Great American Insurance Company v. Bank of Bellevue

• Decision Date: 27 September 1966
• Docket Number: No. 18226.,18226.
• Citation: 366 F.2d 289
• Parties: GREAT AMERICAN INSURANCE COMPANY, a Corporation, Appellant, v. BANK OF BELLEVUE and American Home Assurance Company, Appellees.
• Court: U.S. Court of Appeals — Eighth Circuit

366 F.2d 289 (1966)

GREAT AMERICAN INSURANCE COMPANY, a Corporation, Appellant, v. BANK OF BELLEVUE and American Home Assurance Company, Appellees.

No. 18226.

United States Court of Appeals Eighth Circuit.

September 27, 1966.

COPYRIGHT MATERIAL OMITTED

Benjamin M. Wall, of Haney, Walsh & Wall, Omaha, Neb., for appellant.

L. R. Brodkey, Omaha, Neb., for appellee Bank of Bellevue. Charles S. Reed, Omaha, Neb., with him on the brief.

Before VAN OOSTERHOUT, BLACKMUN and GIBSON, Circuit Judges.

GIBSON, Circuit Judge.

This is an appeal from the judgment of the United States District Court for the District of Nebraska, rendered in an interpleader action commenced by plaintiff, Great American Insurance Company, a corporation of New York, against numerous defendants of diverse citizenship, pursuant to 28 U.S.C. § 1335.¹

Plaintiff (appellant herein), Great American Insurance Company, issued and was surety on a used car dealer's bond required by Nebraska law to cover the 1962 business activities of one Harry Layne, d/b/a Layne Motor Company of Bellevue, Nebraska. This bond, which is the subject matter of this interpleader action, had a face penalty of $10,000 and was effective from January 1, 1962 through December 31, 1962. In addition to this bond it appears that plaintiff was surety on at least one other bond which was issued to cover the business activities of Layne for the year 1961. This second bond, however, was not mentioned in the interpleader complaint nor in any of plaintiff's supporting papers.

During the years 1961 and 1962, Layne engaged in numerous fraudulent transactions relating to the sale and financing of automobiles. As the result of Layne's fraudulent activities, plaintiff was beset with numerous claims, the total of which exceeded $10,000. One of the claimants was defendant Bank of Bellevue. American Home Assurance Company is an insurer of the Bank of Bellevue and is a claimant in this suit by virtue of its right of subrogation on amounts it paid to the Bank of Bellevue because of the Bank's losses on some of Layne's activities.² At this juncture, plaintiff interpleaded all of the known and unknown claimants, admitted liability under the 1962 bond and paid the face amount of the single $10,000 bond into court. The answers to this bill of interpleader set forth the various claims the defendants had against Layne. Plaintiff presented the affidavit of Ronald Hartman, State Agent for plaintiff, which stated that his Company, "has not issued any bond other than the one referred to * * *." Thereafter, plaintiff's motion for summary judgment was granted and plaintiff's liability on this bond in the order of summary judgment was specifically limited to the $10,000 amount deposited with the Court.

After the summary judgment, the individual claimants began to resolve their individual claims to the deposited fund. In the course of the discussion it was discovered that two of the transactions between Layne and the Bank of Bellevue actually originated in 1961 and would, therefore, not be covered in the pleaded bond for 1962. The parties defendant, being all of the claimants to the fund, therefore stipulated, amongst themselves but not with the plaintiff, that the two claims arising from the 1961 transaction be dismissed without prejudice to seek relief under "any bond other than the one named in plaintiff's complaint." This stipulation was approved by the District Court and incorporated in its final judgment. Plaintiff objected to the dismissal without prejudice of the two claims here in issue, and appeals from that portion of the District Court's judgment.

Plaintiff's first argument on appeal is that since its interpleader complaint alleged the 1962 bond and set forth the transactions in question, the failure of appellees to deny that the transactions fell under the coverage of the 1962 bond constituted a judicial admission binding them to seek satisfaction only under the 1962 bond. Therefore, according to plaintiff, the subsequent dismissal without prejudice to these claims was error.

