John Hancock Mut. Life Ins. Co. v. Kegan

• Decision Date: 16 February 1938
• Docket Number: No. 2523.,2523.
• Citation: 22 F. Supp. 326
• Parties: JOHN HANCOCK MUT. LIFE INS. CO. v. KEGAN et al.
• Court: U.S. District Court — District of Maryland

22 F. Supp. 326

JOHN HANCOCK MUT. LIFE INS. CO. v. KEGAN et al.

No. 2523.

District Court, D. Maryland.

February 16, 1938.

Knapp, Tucker & Thomas, James Thomas, and Clarence A. Tucker, all of Baltimore, Md., for plaintiff.

Emory, Beeuwkes, Skeen & Oppenheimer and George Gump, all of Baltimore, Md., for defendant Carrie B. Kegan.

Marbury, Gosnell & Williams and Jesse Slingluff, Jr., all of Baltimore, Md., for defendant Culpeper Nat. Bank.

CHESNUT, District Judge.

The defendants in this case have filed a motion to dismiss the bill on the ground that it is neither a bill for interpleader nor a bill "in the nature of interpleader" within the meaning of the Judicial Code, § 24(26), as amended January 20, 1936, c. 13, § 1, 49 Stat. 1096, United States Code Supp. III, title 28, § 41(26), 28 U.S.C.A. § 41(26), which is the latest amendment by Congress of the Federal Interpleader Statute.

The averments of the bill, so far as material to the ruling on the motion to dismiss, are as follows: The John Hancock Mutual Life Insurance Company, plaintiff, is a Massachusetts corporation doing business in Maryland, and the defendant Carrie B. Kegan, widow of Alfred Kegan, who died September 7, 1937, is a citizen of the State of Maryland; and the other defendant, the Culpeper National Bank, is a national bank situated in Virginia. On January 3, 1924, the Insurance Company issued its policy of life insurance in the face amount of $30,000 to Alfred Kegan as the insured, the proceeds of the policy upon his death to be payable to his wife, Carrie B. Kegan, who was named as the revocable beneficiary. In February, 1931, in accordance with loan privileges of the policy, Alfred Kegan obtained a loan from the Insurance Company, the amount of which with interest on March 15, 1937, was $6,568.40. When the loan was obtained the insured revoked the nomination of his wife as beneficiary and named his executors or administrators as beneficiary; but stated in the application for the change that upon the completion of the loan transaction he further nominated his wife as revocable beneficiary. On October 5, 1935, the loan still being unpaid, the insured executed a collateral assignment of the policy in writing to the Culpeper National Bank to secure a loan from the bank in the amount of $8,600 with interest. The assignment purported to have been signed also by the defendant Carrie B. Kegan. On March 5, 1937, the insured executed an absolute assignment of the policy to the Bank, also apparently signed by the wife, and also revoking the nomination of the beneficiary in the policy; and thereupon the policy was delivered to the Bank which caused the collateral assignment to be cancelled and discharged. On March 15, 1937, the Bank paid to the Insurance Company the full amount of the loan previously made by the insurer on its policy and a notation to that effect was endorsed on the policy. On January 3, 1937, the Bank paid out of its own funds the semi-annual instalment of premium then falling due. The succeeding semi-annual instalment of premium which fell due on July 3, 1937, was not paid to the Insurance Company by the Bank or any one else, and according to the terms of the policy it lapsed for non-payment of premium thirty-one days thereafter.

The policy gave to the "holder" certain non-forfeiture options in the event of such default in the payment of premium. These options were (a) paid-up life insurance in accordance with a certain schedule; (b) payment of surrender value in cash; and (c) extended term insurance in the face amount of the policy in accordance with the schedule therefor. It was provided with respect to option (c) that it could be exercised "upon written request by the holder filed at the home office of the Company within 90 days of the due date of the premium in default." After the lapse of the policy and before the death of the insured, the Bank, claiming to be the holder and absolute owner thereof, elected to take option (a), that is, it had the policy continued as participating paid-up life insurance in the amount of $13,035.

Alfred Kegan died September 7, 1937, and shortly thereafter the Bank filed proofs of death and demanded the aforesaid sum of $13,035 at the same time surrendering the policy for cancellation; but about the same time the defendant Carrie B. Kegan notified the plaintiff not to pay the proceeds of the policy to any one other than herself or her attorneys, claiming that both assignments to the Bank were invalid on the ground that they were executed by Alfred Kegan when mentally incompetent and that her apparent signatures to the assignments were not genuine and not made by her authority; and she also then claimed the right to make the election among the three non-forfeiture options as the beneficiary (and therefore the alleged "holder") of the policy; and pursuant thereto she elected to take extended term insurance, which position, if sound, would have entitled her to claim the full face amount of the policy, $30,000. The plaintiff further alleged that it disputed her right to do so on the ground that she was not at that time the "holder" of the policy even if the assignments were invalid; and that at the time of the death of the said Alfred Kegan the policy was in force only as a paid-up policy in the amount of $13,035 and no more, which amount the insurer was ready and willing to pay to whomsoever is entitled thereto. A photostatic copy of the policy with various endorsements thereon and with copies of the assignments referred to was filed as an exhibit with the bill.

