Case Title: 1ST NAT L BANK OF CIRCLE v GARNER

Citation: 

Docket Number: 

State: montana

Court: Montana Supreme Court

Date: 1977-07-26T00:00:00Z

Document:
No. 13441 IN THE SUPREME COURT OF THE STATE OF MONTANA 1977 FIRST NATIONAL BANK OF CIRCLE, Circle, Montana, Plaintiff and Appellant, -vs- GRAHAM CHARLES GARNER and SYDNEY MORRIS et al., Defendants, Graham Charles Garner and Sydney Morris et al., Cross Plaintiffs, -vs- FEDERICO CRUZ, et al., Cross Defendants, Frederico Cruz , Cross-Plaintiff, -vs- BERNARD GADD , Cross-Defendant. Appeal from: District Court of the Seventh Judicial District, Hon. C.B. Sande, Judge presiding. Counsel of Record: For Appellants: Towe, Ball & Enright Thomas Towe argued, Billings, Montana For Respondents : George Dalthorp argued, Billings, Montana Crowley, Kilbourne, Hanson, Gallagher & Toole, Billings, Montana Gene Huntley, Baker, Montana J.B. Casas, Jr., Los Angeles, California Submitted: March 21, 1977 Yr. jusrice Gene 3 . Daly delivered the Opinion of the Court. P l a i n t i f f , F i r s t National Bank of Circle, Circle, Montana, filec; t h i s action on May 22, 1972, i n the d i s t r i c t court, McCone dounty, f o r a declaratory judgment t o determine i t s l e g a l obliga- Lions regarding c e r t a i n bank deposits and c a s h i e r ' s checks. 3 1 1 W a y 6 , 1975, p l a i n t i f f ' s motion f o r summary judgment was granted, p l a i n t i f f then f i l e d a motion f o r award of attorney fees. This motion was denied on May 5 , 1976 and from t h a t denial p l a i n t i f f appeals. I n 1971, D r . Federico Cruz acquired control of the B r i t i s h .4merican Bank Limited of the Bahamas. D r . Cruz was president ; I £ the bank when i t s license was suspended by the government oi tlhe Bahamas i n early 1972. O n March 23, 1972, D r . Cruz, cepresenting himself t o be the president of the British-American Yank, Ltd.(Glasgow, scotland), opened a corporate checking account with p l a i n t i f f F i r s t National Bank of Circle, Montana. de presented checks endorsed t o the B r i t i s h American Bank Limited from depositors located a l l over the world, i n the approximate rlinount of $1,600,000.00. O n May 8, 1972, the account balance was approximately $1,542,868.01 and D r . Cruz requested a with- drawal of $1,327,788.00. The Circle Bank issued cashier's checks t o him personally t o t a l i n g t h i s amount. O n M a y 15, 1972, the Circle Bank received a telephone c a l l and a celegram from a Bernard Gadd who informed the Circle Bank he had been appointed Provisional Liquidator f o r the British- American Bank,Ltd., on May 11, 1972, and demanded the Circle Bank stop payment on the c a s h i e r ' s checks issued t o D r . Cruz on !day 8, 1972. Gadd l a t e r demanded t h a t a l l remaining funds be Lro~erl and returned t o him. M a y 15, 1972, was the f i r s t notice co the Circle Bank of such liquidation proceedings. O n May 22, 1972, the Circle Bank f i l e d t h i s action against deielldarlts. Although the action was styled "Complaint f o r 9eclaratory Judgment!', the d i s t r i c t court treated it a s an interpleader. The Circle Bank asked the d i s t r i c t court (1) t o ddjudicate i t s legal obligations t o defendants regarding the bank deposits and cashier's checks, (2) f o r a determination whether it should freeze the account and stop payment on the cashier's checks, and (3) f o r reasonable attorney fees and costs. D r . Federico Cruz f i l e d a counterclaim demanding damages against the Circle Bank f o r the face amount of the c a s h i e r ' s zhdcks, which D r . Cruz alleged were wrongfully dishonored by the i l r c l e Bank. The Liquidator f i l e d a counterclaim f o r a f u l l accounting of a l l monies deposited i n the Circle Bank i n the name of the British-American Bank Ltd. O n November 1, 1972, the Circle Bank f i l e d a motion f o r the discharge of i t s e l f and i t s o f f i c