Title: Lawhorne v. Employers Ins. Co.

State: maryland

Issuer: Maryland Supreme Court

Document:

Karen M. Lawhorne et vir. v. Employers Insurance Company of Wausau,
No. 78, September Term, 1995.
[Interpleader - Interest - Liability insurer initiated interpleader
between bodily injury claimants without depositing net policy
limits.  Rule 2-221 does not require deposit of fund until ordered
by court.  Held:  Interest not payable on amount of fund while held
by insurer from interpleader institution to deposit with court.] 
Circuit Court for Anne Arundel 
County Case #3109960/C-92-11520
IN THE COURT OF APPEALS OF MARYLAND
No. 78
September Term, 1995
____________________________________
KAREN M. LAWHORNE et vir.
v.
EMPLOYERS INSURANCE COMPANY 
OF WAUSAU
____________________________________
Murphy, C.J.
Eldridge
Rodowsky
Chasanow
Karwacki
Bell
Raker, 
JJ. 
____________________________________
Opinion by Rodowsky, J.
____________________________________
Filed:  August 2, 1996
Presented here is an interpleader action brought by an
automobile liability insurer faced with multiple claims against an
insured that exceeded the limits of the insuredUs coverage.  The
issue is whether the claimants are entitled to interest on
$849,680.16 for the period of more than two years that elapsed from
the filing of the interpleader action to the payment of that sum
into court, a delay principally caused by the bankruptcy of the
insured.  The circuit court would not order prejudgment interest,
and the Court of Special Appeals affirmed in an unreported opinion
by a divided panel.  We granted the claimantsU petition for
certiorari in order to consider this issue. 
The insurer and original plaintiff in interpleader is the
respondent, Employers Insurance Company of Wausau (Employers).  The
automobile accident underlying the interpleader action occurred on
November 27, 1984.  For a period encompassing that date Employers
had issued a business automobile policy to Beltran Corporation
(Beltran) of Acton, Massachusetts and to its subsidiaries,
including Acton Foodservices Corporation (Acton), as additional
named insureds.  The accident occurred in Cecil County, Maryland
when a tractor trailer truck, operated on behalf of Acton by its
employee, Louis Wallace Powell (Powell), pulled into the roadway of
U.S. Route 301 at its then foggy intersection with Route 299.  A
pickup truck, towing a horse trailer with two horses and proceeding
on U.S. Route 301, crashed into the tractor trailer.  Petitioner
Karen M. Lawhorne, then wife of petitioner Darrell F. Lawhorne, was
-2-
     We were advised at oral argument that Mrs. Lawhorne died
1
after the partiesU briefs were filed in this Court.  Although we
find no indication that a person has been substituted for Mrs.
Lawhorne as a party, see Maryland Rules 8-401(b) and 2-241, Mr.
Lawhorne, one of the petitioners, has standing in his own right, as
an original defendant in the interpleader action, to pursue the
appeal.  
In this opinion we shall refer to the applicants for review in
this Court, as "the petitioners" or "the Lawhornes."
a passenger in the pickup truck.  Mrs. Lawhorne suffered totally
disabling injuries as a result of the accident.   Two other persons
1
in the pickup truck suffered bodily injuries in the accident, the
operator, Kelley Ann Corrigan, and her mother, Mary Anna Corrigan.
The Lawhornes sued Acton and Powell in December 1985 in the
Circuit Court for Anne Arundel County.  Employers undertook
defense.  Unknown to the Lawhornes and to Employers, Acton had
filed a petition for bankruptcy in Massachusetts in June 1985.  
The record is unclear as to whether Acton was the subject of
one, or more than one, bankruptcy proceeding and, if more than one,
precisely when any earlier proceeding terminated and any later
proceeding commenced.  It is clear, however, that on or about April
17, 1986, Beltran and various of its subsidiaries filed petitions
under the Bankruptcy Code which were consolidated in the District
of Massachusetts and that the consolidated proceedings included
Acton.  There is also an evidentiary conflict over the earliest
date as of which Employers was on notice that Acton was in
bankruptcy.  Imprecision and conflicts on these aspects of the
-3-
     Part IV.A.2 of the Employers policy in part states:  "Our
2
payment of the LIABILITY INSURANCE limit ends our duty to defend or
settle."  This aspect of interpleader actions filed by liability
insurers is not involved in the issue before us, and we intimate no
opinion thereon.  Some of the legal problems involved in
interpleaders brought by liability insurers are discussed in
Morris, The Use of an Interpleader Action to Resolve Multiple
Claims from One Accident, 51 Ins. Council J. 99 (Jan. 1984).
matter before us are immaterial, in view of our ground of decision,
explained below.
Employers filed the subject interpleader in the Circuit Court
for Anne Arundel County on April 27, 1987.  It named as defendants
EmployersU insureds, the bodily injury claimants, and property
damage claimants, including a subrogated insurer.  The complaint
alleged that Employers "will pay into the registry of this Court
the sum of $1,000,000.00, less credit for payments heretofore made
...."  The relief requested by the complaint included a court order
"directing and authorizing [Employers] to deposit with the Clerk of
this Court the sum of $1,000,000, less credit for amounts
previously paid ... and, upon such payment, [discharging Employers]
from any and all further obligations under the terms of its policy
of insurance."   Employers requested that the defendants be ordered
2
to "interplead and settle among themselves their rights and claims"
to the amount payable under the liability policy, and that the
defendants be enjoined from instituting or further prosecuting
actions arising out of the accident.
Answering the complaint for interpleader in June 1987, the
Lawhornes raised no objection to the use of interpleader and
-4-
requested that the "appropriate sum" be paid into court and
invested in an interest-bearing account(s).  Employers did not
deposit the balance of the liability coverage with the court, and
no party at that time sought a court order requiring the deposit.
Almost two years later, on May 30, 1989, the Lawhornes moved
for an order directing Employers to deposit the balance of the
policy limits in court.  By an order of June 29, 1989, the circuit
court directed Employers to deposit that balance, namely,
$849,680.16.  During the pendency of the interpleader Employers had
settled the property damage claims and had advanced $81,324.31 for
the care of Mrs. Lawhorne.  The order directing deposit of the
balance further directed the court clerk to make a distribution of
that balance to the bodily injury claimants in specified amounts
upon which they obviously had agreed.  Employers paid the balance
into court on the day immediately following passage of the order to
deposit.  The Lawhornes and their counsel received $712,180.16.  
During the period between the filing of the interpleader and
the deposit of the funds, the parties to the interpleader, and
others, were occupied in efforts to settle the tort claims.  These
settlement negotiations involved the trustee in bankruptcy of Acton
because, as explained below, the amount available under a policy of
liability insurance issued to a debtor against whom tort claims are
asserted is an asset of the debtorUs bankruptcy estate.  Further,
inasmuch as Employers was willing to pay policy limits, Employers
advised the Lawhornes to negotiate with ActonUs excess liability
-5-
carrier, Mission Insurance Company (Mission), a California-based
insurer.  In late 1986 or early 1987 Mission was placed in
liquidation 
in 
California. 
 
