Transamerica Life Insurace Company v. Young et al, No. 2:2014cv02314 - Document 31 (E.D. Cal. 2015)
Court Description: FINDINGS and RECOMMENDATIONS signed by Magistrate Judge Allison Claire on 10/13/15 Recommending that Plaintiff's Motion for default 14 be granted; The court APPROVE the proposed judgment submitted by plaintiff 28 ; and Plaintiff be ORDERED t o file dispositional documents within 30 days of the entry of the default judgment, based upon its representation that all remaining defendants have "reached an agreement for payment of the Policy proceeds." This Findings and Recommnedations are submitted to Judge Morrison C. England, Jr; Objections to these F&Rs due within twenty one days. (Mena-Sanchez, L)
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Transamerica Life Insurace Company v. Young et al Doc. 31 1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 FOR THE EASTERN DISTRICT OF CALIFORNIA 10 11 12 TRANSAMERICA LIFE INSURANCE COMPANY, Plaintiff-in-Interpleader, 13 14 15 16 17 No. 2:14-cv-2314 MCE AC FINDINGS AND RECOMMENDATIONS v. CAROLYN YOUNG, as trustee of the ALVIN M. WHEELER REVOCABLE TRUST; et al., Defendants-inInterpleader. 18 19 Plaintiff-in-Interpleader (“plaintiff”) moves for the entry of a default judgment against 20 defendant-in-interpleader (“defendant”) Linda Wilson. This proceeding was referred to this court 21 by Local Rule 302(c)(19) (motions for entry of default judgment under Fed. R. Civ. P. 55(b)(2)). 22 Alvin M. Wheeler (the “decedent”), is the late father of defendants-in-interpleader 23 (“defendants”) James E. Wheeler, Daniel M. Wheeler, Patricia Smith and Linda Wilson. The 24 Alvin M. Wheeler Revocable Trust (“the Trust”) is a trust that the decedent established during his 25 lifetime; defendant Carolyn Young is the Trustee, and is sued in that capacity. Plaintiff insurance 26 company issued a life insurance policy (“Policy”) on the decedent’s life, which was in effect at 27 the time of his death on May 5, 2014. Plaintiff admits its liability under the Policy in the amount 28 of $86,525.56, plus interest, but is unable to determine who among the several defendants is 1 Dockets.Justia.com 1 entitled to receive the proceeds. 2 I. PROCEDURAL BACKGROUND 3 On October 3, 2014, following the California procedure applicable to these interpleader 4 actions, plaintiff deposited $87,241.47 into the registry of the court (presumably $86,525.56 plus 5 interest to the date of the deposit). See Cal. Civ. Proc. Code § 386(c) (plaintiff may deposit 6 “[a]ny amount which a plaintiff . . . admits to be payable . . . with the clerk of the court at the time 7 of the filing of the complaint . . . in interpleader without first obtaining an order of the court 8 therefor”) . On April 16, 2015, plaintiff filed an amended interpleader complaint naming all the 9 actual and potential claimants to the Policy proceeds as defendants-in-interpleader. 10 11 The court exercises diversity jurisdiction over this state-law matter. 28 U.S.C. § 1332(a)(1).1 12 Plaintiff has filed Linda Wilson’s Waiver of the Service of Summons. It appears that all 13 other defendants have been served.2 The time for Wilson to respond to the complaint has 14 expired.3 Plaintiff filed this Motion for Default Judgment (“Motion”) against Wilson on August 15 25, 2015, about a month after Wilson’s time to respond had expired. Plaintiff also served Wilson 16 with the default judgment motion. 17 II. LEGAL STANDARDS 18 A. Motion for Default Judgement 19 The Federal Rules of Civil Procedure provide for the court-ordered entry of a default 20 judgment following the entry of a default by the Clerk of the Court. Fed. R. Civ. P. 55(a), (b)(2); 21 see Eitel v. McCool, 782 F.2d 1470, 1471 (9th Cir. 1986) (distinguishing Clerk’s entry of default 22 under Rule 55(a) from court’s entry of default judgment under Rule 55(b)). It is within the sound 23 discretion of the district court to grant or deny an application for default judgment. Aldabe v. 24 Aldabe, 616 F.2d 1089, 1092 (9th Cir. 1980) (per curiam). “‘The general rule of law is that upon 25 1 26 27 28 Federal interpleader jurisdiction does not apply here, as the claimants are not diverse. See 28 U.S.C. § 1335(a)(1). 2 According to plaintiff, the remaining defendants (that is, all except Wilson), have “reached an agreement for payment of the Policy proceeds.” Motion at 10. 3 At the hearing on this matter, plaintiff’s counsel represented that he had spoken to Wilson about this matter but that at some point she stopped returning his calls. 