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Transamerica Life Insurance Company v. Estate of Caroline Ward

October 31, 2011

TRANSAMERICA LIFE INSURANCE COMPANY, PLAINTIFF,
v.
ESTATE OF CAROLINE WARD; DRENA M. MOORE, EXECUTOR OF THE ESTATE OF CAROLINE WARD; HERIBERTO TORRES A.K.A. EDDIE TORRES, DEFENDANTS.
DRENA M. MOORE, EXECUTOR OF THE ESTATE OF CAROLINE WARD, DECEASED, CROSS-CLAIMANT,
v.
HERIBERTO TORRES A.K.A. EDDIE TORRES, CROSS-DEFENDANT.



ORDER AND FINDINGS AND RECOMMENDATIONS

This case was referred to the undersigned pursuant to Eastern District of California Local Rule 302(c)(19) and 28 U.S.C. § 636(b)(1) for hearing on plaintiff Transamerica Life Insurance Company's motion for entry of default judgment against defendant Heriberto Torres, and cross-claimant Drena M. Moore's motion for default judgment against Torres. Dckt. Nos. 21, 24.

On September 14, 2011, the court heard both motions for default judgment. Attorney Kristin Kyle de Bautista appeared at the hearing on behalf of plaintiff Transamerica Life Insurance Company ("Transamerica"); attorney Janet Haines appeared on behalf of defendant and cross-claimant Moore; defendant and cross-defendant Torres failed to appear.

At the hearing, the court addressed Moore's failure to effect proper service of process. Specifically, although Moore's cross-complaint was served on Torres by mail, pursuant to Federal Rule of Civil Procedure ("Rule") 5, that service was ineffective. Torres had not appeared in the action at the time that the cross-complaint was filed, and therefore Moore was required to personally serve Torres in accordance with Rule 4. See Fed. R. Civ. P. 5(a)(1)(B) (requiring crossclaims to be filed and served on all parties) and 5(a)(2) (providing that "[n]o service is required on a party who is in default for failing to appear. But a pleading that asserts a new claim for relief against such a party must be served on that party under Rule 4."); see also The Rutter Guide, Federal Civil Procedure Before Trial, § 8:1345 ("Any new third party named in a cross-claim (or any party who has not yet appeared in the action) must be personally served with a summons on the cross-claim."); Wright & Miller, Federal Civil Procedure Before Trial, 4B Fed. Prac. & Proc. Civ. § 1144 (3d ed.) ("[A]ccording to the second sentence of Rule 5(a), although a party in default for failure to appear is not entitled to receive a copy of any paper in the action, he is entitled to receive a pleading asserting a new or additional claim for relief against him, but it must be served upon him pursuant to Rule 4 as if it were original process."). Accordingly, Moore's motion, Dckt. No. 21, was denied without prejudice due to improper service of process.

Additionally, at the hearing, the court found that Transamerica was entitled to default judgment against Torres. Accordingly, for the reasons stated on the record at the hearing, as well as for the reasons stated herein, the undersigned recommends that Transamerica's motion for default judgment be granted.

I. BACKGROUND

Transamerica filed this interpleader action on February 16, 2011, because of a dispute among defendants -- the Estate of Carolyn Ward; Moore, individually and as the executor of the Estate of Carolyn Ward; and Torres -- with respect to the distribution of proceeds from two annuity contracts Transamerica had with Carolyn Ward. Compl., Dckt. No. 2.

According to Transamerica's complaint, Transamerica issued to Caroline Ward, as owner and annuitant, a fixed annuity contract number 26004268, with an effective date of February 22, 2001, for an initial premium payment of $47,590.83. Id. ¶ 8. The designated primary beneficiary was Caroline Ward's nephew, Torres. Id. Subsequently, Transamerica issued to Caroline Ward, as owner and annuitant, its fixed annuity contract number 26004704, with an effective date of March 1, 2001, for an initial premium payment of $204,000.00. Id. ¶ 9. Again, the designated primary beneficiary was Torres. Id. Under the terms of each of the annuity contracts, if the insured dies, then the beneficiary is the person designated in the contract as the primary beneficiary. Id. ¶¶ 8, 9. Transamerica is informed and believes that Caroline Ward died on November 4, 2008, at which time the benefits under the two annuity contracts became due and payable. Id. ¶ 10. Torres made a claim for the proceeds of the two annuity contracts. Id. ¶ 11. However, Moore also contacted Transamerica to contest payment of proceeds of the annuity contracts to Torres, and asserted that Torres used fraud and/or undue influence to secure his designation as beneficiary on each of the contracts. Id. ¶ 12. Moore requested that Transamerica interplead the proceeds. Id.

As a result of the competing claims of Torres and Moore, there existed rival, adverse and conflicting claims to the contract benefits payable as a result of the death of Caroline Ward. Id.

¶ 13. Because Transamerica could not determine which defendant was entitled to the proceeds and could not pay the proceeds without exposing itself to potential multiple liability or litigation, and since Transamerica claimed no beneficial interest in the proceeds, Transamerica deposited with the Clerk of this Court the total sum of $397,290.89.*fn1 Id. ¶ 14. Transamerica contends that it "should not be compelled to become involved in the actual or potential disputes or contentions of defendants . . . ." Id. ¶ 16. Transamerica's complaint requests that the court: (1) find that it has jurisdiction over this matter and the parties under 28 U.S.C. § 1335 and Rule 22; (2) enjoin defendants from instituting or prosecuting against Transamerica any proceeding regarding the contract benefits payable as a result of the death of Caroline Ward; (3) determine the rights of the defendants to the benefits due under the contracts; (4) discharge Transamerica of and from any and all liability for any benefits whatsoever due under the contracts; (5) dismiss Transamerica from this case; and (6) award Transamerica costs and attorneys' fees. Id. at 4-5.

A certificate of service, filed March 8, 2011, demonstrates that the summons and complaint were personally served on Torres on February 8, 2011. Dckt. No. 8. On May 23, 2011, pursuant to plaintiff's request, the Clerk of Court entered the default of defendant Torres. Dckt. Nos. 15, 16. On August 17, 2011, Transamerica moved for default judgment against Torres, Dckt. No. 24, and mail served a copy of the motion on Torres, Dckt. No. 25. Torres has not filed any opposition to the motion and, as noted above, failed to appear at the September 14, 2011 hearing on the motion.

II. DISCUSSION

A. Standards

It is within the sound discretion of the district court to grant or deny an application for default judgment. Aldabe v. Aldabe, 616 F.2d 1089, 1092 (9th Cir. 1980). In making this determination, the court considers the following factors:

(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 the material facts, (6) whether the default was due to excusable neglect, and (7) the strong ...


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