State Farm Life Insurance Company v. Ablaza

Filing 28

ORDER ADOPTING IN PART 22 REPORT AND RECOMMENDATION; DENYING 19 PLAINTIFF'S MOTION FOR DEFAULT JUDGMENT AGAINST DEFENDANT ABLAZA; GRANTING 19 PLAINTIFF'S REQUEST TO DEPOSIT INTERPLEADER FUNDS INTO COURT'S REGISTRY; AND ENJOINING DEFENDANT ABLAZA FROM INITIATING ANY ACTION AGAINST STATE FARM REGARDING INTERPLEADER FUNDS. Signed by Judge Beth Labson Freeman on 9/8/2021. (blflc1S, COURT STAFF) (Filed on 9/8/2021)

Case 5:20-cv-06519-BLF Document 28 Filed 09/08/21 Page 1 of 5

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UNITED STATES DISTRICT COURT

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NORTHERN DISTRICT OF CALIFORNIA

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SAN JOSE DIVISION

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STATE FARM LIFE INSURANCE
COMPANY,
Plaintiff,

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v.

United States District Court
Northern District of California

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MICHAEL R. ABLAZA and JANE DOE,
the Administrator of the Estate of Maribeth
Garces Ablaza,
Defendants.

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Case No. 20-cv-06519-BLF
ORDER ADOPTING IN PART
REPORT AND RECOMMENDATION;
DENYING PLAINTIFF’S MOTION
FOR DEFAULT JUDGMENT AGAINST
DEFENDANT ABLAZA; GRANTING
PLAINTIFF’S REQUEST TO DEPOSIT
INTERPLEADER FUNDS INTO
COURT’S REGISTRY; AND
ENJOINING DEFENDANT ABLAZA
FROM INITIATING ANY ACTION
AGAINST STATE FARM REGARDING
INTERPLEADER FUNDS
[Re: ECF 19, 22]

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Before the Court is a “Motion for Default Judgment and For Deposit Pursuant to Fed. R.

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Civ. P. 67” filed by Plaintiff State Farm Life Insurance Company (“State Farm”) (ECF 19), and a

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Report and Recommendation (“R&R”) filed by Magistrate Judge Susan van Keulen (ECF 22).

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Judge van Keulen has recommended that this Court grant State Farm’s motion for default

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judgment against Defendant Michael R. Ablaza (“Ablaza”), grant State Farm’s request to deposit

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interpleader funds into the Court’s registry, enjoin Ablaza from initiating any action against State

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Farm regarding the interpleader funds, and dismiss State Farm from the action.
For the reasons discussed below, the Court ADOPTS IN PART the R&R; DENIES State

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Farm’s motion for default judgment against Ablaza; GRANTS State Farm’s request to deposit

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interpleader funds into the Court’s registry; ENJOINS Ablaza from initiating any action against

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State Farm regarding the interpleader funds; and DECLINES to dismiss State Farm from the

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action.

Case 5:20-cv-06519-BLF Document 28 Filed 09/08/21 Page 2 of 5

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I.

BACKGROUND
State Farm filed this interpleader action following the death of its insured, Maribeth Garces

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Ablaza (“the Insured”), to resolve uncertainty over the appropriate payee of approximately

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$145,000 in benefits from a life insurance policy (“the policy proceeds”) issued by State Farm.

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See Compl., ECF 1. The policy names the Insured’s only child, Ablaza, as the primary beneficiary

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and does not name a secondary beneficiary. See id. ¶ 8. State Farm alleges that Ablaza has been

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arrested and charged with the Insured’s murder. See id. ¶ 12. State Farm further alleges that if

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Ablaza is convicted of murdering the Insured, the policy proceeds will not be payable to him

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under California law. See id. ¶¶ 13-14. If Ablaza is not convicted of murdering the Insured, he
will be entitled to receive the policy proceeds. See id. ¶ 15. It is State Farm’s understanding that

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United States District Court
Northern District of California

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no proceeding has been commenced to administer the Insured’s estate. See id. ¶ 16.

