Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caed-2_05-cv-01716/USCOURTS-caed-2_05-cv-01716-4/pdf.json

Nature of Suit Code: 110
Nature of Suit: Insurance
Cause of Action: 28:1332 Diversity-Interpleader Action

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1

UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF CALIFORNIA

UNITED INVESTORS LIFE No. 2:05-cv-1716-MCE-DAD

INSURANCE COMPANY,

Plaintiff,

v. MEMORANDUM AND ORDER

DONNA GRANT, individually and

as Administrator of the Estate

of George H. Grant, HELEN

FAUERBACH, JIM GRANT, KENNY

GRANT, BRANDON GRANT, and DOES

1 through 20, inclusive,

Defendants.

_________________________________/

DONNA GRANT, individually and as

Administrator of the Estate of 

George H. Grant,

Cross-Plaintiff,

v.

UNITED INVESTORS LIFE INSURANCE

COMPANY, and DOES 1 through 100,

inclusive,

Cross Defendants.

----oo0oo----

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All further references to “Rule” or “Rules” are to the 1

Federal Rules of Civil Procedure unless otherwise noted.

2

In instituting the present Complaint in Interpleader under

Federal Rule of Civil Procedure 22, Plaintiff United Investors 1

Life Insurance Company (“United Investors”) seeks a discharge

from any further liability with respect to the proceeds of a life

insurance policy taken out by its insured, George Grant

(“George”). Jurisdiction over United Investor’s Complaint is

premised on diversity of citizenship pursuant to 28 U.S.C. §

1332.

United Investors argues that is entitled to interplead the

policy proceeds because George’s death has been deemed a

homicide, and because his wife, Defendant Donna Grant (“Donna”),

has not been cleared as a suspect in her husband’s murder. Donna

now moves for summary judgment on grounds that in the absence of

any other potential policy beneficiaries, the instant action in

interpleader cannot be maintained. In response, United Investors

has filed a counter motion for judgment in interpleader on

grounds that all prerequisites for a discharge as to its policy

proceeds have in fact been satisfied. Finally, United Investors

has also filed its own request for summary judgment, or

alternatively for summary adjudication, with respect to Donna’s

Cross-Complaint against United Investors.

For the reasons set forth below, Donna’s summary judgment is

denied. United Investor’s Motion for Judgment in Interpleader is

granted. 

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3

Finally, while United Investor’s request for summary

judgment as to Donna’s Cross-Complaint is denied, partial summary

judgment will be granted as to certain of the claims pled in the

Cross-Complaint.

BACKGROUND

On or about February 10, 1998, George obtained a policy of

life insurance, number 40007698957, issued by United Investors in

a face amount of $500,000. George’s wife, Donna, was designated

the primary beneficiary, and Donna’s sister, Helen Fauerbach, was

listed as contingent beneficiary.

On or about June 15, 2004, Donna submitted a claim for

policy benefits to United Investors along with George’s death

certificate. The death certificate indicated that George had

died at his Fairfield, California residence on May 30, 2004 as a

result of a gunshot wound to the head. The death certificate

described George’s death as a homicide.

United Investor’s claims file indicates that its claims

representative initially contacted the Solano County Sheriff’s

Department on or about June 18, 2004 to ascertain whether Donna

had been implicated in her husband’s murder. On June 22, 2004,

Detective Brad DeWall told United Investors that no one had been

cleared of involvement. Over the course of at least five 

subsequent phone conversations with Detective DeWall between July

of 2004 and June of 2005, DeWall reiterated that the

investigation remained ongoing and that neither Donna or anyone

else had been ruled out as potential suspects in George’s death.

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4

United Investors initially wrote to Donna on July 2, 2004,

indicating that the claim for policy proceeds would remain

pending given the ongoing status of the homicide investigation. 

According to United Investors, it was concerned about paying

Donna the policy proceeds given the fact that she had not been

cleared of involvement, and given the fact that she would not be

entitled to collect under the policy if she was indeed

responsible for George’s death.