The bill further averred that Carrie B. Kegan had brought suit against the plaintiff in the Superior Court of Baltimore City; and that the attorneys for the Bank threatened to institute suit against the plaintiff in Virginia to collect the aforesaid sum of $13,035; and that in consequence the plaintiff was in danger of double vexation in respect to one liability, and in danger of suffering irreparable injury and loss, as it could not safely pay to either of the claimants without the aid of this court; and that it had filed its approved bond in the case in the amount of $30,000. The bill prayed that the defendants be required to interplead with respect to the claims of money due under the policy; and for an injunction against the prosecution of the pending and threatened suits; and that the plaintiff and its bond be released "from all further liability on account of said policy, upon a proper determination being had as to the amount due thereon, and by the payment by the plaintiff Company of the same."

It thus appears from the bill that the maximum liability of the plaintiff on its policy of life insurance is $30,000, but that one defendant, a citizen of Virginia (for federal judicial jurisdictional purposes), is claiming $13,035 from the plaintiff, and the other defendant, a citizen of Maryland, is claiming $30,000 under the same policy; and thus the plaintiff is subject to double vexation for the one obligation. It also appears that the essential controversy between these two adverse claimants is which one was to be treated as the "holder" of the policy on the death of the insured, Alfred Kegan; and as to this the plaintiff is not disinterested in the result because if the Bank is determined to have been the holder the plaintiff's liability is only $13,035, but if Mrs. Kegan was the "holder" the liability may be $30,000. It is further apparent that the plaintiff's case for interpleader is clearly within the provisions of the statute, unless its interest in the result is sufficient to debar it from the benefit of the statute; and if so debarred the plaintiff may possibly be required to pay $43,035 on an obligation limited to $30,000.

The motion to dismiss is based on the grounds (a) that the bill is not a bill of interpleader because the plaintiff "has a direct substantial interest in the issues of fact alleged to be disputed by and between it and the defendants and by and between the defendants" and (b) "is not a bill in the nature of an interpleader since it alleges no facts constituting grounds for equitable relief other than the fact that the plaintiff is liable to double vexation."

The equitable remedy of interpleader has long been a well known ground of equity jurisdiction. Apart from the special Federal Interpleader Statute, it is maintainable in the district courts under the general provisions of the United States Code, title 28, § 41(1), 28 U.S.C.A. § 41(1), where the jurisdictional amount of over $3,000 and diverse citizenship of the parties exist. Mallers v. Equitable Life Assur. Soc. of United States, 7 Cir., 87 F.2d 233; Klaber v. Maryland Casualty Co., 8 Cir., 69 F.2d 934, 937, 106 A.L.R. 617; Penn Mutual Life Ins. Co. v. Meguire, D.C., 13 F.Supp. 967, 972; Turman Oil Co. v. Lathrop, D.C., 8 F.Supp. 870, 873. Compare Eagle, Star & British Dominions v. Tadlock, D.C.Cal., 14 F.Supp. 933, 940. But where the rival claimants to the fund were citizens of and resided in different States there was no available procedure whereby they could be sued in an interpleader suit in any one district court by reason of the venue statute, and because there was no provision in such a case for service of process on the non-resident claimant; and, also because state court suits generally could not be enjoined by the federal courts. Klaber v. Maryland Cas. Co., 8 Cir., 69 F.2d 934, 937, 106 A.L.R. 617. The procedural difficulty was illustrated by New York Life Ins. Co. v. Dunlevy, 241 U.S. 518, 36 S.Ct. 613, 60 L.Ed. 1140. See, also, Sanders v. Armour Fertilizer Works, 292 U.S. 190, 194, 54 S.Ct. 677, 78 L.Ed. 1206, 91 A.L.R. 950. To remedy this situation the first Federal Interpleader Act was passed by Congress February 22, 1917, c. 113, 39 Stat. 929, and amended February 25, 1925, c. 317, 43 Stat. 976; but it was of limited scope, and was again amended and somewhat expanded by the Act of May 8, 1926, c. 273, § 4, 44 Stat. 417, codified...