e r s . After a lengthy l i t i g a t i o n process, on May 7, 1975, the d i s t r i c t court ordered: "yc 9~ t h a t the motions f o r summary judgment of the F i r s t National Bank of Circle a r e i n a l l respects granted and t h a t the motion f o r summary judgment of the B r i t i s h American Bank Limited and the O f f i c i a l Liquidators thereof against Federico Cruz a r e granted with respect t o a l l matters dealt with herein and with respect t o the ownership of the funds i n the custody of the Court * * *.I' Jw11drship was granted t o the O f f i c i a l Liquidator. All questions !were s e t t l e d , except f o r the F i r s t National Bank of C i r c l e ' s :lain1 f o r attorney fees. P l a i n t i f f presents one issue for review by t h i s Court-- whether p l a i n t i f f F i r s t National Bank of Circle i s e n t i t l e d t o attorney fees and costs t o be paid out of t h e interpleader fund? To answer t h i s question the Court must decide whether the Circle Bank was a disinterested stakeholder, I f the stakeholder does not stand indifferent between the claimants, it i s not entitled t o an allowance for attorney fees. Defendant Bernard Gadd contends t h i s action was not an interpleader and that plaintiff had an interest in keeping the funds i n i t s bank as long as possible. This Court i n Central Montana Stockyards v. Fraser; 133 Mont, 168, 193, 320 P.2d 981, stated: "'An attitude of perfect disinterestedness, excluding even an indirect interest on the part of the p l a i n t i f f i s indispensable to the maintenance of the b i l l [of interpleader! * J c *. "' However, Rule 22(a), M.R.Civ.P., removes t h i s restriction and expressly provides it i s not a ground for objection when a plaintiff in an interpleader action avers he i s not l i a b l e i n whole or in part to any or a l l of the claimants. Since the award of costs and attorney fees i s within the discretion of the court, such award i s commonly denied when the stakeholder, although disinterested, i s i n some way culpable as regards the subject matter of the interpleader proceeding, but not sufficiently culpable to warrant denial of interpleader altogether. Merrimack Manufacturing Co. v. Bergman, 154 F.Supp. 688. Plaintiff contends the reason it did not f i l e a s t r i c t interpleader action was to make sure t h i s money would continue t o receive interest. The money did receive interest i n the amount of approximately $345,000.00. Defendants, on the other hand, con- tend p l a i n t i f f ' s motive was not a l l that a l t r u i s t i c . They f e l t the bank's reason for not f i l i n g an interpleader was t o keep the funds as a deposit i n i t s bank as long as possible. The record shows a motion was made demandi~ig t h a t p l a i n t i f f pay i n t o the registry of court o r deposit for safekeeping i n a bank not a pal-ty t o t h i s action, designated by the court, a l l sums in the dccount i n question. The F i r s t National Bank of Circle r e s i s t e d the t r a n s f e r 02 the funds from i t s custody, arguing t h a t it should be released from a l l l i a b i l i t y i n consideration of i t s releasing the funds. 3n Wovember 6 , 1972, the funds were ordered transferred t o the jecurity Trust and Savings Bank of Billings, Montana. During t h e period the p l a i n t i f f had control of the funds, 4Zron1 :<larch 23, 1972, u n t i l they were paid over t o the Security Crust and Savings Bank, the p l a i n t i f f paid an i n t e r e s t r a t e of 4% compounded quarterly. The Security Trust and Savings Bank paid an i n t e r e s t r a t e of 5 118% compounded quarterly. A t 4% the o r i g i n a l deposit would have produced $7,700 i n t e r e s t during rhe period from the date of the i n i t i a l deposit, March 23, 1972, t o the date of the f i l i n g of the action, May 22, 1972. During t h i s period p l a i n t i f f Circle Bank paid no i n t e r