On August 25, 2005, more than thirteen months after Donna’s

claim for policy benefits was submitted, United Investors

commenced the present action by filing its Complaint in

Interpleader and depositing the face amount of the policy, plus

interest (for a total of $518,616.44) with the Clerk of this

Court. On or about September 19, 2005, Donna responded by filing

her own claim against United Investors in the form of a CrossComplaint alleging that United Investors wrongfully delayed

paying the benefits due her under the United Investors policy. 

In addition to requesting declaratory relief and alleging claims

for breach of contract and breach of the covenant of good faith

and fair dealing, Donna’s Cross-Complaint also alleges, inter

alia, claims sounding in fraud as well as claims for intentional

and negligent infliction of emotional distress stemming from

United Investors’ handling of the subject life insurance claim.

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Although interpleader actions in federal court may also be 2

premised on the Federal Interpleader Act, 28 U.S.C. § 1335, the

present claim is premised solely on Rule 22. The general

prerequisites for maintaining an interpleader action are

identical for both statutory and Rule 22 interpleader. While

statutory interpleader does alter certain jurisdictional

requirements, those requirements do not apply to the instant

controversy. Procedural distinctions between the two

interpleader alternatives are also not germane to this action,

except that under Rule 22 interpleader cross claims can be

asserted so long as such claims arise out of the same

“transaction or occurrence” as the obligation forming the basis

of interpleader. See Sayer Bros., Inc. v. St. Paul Fire & Marine

Ins. Co., 150 F. Supp. 2d 907, 917 (S.D. W.V. 2001). There is no

dispute that Donna’s Cross-Complaint herein satisfies this test. 

5

STANDARD

Interpleader. A stakeholder holding funds or property to

which conflicting claims may be made can protect itself from

multiple liability, and require potential claimants to litigate

between themselves who is entitled to the funds or property, by

commencing an action in interpleader. Rule 22 authorizes the

filing of interpleader actions in federal courts, stating as 2

follows: 

“Persons having claims against the plaintiff may be joined

as defendants and required to interplead when their claims

are such that the plaintiff is or may be exposed to double

or multiple liability...”

The court’s jurisdiction in an interpleader action extends

both to potential and actual claims. Minn. Mut. Life Ins. Co. v.

Ensley, 174 F.3d 977, 980 (9th Cir. 1999). The purpose is to

protect the stakeholder against the possibility of multiple

liability on the same obligation, even where only one claim is

pending. See Federal Civil Procedure Before Trial (Rutter Group

2006), Ch. 10:90.7, p. 10-25. 

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6

Actual claims need not have been actually filed; it is sufficient

that the stakeholder can demonstrate a real and reasonable fear

of multiple liability. Dunbar v. U.S., 502 U.S. 506, 511 (5th

Cir. 1974), citing State Farm Fire & Cas. Co. v. Tashire, 386

U.S. 523 (1967). If the stakeholder has a bona fide fear of

several prospective claims, interpleader is proper. The relative

merit of the claims is not relevant. Algemene Bank Nederland,

N.V. v. Soysen Tarim Urunleri Dis Ticaret Ve Sanayi, A.S., 748 F.

Supp. 177, 180 (S.D.N.Y. 1990).

Generally, an interpleader action consists of two stages. 

First, the stakeholder’s right to interplead is determined. In

order to adjudicate that right, the stakeholder brings a motion

for discharge, or for judgment in interpleader. After the

stakeholder’s right to interplead has been determined, the second

stage of an interpleader proceeding is to adjudicate the merits

of any conflicting claims to the interpled property. See Aetna

Cas. & Sur. Co. v. Ahrens, 414 F. Supp. 1235, 1249 (S.D. Tex.

1975).

The stakeholder seeking discharge, and judgment in

interpleader, has the burden of showing that interpleader is

justified. It must demonstrate that it is or may be exposed to

multiple liability with respect to property it holds because of

conflicting claims. Interfirst Bank Dallas, N.A. v. Purolator

Courier Corp., 608 F. Supp. 351, 353 (D.C. Tex. 1985).

