Tuesday, March 1, 2016

Some Situations Are Made for Interpleader . . .

County of Santa Clara v. Escobar, No. H038121 (D6 Jan 26, 2016)

Under Government Code 23004.1, a county that incurs medical expenses treating injured person P has a direct cause of action against D, who caused the injury. It can also put a lien on any judgement P recovers against D. If P pays off the county’s debt, D is excused.

Here, P won a personal injury verdict against D. And then a County put a lien on the proceeds for a hefty $1.25 million in medical expenses shouldered by a public hospital. To avoid the trouble of dealing with the County, while at the same time keeping P for making collections efforts, D cut a check to the whole amount, but made it jointly payable to P and the County. When P wouldn’t pay off the County out of the award, it separately sued D in a new action. But D argued that any direct action was extinguished when it tendered its joint check to P and the County, leaving up to them to work out who got the money at the end of the day. The trial court agreed and sustained a demurrer, ruling that D’s obligation was extinguished by tendering the check, regardless of whether the County actually got paid. According to the trial court, County’s remedy was instead to enforce its lien against P.

The Court of Appeal disagrees. After waiving off a mootness argument that doesn’t make much sense, the court, relying on subrogation and indemnification principles, as well a deep dive into the relevant provisions of the Government Code, holds that the law does not actually cut off the county’s claim until it actually gets paid. So far as D’s legitimate concerns about multiple liability, those could have been addressed tendering the funds to the court and filing an interpleader against P and the County. Which is what will likely happen on remand.


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