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July 11, 2001

State Farm Fire & Casualty Co. v. Pietak (2001) 90 Cal.App.4th 600

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Straightforward admission of fault by attorney is required to qualify for mandatory relief from default under Code of Civil Procedure § 473.

Gary Pietak made a claim under his State Farm homeowner’s policy when his home was destroyed by fire.  State Farm determined that the fire had been intentionally set, declared the policy void, and denied the claim.

Bank of America acquired title to the property through foreclosure and made its own claim for the policy proceeds.  State Farm responded by filing a complaint in interpleader and depositing the policy benefits into court.  State Farm alleged that Pietak’s refusal to release his claim against the policy in favor of the Bank rendered it unable to determine its liability.  It named as defendants Pietak, the Bank, and several attorneys who had represented Pietak and were claiming an interest in the policy’s benefits.

In his answer, Pietak asserted that he was entitled to a set-off against money owed to him by State Farm.  By way of an affirmative defense, he gave notice of his intent to file a separate breach of contract and bad faith action against State Farm in federal court.  Shortly thereafter, he filed a federal court action against State Farm.

In the interpleader action, Pietak stipulated that the deposited funds be disbursed to Bank of America.  The trial court entered an order in accordance with the stipulation, and State Farm dismissed the interpleader with prejudice.  State Farm then brought a motion to dismiss the federal action arguing that Pietak was required to assert his claims by way of a cross-complaint in the interpleader action.

While State Farm’s motion to dismiss the federal action was pending, Pietak filed a request to reopen the interpleader action so that he could file a cross-complaint against State Farm.  He argued that any error resulted from his attorney’s misinterpretation of the applicable statutes governing compulsory cross-claims in interpleader actions.  In support of Pietak’s motion, his attorney filed a declaration stating that the contents of the supporting memorandum was correct and another stating that he was not authorized by his client to dismiss affirmative claims for relief that were not then on file in the interpleader action.

The appellate court held that neither declaration was sufficient to trigger the mandatory relief from default provision of C.C.P. § 473(b).  That section requires an attorney’s sworn admission of mistake, inadvertence, surprise or error that result in a dismissal of claims.  A declaration that the attorney erred by proceeding in a manner that precludes his client from pursuing claims is not sufficient.  The attorney’s affirmation of the contents of the memo of points and authorities was also insufficient because the admissions should have been contained in the declaration itself.  Moreover, the memorandum contained no real concession of error; it argued that this was not a case of neglect on the part of counsel, and that counsel’s interpretation of the interpleader section was correct.  Without a straightforward admission of attorney fault, mandatory relief is unavailable.

Nevertheless, the appellate court held that the trial court had abused its discretion in refusing discretionary relief from default under C.C.P. § 473. The interpleader statute is unclear as to whether affirmative claims for relief against the stakeholder must be asserted in an interpleader action. Since case law interpreting the statute is divided on the issue, the attorney’s failure to fully research the issue was not dispositive.  Because of the legal uncertainty, there was no reason to believe that the attorney would have reached a different conclusion had he performed the research.

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