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7

Summary Judgment. The Federal Rules of Civil Procedure

provide for summary judgment when “the pleadings, depositions,

answers to interrogatories, and admissions on file, together with

affidavits, if any, show that there is no genuine issue as to any

material fact and that the moving party is entitled to a judgment

as a matter of law.” Fed. R. Civ. P. 56(c). One of the

principal purposes of Rule 56 is to dispose of factually

unsupported claims or defenses. Celotex Corp. v. Catrett, 477

U.S. 317, 325 (1986).

Rule 56 also allows a court to grant summary adjudication on

part of a claim or defense. See Fed. R. Civ. P. 56(a) (“A party

seeking to recover upon a claim ... may ... move ... for a

summary judgment in the party’s favor upon all or any part

thereof.”); see also Allstate Ins. Co. v. Madan, 889 F. Supp.

374, 378-79 (C.D. Cal. 1995); France Stone Co., Inc. v. Charter

Township of Monroe, 790 F. Supp. 707, 710 (E.D. Mich. 1992).

The standard that applies to a motion for summary

adjudication is the same as that which applies to a motion for

summary judgment. See Fed. R. Civ. P. 56(a), 56(c); Mora v.

ChemTronics, 16 F. Supp. 2d 1192, 1200 (S.D. Cal. 1998). 

In considering a motion for summary judgment, the court must

examine all the evidence in the light most favorable to the nonmoving party. U.S. v. Diebold, Inc., 369 U.S. 654, 655 (1962). 

Once the moving party meets the requirements of Rule 56 by

showing that there is an absence of evidence to support the nonmoving party’s case, the burden shifts to the party resisting the

motion, who “must set forth specific facts showing that there is

a genuine issue for trial.” 

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Those Defendants include Helen Fauerbach, the named 3

contingent beneficiary under the terms of the policy, George’s

son, Brandon Grant, and George’s two brothers, Jim Grant and

Kenny Grant. George and Donna’s minor daughter, Nicole Grant,

was not listed as a Defendant.

8

Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 256 (1986). 

Genuine factual issues must exist that “can be resolved only by a

finder of fact, because they may reasonably be resolved in favor

of either party.” Id. at 250. In judging evidence at the

summary judgment stage, the court does not make credibility

determinations or weigh conflicting evidence. See T.W. Elec. v.

Pac. Elec. Contractors Ass’n, 809 F.2d 626, 630-631 (9 Cir. th

1987), citing Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio

Corp., 475 U.S. 574, 587 (1986).

ANALYSIS

1. United Investors Properly Interpled the Policy Proceeds

In moving for summary judgment as to United Investors’

Complaint in Interpleader, Donna claims there is no potential for

multiple adverse claims against the policy proceeds. She argues

that United Investors cannot establish that there are two or more

claimants to said proceeds, and points out that defaults have

been entered against the other potential beneficiaries named as

Defendants in the Complaint in Interpleader. (See Donna’s 3

Motion for Summary Judgment, 5:17-19). 

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9

Donna contends that she is entitled to judgment in her favor

because United Investors has no cognizable interpleader claim,

and asks that the proceeds of the United Investors policy, plus

interest, be paid to her forthwith.

As indicated above, however, the scope of interpleader

extends to potential, as well as actual claims. Ensley, 174 F.3d

at 980. While defaults have been entered against the other

potential claimants to the policy proceeds, those defaults have

not been reduced to judgment and no potential contingent

beneficiary has expressly waived his or her right to those

proceeds.

California Probate Code § 252 prevents an named beneficiary

under a policy of life insurance from receiving policy benefits

if he or she kills the person insured by the policy, stating as

follows:

“A named beneficiary of a bond, life insurance policy, or

other contractual arrangement who feloniously and

intentionally kills the principal obligee or the person upon

whose life the policy issued is not entitled to any benefit

under the bond, policy, or other contractual arrangement,

and it becomes payable as though the killer had predeceased

the decedent.” 

In an insurance case like this one where federal

jurisdiction is founded on diversity of citizenship, state law

governs substantive issues. Am. States Ins. Co. v. Borbor, 826

F.2d 888, 890 n. 2 (9th Cir. 1987). Indeed, Donna does not

dispute that Probate Code § 252 applies to these proceedings.

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The couple’s minor daughter, Nicole, was staying with a 4

friend the night her father was killed.

