Barrett Daffin Frappier Teder & Weiss, LLP v. Chu

Background

Barrett Daffin Frappier Teder & Weiss, LLP brought this interpleader action to distribute $364,677.64 in surplus funds from a nonjudicial foreclosure sale of real property in Foster City, California. The firm is the current trustee named in the deed of trust connected to the property. The defendants are Stephanie J. Chu, identified as the former property owner; Ray Yeganeh, who allegedly claims an interest in the property; and the Internal Revenue Service, which allegedly claims an interest in the surplus funds based on a federal tax lien assessed against Chu.

The United States removed the case to federal court, and it filed an answer. The firm reported service efforts involving Chu and Yeganeh. Yeganeh appeared and filed an answer, but Chu had not appeared. The firm then moved to serve Chu by publication in the Daily Journal. Its counsel submitted a declaration describing searches and service attempts at five addresses in California and Utah and attaching various records.

Legal standard

Under California law, service by publication is permitted only if an affidavit satisfies the court that the defendant cannot be served by another method with reasonable diligence and that a cause of action exists against the defendant or the defendant is a necessary or proper party. The court described publication as a high-standard, last-resort method because it rarely results in actual notice. If the defendant’s address can be found, a better method, such as mailing or substitute service, must be used.

The motion also had to include independent evidence supporting the existence of a cause of action against Chu.

Court’s analysis

The court held that the firm’s current showing did not establish the required systematic and thorough investigation. The firm did not explain how it identified the addresses, why Chu was likely to be found at them, or why attempting service at the former property address would likely provide adequate service. Although the firm identified four other addresses where it made one unsuccessful attempt each, it did not show that it followed up at those addresses or requested forwarding addresses from the postal service.

The court also noted that the motion did not address relevant case law and that the declaration attached records without authenticating each record or explaining its significance. A renewed motion would need to explain, with specific citations to supporting exhibits, how each address was identified, why it was likely to locate Chu, why service failed, and what follow-up occurred. It would also need to describe other location-investigation steps, provide independent evidence of a cause of action against Chu, and explain why publication in the Daily Journal would give her actual notice.

Disposition

The court denied the motion without prejudice. It stated that the firm could file a renewed motion and ordered it to file either a renewed motion or a status report by August 17, 2022.