e s t on the funds, thus f o r t h i s period it had the use of t h i s money i n t e r e s t f r e e to invest as it saw f i t . It appears from the d i s t r i c t court record t h a t p l a i n t i f f was i n no hurry t o release the funds. M r . Towe, attorney f o r plain- t i f f stated: ''We are not anxious t o release the funds u n t i l we receive discharge, a t l e a s t f o r the l i a b i l i t y . " Thus it seems p l a i n t i f f i n t h i s action was not a disinterested stakeholder. The Circle Bank indicated before it would release these funds it desired further protection from the court i n exon- erating it from any l i a b i l i t y . When the action is not one of s t r i c t interpleader, and p l a i n t i f f i s more than a mere stakeholder, attorney fees a r e not allowable. Metropolitan Life Insurance Co. v. Enright, 231 F.Supp. 275, 278. I n t h i s case the record reveals the Circle Bank was not a disinterested stakeholder. The Bahama Bank Liquidator was attempting t o hold p l a i n t i f f l i a b l e f o r $97,000 withdrawn from the account p r i o r t o the time the liquidation procedure started. Such a claim can hardly be characterized a s a minor p a r t of t h e l i t i g a t i o n . Circle Bank had a great deal riding on the outcome of t h i s l i t i g a t i o n . It i s generally recognized t h a t when a party interpleading claimants t o funds o r property disputes the amount of the fund o r t o the extent of the property, has some other substantial i n t e r e s t i n the subject matter o r the outcome of the l i t i g a t i o n , o r does not stand indifferent between t h e claimants, he stands on the same footing a s any other l i t i g a n t and i s not e n t i t l e d t o an allowance f o r attorney fees. Groves v. Sentell, 153 U.S.465, 14 S.Ct. 898,:38 L ed 785. Where a p l a i n t i f f has placed himself i n a position necessitating interpleader t o avoid double vexation, he i s not e n t i t l e d t o attorney fees. Gresham S t a t e Bank v. 0 and K Con- struction Co., 231 O r . 106, 370 P.2d 726. Here, it appears from the record p l a i n t i f f used l e s s than prudent banking practices i n handling t h i s account. O n March 24, 1972, Edward Towe, president of the Circle National Bank called the Office of the Comptroller of the Treasury i n Washington D. C. t o make sure D r . Cruz was president of the BritSsh-American Bank, Ltd., of Scotland. H e never received a response and no further inquiries were made. Subsequently p l a i n t i f f issued $1,327,788.00 i n cashier's checks t o D r . Cruz a t h i s request, including one check i n the sum of $914,288.00 payable personally t o D r . Cruz, out of the account regiseered L n the name of the British-American Bank, Ltd., of Scotland without further confirmation. These c a s h i e r ' s checks 5ecame an issue in the lawsuit and i n the p l a i n t i f f ' s plead.ings it asked the court t o adjudicate the r i g h t s and obligations of defendants t o the funds represented by the cashier's checks. To deny the award of counsel fees t o the stakeholder w i l l not 5e to leave i t s attorney uncompensated. It simply represents a decision t h a t a l l or part of the fees incurred by the stake- holder should be paid out i t s pocket, rather than out of the pocket of the prevailing claimant. 3 A Moore's Federal Practice $~22.16[2], p. 3144, s t a t e s : "The prevailing principle i n interpleader actions brought i n the federal courts, whether under the interpleader s t a t u t e o r under Rule 22(1), i s t h a t it i s within the discretion of the court t o award the stakeholder costs including a reasonable attorneys' fee out of the deposited fund." The d i s t r i c t court did not abuse i t s discretion i n denying attorney fees t o the F i r s t National Bank of Circle. The judgment of the d i s t r i c t court i s affirmed, J u s t i c e chief J u s t i c e / ' I Justices.