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In its complaint, State Farm requests the following relief: appointment of a representative

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to administer the insured’s estate; an order requiring such representative and Ablaza to answer the

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complaint and litigate between themselves their rights to the policy proceeds; an order permitting

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State Farm to deposit the policy proceeds into the Court’s registry and discharging State Farm

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from further liability with respect to the policy proceeds; enjoining Defendants from instituting or

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prosecuting any action against State Farm with respect to the policy proceeds; and awarding State

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Farm its attorneys’ fees and costs. See Compl. at pp. 4-5.

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The clerk entered default against Ablaza on January 6, 2021. See Clerk’s Entry, ECF 14.

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On May 7, 2021, State Farm filed a motion for default judgment against Ablaza. See Mot. for

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Def. Jud., ECF 19. Magistrate Judge Susan van Keulen, to whom this case originally was

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assigned, issued a Report and Recommendation (“R&R) on July 21, 2021, directing the clerk to

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reassign the case to a district judge and recommending that State Farm’s motion for default

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judgment be granted. See R&R, ECF 22. Judge van Keulen also recommended that State Farm be

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ordered to deposit the policy proceeds into the Court’s registry, that Ablaza be enjoined from

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initiating any action against State Farm regarding the policy proceeds, and that State Farm

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thereafter be dismissed from the action. See id.

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Defendant Michael Ablaza was served with the R&R but has not filed an objection or other
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Case 5:20-cv-06519-BLF Document 28 Filed 09/08/21 Page 3 of 5

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response. See Notice, ECF 26. State Farm filed a response to the R&R on August 4, 2021,

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suggesting that the Court adopt the R&R with the modification that State Farm’s dismissal be

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stayed pending appointment of an administrator of the Insured’s estate. See Response, ECF 27.

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State Farm points out that if it were dismissed before appointment of an administrator, the Court

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would be in possession of interpleaded funds without an active party to apply for distribution. See

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id.

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II.

LEGAL STANDARD

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When a magistrate judge is assigned, without the parties’ consent, to hear a pretrial matter

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dispositive of a claim, the magistrate judge must issue a recommended disposition for review by a
district judge. Fed. R. Civ. P. 72(b)(1). The recommended disposition must be served on the

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United States District Court
Northern District of California

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parties, who then have fourteen days to file objections. Fed. R. Civ. P. 72(b)(2). “The district

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judge must determine de novo any part of the magistrate judge’s disposition that has been properly

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objected to.” Fed. R. Civ. P. 72(b)(3). “The district judge may accept, reject, or modify the

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recommended disposition; receive further evidence; or return the matter to the magistrate judge

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with instructions.” Id.

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III.

DISCUSSION
As discussed above, no party has objected to the R&R, although State Farm proposes that

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the R&R be modified to stay its dismissal from the action pending appointment of an

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administrator of the Insured’s estate. However, for the reasons discussed below, the Court adopts

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the R&R only in part. Specifically, the Court declines to adopt the portions of the R&R

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recommending that State Farm’s motion for default judgment be granted and that State Farm be

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dismissed from the action. The Court adopts the portions of the R&R recommending that State

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Farm be permitted to deposit the policy proceeds in the Court’s registry and that Ablaza be

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enjoined from initiating any action against State Farm regarding the policy proceeds.

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A.

Default Judgment is Not Supported by the Allegations of the Complaint

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“The general rule of law is that upon default the factual allegations of the complaint,

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except those relating to the amount of damages, will be taken as true.” TeleVideo Sys., Inc. v.

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Heidenthal, 826 F.2d 915, 917-18 (9th Cir. 1987) (quotation marks and citation omitted).
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Case 5:20-cv-06519-BLF Document 28 Filed 09/08/21 Page 4 of 5

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“However, necessary facts not contained in the pleadings, and claims which are legally

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insufficient, are not established by default.” Cripps v. Life Ins. Co. of N. Am., 980 F.2d 1261,

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1267 (9th Cir. 1992). Consequently, “[a] defendant’s default does not automatically entitle the

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plaintiff to a court-ordered judgment.” PepsiCo, Inc. v. California Sec. Cans, 238 F. Supp. 2d

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1172, 1174 (C.D. Cal. 2002) (citing Draper v. Coombs, 792 F.2d 915, 924-25 (9th Cir.1986)).

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The allegations of State Farm’s complaint, taken as true, establish that Ablaza will not be

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entitled to the policy proceeds if he is convicted of his mother’s murder, but that Ablaza will be

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entitled to the policy proceeds if he is not convicted of his mother’s murder. See Compl. ¶¶ 14-15.

