Equifax, Inc. v. Luster

• Decision Date: 22 November 1978
• Docket Number: No. J-78-C-74.,J-78-C-74.
• Parties: EQUIFAX, INC., v. A. D. LUSTER, David Wilkens & Mike Kinard, Farmer's Seafood Company, Inc., Bank of Northeast Arkansas, First National Bank of Poinsett County, Arkansas Louisiana Gas Company, First Security Bank of Searcy, Paul L. Simpson & Norma Simpson.
• Court: U.S. District Court — Eastern District of Arkansas

463 F. Supp. 352

EQUIFAX, INC., v. A. D. LUSTER, David Wilkens & Mike Kinard, Farmer's Seafood Company, Inc., Bank of Northeast Arkansas, First National Bank of Poinsett County, Arkansas Louisiana Gas Company, First Security Bank of Searcy, Paul L. Simpson & Norma Simpson.

No. J-78-C-74.

United States District Court, E. D. Arkansas, Jonesboro Division.

November 9, 1978.

Supplemental Opinion November 22, 1978.

COPYRIGHT MATERIAL OMITTED

COPYRIGHT MATERIAL OMITTED

Stephen Reasoner of Barrett, Wheatley, Smith & Deacon, Jonesboro, Ark., for plaintiff.

Bill Bristow, Jonesboro, Ark., for Luster.

Randell Ishmael, Jonesboro, Ark., for Wilkens, Kinard, Simpsons.

Kelly Webb, Trumann, Ark., for Farmer's.

Parker & Henry, Jonesboro, Ark., for Bank of N. E. Ark.

L. D. Gibson, Trumann, Ark., for 1st Nat. Bank of Poinsett Co.

Anthony Bartels, Jonesboro, Ark., for Arkla Gas.

Boyett & Morgan, Searcy, Ark., for 1st Security Bank of Searcy.

MEMORANDUM OPINION

ARNOLD, District Judge.

This is a suit in equity by Equifax, Inc., in the nature of interpleader. The principal question is the distribution among various claimants of the fund for which the plaintiff made bond when it instituted suit. The case is before the Court on pleadings and briefs amounting in substance to motions for summary judgment by all parties.

On December 10, 1976, A. D. Luster, one of the defendants here, recovered a judgment in this court against Equifax, Inc.¹ The principal amount of the judgment, after appellate review and the filing of a remittitur, is $50,000. The remittitur was filed on June 15, 1978. Various judgment creditors of Luster, all of whom have been made defendants in this interpleader suit, have served writs of garnishment on Equifax, demanding amounts that aggregate considerably more than $50,000. In addition, the attorneys who represented Luster against Equifax claim a statutory lien for attorneys' fees and costs expended. In the face of these conflicting claims, not all of which could be satisfied out of the money it owed Luster, Equifax sued for interpleader on June 23, 1978. A bond was filed with the Clerk of this Court to assure payment of the amount of the plaintiff's indebtedness to Luster, as the Court might direct. Equifax asks that the precise amount of its liability be determined, that it be discharged from any further indebtedness to Luster or any other defendant, and that it be awarded an attorney's fee and costs. Two main groups of issues on the merits are thus presented: (1) the total amount of Equifax's liability; and (2) the proper division of this amount among the claiming defendants. This court has jurisdiction under 28 U.S.C. § 1335. At least two of the claimants are of diverse citizenship.

I. THE AMOUNT OF THE FUND TO BE DISTRIBUTED

The principal amount of the judgment recovered by Luster against Equifax is $50,000. The judgment was entered on December 10, 1976. What rate of interest should be applied to this indebtedness? Arkansas judgments have traditionally borne interest at the rate of six per cent. per annum. In 1975, however, the General Assembly, perhaps reacting to the generally higher prevailing cost of money, passed Act 474, Section 1 of which is now codified as Ark.Stats. § 29-124 (Supp.1977). This statute provides that judgments shall bear interest at the rate of ten per cent. per annum from entry of judgment "until . . . satisfaction be made . . .." The Court entering the judgment may reduce the rate of interest, but not below six per cent., in its discretion. As a technical matter, this decision should probably be made in the cause in which the judgment was entered, but that cause and this one are in the same court, and the Judge who tried the earlier case has since died. There is no reason, therefore, as a practical matter, why the decision as to interest should not be made now.

It is true, as Equifax argues, that the remittitur ordered on appeal shows that the appeal and the consequent delay in satisfying the judgment were not unreasonable. The appeal and its disposition also show, however, that Equifax has been indebted to Luster (or to his creditors, as the case may be) in at least the amount of $50,000 since December 10, 1976, since this is the amount of the judgment remaining in effect after the remittitur was filed. The purpose of interest on judgments is to compensate the judgment creditor for the fact that he has not had the use of a certain sum of money that has been adjudged to be his. When defendant chose to appeal instead of paying the judgment at once, it of course knew that interest would run during the entire time on whatever sum was ultimately found to be owed. The Arkansas statute appears to lay down ten per cent. as a general rule. Interest rates have fluctuated somewhat during the last two years, but on the whole they have been at abnormally high levels. The Court is of the opinion that a rate of ten per cent. should be applied.