Consequently, 
the 
settlement
negotiations expanded beyond the parties to the interpleader action
and ActonUs trustee in bankruptcy to include the liquidator of
Mission and the Massachusetts Insurance Insolvency Fund (MIIF).  
The lengthy negotiations led to a structured settlement under
which EmployersU contribution was to be an annuity for Mrs. Lawhorne
purchased from an affiliate of Employers.  When the settlement
agreement was circulated for signature, however, the Acton trustee
concluded, after analyzing claims and assets of the bankruptcy
estate, that Acton could not fund its portion of the settlement.
In addition, MIIF advised that it did not provide the level of
coverage that had been anticipated.  The long awaited settlement
fell through.
The Lawhornes then concentrated their efforts on lifting the
bankruptcy stay.  It was lifted by the Bankruptcy Court on May 15,
1989.  There followed in this interpleader action the LawhornesU
motion for an order directing the deposit of funds, described
above, and a counterclaim by the Lawhornes seeking interest on the
net of the liability policy limits.  That counterclaim was decided
favorably to Employers on its motion for summary judgment.  That
interest issue, however, was not resolved until May 1994, for
reasons that are not relevant to the instant matter.  
-6-
Petitioners contend that prejudgment interest is awardable in
this case under:  (1) the law governing interpleader actions; (2)
Maryland Code (1974, 1995 Repl. Vol.), § 11-301 of the Courts and
Judicial Proceedings Article (CJ); and (3) the law governing
constructive trusts.
I
Petitioners give the following explanation of their first
theory for prejudgment interest:
"The requested award does not derive from the mere act of
filing the interpleader action.  Nor do the Lawhornes
seek an award of interest based on an obligation to pay
interest, such as that created by a note or a loan.
Rather it is simply bedrock logic that leads to the
conclusion that the stakeholder should pay interest,
where it would be inequitable not to make it do so."
AppellantsU Brief at 14.  In support of this position petitioners
cite decisions from federal courts.  Analysis of petitionersU
argument begins with some background on interpleader in Maryland
and in federal practice.  
Chief Judge Murphy, writing for this Court in Farmers &
Mechanics NatUl Bank v. Walser, 316 Md. 366, 558 A.2d 1208 (1989),
reviewed the evolution of modern interpleader.  It "is derived from
the chancery practices of the eighteenth and nineteenth centuries
...."  Id. at 372, 558 A.2d at 1211.  During the nineteenth
century, due to the work by Professor Pomeroy, courts rather
rigidly considered that there were four requirements for a strict
bill of interpleader.  Id. at 373, 558 A.2d at 1211.  In addition
-7-
to a res claimed by two or more parties that was held by a
stakeholder who had no interest in the res nor any independent
liability to the claimants, "U[a]ll [the claimantsU] adverse titles
or claims must be dependent, or be derived from [a common] source."
Id. (quoting 4 J. Pomeroy, Equity Jurisprudence § 1322, at 906 (5th
ed. 1941)).  In Farmers & Mechanics NatUl Bank, we further explained
how "[t]he viability of the classic interpleader requirements was
further eroded" by Fed. R. Civ. P. 22 governing interpleaders.  316
Md. at 375, 558 A.2d at 1212.  That federal rule in part provides
that "[i]t is not ground for objection to the joinder that the
claims of the several claimants or the titles on which their claims
depend do not have a common origin or are not identical but are
adverse to and independent of one another ...."  Fed. R. Civ. P.
22.  We then pointed out that, in 1961 when this Court adopted
former Subtitle BU, "Interpleader," of the Maryland Rules of
Procedure dealing with Special Proceedings, the "rules established
a procedure for interpleader which was closely analogous to the
federal practice, drawing upon both the federal ruleUs language and
the case law which arose from it."  316 Md. at 379-80, 558 A.2d at
1214.  Interpleader in Maryland courts is now governed by Maryland
Rule 2-221.  
Rule 2-221(a) in part provides that "[a]n action for
interpleader or in the nature of interpleader may be brought
against two or more adverse claimants who claim or may claim to be
-8-