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Those allegations are legally insufficient to support entry of default judgment against Ablaza at
this time, as he may be entitled to the policy proceeds in the future, depending on the outcome of

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United States District Court
Northern District of California

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the criminal proceedings against him. In the Court’s view, State Farm’s motion for default

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judgment is simply premature. Accordingly, the Court declines to adopt the portion of the R&R

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recommending that default judgment be granted.

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State Farm’s motion for default judgment against Ablaza is DENIED.

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B.

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In addition to seeking default judgment against Ablaza, State Farm requests that it be

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permitted to deposit the policy proceeds into the Court’s registry. The Court agrees with the

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portions of the R&R concluding that this Court has subject matter jurisdiction over the action

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because the parties are diverse and the amount in controversy exceeds $75,000, see 28 U.S.C. §

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1332, and that deposit of the policy proceeds is appropriate under Federal Rule of Civil Procedure

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22, see Fed. R. Civ. P. 22.

State Farm May Deposit the Policy Proceeds in the Court’s Registry

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State Farm’s request to deposit the policy proceeds in the Court’s registry is GRANTED.

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C.

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State Farm also requests that, once it deposits the policy proceeds with the Court, Ablaza

An Injunction Against Ablaza is Appropriate

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be enjoined from initiating any proceedings against State Farm relating to the policy proceeds.

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The Court agrees with the portion of the R&R concluding that the requested injunction is

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appropriate. While Federal Rule of Civil Procedure 22 does not itself authorize district courts to

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enjoin litigants from pursuing further claims regarding interpleader funds, courts in this district
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Case 5:20-cv-06519-BLF Document 28 Filed 09/08/21 Page 5 of 5

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have issued such injunctions pursuant to the All Writs Statute, 28 U.S.C. § 1651. See, e.g., Pruco

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Life Ins. Co. v. Tan, No. 19-CV-00335-JCS, 2020 WL 2574662, at *5 (N.D. Cal. May 4, 2020),

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report and recommendation adopted sub nom. Pruco Life Ins. Co. v. Chao Hui Tan, No. 19-CV-

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00335-WHO, 2020 WL 2572804 (N.D. Cal. May 21, 2020); Trustees of ILWU-PMA Pension Plan

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v. Coates, No. C-11-3998 EMC, 2013 WL 556800, at *7 (N.D. Cal. Feb. 12, 2013); Trustees of IL

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WU-PMA Pension Plan v. Peters, 660 F. Supp. 2d 1118, 1145 (N.D. Cal. 2009). Once State Farm

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deposits the policy proceeds with the Court, the rights to the policy proceeds will be litigated in

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this action. Allowing Ablaza to relitigate those rights by bringing action against State Farm would

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defeat the purpose of interpleader.
Ablaza is ENJOINED from bringing any future action in state or federal court regarding

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United States District Court
Northern District of California

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his claims to the policy proceeds at issue.

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D.

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As State Farm points out in its response to the R&R, dismissal of State Farm at this time

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would be premature. See Response, ECF 27. State Farm suggests that its dismissal be deferred

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pending appointment of an administrator of the Insured’s estate. State Farm also indicates that it

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prefers to remain in the case because it wishes to file a motion for discretionary reimbursement of

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attorneys’ fees and costs incurred in bringing this interpleader action.
The Court DECLINES to dismiss State Farm from the case at this time.

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IV.

ORDER
(1)

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(c)

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(d)

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The R&R filed by Judge van Keulen is ADOPTED IN PART, as follows:
(a)
(b)

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Dismissal of State Farm Would be Premature

(2)

State Farm’s motion for default judgment against Ablaza is DENIED;
State Farm’s request to deposit the policy proceeds into the Court’s registry
is GRANTED;
Ablaza is ENJOINED from bringing any future action in state or federal
court regarding his claims to the policy proceeds at issue; and
The Court DECLINES to dismiss State Farm from the case at this time.

The Case Management Conference REMAINS SET for December 2, 2021. State
Farm shall file a Case Management Statement at least seven days prior to
December 2, 2021, advising the Court of the status of the appointment of an
administrator of the Insured’s estate.

Dated: September 8, 2021

______________________________________
BETH LABSON FREEMAN
United States District Judge
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