Farmers & Mechanics Nat. Bank v. Walser

• Decision Date: 01 September 1988
• Docket Number: No. 104,104
• Citation: 558 A.2d 1208,316 Md. 366
• Parties: FARMERS & MECHANICS NATIONAL BANK v. Sally F. WALSER. ,
• Court: Maryland Court of Appeals

Page 366

316 Md. 366

558 A.2d 1208

FARMERS & MECHANICS NATIONAL BANK v. Sally F. WALSER.

No. 104, Sept. Term, 1988.

Court of Appeals of Maryland.

June 16, 1989.

Lawrence E. Finegan (Miles & Stockbridge, on brief), Frederick, for appellant.

Charles A. Castle, Frederick, for appellee.

Argued before MURPHY, C.J., and ELDRIDGE, COLE, RODOWSKY, McAULIFFE, ADKINS and BLACKWELL, JJ.

MURPHY, Chief Judge.

Maryland Rule 2-221(a) provides that "[a]n action for interpleader or in the nature of interpleader may be brought against two or more adverse claimants who claim or may claim to be entitled to property." The rule further states that the defendants' claims "need not have a common origin or be identical but may be adverse to and independent of each other ... [and that] [t]he plaintiff may deny liability in whole or in part to any or all of the defendants." In this case, we consider whether Rule 2-221 abrogates the common law rule that a stakeholder cannot maintain an interpleader action when one of the defendant-claimants alleges that the stakeholder has incurred an independent liability to her.

I.

On March 10, 1981, Billy and Sally Walser, husband and wife, executed an agency agreement with the Farmers and Mechanics National Bank of Frederick, Maryland (the Bank). Pursuant to this agreement, the Bank established joint agency trust account # 56136500 (# 6500) in the names of Billy and Sally. At that time, the Walsers made an initial deposit of $10,522.34 into the account. The agency agreement provided that the Bank was to hold any principal collected by it "subject to the written instructions of Billy F. Walser and Sally F. Walser, signed by Billy F. Walser and Sally F. Walser." The agreement further provided that "cash may be withdrawn from this Agency Agreement or added to from time to time through the medium of Supplemental Receipts to be attached to the original Agency Agreement.... [and that] [t]his Agreement may be terminated by either party on thirty (30) days written notice."

The transactional history of this account shows that from March 10, 1981 through October 23, 1981, eleven separate deposits were made, totaling $259,419.24. During this period, various withdrawals were made from the account. The proceeds of some of these withdrawals were used to purchase stocks and other securities, which continued to be held in trust under the agency agreement; other withdrawals represented cash distributions to the Walsers. As of May 11, 1983, the Bank's records showed that the assets of the account consisted of a Federal National Mortgage Association note, with a book value of $99,656.25, and cash totaling $122,723.18. On that date Billy Walser directed the Bank to deposit the assets of the account into an individual agency account in his name alone. The Bank complied with Billy's request, although the Walsers had not given the thirty days' termination notice as required by the agency agreement, and despite the fact that Sally Walser had not signed the document authorizing the termination of the agreement and the transfer of the funds. This account was designated # 56072800 (# 2800).

Billy died on November 22, 1985. He was survived by his wife, Sally, and three children by a previous marriage. Sally and Billy's three children qualified and were appointed as Personal Representatives of his estate. ¹ On December 3, 1985, Sally and Billy's children, acting as Personal Representatives, directed the Bank to deposit the proceeds of account # 2800 into an account for the Estate of Billy Walser. The Bank's records indicated that at Billy's death the assets in account # 2800 had a cash value of $385,874.96. In accordance with the Personal Representatives' request, the Bank transferred these assets into the Estate's Account.

On April 16, 1987, counsel for Sally Walser, individually, sent a letter to the Bank regarding the original trust account (# 6500) established by her and her husband on March 10, 1981. This letter indicated that Sally had been informed that the funds in this account had been transferred by the Bank into an account for the Estate of Billy F. Walser. The letter advised the Bank that the initial agency agreement required both Sally and Billy to sign all withdrawal authorizations and that Sally had never authorized the transfer of the funds from account # 6500. Consequently, Sally demanded that the Bank transfer all funds, including accrued interest, which had been in joint account # 6500 into an individual account in her name alone.

