National Fire Ins. Co. v. Sanders

• Decision Date: 25 February 1930
• Docket Number: No. 5636.,5636.
• Parties: NATIONAL FIRE INS. CO. v. SANDERS et al. HARTFORD FIRE INS. CO. v. SAME.
• Court: U.S. Court of Appeals — Fifth Circuit

38 F.2d 212 (1930)

NATIONAL FIRE INS. CO. v. SANDERS et al.^*

HARTFORD FIRE INS. CO. v. SAME.

No. 5636.

Circuit Court of Appeals, Fifth Circuit.

February 25, 1930.

Will C. Thompson, of Dallas, Tex. (Thompson, Knight, Baker & Harris, of Dallas, Tex., on the brief), for appellants.

Alfred McKnight, of Fort Worth, Tex. (W. C. Kirk, of Chicago, Ill., and Warren Scarborough and Cantey, Hanger & McMahon, all of Fort Worth, Tex., on the brief), for appellee Armour Fertilizer Works.

Alvin H. Lane, of Dallas, Tex. (Rodgers & Rodgers, of Texarkana, Tex., and Winfrey & Lane, of Dallas, Tex., on the brief), for appellee W. D. Sanders.

Rollin W. Rodgers, of Texarkana, Tex. (Rodgers & Rodgers, of Texarkana, Tex., and Winfrey & Lane, of Dallas, Tex., on the brief), for appellee Mrs. W. D. Sanders.

Before WALKER and FOSTER, Circuit Judges, and DAWKINS, District Judge.

FOSTER, Circuit Judge.

These two cases were consolidated for trial and on appeal. The facts are not disputed, are practically identical, and the suits may be disposed of as one case.

Appellants are insurance companies organized under the laws of Connecticut. They had issued policies to W. D. Sanders, a citizen of Texas, residing within the jurisdiction of the District Court, and covering a dwelling house owned by him, situated in De Kalb, Texas. The building was destroyed by fire, and eventually the insurance was adjusted by appellants at $3,400, and $4,250, respectively.

After the fire, but before the adjustment, the Armour Fertilizer Works, hereafter called Armour, a corporation organized under the laws of Illinois and domiciled in Chicago, filed suit in the municipal court of Chicago against Sanders to recover on certain promissory notes, amounting in principal and interest to $7,589.81. Jurisdiction was obtained by publication and attachment, on the ground of nonresidence, secured through garnishment proceedings against appellants. Sanders did not appear and judgment by default was entered against him. Judgment had not been entered against appellants as garnishees when these suits were filed.

Sanders advised appellants that the building covered by the policies constituted his homestead at the time of its destruction; that under the laws of Texas the proceeds of the policies were exempt from seizure and that he would hold them liable, notwithstanding any judgment rendered in the Armour suit.

Appellants filed their bills in the District Court impleading Armour and Sanders, invoking jurisdiction under and by virtue of the Act of February 22, 1917, as amended by the Act of February 25, 1925 (28 USCA § 41, subd. 26). The said act gives to any insurance company the right to file a bill of interpleader, on depositing the amount admitted to be due in the registry of the court, where the amount involved is $500 or more, and two or more adverse claimants, citizens of different states, are claiming to be entitled to the insurance. Jurisdiction is vested in the District Court within the jurisdiction of which one of the claimants resides. That court is given power to hear and determine the cause and discharge the complainant from further liability, to enter all necessary orders and decrees, and to issue such writs as may be proper, customary, and convenient to carry out and enforce the decree.

Armour answered, objecting to the jurisdiction of the court and praying for the dismissal of the bill; and, in the alternative, it prayed that the amount deposited be awarded to it. Sanders filed answer claiming the proceeds of the policies as exempt under the laws of Texas. Mrs. Sanders, his wife in community, intervened, asking the same relief as her husband. The intervention may be dismissed from further consideration as immaterial.

After a hearing the District Court reached the following conclusions, as appears from a memorandum opinion in the record, 33 F.(2d) 157. That the statute does not enlarge the functions or application of the equitable principles of interpleader; that the controversy is not one between adverse claimants, as Armour claims through Sanders; that the Illinois court had gotten possession of the res and had jurisdiction over it to the exclusion of any other court; that its judgment would afford complete protection to appellants, and therefore they have an adequate remedy at law. For these reasons the bills were dismissed for want of jurisdiction.

As to the first-mentioned conclusion, reliance is had on Calloway v. Miles (C. C. A.) 30 F.(2d) 14. It may be conceded that the statute does not enlarge the equitable right of interpleader, but neither does it restrict it. It is not necessary to seek any enlargement of equitable right from the statute in this case. It is a fundamental principle of interpleader that its office is not so much to protect a party against double liability as against double vexation in respect of one liability. It is immaterial whether the danger apprehended comes from suits pending or merely threatened. In either case, a court of equity having jurisdiction over the parties may enjoin the institution or further prosecution of the suits and grant adequate relief to the stakeholder and the adverse claimants of the fund. Pomeroy's Equity Jurisprudence (4th Ed.) par. 1320; Street's Federal Equity Practice, par. 2236. Calloway v. Miles, supra, is not persuasive as it does not give effect to the fundamental principle of interpleader, that a bill will lie to protect a party against double vexation.

It would seem to be of little concern to the District Court whether the res had been impounded by the Illinois court or not, as it has a fund in its own hands to award to either of the claimants, but we do not think that the attachment and garnishment proceedings vested jurisdiction of the res in the Illinois court. If the Illinois suit were truly an action in rem it would be...