Summary
noting that discharge is appropriate where the stakeholder "can contribute nothing toward resolution of the issues between the other parties, its interpleader action is properly filed, and no genuine issue exists as to its rights and liabilities"
Summary of this case from Bank of Colorado v. BerwickOpinion
Case No. 02-4168-SAC
May 16, 2003.
MEMORANDUM AND ORDER
This case comes before the court on the motion of plaintiff American Home Life Insurance Co. for judgment on the pleadings pursuant to Fed.R.Civ.P. 12(c). This statutory interpleader action is brought by plaintiff insurance company which has paid into court the proceeds from a life insurance policy, of which both defendants claim to be the proper beneficiary. See 28 U.S.C. § 1335, 1397, 2361 and Fed.R.Civ.P. 22(2).
FACTS
The controlling facts are undisputed. Plaintiff is an insurance company organized and incorporated under the laws of Kansas. Defendant Alan Barber is a resident of Kansas and the brother of the decedent, Mark Barber. Defendant Sonya Barber is a resident of Texas and the spouse of the decedent. Both defendants, represented by counsel, filed separate answers.
On or about May 12, 1985, Mark Barber applied for and soon thereafter received life insurance in a face amount of $50,000 with plaintiff. The application listed the primary life insurance policy beneficiary as Lyle D. Barber, the father of the decedent, and the contingent beneficiaries as Scott C. Barber and Alan L. Barber, brothers of the decedent.
The policy provided that the owner could change the beneficiary at any time before the insured dies, pursuant to certain terms and conditions. Thereafter, Mark Barber changed the beneficiary from his father to the following:
November 1, 1986 — "Sonya L. Barber, wife of the insured, if living otherwise to Lyle D. Barber, father of the insured."
May 21, 1998 — "Sonya L. Barber, wife of the insured, if living, otherwise to Alan. L. Barber, brother of the insured, or if both said wife and brother shall die before the insured, to Killian C. Barber and Skyler D. Barber, children of the insured, the survivor or survivors equally."
May 15, 2002 — "Alan L. Barber, brother of insured."
All such changes were made in accordance with the terms and conditions required by the policy.
Approximately two months after the last change in beneficiary, Mark Barber committed suicide. Upon receiving notice of the death, plaintiff sent Alan Barber, as beneficiary, notice and a claimant's statement. Before Alan Barber returned the claimant's statement to plaintiff, plaintiff received a letter from Sonya Barber stating her claim to the insurance proceeds. Therein she asserted that any purported change in beneficiary during the last nine months had no legal effect because of Mark Barber's mental incapacity and because of public policy prohibiting suicide pacts. The same letter stated her intent to file a legal action to determine Mark Barber's mental capacity, and requested that plaintiff hold the insurance funds in suspense until a final court order was obtained.
Plaintiff filed this interpleader action on October 23, 2002. Plaintiff admits that $45,759.97, plus interest, is now due and payable on the life insurance policy, and has paid that amount into the registry of this court. Plaintiff claims no beneficial interest in the proceeds, and asserts that it is a mere stakeholder. It seeks an order restraining defendants from instituting any action against it for the recovery of the policy amount, discharging it from all liability except to whomever the court shall decide is entitled to the proceeds, and requiring defendants to settle their rights to the proceeds between themselves. Plaintiff also seeks judgment on a counterclaim filed by defendant Alan L. Barber, and recovery from the insurance proceeds of its costs and attorney fees incurred in filing this interpleader action.
Defendants do not dispute this amount is due and payable, pursuant to the terms of the life insurance policy.
Interpleader Actions
The court finds that it has subject matter jurisdiction over this case, given the diverse residence of the defendants and the amount in controversy of five hundred dollars or more. See 28 U.S.C. § 1335(a). Plaintiff has deposited the insurance proceeds into the registry of the court, meeting the requirements for interpleader actions. See 28 U.S.C. § 1335. Venue is appropriate. See 28 U.S.C. § 1397.
