United States v. Sentinel Fire Ins. Co.

• Decision Date: 02 December 1949
• Docket Number: No. 12513.,12513.
• Citation: 178 F.2d 217
• Parties: UNITED STATES et al. v. SENTINEL FIRE INS. CO. et al.
• Court: U.S. Court of Appeals — Fifth Circuit

178 F.2d 217 (1949)

UNITED STATES et al. v. SENTINEL FIRE INS. CO. et al.

No. 12513.

United States Court of Appeals Fifth Circuit.

August 13, 1949.

Rehearing Denied December 2, 1949.

COPYRIGHT MATERIAL OMITTED

Theron Lamar Caudle, Asst. Atty. Gen., George A. Stinson, Ellis N. Slack, Helen Goodner, Sp. Assts. to Atty. Gen., Joseph E. Brown, U. S. Atty., Jackson, Miss., for the United States.

Daniel E. Breland, Weaver E. Gore, John G. Burkett, Jackson, Miss., for appellants Breland and Pyles.

John Harvey Thompson, Thomas H. Watkins, Jackson, Miss., for appellees.

Before HUTCHESON, SIBLEY, HOLMES, McCORD, and WALLER, en banc. (Judge LEE not participating.)

WALLER, Circuit Judge.

This interpleader suit, by Sentinel and six other fire insurance companies, was purportedly brought under the Federal Interpleader Statute, Sec. 41(26), Title 28 U. S.C.A., as amended January 20, 1936,¹ and as supplemented by Rule 22(1) and (2) of Federal Rules of Civil Procedure, 28 U.S.C.A.,² against William Harold Davis, doing business as Radolite Manufacturing Company, the insured; J. C. Stennett, Receiver in Bankruptcy of Davis; Rosenthal Plywood Sales Company, mortgagee of Davis; Bradshaw and Hoover, insurance agents; Pyles and Breland, attorneys and assignees from Davis of the proceeds of the policies; Eugene Fly, Collector of Internal Revenue of the United States for the State of Mississippi. The plaintiffs were all citizens of different states from all of the defendants, and there was also the requisite diversity of citizenship among the claimants.³ Plaintiffs alleged that each of them had in its custody or possession money in excess of $500 which it was obligated to pay under policies of insurance each in an amount in excess of $500; that there were two or more adverse claimants to such money, citizens of different states, claiming to be entitled to the money or to one or more benefits arising by virtue of the policies of insurance; that each complainant insurance company had deposited in the registry of the Court the sum of $2,078.43, with the exception of one company which deposited $1,662.74; that complainants believed that the defendants named constituted all parties having, or claiming, any of the proceeds of the policies of insurance; that the complainants were without interest in the controversy but were merely disinterested stakeholders desiring to make payments to the person or persons entitled thereto and to avoid double liability, as well as the necessity of defending suits brought by one or more of said adverse claimants, to prevent which an injunction was sought in conformity with the statute.

Those allegations were fully established by the following facts:

Davis, the insured, who was the owner and operator of saw mills, had executed and delivered a mortgage to Rosenthal Plywood Sales Company on these mills to secure present and future indebtedness. Some of the property covered by the fire insurance policies was damaged or destroyed by fire. There was an adjustment of the fire damage and the amounts claimed in the proofs of loss have been deposited in Court, and there is no controversy on that issue.

The mortgagee claims that under Sec. 5695, Miss.Code of 1942, providing for loss payable clauses to mortgagees in fire insurance policies, it is entitled to the proceeds of the policies. The Collector of Internal Revenue asserted a lien on the funds for unpaid income taxes. Bradshaw and Hoover, insurance agents, interposed a claim of $2,690.14 for unpaid premiums on the insurance policies. Davis went into bankruptcy after the fire and the receiver in bankruptcy also set up a claim to the funds. Pyles and Breland claimed the entire proceeds of the policies by virtue of an assignment made to them by the insured between the dates of the fire and bankruptcy.

The claim of the receiver in bankruptcy was adversely adjudicated early in the proceedings, but that of the insurance agents for the amount of the premiums was sustained and paid. Upon final hearing the lower Court sustained the interpleader and held that the mortgagee, by virtue of the Mississippi statute Sec. 5695, supra, was entitled to the entire proceeds of the policies, less costs, attorneys' fees, and agents' premiums — since the mortgage indebtedness was greatly in excess of the amount due under the policies.

