Code of Civil Procedures section 720.350, subdivision (a)(1) but the Court retains discretion to permit an amendment to the pleading. (Code Civ. Proc., § 720.350, subd. (a)(1).) Accordingly, the Court will consider the additional documents submitted by Claimants as an amendment to the claim.

In response to the instant Petition, Claimant Zargar submits a declaration stating Claimant ATM Pro contracted with Green Door to install and operate an ATM with cash supplied and replenished by him. (Response, Zargar Decl., ¶3.) In support of this statement, Claimant Zargar cites the Location Agreement with Green Door but does not point to any particular provision of the contract that demonstrates the source of the ATM funds. (Id. at Exh. A.) As discussed above, a copy of the Location Agreement was previously provided to Petitioner as part of the claim to the funds but nothing in the Location Agreement requires Claimants to provide those funds or otherwise demonstrates that Claimants did in fact supply the funds in the ATM.

Claimant Zargar also declares that on January 16, 2018, Claimant ATM Pro completed a set-up form for Automated System America, Inc. (“ASAI”). ASAI acts as an intermediary to process ATM transactions for ATM operators such as ATM Pro. (Motion, Cain Decl., ¶1.) ASAI charges the cardholder’s bank account and then deposits that fee into the ATM operator’s bank account. (Ibid.) Pursuant to a 2013 agreement with Claimant ATM Pro, ASAI processed transactions for various ATM Pro ATMs; on January 16, 2018, ATM Pro submitted a set-up form for the Green Door ATM. (Id. at ¶2 and Exh. B.) Pursuant to the January 16, 2018 set-up form, ASAI deposited the amounts from the Green Door ATM to Zargar’s Comerica Bank account. (Id. at ¶¶3-4.) A copy of monthly statements for the Green Door ATM identifies all transactions from December 2019 to June 2020. (Id. at ¶3 and Exh. C.)

Despite this additional evidence, Claimants still have not addressed the main issue raised by the Petition: the source of the funds in the Green Door ATM. Claimant Zargar declares that he agreed to supply and replenish the funds for the ATM but does not demonstrate where this obligation was memorialized or how it was effectuated. Petitioner specifically asked Claimants to provide copies of bank statements showing that the funds in the Green Door ATM were withdrawn from an account belonging to ATM Pro or Zargar. The transaction history from ASAI does not demonstrate from where funds placed in the Green Door ATM were obtained. That transaction history only shows where the withdrawal fees from the Green Door ATM were deposited.

Therefore, it remains that Claimants have not carried their burden of proof to demonstrate the validity of their claim to the ATM funds.

Conclusion

PETITIONER CALIFORNIA DEPARTMENT OF TAX AND FEE ADMINISTRATION’S PETITION FOR HEARING ON THIRD PARTY CLAIM CAME BEFORE THE COURT ON MARCH 17, 2021. CLAIMANTS ATM PROFESSIONAL, INC. AND MICHAEL ZARGAR’S THIRD PARTY CLAIM IS DENIED.

PETITIONER TO FILE A PROPOSED ORDER WITHIN TEN (10) DAYS’ SERVICE OF THIS ORDER.

Petitioner to give notice.

Case Number: 20STCP02749    Hearing Date: February 24, 2021    Dept: 26

California Department of Tax and Fee Administration v. ATM Professional, Inc., et al.

PETITION FOR HEARING ON THIRD PARTY CLAIM

(CCP § 720.310)

TENTATIVE RULING:

FOLLOWING THE HEARING ON PETITIONER CALIFORNIA DEPARTMENT OF TAX AND FEE ADMINISTRATION’S PETITION FOR HEARING ON THIRD PARTY CLAIM, THE COURT FINDS CLAIMANTS ATM PROFESSIONAL, INC. AND MICHAEL ZARGAR HAVE NOT DEMONSTRATED THE VALIDITY OF THEIR CLAIM. PETITIONER TO FILE A PROPOSED ORDER WITHIN TEN (10) DAYS’ SERVICE OF THIS ORDER.

