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

Tentative Rulings

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.