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Midland National Life Insurance Co. v. Santana-Ayala

United States District Court, W.D. Texas, San Antonio Division

January 2, 2020

MIDLAND NATIONAL LIFE INSURANCE COMPANY, Plaintiff,
v.
IRIS V. SANTANA-AYALA a/k/a IRIS SANTANA a/k/a IRIS VELIA AYALA a/k/a IRIS VELIA AYALA-AYALA, HERIBERTO RODRIGUEZ, AND JUAN CARLOS VEGA-DIAZ a/k/a JUAN CARLOS VEGA, Defendants.

          ORDER

          JASON PULLIAM UNITED STATES DISTRICT JUDGE.

         This matter is before the Court upon Plaintiff Midland National Life Insurance Company's Motion for Judgment on its Interpleader (ECF No. 21) and Defendant Iris V. Santana-Ayala's Motion for Default Judgment (ECF No. 22). The premises considered, the Court grants Midland's judgment on its Interpleader and enters default judgment against Juan Carlos Vega-Diaz a/k/a Juan Carlos Vega.

         I. Background

         On May 31, 2019, Plaintiff Midland National Life Insurance Company (“Midland”) filed a Complaint for Interpleader pursuant to 28 U.S.C. § 1335 and Rule 22 of the Federal Rules of Civil Procedure to resolve competing claims to the death benefit of a life insurance policy issued by Midland to Deborah M. Santana (“Deborah”). ECF No. 1. Iris V. Santana-Ayala a/k/a Iris Santana a/k/a Iris Velia Ayala a/k/a Iris Velia Ayala-Ayala (“Iris”), Deborah's mother, was the original beneficiary but shortly before Deborah's death Midland received an incomplete change of beneficiary form naming Heriberto Rodriguez (“Heriberto”) as the beneficiary in place of Iris.

         Although Midland initially determined that the form was sufficient to effect the change, and Heriberto made a claim for the proceeds, Iris and other family members disputed Heriberto's entitlement to the money. Further, Midland was concerned that Deborah may have been married both at the time she applied for the Policy and at the time of her death even though Deborah stated in her application for the Policy that she was single, and is listed on her death certificate as divorced. Midland noted that because Texas is a community property state, Deborah's estranged spouse, Juan Carlos Vega-Diaz a/k/a Juan Carlos Vega (“Juan”), may have a potential claim to some portion of the proceeds.[1] Consequently, Midland filed its interpleader asking the Court to determine whom among the Defendants is entitled to the proceeds and in what amount, and deposited the proceeds with the Registry of the Court.

         Midland contends it has done all that is required to perfect its interpleader and asks the Court to enter an order discharging Midland from any further liability under the Policy, award Midland its attorney fees and costs incurred in bringing its interpleader, and dismiss Midland from all further proceedings. See ECF No. 21.

         Iris's motion states Defendants each waived service of summons, but only Iris answered the Complaint; Heriberto and Juan are each in default; and the Clerk has entered default. Thus, Iris contends, default judgment against Heriberto and Juan is proper. And, as the only competing claimant to appear in these proceedings in which the Complaint sufficiently alleges that she is a putative beneficiary of the death benefit, Iris argues she is therefore entitled to the disputed death benefit. See ECF No. 22-1.

         II. Legal Standards

         Under Federal Rule of Civil Procedure 55(b)(2), the court may enter a default judgment where the clerk, under Rule 55(a), has entered the party's default based upon a failure to plead or otherwise defend the action. A default occurs when a defendant has failed to plead or otherwise respond to the complaint within the time required by the Federal Rules of Civil Procedure. Saldana v. Zubha Foods, LLC, 2013 WL 3305542 (W.D. Tex. 2013) (citing New York Life Ins. Co. v. Brown, 84 F.3d 137 (5th Cir. 1996)). Even if a defendant is technically in default, a plaintiff is not entitled to a default judgment as a matter of right. Lewis v. Lynn, 236 F.3d 766, 767 (5th Cir. 2001) (per curiam); accord Ganther v. Ingle, 75 F.3d 207, 212 (5th Cir. 1996). Generally, the entry of default judgment is committed to the discretion of the district court. Mason v. Lister, 562 F.2d 343, 345 (5th Cir. 1977). Among the factors a district court may consider when deciding whether to grant a default judgment are: (1) whether the default was caused by a good-faith mistake or excusable neglect; (2) whether there has been substantial prejudice; (3) the harshness of a default; (4) whether there are material issues of fact; (5) whether grounds for a default judgment are clearly established; and (6) whether the court would think it was obligated to set aside the default on the defendant's motion. Lindsey v. Prive Corp., 161 F.3d 886, 893 (5th Cir. 1998).

