Auto-Owners Ins. Co. v. Bolden
| Decision Date | 07 September 2017 |
| Docket Number | No. 9:16-cv-2961-DCN,9:16-cv-2961-DCN |
| Court | U.S. District Court — District of South Carolina |
| Parties | AUTO-OWNERS INSURANCE COMPANY, Plaintiff, v. QUENTIN R. BOLDEN, as Personal Representative of the ESTATE OF ANNA MAE BOLDEN, and REVERSE MORTGAGE SOLUTIONS, INC., d/b/a VERTICAL LEND ISAOA/ATIMA, Defendant |
The following matters are before the court on plaintiff Auto-Owners Insurance Company's ("AO") motion for interpleader, constructive trust, and to be dismissed, ECF No. 10, AO's motion to dismiss defendant Quentin R. Bolden, as personal representative of the Estate of Anna Mae Bolden's (the "Estate") counterclaims, ECF No. 16, and defendant Reverse Mortgage Solutions, Inc. d/b/a Vertical Lend ISAOA/ATIMA's ("RMS") motion to dismiss for lack of subject-matter jurisdiction, ECF No. 20. For the following reasons, the court grants in part and denies in part these motions.
The instant action arises out of a dispute as to the proper payee of proceeds owed by AO pursuant to a certain homeowners insurance policy bearing the number 44-180-363-00 (the "Policy"). ECF No. 1, Compl. ¶ 5. The Policy was issued to Anna Mae Bolden ("Bolden") for a period beginning on February 3, 2015 and ending on February 2, 2016. Id. The Policy provided dwelling coverage of up to $342,000 for Bolden's home at 609 William Hilton Parkway, Hilton Head Island, South Carolina (the "insured property"). Id.; ECF No. 12, Estate's Answer ¶ 26. The Policy lists RMS as a mortgagee of the insured property, and provides that any loss covered by the Policy "shall be payable to the mortgagee, as their interest may appear, under all present or future mortgages upon the property described in the [d]eclarations of this policy in which the mortgagee may have an interest." ECF No. 16-1, Policy 3, 39.1
On July 22, 2015, RMS instituted a foreclosure action against Bolden in state court (the "Foreclosure Action").2 Compl. ¶ 8. On November 27, 2015, while the Foreclosure Action was pending, Bolden was killed in a fire that destroyed the insured property. Id. ¶ 6. Both RMS and the Estate made claims for the insurance proceeds due under the Policy. Id.
While these competing claims were pending, the Foreclosure Action moved forward, and on April 28, 2016, the state court entered a Judgment of Foreclosure and Sale, Deficiency Judgment Waived (the "Foreclosure Judgment"), ordering that the insured property be sold at a foreclosure sale. ECF No. 24-5, Foreclosure Judgment 5-8. AO attempted to resolve the insurance payment dispute in July 2016 by first issuing "an advance payment" of a portion of the dwelling coverage limits to the Estate in the amount of $100,000 on July 15, 2016, and later issuing a check payable to both the Estate and RMS for the balance of the dwelling coverage limits—$242,000—on July 29, 2016. Compl. ¶ 10, 12. The foreclosure sale occurred on August 1, 2016, at which time the insured property was sold to RMS. Id. ¶ 11. On August 2, 2016, the Estate voided AO'scheck for the $242,000 balance, demanding that payment of the Policy proceeds be made solely to the Estate. Id. ¶12. On August 24, 2016, following recording of the foreclosure deed, RMS demanded payment of the same Policy proceeds. Id. ¶ 13.
AO believes that RMS may have an interest in the proceeds, even following the foreclosure, and filed the instant action for interpleader on August 29, 2016 in an effort to avoid multiple liability from the Estate and RMS's (together, the "defendants") competing claims. Id. ¶¶ 14-16. AO wishes to pay the policy limits to the court and be released from any liability in connection with the defendants' competing claims. Id. ¶ 16. The Estate answered on September 30, 2016, bringing counterclaims against AO for breach of contract and bad faith, and various crossclaims against RMS. ECF No. 12, Estate's Answer ¶¶ 85-121.
On September 29, 2016, AO filed a motion to pay the remaining Policy balance of $242,000 to the court pursuant to Federal Rule of Civil Procedure 22, to place the $100,000 previously paid to the Estate into a constructive trust, and to be dismissed from further participation in this action. ECF No. 10. The Estate filed a response on October 13, 2016, ECF No. 18, and AO filed a reply on October 18, 2016. ECF No. 19. AO filed a motion to dismiss the Estate's counterclaims on October 12, 2016. ECF No. 16. The Estate filed a response to the motion to dismiss on October 28, 2016, ECF No. 23, and AO filed a reply on November 11, 2016. ECF No. 24. RMS filed its own motion to dismiss the Estate's crossclaims for lack of jurisdiction on October 24, 2016. ECF No. 20. The Estate filed a response to RMS's motion of November 10, 2016, ECF No. 25, and RMS filed a reply on November 21, 2016, ECF No. 26. The court held a hearing on February 2, 2017, ECF No. 30, and allowed AO and the Estate to pay their respectiveportions of the disputed funds into the court on April 10, 2017, ECF No. 31. The court took all other issues in this matter under advisement. Id. The matters are now ripe for the court's review.
