First Bank & Trust v. Scottsdale Ins. Co.

Decision Date10 November 2015
Docket NumberCIVIL ACTION NO. 14-2017 SECTION: "G"(1)
CourtU.S. District Court — Eastern District of Louisiana

In this litigation, Plaintiff and Defendant-in-Interpleader First Bank and Trust ("First Bank") alleges that it is entitled to money due under Defendant-in-Interpleader Edward Neely's ("Neely") insurance policy with Defendant and Plaintiff-in-Interpleader Scottsdale Insurance Company ("Scottsdale").1 First Bank asserts that, because money is due under the policy for damage to the insured property, and because First Bank's interest in the insured property as a mortgagee is superior to that of Neely, under the terms of the policy, the money due is properly payable to First Bank.2 Pending before the Court is Scottsdale's "Motion for Summary Judgment."3 Having reviewed the motion, the memoranda in support, the memoranda in opposition, the record, and the applicable law, the Court will grant the motion in part and deny it in part.

I. Background
A. Factual Background

In its complaint, First Bank alleges that Scottsdale issued an insurance policy to Edward Neely covering seven properties in New Orleans ("Insured Properties").4 First Bank contends thatScottsdale's insurance policy designates it as the loss payee / mortgagee.5 First Bank maintains that Neely is obligated to it, and granted it a multiple indebtedness mortgage on the insured properties to secure his obligation.6 According to First Bank, Edward Neely and Sheryl Neely executed two promissory notes to it on January 29, 2008: a note for $977,600 and a note for $465,000.7 Both notes, First Bank asserts, are secured by the mortgage upon the insured properties; principal amounts of $994,247.92 and $182,015.54, plus additional amounts, remain due on the notes.8

First Bank alleges that Scottsdale tendered two checks to Neely in connection with damage to the insured properties, including a check in the amount of $89,750, dated June 30, 2014 ("Check 1"), made payable to Neely, Binegar Christian, LLC, and First Bank and a check in the amount of $16,978.70, dated August 18, 2014 ("Check 2"), made payable to Neely and First Bank, both of which First Bank possessed at the time it filed its complaint.9 First Bank asserts that the terms of Scottsdale's insurance policy with Neely entitle First Bank to the amounts due under the policy, since its interest in the mortgage is superior to Neely's.10 First Bank contends that, as the loss payee/mortgagee, it is entitled to the proceeds of the checks plus legal interest from the date of the filing of its original complaint.11

B. Procedural Background

First Bank filed a complaint with this Court on September 4, 2014.12 The matter was initially assigned to Section "A" of this Court, but Section "A" entered an "Order of Recusal"13 on September 8, 2014, causing the matter to be reassigned to this Section, Section "G."14 On September 9, 2014, First Bank filed an ex parte "Motion to Deposit Original Checks for Safekeeping."15 The Court granted First Bank's ex parte motion on September 10, 2014, causing Checks 1 and 2 to be deposited with the Clerk of Court pending the resolution of this matter.16 On December 11, 2014, Scottsdale filed a "Motion to Dismiss Pursuant to Federal Rule of Civil Procedure 12(b)(6)."17

On May 1, 2015, First Bank and Trust filed a "Motion for Summary Judgment."18 On May 27, 2015, the Court denied Scottsdale's "Motion to Dismiss Pursuant to Federal Rule of Civil Procedure 12(b)(6)."19 The same day, Scottsdale requested and was granted leave of Court to file a "Third Party Complaint and Cross Claim for Interpleader,"20 in which it listed as defendants-in-interpleader First Bank, Neely, and Binegar Christian, LLC.

On August 4, 2015, Scottsdale filed a "Rule 67 Motion for Leave to Withdraw NegotiableInstruments and to Deposit Funds."21

Scottsdale filed its own "Motion for Summary Judgment"22 on August 25, 2015. First Bank filed an opposition to the motion for summary judgment on September 8, 2015.23 On September 16, 2015, with leave of Court, Scottsdale filed a reply memorandum.24 On September 21, 2015, with leave of Court, First Bank filed a surreply.25 Pursuant to Local Rule 7.5, opposition to a motion must be filed eight days before the noticed submission date. The instant motion was set for submission on September 16, 2015. Neither Neely nor Binegar Christian, LLC, have responded to the motion for summary judgment, timely or otherwise.