10

Aside from arguing that United Investors investigation into the

circumstances of George’s murder has been inadequate (as

discussed in more detail below), Donna largely ignores § 252,

instead choosing to focus her argument on the fact that no other

definitive claims have surfaced to date.

It is nonetheless undisputed that the circumstances of

George’s death remain unresolved, and no evidence has been

presented that Donna herself has been exonerated as a suspect in

her husband’s murder. Indeed, as of June 14, 2005, the last

contact had with Detective DeWall before filing the present

interpleader action on August 25, 2005, United Investor’s claims

file notes specifically indicate that no one had been so cleared. 

(See Exhibit “E” to Garrison Decl., p. UIL 372).

The fact that Donna has not been cleared as a suspect must

be viewed in conjunction with her own version of events, pursuant

to which she admits being alone at the family residence with her

husband the night of George’s murder. She claims that after 4

going upstairs to bed between 1:30 and 2:00 a.m. the morning of

the murder, she awoke in the middle of the night and went

downstairs. While downstairs, she claims to have heard footsteps

and a subsequent gunshot. Donna then discovered her husband shot

to death in the couple’s bedroom.

These circumstances do not bode well for any routine

exoneration on Donna’s part as a suspect, even if she ultimately

is determined to have no role whatsoever in George’s demise. 

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11

Given the mandate of Probate Code § 252, United Investors had a

bona fide fear of multiple liability if it elected to pay Donna

while she remained a suspect. If her claim to the policy

proceeds was subsequently disqualified by a determination that

she had indeed killed her husband, then other claimants would

undisputedly have viable claims given the statutory mandate that

upon such a finding the policy proceeds would be payable “as

though the killer had predeceased the decedent”. Cal. Prob. Code

§ 252.

 Donna argues that the policy simply states that payment

shall be made “to the beneficiary upon receipt of due proof of

the death of the insured while this policy is in force” (See

Defendant’s Additional Statement of Undisputed Fact No. 48), and

claims that the policy does not predicate payment upon being

cleared as a murder suspect.

In the Court’s view that argument is disingenuous. Probate

Code § 252 must necessarily be implied by law into every policy

of life insurance, in accordance with the well established rule

that no person shall be permitted to take advantage of his own

wrong, or acquire property by his own crime. See, e.g., Harper

v. Prudential Ins. Co. Of Am., 233 Kan. 358, 364 (1983), citing

Smith v. Todd, 152 S.E. 2d 506 (1930) 4 Couch on Insurance 2d §

27.149, and annotations in 70 A.L.R. 1539 and 91 A.L.R. 1486. 

While the Court is unable to locate any authority squarely

applying this principle to § 252, examination of California

Insurance Code § 533 is both analogous and instructive. 

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Consistent with the same legal maxim that a person must not be

permitted to benefit from his own wrongdoing, § 533 provides that

an insurer “is not liable for a loss caused by the wilful act of

the insured...” Case law interpreting § 533 holds unequivocally

that this provision is read as an implicit term into every

insurance contract. Zurich Ins. Co. v. Killer Music, Inc., 998

F.2d 674, 678 n. 2 (9th Cir. 1993). Indeed, the provisions of §

533 have been deemed to be equivalent to an exclusionary clause

in the insurance policy itself. Allstate Ins. Co. v. Gilbert,

852 F.2d 449, 451 (9th Cir. 1988).

The same rationale for implying Insurance Code § 533 into

every contract of insurance mandates that Probate Code § 252 also

be implied as a matter of law into every life insurance policy. 

Because of § 252's prohibition on paying policy benefits to a

beneficiary who killed the insured, and its clear direction that

under such circumstances benefits be paid as if the primary

beneficiary had predeceased the insured, United Investors had a

bona fide concern of multiple liability if it were to pay Donna

and she was subsequently found responsible for George’s death.

While no California case appears to be expressly on point,

in Harper v. Prudential Ins. Co. of Am., supra, Prudential paid

the primary beneficiary Fenton the proceeds of its insurance

policy despite indication of the beneficiary’s potential

involvement in murdering the insured under Prudential’s policy. 

