Fidelity Bank v. COM. MARINE AND GENERAL ASSUR. CO.

• Decision Date: 07 August 1984
• Docket Number: Civ. A. No. 83-2071.
• Citation: 592 F. Supp. 513
• Parties: The FIDELITY BANK v. COMMONWEALTH MARINE AND GENERAL ASSURANCE COMPANY, LTD; J.E. Mamiye & Sons, Inc.; Maurice L. Jackson; Floyd Fountain and Farmers State Bank of Center, Texas; George K. Lynch; Horizon Medical Administrators, Inc.; G.A. Brown; Pak-Mor Manufacturing Company; Delan Townson and First Alabama Bank of Conecuh County; Phillips & Son, Inc.; Hutchinson Financial Corporation of Alabama; Neb, Ltd.; Anne and Art Johnston d/b/a Treasure Harbor Sailing Yachts; and Reid, Inc.
• Court: U.S. District Court — Eastern District of Pennsylvania

592 F. Supp. 513

The FIDELITY BANK v. COMMONWEALTH MARINE AND GENERAL ASSURANCE COMPANY, LTD; J.E. Mamiye & Sons, Inc.; Maurice L. Jackson; Floyd Fountain and Farmers State Bank of Center, Texas; George K. Lynch; Horizon Medical Administrators, Inc.; G.A. Brown; Pak-Mor Manufacturing Company; Delan Townson and First Alabama Bank of Conecuh County; Phillips & Son, Inc.; Hutchinson Financial Corporation of Alabama; Neb, Ltd.; Anne and Art Johnston d/b/a Treasure Harbor Sailing Yachts; and Reid, Inc.

Civ. A. No. 83-2071.

United States District Court, E.D. Pennsylvania.

August 7, 1984.

COPYRIGHT MATERIAL OMITTED

COPYRIGHT MATERIAL OMITTED

Joan A. Yue, Pepper, Hamilton & Scheetz, Philadelphia, Pa., for The Fidelity Bank.

Gordon Gelfond, Margolis, Edelstein, Scherlis, Sarowitz & Kraemer, Philadelphia, Pa., for Com. Marine & General Assur. Co., Ltd.

Miles H. Shore, Saul, Ewing, Remick & Saul, Philadelphia, Pa., for J.E. Mamiye & Sons, Inc.

Eileen P. Epley, Philadelphia, Pa., for Maurice L. Jackson.

T.R. McLeroy, Jr., Center, Tex., for Floyd Fountain and Farmers State Bank of Center, Texas.

Glenn E. Woodard, El Paso, Tex., for George K. Lynch.

Stephen D. Ivey, Philadelphia, Pa., for G.A. Brown.

Joseph H. Reiter, Stephen M. Chiles, Stassen, Kostos & Mason, P.C., Philadelphia, Pa., for Pak-Mor Mfg. Co.

William J. Barker, Jr., Stradley, Ronon, Stevens & Young, Philadelphia, Pa., for Delan Townson d/b/a Townson Trucking Co., and First Alabama Bank of Conecuh County.

Brenda Smith Stedham, Merrill, Porch, Doster & Dillon, Anniston, Ala., for Hutchison Financial Corp. of Alabama.

John C. Sullivan, Lennon C. Wright, Esquire c/o John C. Sullivan, Frumkin & Manta, Philadelphia, Pa., for Phillips and Son, Inc.

Maurice J. Maley, Jr., Krusen Evans & Byrne, Philadelphia, Pa., for Anne & Art Johnston, d/b/a Treasure Harbor Sailing Yachts.

Arnold P. Borish, Hangley, Connolly, Epstein, Chicco, Foxman & Ewing, Philadelphia, Pa., for Horizon Medical Administrators, Inc.

William J. Cattie, III, Heckler & Cattie, Wilmington, Del., for NEB, Ltd.

Neal L. Conner, Jr., Kopp, Peavy & Conner, P.C., Waycross, Ga., for Reid, Inc.

OPINION

LOUIS H. POLLAK, District Judge.

The facts underlying this action, and certain preliminary legal analysis, appear in my earlier Opinion in this matter dated February 24, 1984. Fidelity Bank v. Commonwealth Marine and General Assurance Company, Ltd., 581 F.Supp. 999 (E.D.Pa.1984). This Memorandum and the accompanying Order dispose of certain legal issues left unresolved by that earlier Opinion. In order to provide background for the discussion here, I repeat in abbreviated form some of the pertinent facts related at length in 581 F.Supp. at 1002-1011, together with some more recent developments.

Commonwealth Marine and General Assurance Company, Ltd. ("Commonwealth") sold insurance in the United States for some period preceding the inception of this action. Commonwealth, a Belize corporation, established a Trust Fund on deposit with The Fidelity Bank ("Fidelity") to provide security for Commonwealth's American policyholders.¹ Fidelity served as trustee. As of April 29, 1983, eight individuals and corporations had made claims against the fund which far exceeded the amount on deposit.² Fidelity, unsure which claimants to recognize, and in what order, commenced this action in interpleader on April 29, 1983, paying $440,891.61 into court. By February 24, 1984, fifteen individuals and corporations had asserted thirteen separate claims against the interpleaded fund. See 581 F.Supp. at 1005-1009 (describing thirteen claims).