ANALYSIS:

Petitioner California Department of Tax and Fee Administration (“Petitioner’) filed the instant Petition for Determination of Third Party Claim on August 27, 2020 against Respondents ATM Professional, Inc. and Michael Zargar (“Claimants”). On October 2, 2020, Petitioner filed Notice of Hearing and Proof of Service. On October 29, 2020, Petitioner filed a Notice of Acknowledgment of Receipt. To date, no opposition has been filed.

Legal Standard

A third person who has a claim of ownership or a right to possession in property that is superior to a judgment creditor’s lien may file a third party claim. (Code Civ. Proc., § 720.110.) This procedure is also applicable to funds seized by a government agency. (Code Civ. Proc., § 688.030.) The third party claim must contain: (1) the third party’s name and address in California where service by mail may be made; (2) a description of the property involved and the interest claimed, including a statement of facts on which the claim is based; and (3) an estimate of the market value of the interest claimed. (Code Civ. Proc., § 720.130, subd. (a).)

Either the judgment creditor or the third person may petition the court for a hearing to determine the validity of the claim and the proper disposition of the property. (Code Civ. Proc., § 720.310, subd. (a).) The third party claim constitutes the claimant’s pleading, and the judgment creditor’s statement opposing a claim by a secured party constitutes the creditor’s pleading. (Code Civ. Proc., § 720.310, subd. (a).) The third party or the creditor may petition the court for a hearing to determine the validity of the claim no later than 15 days after the claim is filed. (Code Civ. Proc., § 720.310, subd. (a).) The petitioner must then serve the non-petitioner with notice of the time and place of the hearing personally or by mail, and file a copy with the levying officer. (Code Civ. Proc., § 720.320, subd. (a).)

Substantively, the burden of proof lies with the party claiming the exemption. (Code Civ. Proc., § 720.360.) At the conclusion of the hearing, the court must give judgment determining the validity of the claim and may order disposition of the property or its proceeds in accordance with the respective interests of the parties. (Code Civ. Proc., § 720.390.) Subject to appeal under Code of Civil Procedure section 720.420, the judgment is conclusive between the parties to the proceedings. (Code Civ. Proc., § 720.390.)

Discussion

David Marlon Garcia doing business as Green Door (“Green Door”) sells cannabis and cannabis related products at 5522 Cahuenga Boulevard, North Hollywood (“the Business Location”). (Pet., Brauer Decl., ¶3.) Green Door previously operated without a license or permit, and even after registering for a seller’s permit, did not file tax returns or remit taxes. (Id. at ¶¶3-6.) Petitioner determined that Green Door owes tax, interest, and penalties in the amount of $257,152.92. (Id. at ¶¶7-8 and Exh. A.) Petitioner issued a till tap warrant that the California Highway Patrol executed, resulting in the seizure of $13,000.00 from the ATM at the Business Location. (Pet., Klomp Decl., ¶¶6-7 and Exh. A-B.)

On August 12, 2020, third party claimants Michael Zargar and ATM Professional, Inc. (“Claimants”) delivered a verified claim to Petitioner, requesting the ATM funds seized from the Business Location. (Pet., Brauer Decl., ¶9 and Exh. B.) Claimants’ evidence in support of their claim to the ATM funds is as follows:

· A completed Tax Seizure Tally Receipt itemizing the cash seized from the ATM;

· A letter from Zargar to Petitioner dated August 12, 2020 stating that ATM PRO is the owner of the ATM machine and Funds and requesting that the ATM Funds be refunded to Zargar personally;

· A completed ATM Source of Funds Provider Declaration Agreement indicating that ATM PRO is the source of the funds disbursed by the ATM;

· A copy of an ATM Professional, Inc. Location Agreement between Green Door and ATM PRO dated January 13, 2018, which is signed by Zargar as ATM PRO’s president and “Lisa Woo” as president of Green Door;

· A copy of a purchase invoice indicating that the ATM was jointly purchased by Zargar and ATM PRO;

· An “ATM Monthly Statement” reflecting the daily withdrawal from the ATM for the period of December 2019 to May 2020; and

· A document entitled “Daily Deposits” summarizing the ATM’s daily activity of cash withdrawn from the ATM and related surcharges.