2 1 default the factual allegations of the complaint, except those relating to the amount of damages, 2 will be taken as true.’” TeleVideo Systems, Inc. v. Heidenthal, 826 F.2d 915, 917-18 (9th 3 Cir. 1987) (per curiam) (quoting Geddes v. United Financial Group, 559 F.2d 557, 560 (9th 4 Cir. 1977) (per curiam)). Those well-pleaded factual allegations must be sufficient to establish 5 plaintiff’s entitlement to a judgment under the applicable law. DIRECTV, Inc. v. Hoa Huynh, 6 503 F.3d 847, 855 (9th Cir. 2007) (district court properly refused to grant default judgment where 7 the complaint failed to state violations of the relevant statute), cert. denied, 555 U.S. 937 (2008); 8 Cripps v. Life Ins. Co. of North America, 980 F.2d 1261, 1267 (9th Cir. 1992) (“claims which are 9 legally insufficient, are not established by default”). 10 Even when a default judgment is warranted, the propriety of its entry is committed to the 11 sound discretion of the court. Eitel, 782 F.2d at 1471 (although all requirements for default 12 judgment were met, “[t]he denial of a default judgment here was within the court’s discretion”). 13 14 15 16 17 18 19 20 21 22 Factors which may be considered by courts in exercising discretion as to the entry of a default judgment include: (1) the possibility of prejudice to the plaintiff, (2) the merits of plaintiff’s substantive claim, (3) the sufficiency of the complaint, (4) the sum of money at stake in the action; (5) the possibility of a dispute concerning material facts; (6) whether the default was due to excusable neglect, and (7) the strong policy underlying the Federal Rules of Civil Procedure favoring decisions on the merits. Eitel, 782 F.2d at 1471-72. B. Interpleader Action Under Cal. Civ. Proc. Code § 386(b) Any person, firm, corporation, association or other entity against whom double or multiple claims are made, or may be made, by two or more persons which are such that they may give rise to double or multiple liability, may bring an action against the claimants to compel them to interplead and litigate their several claims. 23 Cal. Civ. Proc. Code § 386(b). Once the plaintiff “admits liability and deposits the money with 24 the court, he or she is discharged from liability and freed from the obligation of participating in 25 the litigation between the claimants.” City of Morgan Hill v. Brown, 71 Cal. App. 4th 1114, 1122 26 (6th Dist. 1999). “The purpose of interpleader is to prevent a multiplicity of suits and double 27 vexation” in respect to one liability. Id. at 1122 (citing Hancock Oil Co. of Cal. v. Independent 28 Distributing Co., 24 Cal. 2d 497, 510 (1944)). 3 1 III. ANALYSIS 2 A. Procedural Requirements 3 Plaintiff has satisfied the procedural requirements predicate to this court’s entry of a 4 default judgment. As discussed above, plaintiff filed a Waiver of the Service of Summons 5 executed by Wilson. See ECF No. 21. Wilson failed to answer or otherwise respond to the 6 summons and complaint within the 60 days allotted. Upon application by plaintiff (ECF No. 26), 7 the Clerk of the Court properly entered a default against Wilson pursuant to Fed. R. Civ. P. 55(a). 8 See ECF No. 27. Plaintiff then filed the current motion for default judgment, showing proper 9 service of the summons and complaint, Wilson’s failure to respond, and the entry of default. See 10 ECF No. 28. The motion further avers that Wilson is not a minor, incompetent person, in military 11 service or otherwise exempt from default judgment. See ECF No. 28. Finally, the motion 12 complies with Fed. R. Civ. P. 54(c) in that it requests a remedy that is not different in kind from 13 that prayed for in the Complaint. Thus, the court, in its discretion, may order a default judgment 14 against Wilson based on the Eitel factors, outlined below. 15 16 17 B. Eitel Factors 1. Factor One: Possibility of Prejudice to Plaintiff The first Eitel factor considers whether the plaintiff would suffer prejudice if default 18 judgment is not entered, and such potential prejudice to the plaintiff militates in favor of granting 19 a default judgment. Here, plaintiff would be prejudiced if the court did not enter a default 20 judgment, since plaintiff would be without another recourse for relief. See PepsiCo, Inc. v. 21 California Security Cans, 238 F. Supp. 2d 1172, 1177 (C.D. Cal. 2002). Accordingly, the first 22 Eitel factor favors the entry of default judgment. 