Up to what date should the interest run? Is the running of interest cut off by the filing of this interpleader suit on June 23, 1978? The Arkansas statute, already quoted, specified that interest shall run "until . . . satisfaction be made . . .." When Equifax filed this suit, it did not pay into the court the amount of Luster's judgment against it. Instead, it filed a corporate surety bond to assure the Court and the other parties that whatever amount should ultimately be found due would be paid. Under 28 U.S.C. § 1335, the filing of such a bond is a proper way in which to commence suit for interpleader, just as payment into court of the fund claimed would have been. But bond is not payment. The obligor on the bond, here Equifax, retains the use of its money, and the various claimants continue to be exposed to the risk that Equifax and its corporate surety might become insolvent.

Great Lakes Transit Corp. v. Marceau, 154 F.2d 623 (2d Cir. 1946), is in point. There, Marceau recovered a judgment against Great Lakes for $4,500. Both Marceau and several sets of lawyers claimed an interest in the judgment. Great Lakes filed suit for interpleader and made bond for $6,000. The Court held that interest continued to run on the judgment until actual payment.

Plaintiff chose to retain use of the $4,500, and rather than pay the money into court, it gave a bond. Plaintiff is entitled to receive the cost of the premiums on that bond, but not to an order stopping the running of the interest against it.

154 F.2d at 626-27. See also Stuyvesant Ins. Co. v. Dean Constr. Co., 254 F.Supp. 102, 113 (S.D.N.Y.1966), aff'd per curiam, 382 F.2d 991 (2d Cir. 1967); United States v. McDonald Grain & Seed Co., 135 F.Supp. 854 (D.N.D.1955).

The cases cited by Equifax are not to the contrary. Vernon v. McEntire, 234 Ark. 995, 356 S.W.2d 13 (1962), holds that a tender stops the running of interest, but it is hornbook law that the tender must be kept good or alive, as the dissenting opinion of McFaddin, J., points out. 234 Ark. at 1003, 356 S.W.2d at 17. One way of keeping the tender good, of course, is to pay the money into court. This is not the same thing as the creditor's having the money in his own hands, to be sure, but is better than a bond, which, after all, is simply a promise to pay. An analogous point is made in Murphy v. Travelers Ins. Co., 534 F.2d 1155, 1164-65 (5th Cir. 1976), also cited by Equifax. Murphy holds that payment into court by a stakeholder is an unconditional tender terminating the right to interest. The stakeholder has ceased to exert dominion over money. That is not the case where the stakeholder has merely made bond. The Court therefore holds that interest on the $50,000 judgment, which began to run at the rate of ten per cent. per annum on December 10, 1976, will continue to run until the amount of the judgment is paid either into court or directly to the parties entitled to receive payment.

Should Equifax, as the interpleading plaintiff, receive any allowance for attorneys' fees and costs? Some of the claimants, resisting this request, claim that the filing of this interpleader suit was unnecessary or even improper. Equifax, they say, should simply have paid its creditor, Luster, and let the other claimants pursue whatever remedies they might have. No doubt there was a time, immediately after the entry of judgment against it, when Equifax could have paid Luster and avoided the other conflicting claims now before the Court. That time was very short indeed. In was only five days after the entry of judgment that the first writ of garnishment was served on Equifax by one of Luster's creditors. In the face of this and subsequent garnishment attempts, it would have been imprudent, to say the least, for Equifax to pay Luster and ignore the other claims to the fund. A writ of garnishment after judgment, when served on a garnishee, is more than the assertion of a personal liability. Under Arkansas law, to be fully discussed later in this opinion, service of a writ of garnishment establishes a lien in favor of the garnishor against whatever the garnishee has in his possession belonging to the debtor. Thus, if Equifax, after having been served with one of these garnishments, had proceeded to pay Luster, it would have run a substantial risk of double liability, the very grievance that interpleader is supposed to remedy. Equifax acted, at least in part, as a disinterested stakeholder. The Court believes that its suit was filed in good faith and, presumably, on advice of counsel, and that it resisted payment only to protect itself against other claims. This is therefore a proper case for payment of an attorney's fee from the fund interpleaded. New York Life Ins. Co. v. Miller, 139 F.2d 657 (8th Cir. 1944); National Life & Acc. Ins. Co. v. Bruce, 309 F.Supp. 1314 (W.D.Mo.1970); Tollett v. Phoenix Assur. Co. of N. Y., 147 F.Supp. 597, 605-06 (W.D. Ark.1956). The amount of the fee should be modest, both in view of the relatively routine services...