Interpleader is appropriate when "two or more adverse claimants" "are claiming or may claim" entitlement to the same proceeds. See 28 U.S.C. § 1335. Where there is a real risk of vexatious, conflicting claims, a stakeholder, acting in good faith, may maintain a suit in interpleader to avoid the vexation and expense of resisting such claims, even though only one will be found meritorious. See Metropolitan Life Ins. Co. v. Segaritis, 20 F. Supp. 739, 741 (E.D.Pa. 1937) (the purpose of an interpleader bill is as much to protect a stakeholder from the expense of double litigation, however groundless, as it is to protect him from the risk of double liability).
28 U.S.C.A § 2361 provides:
In any civil action of interpleader or in the nature of interpleader under section 1335 of this title, a district court may issue its process for all claimants and enter its order restraining them from instituting or prosecuting any proceeding in any State or United States court affecting the property, instrument or obligation involved in the interpleader action until further order of the court. . . .
Such district court shall hear and determine the case, and may discharge the plaintiff from further liability, make the injunction permanent, and make all appropriate orders to enforce its judgment.
Where an insurance company is a mere stakeholder and can contribute nothing toward resolution of the issues between the other parties, its interpleader action is properly filed, and no genuine issue exists as to its rights and liabilities, "it should be discharged from any and all liability arising out of or based on the policies involved, except to pay the proceeds of such policies to the party or parties ultimately adjudged to be entitled thereto." Rosenberger v. Northwestern Mut. Life Ins. Co., 176 F. Supp. 379, 385 (D.Kan. 1959), modified 182 F. Supp. 633 (D.Kan. 1960). See Nationwide Mut. Ins. Co. v. Eckman, 555 F. Supp. 775, 777 (D.Del. 1983); Francis I. du Pont Co. v. Sheen, 324 F.2d 3, 5 (3d Cir. 1963) (When a plaintiff in interpleader has paid the amount of his admitted debt into court and, after notice and opportunity to be heard, the claimants have been ordered to interplead, the law normally regards the plaintiff as having discharged his full responsibility in the premises and "the court often enters an order finally relieving the plaintiff of further responsibility and permanently enjoining the claimants from harassing him.")
Plaintiff has met the statutory prerequisites for interpleader, has admitted liability to pay the insurance proceeds to the proper beneficiary, and has no interest in the insurance proceeds or other stake in the outcome of the dispute between the disputing claimants. Plaintiff is thus a disinterested stakeholder, and the court will, in its discretion, discharge it from all further liability to defendants.
Alan Barber's counterclaim
Defendant Alan L. Barber's counterclaim cites to no legal theory, statute, or rule of law, but instead states only that he is the designated beneficiary under the insurance policy, and "is entitled to these funds and should not be responsible for the payment of any Court costs, attorney fees or other expenses since there is no legal basis to the claims of Sonya Barber." Dk. 6. p. 2.
By this language, it is possible, although far from clear, that Alan Barber may be seeking to recover his own attorney fees from plaintiff under K.S.A. § 40-256. This statute provides that, in an action on an insurance policy, fees are allowed if the insurance company has refused without just cause or excuse to pay the claim. Defendant has made no showing entitling him to fees here. See Macek v. Swift Co. Employees Benefit Ass'n, 203 Kan. 581, 455 P.2d 521 (1969); Club Exchange Corp. v. Searing, 222 Kan. 659, 664, 567 P.2d 1353 (1977). Plaintiff has paid out the proceeds, albeit to the court, and has not refused to pay without just cause, rendering the above-cited statute inapplicable. See Aetna U.S. Healthcare v. Higgs, 962 F. Supp. 1412, 1414-15 (D.Kan. 1997). To the extent Alan Barber may be seeking some judgment against plaintiff, or to recover his costs and attorney fees from plaintiff under some other theory, his pleading fails to state a claim for relief.