23 2. Factors Two and Three: The Merits and the Sufficiency of the Complaint 24 The undersigned considers the merits of plaintiff’s substantive claims and the sufficiency 25 of the complaint together because of the relatedness of the two inquiries. The undersigned must 26 consider whether the allegations in the complaint are sufficient to state a claim that supports the 27 relief sought. See Cripps, 980 F.2d at 1267 (“claims which are legally insufficient, are not 28 established by default”). 4 1 Plaintiff states a claim for interpleader where it alleges that (1) the proceeds of the Policy 2 are claimed, or may be claimed, by all the parties against whom relief is demanded, and 3 (2) plaintiff is a “disinterested stakeholder” in that it does not claim any interest in the proceeds of 4 the Policy. See Hancock Oil Co., 24 Cal. 2d at 502-03 (setting out common law elements as 5 modified by Section 386(b)); Pacific Loan Management Corp. v. Superior Court, 196 Cal. 6 App. 3d 1485, 1489 (6th Dist. 1987) (the interpleader statute “requires only that the stakeholder 7 file a verified pleading disclaiming any interest in the money or property claimed”).4 8 a. Conflicting actual or potential claims 9 According to the complaint, each defendant, including Wilson, has made a claim for the 10 proceeds of the Policy, or has a potential claim for the proceeds of the Policy.5 The interpleader 11 statute may be used where multiple claims “are made, or may be made” against the Policy 12 proceeds. See Cal. Civ. Proc. Code § 386(b) (emphasis added). In particular, Wilson, as a 13 daughter and heir to decedent, is a “potential beneficiar[y] of Alvin M. Wheeler’s estate,” of 14 which the Policy proceeds are, or potentially are, a part. See Complaint ¶ 38. 15 b. Disinterested stakeholder 16 Plaintiff admits that it is obligated to pay out the policy proceeds, plus interest. Complaint 17 4 18 19 20 21 22 23 24 25 26 27 28 The two additional elements of the common law claim were removed when Section 386(b) was enacted. The common law requirement that “all of the adverse titles or claims must be dependent, or be derived from a common source,” is no longer an element of the claim. Hancock Oil Co., 24 Cal. 2d at 503 (the statute “directly abrogates the common law requirement that all the adverse titles or claims must be dependent or be derived from a common source”). The requirement that the plaintiff “must have incurred no independent liability” to any of the claimants, is also no longer an element of the claim. Pacific Loan, 196 Cal. App. 3d at 1489 (“[t]he true test of suitability for interpleader is the stakeholder’s disavowal of interest in the property sought to be interpleaded, coupled with the perceived ability of the court to resolve the entire controversy as to entitlement to that property without need for the stakeholder to be a party to the suit,” so that “[i]f a claimant of these funds also has an independent right of action against the stakeholder, he is free to sue him separately”). 5 See Complaint ¶¶ 33 (“Carolyn Young seeks the Policy benefits on behalf of the Trust”), 35 (James E. and Daniel M. Wheeler “claim to be entitled to the Policy benefits as beneficiaries of the Trust”), 36 (“James E. Wheeler alternatively claims to be entitled to the Policy benefits based on the December 9, 2009 beneficiary designation”), 37 (“Daniel M. Wheeler alternatively claims to be entitled to the Policy benefits based on the original August 5, 2009 beneficiary designation in the Application”), 38 (the decedent’s daughters, “Patricia Smith and Linda Wilson are potential beneficiaries of Alvin M. Wheeler’s estate”). 5 1 ¶ 45. It further alleges that it “claims no interest in the Policy Proceeds,” and “is a mere 2 stakeholder in this action.” Complaint ¶ 44. 3 4 Plaintiff has accordingly alleged facts sufficient to support an interpleader claim against Wilson. 5 6 3. Factor Four: The Sum of Money at Stake in the Action Under the fourth factor cited in Eitel, “the court must consider the amount of money at 7 stake in relation to the seriousness of Defendant’s conduct.” PepsiCo, Inc., 238 F. Supp. 2d 8 at 1177. The money at stake in this litigation is the $87,241.47 which plaintiff has deposited with 9 the court. However, it is not clear whether this sum favors or disfavors default judgment, since 10 the judgment sought is only to enjoin Wilson from suing plaintiff over the money. The proposed 11 default judgment does not purport to preclude plaintiff from making a claim for the money as 12 against the other defendants, and no party has briefed the court on how a default judgment here 13 would, or would not, affect Wilson’s ability to make a claim for the funds against the other 14 defendants. 