On September 14, 2015, Scottsdale filed a "Motion to Strike,"26 requesting that the Court strike a document attached as Exhibit A to First Bank's memorandum in opposition to the motion for summary judgment.27 According to First Bank, the document Scottsdale sought to be stricken was the copy of the backs of checks currently being held by the Clerk of Court.28 The Court converted the motion to an objection and held that "[b]ecause the authenticity of the actual checks filed into the registry of the Court is not disputed, the Court will examine them and disregard anycopies submitted into the record."29

II. Parties' Arguments
A. Scottsdale's Arguments in Support of its Motion for Summary Judgment

In Scottsdale's "Motion for Summary Judgment,"30 it moves for an order: (1) holding that the interpleader action filed on May 27, 2015 is proper; (2) dismissing Scottsdale as a disinterested stakeholder; (3) enjoining First Bank, Neely, and Binegar Christian, LLC from filing any other action against Scottsdale regarding the negotiable instruments at issue in this case and/or any amounts or proceeds listed on such negotiable instruments; (4) denying First Bank's claim for judicial interest; and (5) granting Scottsdale attorney's fees associated with this case.

First, Scottsdale asserts that the three prerequisites to sustain an action for interpleader pursuant to Federal Rule of Civil Procedure 22 have been met: (1) that the amount in controversy exceeds $75,000; (2) there is complete diversity of citizenship; and (3) the plaintiff-in-interpleader is exposed to multiple liability.31 Scottsdale asserts that the amount in controversy is $106,728.70, the parties are completely diverse, and all three defendants-in-interpleader have made claims for the proceeds of the two checks issued by Scottsdale and are listed as payees on the checks.32

Second, Scottsdale contends that it should be dismissed as a disinterested stakeholder, the requirements of which are that: (1) the amount at issue is deposited into the registry of the Court; (2) the stakeholder disavows any interest in the funds; and 3) there is no material controversyinvolving the stakeholder.33 Scottsdale avers that it has sought leave of Court to deposit the funds into the Court's registry, it has made no claims to the funds since the checks were issued, and there is no material controversy involving Scottsdale because it met its duty under Louisiana law to First Bank, Neely, and Binegar Christian, LLC upon the original issuance of the checks.34 Quoting Louisiana Revised Statute § 10:3-310(b), Scottsdale asserts that when "an uncertified check is taken for an obligation, the obligation is suspended to the same extent the obligation would be discharged if an amount of money equal to the amount of the instrument were taken."35 Scottsdale maintains that the suspension "continues until dishonor of the check or until it is paid or certified" and that the obligation is not enforceable during that time.36 Citing Deutsche Bank National Trust Co. v. Regions Bank,37 a case from another section of the Eastern District of Louisiana, Scottsdale asserts that a check issued to the named insured and the mortgagee has been found to be proper in Louisiana federal courts and is proper under the terms of the policy.38 Scottsdale avers that its obligation will be discharged when the funds are deposited into the registry of the Court.39

Third, Scottsdale asserts that any claims by First Bank against Scottsdale should bedismissed and enjoined in light of the interpleader action.40

Fourth, Scottsdale contends that First Bank's claim for judicial interest should be dismissed.41 Scottsdale asserts that the Fifth Circuit has awarded interest against a stakeholder in an interpleader action only when the stakeholder "makes use of the money while it is in his possession, for the reason that a contrary rule would permit a person with no claim to a sum of money to enjoy a greater benefit from its possession than a person who makes such a claim, when the claim is later adjudged inferior to that of another person."42 Scottsdale avers that it did not owe interest to First Bank while the obligation was suspended by payment of the check and that any interest was terminated by the deposit of the funds into the registry of the Court.43 Furthermore, Scottsdale asserts that it was First Bank who had access to the funds at issue because Neely and Binegar Christian, LLC state that they endorsed the checks and delivered them to First Bank.44

Fifth, Scottsdale contends that it is entitled to attorney's fees.45 Quoting this Court's opinion in American General Life Insurance Co. v. Gibson,46 Scottsdale asserts that "[a] district court has the authority to award reasonable attorney's fees in interpleader actions. The award of attorney's fees is in the discretion of the district court, and fees are available when the interpleader is adisinterested stakeholder, and is not in substantial controversy with one of the claimants."47 Scottsdale contends that attorney's fees are proper in this case because "First Bank [has] made misrepresentations to this Court since inception of the suit; has no valid cause of action against Scottsdale; and, per the allegations of Neely and Binegar [Christian, LLC], use[d] this suit as a vehicle to avoid the jurisdiction of the state district court."48

B. First Bank's Arguments in Opposition

In its opposition, First Bank incorporates by reference the "Unsworn Declaration Under Penalty of...

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