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CONSOLIDATED UNDERWRITERS OF S.C. INS. v. BRADSHAW

December 7, 1955

CONSOLIDATED UNDERWRITERS OF SOUTH CAROLINA INSURANCE COMPANY, TRAVELERS INSURANCE COMPANY, THE CONTINENTAL INSURANCE COMPANY AND MILWAUKEE INSURANCE CO. OF MILWAUKEE, WIS., PLAINTIFFS,
v.
F. A. BRADSHAW, PORTER MONTGOMERY, OZAN LUMBER COMPANY, A CORPORATION, DOING BUSINESS AS PRESCOTT MOTOR COMPANY, ORGILL BROS. ARKANSAS COMPANY, AND HAZEL ATKINS, DEFENDANTS, MCMILLAN & MCMILLAN, INTERVENORS.



The opinion of the court was delivered by: John E. Miller, District Judge.

On May 13, 1955, in Civil Action No. 604, Hot Springs Division, this Court entered judgment in favor of F.A. Bradshaw and Porter Montgomery against the Milwaukee Insurance Company of Milwaukee, Wis., in the sum of $5,000. On the same date the Court entered judgment in Civil Action No. 606 in favor of Bradshaw and Montgomery and against the Travelers Insurance Co. in the sum of $5,000.

On the same date the Court entered judgment in Civil Action No. 603 in favor of F.A. Bradshaw against Consolidated Underwriters of the South Carolina Insurance Co. in the sum of $2,500, and a judgment in favor of Bradshaw in Civil Action No. 605 against the Continental Insurance Company in the sum of $2,500.

Subsequent to the entry of the above mentioned judgments, several creditors of Bradshaw made claims against the various insurance companies concerning the proceeds due from the insurance companies to Bradshaw and Montgomery. As a result, on June 25, 1955, the present interpleader action was filed by the said insurance companies. On June 28, 1955, the plaintiff insurance companies paid into the registry of the Court the sum of $15,000, being the face amount of the judgments in Civil Actions Nos. 603 to 606, inclusive, and on the same date the Court entered an order discharging plaintiffs from further liability upon said judgments, except as to costs. (The costs were subsequently paid by plaintiffs, thus completely discharging them.) The order further provided that the "cause be and is continued for distribution of the funds now in the registry of this court and other proceedings herein".

Thereafter pleadings were filed by the following persons or firms, each of whom claimed an interest in the money in the registry of the Court: Ozan Lumber Company; McMillan and McMillan; Hazel Atkins; Porter Montgomery; Orgill Bros. Arkansas Company; and F.A. Bradshaw.

A pretrial conference was had on September 7, 1955, at which time the issues in the case were discussed and the Court fixed the attorneys' fee of plaintiffs at the sum of $200, to be paid to plaintiffs' attorneys out of the funds in the registry of the Court. The case proceeded to trial on November 4, 1955, and at the conclusion thereof the Court took the case under advisement pending receipt of briefs from the various claimants. The briefs have been received and the case is now ready for final disposition.

Jurisdiction of the Court

At the threshold the Court is confronted with a question of jurisdiction. Each of the plaintiffs is a citizen of a state other than Arkansas. Each of the defendants is a resident and citizen of Arkansas, and the amount involved exceeds the sum of $3,000.

Thus, diversity of citizenship is present, and the jurisdictional amount is involved, and it is well settled, at least in this Circuit, that the Court has jurisdiction of such an interpleader action, even though the claimants may be citizens of the same state. Hunter v. Federal Life Ins. Co., 8 Cir., 111 F.2d 551; E.C. Robinson Lumber Co. v. Fort, D.C.Mo., 112 F. Supp. 242; 3 Moore's Federal Practice, 2d Edition, page 3012. Therefore, insofar as the first phase of the case is concerned, i. e., the granting of the interpleader, there is little question about the jurisdiction of the Court. There is a serious question, however, concerning the jurisdiction of the Court with respect to the relief that may be granted to the various claimants.

Stated differently, an interpleader action normally proceeds in two phases. The first phase is the granting of the interpleader and the discharging of the plaintiff from further liability upon payment of the particular fund into the registry of the court. The second phase of an interpleader action is the determination of the claimants' rights to the fund. In regard to the second phase, each claimant occupies the position of a plaintiff and must establish his claim by a preponderance of the evidence. See Phoenix Mut. Life Ins. Co. of Hartford, Conn. v. Reich, D.C.Pa., 75 F. Supp. 886.

Again, there is little doubt about the jurisdiction of the Court to determine the respective rights of the claimants to the fund in the registry of the Court, even though the claimants may be citizens of the same state. See Call-wood v. Virgin Islands Nat. Bank, 3 Cir., 221 F.2d 770, 779; Old Colony Ins. Co. v. Lampert, D.C.N.J., 129 F. Supp. 545, 551; Fidelity & Casualty Co. of New York v. Wilson, D.C.S.C., 105 F. Supp. 454, 457.

The real, and somewhat difficult, question of jurisdiction is whether the Court has the power to decide anything other than the rights of the claimants to the fund in the registry of the Court. In other words, the specific question is whether the Court has jurisdiction to enter a judgment or judgments in favor of one or more of the claimants against one or more of the opposing claimants, or whether the Court's jurisdiction is limited to the entry of a judgment merely distributing the fund in the registry of the Court to the claimant or claimants entitled thereto.

The Court is convinced that the latter statement is true, that is, that the jurisdiction of the Court is limited to the distribution of the fund, and that the Court has no power to enter separate judgments as between the claimants. Apparently there is very little authority upon this particular question, but the following language by Judge Delehant in the case of Prudential Ins. Co. of America v. Tomes, D.C.Neb., 45 F. Supp. 353, 356, is indicative of the rule which the Court has concluded is applicable in the instant case:

    "It has been suggested that this court in its
  final judgment may properly make equitable
  distribution of the proceeds of the policy. The
  temptation to that course is inviting. But such
  distribution is not the proper present function of
  the court, which is called upon to determine the
  legal ownership of the fund." (Emphasis added.)

Specifically, the Court is of the opinion that its jurisdiction is limited to a determination of the legal ownership of the fund in the registry of the Court, and the judgment of the Court will be limited to such a determination.

Claim of Porter Montgomery

On April 24, 1954, Montgomery and Bradshaw entered into a contract in which Montgomery agreed to sell a particular building and lot to Bradshaw for a consideration of $10,000 to be paid in monthly installments of $150 each, with interest at six percent per annum, the first of said monthly installments to become due on June 1, 1954. The contract further provided that fire and comprehensive insurance in the amount of $10,000 would be obtained on the property, with a loss payable clause to Porter Montgomery and Bradshaw as their interest might appear.

In the same contract, it was further provided that Bradshaw was indebted to Montgomery in the sum of $2,000, which indebtedness was secured by chattel mortgage on the personal property therein named, being property located in the building and used by Bradshaw in his business. The $2,000 indebtedness of Bradshaw to Montgomery arose by reason of the payment by Montgomery to the Citizens National Bank of Arkadelphia of the balance due on a note in the principal sum of $2,754 which Bradshaw had executed to said Bank.

On April 23, 1954, Travelers Insurance Co. issued to Bradshaw a policy for a period of one year in the sum of $7,000 covering said building, and containing a provision that the loss, if any, on the building should be payable to Porter Montgomery, subject to the provision of the standard mortgage clause attached thereto, i. e., ...


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