15 4. Factor Five: The Possibility of a Dispute Concerning Material Facts 16 The underlying facts involving the various iterations of the trust and the Policy, and the 17 state court litigation about them, are a bit convoluted. See Complaint ¶¶ 11-39. However, the 18 basic fact that each of the defendants is now an actual or potential claimant to the funds does not 19 appear to be subject to any dispute. Assuming the truth of the well-pleaded facts in the 20 complaint, each of the defendant children of the decedent, as well as and the Trustee of the Trust, 21 all have actual or potential claims on the proceeds of the Policy, and the plaintiff has no claim on 22 the proceeds. 23 5. Factor Six: Whether the Default Was Due to Excusable Neglect 24 Upon review of the record before the Court, and based upon the representations of 25 plaintiff’s counsel at the hearing, the undersigned finds that the default was not the result of 26 excusable neglect. Plaintiff properly served Wilson with the summons and complaint. Despite 27 ample notice of this lawsuit and plaintiff’s intention to seek a default judgment, Wilson has not 28 appeared in this action to date. In addition, plaintiff’s counsel has communicated with Wilson by 6 1 telephone about the case, but Wilson at some point stopped returning counsel’s calls. Thus, the 2 record suggests that defendant has simply chosen not to defend this action. Accordingly, this 3 Eitel factor favors the entry of a default judgment. 4 6. Factor Seven: Policy Favoring Decisions on the Merits 5 “Cases should be decided upon their merits whenever reasonably possible.” Eitel, 782 6 F.2d at 1472. However, where a defendant's failure to appear “makes a decision on the merits 7 impracticable, if not impossible,” entry of default judgment is warranted. Pepsico, Inc., 238 F. 8 Supp. 2d at 1177. Therefore, where as here, defendants have failed to appear or respond – 9 making a decision on the merits impossible – the entry of default judgment is warranted, as 10 district courts have concluded with regularity. See, e.g., Microsoft Corp. v. Nop, 549 F. Supp. 2d 11 1233, 1237 (E.D. Cal. 2008) (England, J.) (“defendant's failure to appear and defend against 12 plaintiff's claims has made a decision on the merits impossible in this case”); Craigslist, Inc. v. 13 Naturemarket, Inc., 694 F. Supp. 2d 1039, 1061 (N.D. Cal. 2010) (same). Accordingly, although 14 the undersigned is cognizant of the policy in favor of decisions on the merits – and consistent 15 with existing policy would prefer that this case be resolved on the merits – that policy does not, 16 by itself, preclude the entry of default judgment. 17 III. CONCLUSION 18 For the reasons stated above, IT IS HEREBY RECOMMENDED that: 19 1. Plaintiff’s motion for default judgment against defendant Linda Wilson (ECF No. 14), 20 be GRANTED. 21 22 2. The court APPROVE the proposed judgment submitted by plaintiff (ECF No. 28-4); and 23 3. Plaintiff be ORDERED to file dispositional documents within 30 days of the entry of 24 the default judgment, based upon its representation that all remaining defendants have “reached 25 an agreement for payment of the Policy proceeds.” 26 These findings and recommendations are submitted to the United States District Judge 27 assigned to the case, pursuant to the provisions of 28 U.S.C. § 636(b)(1). Within twenty one days 28 after being served with these findings and recommendations, any party may file written 7 1 objections with the court and serve a copy on all parties. Id.; see also Local Rule 304(b). Such a 2 document should be captioned “Objections to Magistrate Judge’s Findings and 3 Recommendations.” Any response to the objections shall be filed with the court and served on all 4 parties within fourteen days after service of the objections. Local Rule 304(d). Failure to file 5 objections within the specified time may waive the right to appeal the District Court’s order. 6 Turner v. Duncan, 158 F.3d 449, 455 (9th Cir. 1998); Martinez v. Ylst, 951 F.2d 1153, 1156-57 7 (9th Cir. 1991). 8 DATED: October 13, 2015 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 8
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