Appeals were taken by the Collector of Internal Revenue, and by the assignees, Pyles and Breland, with Rosenthal Plywood Sales Company and the insurance companies as appellees. At the time of the oral argument before this Court announcement was made that the United States had collected its indebtedness in full from another source and its appeal was thereupon dismissed, leaving as claimants before this Court only the mortgagee, Rosenthal Plywood Sales Company, and the assignees, Pyles and Breland. After the announcement of the disposition of the claim of the United States, counsel for Pyles and Breland abandoned objections and argument as to the propriety of the interpleader suit, and thereupon the contest between these two remaining and rival claimants to the fund centered chiefly on the questions as to whether or not the provisions of Sec. 5695, supra, have the effect of automatically writing a loss payable clause in favor of the mortgagee into each fire insurance policy covering property embraced in a mortgage, and as to what bearing, if any, the aforementioned statute has as to the action of six of the fire insurance companies in attaching loss payable clauses to these policies in favor of the mortgagee in compliance with the unilateral request to the insurers by the attorney for the mortgagee before the date of the fire.

When a divergence of opinion arose among the members of the panel of the Court that heard the initial argument, the case was then referred to the Court en banc, before which the case was reargued.

On the reargument counsel for the assignees conceded that they had theretofore attempted to waive all questions as to the propriety of the interpleader^3a suit and that such waiver was effective provided the Court had jurisdiction, which they then insisted was absent and could not be waived. Therefore, the question of jurisdiction stands at the threshold of our consideration and should be disposed of first since an absence of jurisdiction of the interpleader suit would dispose of the case.

Apropos this subject it is noted that no question was argued before us as to the amount of the fire loss nor as to any failure of the insurance companies to tender into Court the sum of $14,133.33, the entire amount of the loss as shown in the proofs as submitted by the insured. Unless there is a claim in the pleadings of double liability against the insurance companies under the policies of insurance, no single interpleader plaintiff had a liability in excess of $3,000 such as would have been requisite had the suit been brought as one in strict interpleader under the law in effect prior to the enactment of the Federal Interpleader Statute or the adoption of Federal Rules of Civil Procedure 20(a), 22(1) and (2). This, however, was not brought as a suit in strict interpleader under the ancient rules of practice but was in complete conformity with the provisions of the Federal Interpleader Statute as amended in 1936⁴ and as supplemented by Rule 22, F.R.C.P., and in effect at the time of the bringing and disposition of the suit in the lower Court, which require that:

1. Plaintiff must have custody or possession of money or property, or must have issued a policy or other instrument having a value in excess of $500.

2. Two or more adverse claimants, who are citizens of different states, claim themselves to be entitled to such money or property or to one or more of the benefits arising by virtue of a policy or other instrument.

3. Deposit of such money or property, or the amount or value of such instrument, be made into the registry of the Court or bond given therefor.

4. Such suit be brought in the District Court where one or more of such claimants resides or reside.

The joinder of the plaintiffs under Rules 18(a), 19(a), 20, and 22(1) of F.R.C.P., whereby plaintiffs each assert a right to relief arising out of the same series of transactions or occurrences involving a question of law and fact common to all the plaintiffs, was proper. Each plaintiff had issued a policy of insurance having a value in excess of $500, all of which was claimed by Rosenthal Plywood Sales Company, a citizen of a state different from that of any other claimant, and each other claimant asserted a right to all or a part of the benefits of the insurance policies. The amount now admitted by all to be due for the fire loss was deposited into the registry of the Court, or the equivalent bond given therefor. The suit was brought in the district where one or more of the claimants resides or reside. The plaintiffs, although not required to do so,⁵ stood neutral as to the amount paid into Court. The claims of the conflicting claimants arising out of obligations of the insured to pay out of the proceeds of the policies a mortgage on the one hand and to pay attorneys' fees on the other, have a common origin, although the Court could have entertained the suits even though the claims were adverse to, or independent of, one another.⁶

We think that under Sec. 901 of Title 28 U.S.C.A.^6a, Sec. 2410, Title 28 U.S.C.A., New Judicial Code, the Court from the beginning of the litigation had jurisdiction of the United States. This section provided that: "Upon the conditions herein prescribed * * * the consent of the United States is given to be named a party in any suit which is now pending or which may hereafter be brought in any United States district court, * * * and in any State court having jurisdiction of the subject matter, to quiet title to or for the foreclosure of a mortgage or other lien upon real estate or personal property, for the purpose of securing an adjudication...