The February 24 Opinion disposed of most of the issues raised by the various claimants' cross-motions for summary judgment. In that Opinion I concluded that four claimants would receive distributions from the interpleaded funds. Specifically, I held that Mamiye had validly attached all assets of Commonwealth (1) in the hands of Fidelity on the date of Mamiye's service of the writ of execution, May 28, 1982, or (2) coming into Fidelity's hands thereafter. However, I held that this attachment did not reach assets impressed with Commonwealth's trust because Mamiye was not a creditor entitled to payment under the Trust Agreement. Because principal, but no income, became part of the Trust, I held that Mamiye could recover the full amount of the interpleaded sum not impressed with Commonwealth's trust. See Fidelity Bank, 581 F.Supp. at 1013-1016. I further held that Mamiye's entitlement depended on the outcome of pending proceedings in New York seeking to overturn Mamiye's judgment against Commonwealth. 581 F.Supp. at 1016-1017.³

I next held that Horizon and Brown had validly attached the Trust's assets before any other claimants had perfected a claim under the Trust Agreement and before any other attaching creditors. I therefore held that they had priority in payment of the Trust's assets, at least as to the amounts of the judgments underlying their writs of execution. Horizon has a New York judgment in the amount of $83,080. Brown has a Texas judgment in the amount of $117,066.02. Horizon received $32,080 from the interpleaded fund on March 7, 1984, and $51,000 on March 14. Brown received $117,066.02 on March 14. On February 24, 1984, I further held that Pak-Mor would receive the remainder of the interpleaded fund after determination of all outstanding issues. This Opinion disposes of several of those issues.

First, Jackson has moved for reconsideration of my February 24 Opinion and the accompanying Order as applied to him. Disposition of this motion should precede disposition of other matters. Second, the February 24 Opinion specifically invited further submissions on the reserved question of whether this court could or must award interest to successful claimants out of the interpleaded fund. See Fidelity Bank, 581 F.Supp. at 1120-1121. Third, the Order accompanying the February 24 Opinion invited plaintiff to file further motions for summary judgment against those claimants not prevailing on their motions for summary judgment. That Order also invited plaintiff, Jackson, and Horizon to each move for summary judgment on Jackson and Horizon's counterclaims. Fidelity has petitioned for discharge as to all claimants. Fidelity has also moved for summary judgment on Horizon's counterclaim. Jackson has stipulated to dismissal of his counterclaim.

1. Jackson's Motion for Reconsideration

Each of the claimants to the interpleaded fund has obtained a judgment against Commonwealth in a court of a state other than Pennsylvania. The claimants attempted to induce Fidelity to satisfy these judgments out of Commonwealth's deposits in one of two ways. Mamiye, Horizon, Brown, and Pak-Mor entered their judgments in Pennsylvania courts of common pleas and then served Fidelity with writs of execution, thereby attaching the interpleaded funds. See Pa.R.Civ.P. 3101-3149 (Purdon's 1975 and Supp.1983). Other claimants attempted to follow the procedure delineated in the Trust Agreement.

The second paragraph of article II of the Trust Agreement provides:

A claim against the Company under an American policy issued subsequent to the execution of this trust agreement shall be enforceable by the policy-holder against the Trust Fund when all of the following four conditions have been complied with and not otherwise.

(A) A judgment has been obtained by the policyholder against the Company in any Court of competent jurisdiction within the United States of America in respect of the Company's liability under an American policy (B) Such judgment has become final in the sense that the particular litigation has been concluded either through the failure to appeal within the time permitted therefore or through the final disposition of any appeal or appeals that may be taken, the word "Appeal" being used herein to include any similar procedure for review permitted by the applicable law;

(C) A certified copy of the said judgment has been filed with the Trustee, together with such proof as to its finality and its conformance with the other conditions specified in this Article II as the Trustee shall require;

(D) A period of thirty (30) days from the date of the filing with the Trustee of the said certified copy of the said judgment and all of said proofs has expired, without such judgment having been satisfied, provided, however, that the expiration of such thirty-day period shall not be required in the event the same extends beyond the termination date of the Trust;

WHEREUPON the said judgment shall be forthwith satisfied by the Trustee out of the Trust Fund then in its hands, without regard to the rights of any other policyholder or policyholders provided that the Company at its option may waive any or all of the foregoing conditions mentioned in Subdivisions (A), (B), (C), and (D) hereof and direct the Trustee in writing to pay from the Trust Fund the claim of any policyholder against the Company under an American policy without such claim having become enforceable as above defined, whereupon the said claim shall be forthwith satisfied by the Trustee out of the Trust Fund then in its hands without regard to the rights of any other policyholder or policyholders and provided further that the Trustee shall be absolutely protected in acting upon any such written direction from the Company without investigation and shall be under no obligation to see to the application of any such payment and shall not be concerned to ascertain or inquire as to the validity of such claim or the propriety of such direction.

Fidelity Bank, 581 F.Supp. at 1024.

Under this paragraph's procedure, a claimant had two routes to obtaining payment from the Trust Fund. The claimant could obtain an order from Commonwealth directing Fidelity to pay the claimant. Commonwealth issued no such order. Alternatively, the claimant had to comply with four steps: he had to obtain a judgment, survive all appeals or the pertinent appeal period, certify...