         Federal Rule of Civil Procedure 22 permits a plaintiff “with claims that may expose [it] to double or multiple liability” to join those persons as defendants in a suit to determine each defendant's rights. Fed.R.Civ.P. 22(a)(1). Rule 22 interpleader does not require deposit of funds into the court's registry. Murphy v. Travelers Ins. Co., 534 F.2d 1155, 1159 (5th Cir. 1976). Interpleader relief is also available under 28 U.S.C. § 1335. To establish a right to relief under § 1335, a party must show: (1) it has custody of money or property worth $500 or more; (2) two or more adverse claimants of diverse citizenship are “claiming or may claim to be entitled to such money or property, or to any one or more of the benefits arising by virtue of any note, bond, certificate, policy or other instrument;” and (3) the party has deposited such money or property in the registry of the Court. 28 U.S.C. § 1335. The statute permits all actual and potential claimants to be named in an interpleader action so as to ensure complete resolution of all competing claims.

         “Interpleader actions are decided through a two-step process. The first step is for the Court to determine whether a proper case for interpleader is presented. To so find, the Court must determine that there is a single fund with adverse claimants to that fund. If the Court determines that the requirements for interpleader are met, the next stage of the litigation is to determine the rights of the claimants.” Fresh Am. Corp. v. Wal-Mart Stores, Inc., No. 3:03-CV-1299-M, 393 F.Supp.2d 411, 415 (N.D. Tex. Mar. 31, 2005). The effect of a default judgment against a defendant named in an interpleader is that the party “who fails to answer the interpleader complaint and assert a claim to the res forfeits any claim of entitlement that might have been asserted.” Metro. Life Ins. Co. v. Theriot, No. 08-01480, 2010 WL 4644057 (W.D. La. Nov. 8, 2010) (quoting Shuqualak Lumber Co., Inc. v. Hardin, No. 1:08CV297-P-S, 2009 WL 2767676, at * 1-2 (N.D. Miss. Aug. 27, 2009).

         A district court has the authority to award reasonable attorneys' fees in interpleader actions. Rhoades v. Casey, 196 F.3d 592, 603 (5th Cir. 1999). “Fees may be awarded ‘when the interpleader is a disinterested stakeholder, and is not in substantial controversy with one of the claimants.'” New York Life Ins. & Annuity Corp. v. Cannatella, 550 Fed.Appx. 211, 217 (5th Cir. 2013) (quoting Rhoades, 196 F.3d at 603). A district court may take into account a number of factors when assessing whether attorneys' fees are appropriate: “1) whether the case is simple or involved; 2) whether the stakeholder performed any unique services for the claimants or the court; 3) whether the stakeholder acted in good faith and with diligence; 4) whether the services rendered benefited the stakeholder; and 5) whether the claimants improperly protracted the proceedings.” Id. (quoting 7 Charles Alan Wright, Arthur R. Miller, Mary Kay Kane, Federal Practice and Procedure § 1719, at 688-89 (3d ed. 2001) and citing Royal Indem. Co. v. Bates, 307 Fed.Appx. 801, 806 (5th Cir. 2009)). Courts in this circuit may apply the lodestar method to determine whether requested attorney's fees are reasonable and equitable in interpleaders. See Transamerica Annuity Serv. Corp. v. Symetra Life Ins. Co., No. 16-1426, 2017 WL 3442464 (S.D. Tex. Aug. 9, 2017); Metro. Life Ins. Co. v. Linnear, No. 14-0047, 2014 WL 4678713 (W.D. La. Sept. 18, 2014). Because all that is required in a typical interpleader action is the “preparation of a petition, the deposit in court or posting of a bond, service on the claimants, and the preparation of an order discharging the stakeholder, ” the amount of the attorney's fee award is usually moderate. Charles Alan Wright, Arthur R. Miller & Mary Kay Kane, Federal Practice and Procedure § 1719 (3d ed. 2001).

         III. Analysis

         Upon review of the complaint, motions, exhibits, and the record, the Court finds the following. Midland issued a flexible premium adjustable universal life insurance policy, no. 1503074616, to “Deborah M. Santana” as the owner and insured, with a face value of $250, 000 and a Policy ...


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