When Fenton was convicted two years later for murdering the

insured, the children of the insured demanded payment. The court

held that Prudential should have either delayed making payment or

filed an interpleader action. 233 Kan. at 372. 

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13

Similarly, in Glass v. U.S., 506 F.2d 379 (10th Cir. 1974), the

Tenth Circuit found that the insurer could not avoid paying the

contingent beneficiaries under circumstances where it had paid

the primary beneficiary despite knowledge of her indictment for

the insured’s murder. The Glass court noted that the insured

have avoided double payment by simply interpleading its policy

benefits. Id. at 382. 

While both Harper and Glass involve situations where the

primary beneficiary’s involvement in the insured’s murder was

admittedly far clearer than any responsibility on Donna’s part

herein, the cases still support the proposition that an insurance

company may be liable for negligently paying a primary

beneficiary if that beneficiary is ultimately found to have

murdered the insured. In this case, that possibility represented

a “real and reasonable fear of multiple liability” on the part of

United Investors that justifies interpleader. Dunbar v. U.S.,

502 U.S. at 511.

It follows that Donna’s request for summary judgment must be

denied. Even though no other claims have yet been made on the

United Investors policy, that could change if Donna is found to

have been involved in her husband’s murder. There remains a bona

fide possibility of multiple liability justifying interpleader. 

Because United Investors has made that showing, and because the

policy proceeds, plus interest, have been deposited with the

Court, United Investors is entitled to judgment in interpleader

and is accordingly absolved of any future liability with respect

to the policy proceeds. 

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14

Donna must now adjudicate her right to those proceeds before this

Court in the second stage of the interpleader proceeding. 

2. Summary Judgment on Donna’s Cross-Complaint

As indicated above, in response to United Investor’s

Complaint in Interpleader, Donna has filed a Cross-Complaint

alleging that United Investors wrongfully failed to pay Donna the

proceeds due under George’s policy of life insurance. Donna

argues that United Investors has no good faith basis to refrain

from paying policy benefits to her directly, and claims that

United Investors has failed to conduct an adequate independent

investigation into the circumstances surrounding George’s murder

so as to resolve that question. Donna seeks declaratory relief

that United Investor’s withholding of policy benefits was

unreasonable. Donna then goes on to assert contractual claims

for breach of contract and breach of the covenant of good faith

and fair dealing by virtue of United Investor’s conduct. She

further seeks attorney’s fees incurred in order to obtain the

benefits to which she claims to be entitled. In addition, Donna

asserts claims for both intentional and negligent infliction of

emotional distress under the circumstances of this case, as well

as claims sounding in fraud and negligent misrepresentation due

to United Investor’s purported failure to pay the contracted for

benefits. Finally, Donna argues that United Investors should be

estopped from denying coverage because of its conduct.

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15

In moving for summary judgment, United Investors relies

almost entirely on the argument that all of Donna’s claims as set

forth in her Cross-Complaint are barred under the so-called

litigation privilege codified in California Civil Code § 47. 

United Investors points to the fact that the litigation privilege

has been interpreted broadly to all communications made in

relation to judicial proceedings, with the exception of claims

for malicious prosecution. Silberg v. Anderson, 50 Cal. 3d 205,

212 (1990). It argues that the privilege applies to Donna’s

claims in their entirety. (United Investors’ Opp., 10:16-17).

Aside from arguing that the litigation privilege is

dispositive, United Investors also contends that it cannot be

liable in fraud for misrepresenting that it would pay the

proceeds of its policy “to the beneficiary upon receipt of due

proof of the death of the insured”, because it never denied

coverage and in fact interpled its policy proceeds given its fear

of multiple liability as discussed above. Other than that,

United Investors makes only a passing claim that Donna’s other

claims, including declaratory relief, entitlement to attorney’s

fees to obtain policy benefits, intentional and negligent

infliction of emotional distress, and coverage by estoppel, all

fail as a matter of law because the interpleader action was

“properly filed”. (United Investors’ Opp., 9:27-10:5).

As Donna points out, United Investors’ attempt to extricate

itself from her Cross-Complaint sweeps too broadly. 