Attorneys' Fees
Plaintiff seeks an award of its costs, expenses, and attorney fees incurred in bringing this interpleader action. "The award of fees and costs to an interpleader plaintiff, or `stakeholder', is an equitable matter that lies within the discretion of the trial court." Transamerica Premier Ins. Co. v. Growney, 70 F.3d 123, 1995 WL 675368, at *1 (10th Cir. Nov. 13, 1995).
The Tenth Circuit has recognized the "common practice" of reimbursing an interpleader plaintiff's litigation costs out of the fund on deposit with the court. See United States Fidelity Guar. Co. v. Sidwell, 525 F.2d 472, 475 (10th Cir. 1975).
The rationale for the award is that the plaintiff has, at its own expense, facilitated the efficient resolution of a dispute in which it has no interest (other than avoiding liability for an erroneous distribution of the stake), to the benefit of the competing claimants — the true disputants — who should be able to cover the typically minor expense involved out of the fund distributed to them. See Chase Manhattan Bank, 21 F.3d at 383; Lincoln Income Life Ins. Co. v. Harrison, 71 F.R.D. 27, 30 (W.D.Okla. 1976). Accordingly, fees are normally awarded to an interpleader plaintiff who "(1) is `disinterested' ( i.e., does not itself claim entitlement to any of the interpleader fund); (2) concedes its liability in full; (3) deposits the disputed fund in court; and (4) seeks discharge," and "who is [not] in some way culpable as regards the subject matter of the interpleader proceeding." United Bank of Denver, 683 F. Supp. at 756, 757; see Lincoln Income Life Ins. Co., 71 F.R.D. at 32; see also Liberty Nat'l Bank Trust Co. v. Acme Tool Div. of Rucker Co., 540 F.2d 1375, 1382 (10th Cir. 1976) ("the award of an attorney's fee in an interpleader action has in mind the performance of services in connection with the preservation of the funds").
Transamerica, 1995 WL 675368 at *1.
Neither defendant has lodged specific objections to the amount of plaintiff's fee request, or to specific items therein. Defendant Alan L. Barber contends that plaintiff lacked a reasonable belief that defendant Sonya Barber had a potentially valid claim, such that plaintiff should never have filed this action or incurred any fees in so doing. The court disagrees. It is undisputed that Sonya Barber put plaintiff on written notice of her claim to the insurance proceeds, asserting that the change in beneficiary to Alan Barber was void or voidable due to Mark Barber's mental incapacity and public policy. She additionally noted therein her intent to file a legal action to determine Mark Barber's mental capacity, and requested that plaintiff hold the insurance funds in suspense until a final court order was obtained.
Defendant additionally contends that the fee award should be denied because awarding fees to insurance company plaintiffs in interpleader actions improperly transfers part of the ordinary costs of doing business to the insured. See e.g., The Mutual Benefit Life Ins. Co. v. Johnson Co. Bank, N.A., No. 88-2523-V, 1990 WL 126926 at *1 (D.Kan. July 20, 1990). Although this approach finds support in this district, this exception has not been established by the Tenth Circuit, and the court declines to apply it in this case. The court finds, in its discretion, that plaintiff has met the requirements set forth in Transamerica, and shall be awarded its fees and costs.
The court has reviewed plaintiff's exhibits in support of its fee request, and finds the total amount requested is fair and reasonable, is supported by contemporaneous and detailed records of time, and reflects time and effort reasonably expended in bringing this action. Accordingly, plaintiff's motion for fees in the amount of $3,013.00, and expenses and costs in the amount of $260.77 shall be granted.
IT IS THEREFORE ORDERED that plaintiff's motion for judgment on the pleadings pursuant to Fed.R.Civ.P. 12(c) is granted, including judgment on Alan Barber's counterclaim. Plaintiff is hereby dismissed from the case, and defendants are hereby prohibited from taking further action against plaintiff regarding the subject matter of this case.
IT IS FURTHER ORDERED that plaintiff shall recover the total amount of $3,273.77 as attorney fees, costs and expenses from the funds already paid into the court's registry.