Under certain special circumstances, money can be deposited with the court to safeguard during lawsuits under Code of Civil Procedure sections 572 and 573. The justification for such a rule is that, if the court doesn’t protect the money, the other party may spend it, rendering a plaintiff’s victory somewhat hollow.
However, there are several important limitations in place in order for parties to actually utilize section 572. Chief among them is that the money needs to be “the subject of the litigation.” And even if the money does fall into this category, the Court cannot receive the funds until it is proven that the money is being held wrongfully.
What is a money deposit with the Court?
The circumstances warranting an order for deposit of money into the court are set out under Code of Civil Procedure section 572. The section itself provides:
“When it is admitted by the pleadings, or shown upon the examination of a party to the action, that he or she has in his or her possession, or under his or her control, any money or other thing capable of delivery, which, being the subject of litigation, is held by him or her as trustee for another party, or which belongs or which is due to another party or which should, under the circumstances of the case be held by the court pending final disposition of the action, the court may order the same, upon motion, to be deposited in court or delivered to such party, upon those conditions that may be just, subject to the further direction of the court.”
Code of Civil Procedure section 572 is a unique statute in that it is a “provisional remedy.” Legally speaking, this means it is a temporary solution. It is a route available to the court to preserve the status quo of the parties until the court renders a final judgment.
Put another way, “a provisional remedy is one designed to preserve assets pending resolution of litigation.” (In re Marriage of Fithian (1977) 74 Cal.App.3d 397, 401.) This context is important when reviewing the text of the statute. Section 572 is not some cure-all where one party can force another to turn over their assets on any given occasion. Instead, the statute operates only to preserve things until the court renders a final verdict.
When is money “the subject of litigation” under section 572?
Reviewing the statute itself, one may notice that there are a couple key limitations that prevent its operation in most cases. The first is that the money or thing to be deposited with the court must be “the subject of litigation.” But what does that really mean?
Almost always, money is connected to a lawsuit. If a plaintiff sues a defendant for breach of a sales contract, for example, then the plaintiff will likely want to recover the amount paid under the contract. However, this may not mean that the money is the “subject” of the lawsuit. Rather, it is likely the contract itself that is the focus, while the recovery is incidental.
An old Supreme Court case from 1905 gives the best overview of how this restriction works. If the money is not the subject of litigation, “but its payment is an incident thereto, dependent upon the judgment to be rendered…” then section 572 does not apply. (Green v. Duvergey (1905) 146 Cal. 379, 386.)
The Court went on to give examples, such as actions for specific performance, accounting, and rescission. All of these lawsuits may involve recovery of money from the other side, but that doesn’t mean section 572 is an available “provisional remedy.”
What is the other restriction on utilizing section 572?
As noted above, there are actually two key limitations in place before a plaintiff or defendant may invoke this statute. It is not enough that the money be the subject of the litigation. Instead, there must also be an admission or proof that the money belongs to someone else (presumably the other party).
Put simply, an “essential” part of the statute is “that the party from whom the payment is asked has no right or title to hold the money, and that it belongs to or is due to another.” (In re Elias (1962) 209 Cal.App.2d 262, 274.) So, for example, if the plaintiff’s case is that the defendant is only a 50% owner of a family heirloom, and thus can’t exclusively keep it, section 572 is likely unavailable. The defendant is a part owner, so he has some right or title to the heirloom.
Another important aspect is that the money or item cannot be deposited without proof. The statute itself requires either an admission or examination of the subject party.
Return to the heirloom example above. Suppose the defendant really is wrongfully holding it. He has zero ownership in the heirloom. But when he files his answer, he denies this fact.
Section 572 is again unavailable. There has been no admission. There has been no “examination” in a court proceeding. Until one of those two things occurs, the heirloom cannot be deposited.
How is money deposited under section 572?
Limitations on the statute notwithstanding, how is the money actually deposited if the court finds that section 572 is applicable? This is where Code of Civil Procedure section 573 kicks in.
That section states, “Whenever money is paid into or deposited in the court under this chapter, it shall be deposited with the court’s treasury as provided in Section 68084 of the Government Code.”
All this means is that when the money is deposited, it goes to the county or city treasurer, who files a receipt with the equivalent government auditor. The auditor’s receipt is important, as it must be filed with the court before the money is eventually paid out to whomever it belongs to under the relevant Government Code.
That said, the real question here lies with interest. Suppose that the deposit is money. And suppose that while sitting in the county treasury, the deposited funds accrue a significant amount of interest. Who does that interest belong to? The county, or the parties?
The Courts of Appeal have squarely answered that the interest belongs to the government. “As a matter of general law and one of statutory construction, the superior court is in control of the deposited funds and the owner of any interest earned thereon.” (Ostly v. Saper (1957) 147 Cal.App.2d 671, 674.)
How the Lawyers at Underwood Law Firm Can Help
Disputes over ownership and entitlement to money are some of the most stressful types of lawsuits. And there is always the looming fear that the other side may spend all the money before the court renders a judgment. For the inexperienced litigant, the next steps might seem impossible to determine. Fortunately, the lawyers at the Underwood Law Firm specialize in partition actions and solving the difficult problems that can accompany them. If you have found yourself in one of these situations, then please do not hesitate to contact us today.