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16

Donna correctly contends that United Investors’ interpleader

filing cannot act to absolve United Investors from liability for

tortious conduct occurring prior to the time the interpleader

action was commenced. Donna alleges that her Cross-Complaint is

properly premised, at least in part, on United Investor’s

allegedly unreasonable thirteen-month delay in instituting

interpleader proceedings. 

Donna’s contractually-based causes of action, as well as her

claim for declaratory relief, survive under this theory. An

unreasonable delay in paying a covered claim may support both

breach of contract, as well as the related claim for breach of

the implied covenant of good faith and fair dealing. See Austero

v. Nat’l Cas. Co., 84 Cal. App. 3d 1, 26, 29-30. Whether or not

National Investors acted properly in awaiting the results of the

Solano County investigation for some thirteen months is a

question of fact not amenable to disposition on summary judgment. 

Paulfrey v. Blue Chip Stamps, 150 Cal. App. 3d 187, 194 (1983). 

Although United Investors may well be able to argue that “reason

and justice” required it to wait a reasonable period of time

before paying a claim in order to allow law enforcement personnel

enough time to complete their investigation (see Harper, 233 Kan.

at 371), whether or not thirteen months was in fact reasonable

here cannot be resolved as a matter of law. Moreover, Donna’s

entitlement to attorney’s fees in order to obtain benefits she

alleges were wrongfully delayed also poses the same triable

issue.

Donna’s claims for fraud and negligent misrepresentation,

however, cannot survive summary judgment scrutiny. 

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United Investors also includes a request in its Notice of 5

Counter-Motion that summary adjudication be granted as to Donna’s

request for punitive damages, but its supporting points and

authorities contain no argument to support that request. Only

United Investors’ Reply contains any discussion of the punitive

damage issue, and because the Court declines to considers matters

raised for the first time by way of reply, it will not consider

the propriety of punitive damages at this time. See Lujan v.

Nat’l Wildlife Fed., 597 U.S. 871, 894-95 (1990).

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The only basis for the alleged fraud is United Investors’

supposed misrepresentation in asserting that it would pay the

beneficiary policy proceeds upon proof of the George’s demise. 

As stated above, because United Investors did pay the claim and

because interpleading the policy concerns was proper under both

Rule 22 and California Probate Code § 252, which must be implied

into the policy of insurance, there is no misrepresentation to

which claims for fraud can attach. Summary adjudication will

consequently be granted as to the Seventh and Eighth Causes of

Action set forth in Donna’s Cross-Complaint.

That leaves the claims for intentional and negligent

infliction of emotional distress, and for coverage by estoppel.5

Because United Investors’ only argument for disposing of those

claims lies with a claim that they are barred by the litigation

privilege, summary adjudication cannot be granted. Donna claims,

and a fair reading of her Cross-Complaint supports, the

contention that these claims are also based, at least in part, on

United Investor’s delay in waiting more than a year before filing

the present interpleader action.

///

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///

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The Court notes that United Investors’s has objected 6

strenuously to the Declaration of Clinton Miller submitted by

Donna in Her Opposition to United Investors’ Counter-Motion. 

Because the Miller Declaration was not relied upon by the Court

in ruling upon the instant motions,those objections need not be

addressed.

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CONCLUSION

For the reasons set forth above, both parties’ request for

summary judgment (Donna’s as respect to the propriety of

interpleader and United Investors’ vis-a-vis the viability of

Donna’s Cross-Complaint) are DENIED. United Investors’ request 6

for judgment in interpleader is, however, GRANTED. United

Investors is hereby discharged of any liability with respect to

the proceeds of its life insurance policy issued to George Grant,

and the entitlement to those proceeds between potentially

competing claimants must now be adjudicated. Finally, with

regard to Donna’s Cross-Complaint, while United Investors’

request for summary judgment is denied, summary adjudication will

be GRANTED as to the Seventh and Eighth Causes of Action, for

fraud and negligent misrepresentation.

IT IS SO ORDERED.

DATED: May 8, 2006

_____________________________

MORRISON C. ENGLAND, JR

UNITED STATES DISTRICT JUDGE

Case 2:05-cv-01716-MCE -DAD Document 73 Filed 05/09/06 Page 18 of 18