(Pet., Brauer Decl., Exhs. B, D.) The first two documents simply contain allegations in support of the claim made by ATM PRO and Zargar without supporting evidence. The next document, the ATM Source of Funds Provider Declaration Agreement, does not prove that Claimants are the source of the ATM Funds. Rather, the Source of Funds Provider Declaration Agreement is just an application made to MetaBank with respect to the ATM at the Business Location. (Id. at Exh. B.) There is nothing on the document indicating that the application was accepted, who financed the ATM funds, or the amount of funds to be placed in the ATM. (Ibid.) The next document is an ATM location agreement between Green Door and ATM PRO. (Ibid.) Again, the ATM location agreement does not state who is responsible for the funds in the ATM; the terms only to pertain to ATM PRO’s obligation to provide and operate the ATM at the Business Location. (Ibid.)

Additional documents provided by Claimants at Petitioner’s request include an ATM purchase invoice. (Id. at Exh. D.) Again, this is not relevant to the source of the money in the subject ATM. Similarly, the ATM Monthly Statement and Daily Deposits only shows activity with respect to the ATM funds but offer no information about the source of the funds. (Ibid.) Despite Petitioner’s request, Claimants did not provide copies of bank statements showing that the funds in the ATM were withdrawn from any account belonging to ATM PRO or Zargar. (Id. at ¶¶15, 18.)

Based on the foregoing, Claimants have not carried their burden of proof to demonstrate the validity of their claim to the ATM funds.

Conclusion

FOLLOWING THE HEARING ON PETITIONER CALIFORNIA DEPARTMENT OF TAX AND FEE ADMINISTRATION’S PETITION FOR HEARING ON THIRD PARTY CLAIM, THE COURT FINDS CLAIMANTS ATM PROFESSIONAL, INC. AND MICHAEL ZARGAR HAVE NOT DEMONSTRATED THE VALIDITY OF THEIR CLAIM. PETITIONER TO FILE A PROPOSED ORDER WITHIN TEN (10) DAYS’ SERVICE OF THIS ORDER.

Petitioner to give notice.

Case Number: 20STCP02749    Hearing Date: December 31, 2020    Dept: 26

California Department of Tax and Fee Administration v. ATM Professional, Inc., et al

PETITION FOR HEARING ON THIRD PARTY CLAIM

(CCP § 720.310)

TENTATIVE RULING:

Following the hearing on Petitioner California Department of Tax and Fee Administration’s Petition for Hearing on Third Party Claim, the Court finds Claimants ATM Professional, Inc. and Michael Zargar have not demonstrated the validity of their claim. Petitioner to file proposed order within ten (10) days’ service of this order.

ANALYSIS:

Petitioner California Department of Tax and Fee Administration (“Petitioner’) filed the instant Petition for Determination of Third Party Claim on August 27, 2020 against Respondents ATM Professional, Inc. and Michael Zargar (“Claimants”). On October 2, 2020, Petitioner filed Notice of Hearing and Proof of Service. On October 29, 2020, Petitioner filed a Notice of Acknowledgment of Receipt.

Legal Standard

A third person who has a claim of ownership or a right to possession in property that is superior to a judgment creditor’s lien may file a third party claim. (Code Civ. Proc., § 720.110.) This procedure is also applicable to funds seized by a government agency. (Code Civ. Proc., § 688.030.) The third party claim must contain: (1) the third party’s name and address in California where service by mail may be made; (2) a description of the property involved and the interest claimed, including a statement of facts on which the claim is based; and (3) an estimate of the market value of the interest claimed. (Code Civ. Proc., § 720.130, subd. (a).)

Either the judgment creditor or the third person may petition the court for a hearing to determine the validity of the claim and the proper disposition of the property. (Code Civ. Proc., § 720.310, subd. (a).) The third party claim constitutes the claimant’s pleading, and the judgment creditor’s statement opposing a claim by a secured party constitutes the creditor’s pleading. (Code Civ. Proc., § 720.310, subd. (a).) The third party or the creditor may petition the court for a hearing to determine the validity of the claim no later than 15 days after the claim is filed. (Code Civ. Proc., § 720.310, subd. (a).) The petitioner must then serve the non-petitioner with notice of the time and place of the hearing personally or by mail, and file a copy with the levying officer. (Code Civ. Proc., § 720.320, subd. (a).)