We cannot agree with appellant's interpretation of these pleadings. Plaintiff pleaded the single 1962 bond and tendered the $10,000 penalty into court. In filing its interpleader, plaintiff set forth the various claims being made against it. It did not attempt to contest the validity of the claims asserted. Plaintiff pleaded, moreover, that it was not concerned as to the disposition of these claims so long as the recovery against the 1962 bond did not exceed the amount paid into court, and that it was merely "a disinterested stakeholder, * * * indifferent to the respective claims thereto of the defendants." In granting the summary judgment, the Court afforded plaintiff the exact relief it sought. Nowhere did plaintiff indicate that should relief be denied on these claims under the 1962 bond, it was not to be held liable under any other bond issued for another year.

Likewise, the various answers set forth claims which defendants believed to be covered by the pleaded bond. They no doubt recognized the possibility that these claims may or may not be allowable under the terms of the bond pleaded. In alleging these claims, nowhere did the defendants intimate that should these claims fail because they originated outside the life span of the pleaded bond, no further relief on other non-pleaded bonds could be sought. Plaintiff's interpleader related solely to the 1962 bond, and plaintiff expressly maintained its neutrality in the settlement of the claims. The answers to this complaint merely set forth the claims under the bond and did not indicate that the pleaded bond was the sole source of relief. Therefore, we do not believe these pleadings should be construed to indicate admissions of coverage that would preclude the dismissing of the claims without prejudice to seek relief from other funds not deposited under the 1962 bond.

Even were we to assume, arguendo, that the face of these pleadings indicated an admission on the part of the defendants that their loss occurred in 1962, we do not believe plaintiff should be granted the relief it is seeking.

The primary step in an interpleader proceeding concerns the determination of a fundholder's right to compel claimants to litigate their numerous claims in one proceeding and to confine total recovery to an amount not exceeding the deposited fund. Standard Surety & Casualty Company of New York v. Baker, 105 F.2d 578 (8 Cir. 1939). As far as the plaintiff is concerned, the sole purpose of this interpleader is to protect it from multiple litigation which may result in losses in excess of the face penalty on the bond. Douglas-Guardian Warehouse Corporation v. Ramy Seed Company, 271 F.2d 24 (8 Cir. 1959); Barron & Holtzoff, 2 Federal Practice and Procedure, § 551 at page 227 (Wright Ed. 1961).

Interpleader is an equitable action controlled by equitable principles, Burchfield v. Bevans, 242 F.2d 239 (10 Cir. 1957); Brinson v. Brinson, 334 F.2d 155 (4 Cir. 1964), and the equitable doctrine that one seeking equitable relief must do equity and come into court with clean hands is applicable. Austin v. Texas-Ohio Gas Company, 218 F.2d 739 (5 Cir. 1955).³ Plaintiff has not complied with these doctrines. The affidavit of plaintiff's agent, Ronald Hartman, stating that the plaintiff, "has not issued any bond other than the one referred to under the terms and provisions of Section 60-619, R.R.S.Nebraska, 1943," is not only misleading but appears to constitute an outright falsehood. A full and fair disclosure by the plaintiff, as is required of one seeking the exercise of the equitable powers of a court would have disclosed the full fund held by the plaintiff and the maximum coverage on all bonds issued by the plaintiff that could be applicable to Layne's activities. The various claimants to the fund could then be compelled to respond thereto and plaintiff could be accorded complete protection to the full extent requested.

Interpleader being a remedy solely for the protection of the stakeholder, it may not be used by the stakeholder as a weapon to defeat recovery from funds other than the one before the court. Nonetheless, plaintiff is seeking to do just that.

Plaintiff is the only party in a position to know the exact bonding arrangement between itself and Layne. No mention, however, is made of the existence of other bonds or the possibility of its liability outside the time limits of the single pleaded bond. If there are other bonds to which claims might be made, the benefit to plaintiff of limiting recovery to the single bond through skillful use of the interpleader is obvious. In attempting to do just that, an interpleader complaint can be worded in such a way...