Interplead Disputed Funds
The holder of disputed funds, such as an escrow company
holding proceeds of a transaction where the parties dispute who has the legal
right to receive the proceeds, may interplead the funds by filing an
interpleader complaint in Superior Court under California's Code of Civil
Procedure §§ 386-386.6, naming the claimants as defendants, and requesting
the attorney's fees and costs incurred to obtain a discharge. In the recent
decision of Southern California Gas
Company v. Flannery, the appellate court recognized that such fees and
costs include those incurred in initiating the interpleader case to obtain a
discharge, and also the fees and costs incurred in defending against subsequent
motions, writ petitions, and appeals attacking the validity of the interpleader
complaint and discharge order. Because
an interpleader complaint may allege that the defendants each claim an interest
in some or all the interpleaded funds, defendants have to be careful to not
include a general denial in their answer, because by doing so they may deny
that they claim an interest in the funds.
In other words, defendants should not deny they are entitled to receive
the funds if they want some or all of the funds. If the defendants want to state a conflicting
claim to the funds, they need to include factually specific allegations to
legally state such a claim or it may be disregarded. An interpleader action is a very useful
method to obtain the court's determination of who has the right to the funds,
while also obtaining the attorney's fees and costs incurred in the action. Defendants should attempt to settle their
rights to such funds as the funds will be the source of any attorney's fees and
costs awarded to the plaintiff, and will therefore be reduced to pay the fees
and costs.
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