Interpleader under Federal Rule of Civil Procedure 223 is a procedural device that allows a disinterested stakeholder to bring a single action joining two or more adverse claimants to a single fund. See Chase Manhattan Bank v. Mandalay Shores Coop. Housing Ass'n, (In re Mandalay Shores Coop. Housing Ass'n ), 21 F.3d 380, 383 (11th Cir. 1994); White v. FDIC, 19 F.3d 249, 251 (5th Cir. 1994); Sec. Ins. Co. of Hartford v. Arcade Textiles, Inc., 40 F. App'x. 767, 769, 2002 WL 1473417 at *1 (4th Cir. July 10, 2002). Interpleader is an equitable remedy designed to protect the stakeholder from multiple, inconsistent judgments and to relieve it of the obligation of determining which claimant is entitled to the fund. Sec. Ins. Co. of Hartford, 40 F. App'x. at 769, 2002 WL 1473417 at *1 (citing 4 James Wm. Moore et al., Moore's Fed. Practice § 22.02[1] (3d ed. 2001)). "The propriety of interpleader depends on whether the stakeholder 'legitimately fears' multiple litigation over a single fund." Metro. Life Ins. Co. v. Vines, 2011 WL 2133340, at *2 (D. Md. May 25, 2011); ReliaStar Life Ins. Co. v. Lormand, 2011 WL 900113, at *3 (E.D. Va. Mar. 11, 2011).
Under Federal Rule of Civil Procedure 12(b)(6), a party may move to dismiss for "failure to state a claim upon which relief can be granted." When considering a Rule 12(b)(6) motion to dismiss, the court must "accept[] all well-pleaded allegations in the plaintiff's complaint as true and draw[] all reasonable factual inferences from those facts in the plaintiff's favor." Edwards v. City of Goldsboro, 178 F.3d 231, 244 (4th Cir. 1999). But "the tenet that a court must accept as true all of the allegations contained in a complaint is inapplicable to legal conclusions." Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009).
On a motion to dismiss, the court's task is limited to determining whether the complaint states a "plausible claim for relief." Id. at 679. A complaint must contain sufficient factual allegations in addition to legal conclusions. Although Rule 8(a)(2) requires only a "short and plain statement of the claim showing that the pleader is entitled to relief," "a formulaic recitation of the elements of a cause of action will not do." Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007). The "complaint must contain sufficient factual matter, accepted as true, to 'state a claim to relief that is plausible on its face.'" Iqbal, 556 U.S. at 678 (quoting Twombly, 550 U.S. at 570). "Facts pled that are 'merely consistent with' liability are not sufficient." A Soc'y Without a Name v. Virginia, 655 F.3d 342, 346 (4th Cir. 2011) (quoting Iqbal, 556 U.S. at 678).
The parties do not dispute that the fire triggered coverage under the Policy and that the Policy limits will be exhausted when the proceeds are paid out. Compl. ¶ 7. However, the Estate and RMS have both claimed entitlement to the proceeds. Thus, AO argues, interpleader is appropriate here because it has reason to fear multiple litigations over the defendants' rights to the proceeds. ECF No. 10 at 3. The Estate has no objection to AO interpleading the funds, and as noted above, the court has already allowed AO to do so. However, the Estate does object to AO's request to be dismissed from this action, arguing that its counterclaims against AO for breach of contract and bad faith seek damages in excess of the Policy proceeds. ECF No. 18. Because the Estate's opposition to AO's motion for interpleader is tied to the viability of its counterclaims, it is appropriate to turn to AO's motion to dismiss those counterclaims.
The Estate alleges that, following the loss of the insured property, it "properly demanded that AO pay the dwelling policy limits of $342,000." ECF No. 12, Estate's Answer ¶ 28. Despite the Estate's "repeated demands," AO refused to deliver the Policy proceeds to the Estate. Id. ¶ 31. The Estate alleges that AO's refusal was accompanied by "baseless excuses, request[s] [for] totally irrelevant documents, and [] even [the] institut[ion of] this lawsuit." Id. The Estate further alleges that the Foreclosure Judgment in the Foreclosure Action—and the subsequent sale of the insured property at the August 1, 2016 foreclosure sale—were directly and proximately caused by AO's failure to deliver the Policy proceeds, id. ¶¶ 32, 33, and brings counterclaims for breach of contractclaim and bad faith, id. ¶¶ 37-47. The Estate also claims that it is entitled to attorney's fees pursuant to S.C. Code § 38-59-40. Id. ¶¶ 48-52.
AO argues that the Estate's breach of contract claim must fail because AO never breached the Policy, but instead, attempted to comply with the Policy by determining the proper recipient of the proceeds. ECF No. 16 at 5-6. AO points to the Policy...
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