Substantively, the burden of proof lies with the party claiming the exemption. (Code Civ. Proc., § 720.360.) At the conclusion of the hearing, the court must give judgment determining the validity of the claim and may order disposition of the property or its proceeds in accordance with the respective interests of the parties. (Code Civ. Proc., § 720.390.) Subject to appeal under Code of Civil Procedure section 720.420, the judgment is conclusive between the parties to the proceedings. (Code Civ. Proc., § 720.390.)

Discussion

David Marlon Garcia doing business as Green Door (“Green Door”) sells cannabis and cannabis related products at 5522 Cahuenga Boulevard, North Hollywood (“the Business Location”). (Pet., Brauer Decl., ¶3.) Green Door previously operated without a license or permit, and even after registering for a seller’s permit, did not file tax returns or remit taxes. (Id. at ¶¶3-6.) Petitioner determined that Green Door owes tax, interest, and penalties in the amount of $257,152.92. (Id. at ¶¶7-8 and Exh. A.) Petitioner issued a till tap warrant that the California Highway Patrol executed, resulting in the seizure of $13,000.00 from the ATM at the Business Location. (Pet., Klomp Decl., ¶¶6-7 and Exh. A-B.)

On August 12, 2020, third-party claimants Michael Zargar and ATM Professional, Inc. (“Claimants”) delivered a verified third party claim to Petitioner, requesting the ATM funds seized from the Business Location. (Pet., Brauer Decl., ¶9 and Exh. B.) Claimants’ evidence in support of their claim to the ATM funds is as follows:

· A completed Tax Seizure Tally Receipt itemizing the cash seized from the ATM;

· A letter from Zargar to Petitioner dated August 12, 2020 stating that ATM PRO is the owner of the ATM machine and Funds and requesting that the ATM Funds be refunded to Zargar personally;

· A completed ATM Source of Funds Provider Declaration Agreement indicating that ATM PRO is the source of the funds disbursed by the ATM;

· A copy of an ATM Professional, Inc. Location Agreement between Green Door and ATM PRO dated January 13, 2018, which is signed by Zargar as ATM PRO’s president and “Lisa Woo” as president of Green Door;

· A copy of a purchase invoice indicating that the ATM was jointly purchased by Zargar and ATM PRO;

· An “ATM Monthly Statement” reflecting the daily withdrawal from the ATM for the period of December 2019 to May 2020; and

· A document entitled “Daily Deposits” summarizing the ATM’s daily activity of cash withdrawn from the ATM and related surcharges.

(Pet., Brauer Decl., Exhs. B, D.) The first two documents simply contain allegations in support of the claim made by ATM PRO and Zargar without supporting evidence. The next document, the ATM Source of Funds Provider Declaration Agreement, does not prove that Claimants are the source of the ATM Funds. Rather, the Source of Funds Provider Declaration Agreement is just an application made to MetaBank with respect to the ATM at the Business Location. (Id. at Exh. B.) There is nothing on the document indicating that the application was accepted, who financed the ATM funds, or the amount of funds to be placed in the ATM. (Ibid.) The next document is an ATM location agreement between Green Door and ATM PRO. (Ibid.) Again, the ATM location agreement does not state who is responsible for the funds in the ATM; the terms only to pertain to ATM PRO’s obligation to provide and operate the ATM at the Business Location. (Ibid.)

Additional documents provided by Claimants at Petitioner’s request include an ATM purchase invoice. (Id. at Exh. D.) Again, this is not relevant to the source of the money in the subject ATM. Similarly, the ATM Monthly Statement and Daily Deposits only shows activity with respect to the ATM funds but offer no information about the source of the funds. (Ibid.) Despite Petitioner’s request, Claimants did not provide copies of bank statements showing that the funds in the ATM were withdrawn from any account belonging to ATM PRO or Zargar. (Id. at ¶¶15, 18.)

Based on the foregoing, Claimants have not carried their burden of proof to demonstrate the validity of their claim to the ATM funds.

Conclusion

Following the hearing on Petitioner California Department of Tax and Fee Administration’s Petition for Hearing on Third Party Claim, the Court finds Claimants ATM Professional, Inc. and Michael Zargar have not demonstrated the validity of their claim. Petitioner to file proposed order within ten (10) days’ service of this order.

Petitioner to give notice.