The Bank did not comply with Sally's request. Instead, on July 15, 1987, it filed a Complaint for Interpleader in the Circuit Court for Frederick County, naming Sally Walser and the Estate of Billy Walser as defendants. The complaint requested that the court "schedule a hearing and thereafter pass an order dismissing the Plaintiff from any liability thereon other than payment of the disputed funds into the Court or as the Court directs," require the "Defendants to interplead as to the property, designating one of them as Plaintiff and one as Defendant," and order the "Defendants to raise in the context hereof, any future or other disputes they may have as to any funds, assets or properties held by or invested by the bank on behalf of either of them, or their business interests." Sally initially filed an Answer to the Bank's Complaint on August 21, 1987, in which she admitted that the matter was appropriate for interpleader.

On March 18, 1988, the Bank moved for summary judgment against Sally, contending that there was no genuine dispute as to any material fact and that it was entitled to judgment as a matter of law. On March 31, 1988, before the court had taken any action to interplead the parties, Sally filed an Amended Answer to the Complaint for Interpleader, an Answer to the Bank's motion for summary judgment, and a motion to dismiss the Complaint for Interpleader. In the Amended Answer, she denied that interpleader was the appropriate procedure for settling the matter; she stated that her claim for monies due from the Bank was distinct and separate from any dispute between the Bank and the Estate of Billy Walser. In her motion to dismiss the Complaint for Interpleader, Sally alleged that interpleader was inappropriate because the two named defendants--she and the Estate of Billy Walser--had entirely independent and unrelated claims against the Bank. Sally averred that the Estate claimed funds which were properly in its account at the Bank, while she was making no claim to those funds. Instead, she asserted that her claim against the Bank was for the funds which had been deposited in joint account # 6500, as to which the Bank had negligently, and in violation of the trust agreement, allowed Billy to transfer to his own account without her knowledge or consent. ²

On May 24, 1988, the court, (Stepler, J.), granted Sally's motion to dismiss. It concluded that Steffey, Inc. v. Stationery Co., 161 Md. 124, 155 A. 306 (1931), required dismissal of the interpleader action. It noted that Steffey delineated the essential elements for interpleader as requiring that the same thing, debt or duty be claimed by all defendants, that their adverse titles or claims be dependent or derived from a common source, that plaintiff neither has nor claims any interest in the subject matter, and that he have incurred no independent liability to either claimant, that is that he stand perfectly indifferent between them in the position merely of a stakeholder. 161 Md. at 127-28, 155 A. 306, citing, 1 Pomeroy, Equitable Remedies, § 43, at 70 (5 Eq. Jur.). The court found that Rule 2-221 governing interpleader actions does not change these requirements. Accordingly, it found that Sally had alleged that the Bank was independently liable to her, and thus the fourth requirement was not satisfied and interpleader, therefore, was not appropriate. The court also denied the Bank's motion for summary judgment against Sally, finding that while her affidavit in opposition was not in the correct form, it, nevertheless, satisfied the essential requirements set forth in the rule. The Bank appealed to the Court of Special Appeals. We granted certiorari prior to decision by the intermediate appellate court to resolve the important issues raised in the case.

II.

Interpleader originated as a common law remedy which could be invoked by a stakeholder in a detinue action when confronted with conflicting claims to property in its possession. See Comment, Can Statutory Interpleader Be Used as a Remedy by the Tortfeasor in Mass Tort Litigation?, 90 Dick.L.Rev. 439, 441 (1985); Hazard and Moskovitz, An Historical and Critical Analysis of Interpleader, 52 Cal.L.Rev. 706, 706-07 (1964). Modern interpleader, however, is derived from the chancery practices of the eighteenth and nineteenth centuries and not from the early common law action. Statutory Interpleader, supra, at 441. Initially, courts allowed flexibility in interpleader practice, but during the nineteenth century they adopted a more rigid approach, developing four essential prerequisites for an interpleader action. See generally Hazard and Moskovitz, supra, at 706-49. These requirements had become a permanent part of modern interpleader practice when Professor Pomeroy included them in his treatise, Equity Jurisprudence. In his discussion of interpleader, he indicated that this equitable remedy

"depends upon and requires the existence of the four following elements, which may be regarded as its essential conditions: 1. The same thing, debt, or duty must be claimed by both or all the parties against whom the relief is demanded. 2. All their adverse titles or claims must be dependent, or be derived from the same source. 3. The person asking the relief--the plaintiff--must not have nor claim any interest in the subject-matter. 4. He must have incurred no independent liability to either of the claimants; that is, he must stand perfectly indifferent...