entitled to property."  An interpleader complaint "shall specify
the nature and value of the property and may be accompanied by
payment or tender into court of the property."  Id.  "After the
defendants have had an opportunity to answer the complaint and
oppose the request for interpleader," the court is to schedule a
hearing.  Rule 2-221(b).  Following the hearing the court is
authorized to enter an order with a variety of provisions, among
which is one directing 
"the 
original 
plaintiff 
(the 
party 
bringing 
the
interpleader action) to deposit the property or the value
of the property into court to abide the judgment of the
court or to file a bond with such surety as the court
deems proper, conditioned upon compliance by the
plaintiff with the future order or judgment of the court
with respect to the property[.]"
Rule 2-221(b)(3).  
There is authority from nineteenth century chancery practice
under which the plaintiff in interpleader "must bring the money or
thing claimed into Court, so that he cannot be benefitted by the
delay of payment, which may result from the filing of his bill."
Atkinson v. Manks & Holroyd, 1 Cow. 691, 704 (N.Y. 1823), an appeal
from the Court of Chancery.  Maryland Rule 2-221 changes that
practice.  Employers was not required to deposit the net available
insurance until ordered to do so by the court.  
Neither Md. Rule 2-221 nor Fed. R. Civ. P. 22 requires that
the res be deposited upon institution of a complaint for
interpleader.  On the other hand, one of the conditions for the
-9-
     Two of the major differences between rule and statutory
3
interpleader in the federal courts are in the areas of subject
matter and in personam jurisdiction.  Subject matter jurisdiction
in rule interpleader cases is based on the general federal question
and diversity of citizenship grants of jurisdiction.  Statutory
interpleader requires only a stake of $500 and diversity of
citizenship between two or more of the adverse claimants.  Further,
personal jurisdiction in a rule interpleader case is circumscribed
by the territorial limits in Fed. R. Civ. P. 4, while nationwide
service of process is available in statutory interpleader.  See 7
C. Wright, A. Miller & M. Kane, Federal Practice and Procedure
§ 1703 (2d ed. 1986).
     "The provision for payment into the registry of the court has
4
been included in each of the [federal] interpleader acts since 1917
...."  3A J. Moore, MooreUs Federal Practice ¶ 22.10, at 22-91 (2d
ed. 1995).  
conferral of jurisdiction on United States District Courts under
the Federal Interpleader Act is that the plaintiff have deposited
the money or property in the registry of the court, or have given
bond.  28 U.S.C. § 1335(a)(2).   Commentators on federal practice
3
have pointed out that, as a result of this difference "it may be to
the advantage of the stakeholder to bring suit under Rule 22(1)
...."  7 C. Wright, A. Miller & M. Kane, Federal Practice and
Procedure § 1703, at 499 (2d ed. 1986).  Because of this
difference, "it is possible that the stakeholder could have the use
of all or part of the disputed fund or property for a longer period
of time if he proceeds under Rule 22(1) rather than the statute."
Id.  
4
By way of further background, we note that the type of
interpleader presented here differs from strict nineteenth century
interpleader in that the adverse claims do not rest on a common
-10-
title.  The classical model may be illustrated by the life insurer
which initiates an interpleader over the death benefits payable on
the death of the insured, naming as defendants the originally
designated beneficiary and one designated in a change of
beneficiary that the original beneficiary challenges.  In the
illustration, the claims are mutually exclusive, so that if the
insurer pays the wrong claimant, it may be required to pay the same
obligation twice.
Justification for the type of interpleader utilized by
Employers in the instant matter is explained by Hazard & Moskovitz,
An Historical and Critical Analysis of Interpleader, 52 Cal. L.
Rev. 706 (1964).  The authors state:
"A more complicated but modernly more important type of
case is where a liability insurance carrier is confronted
with claims against its insured that exceed the limits of
the policy.  In this type of case, the middleman does not
face the risk of paying twice, for he is acquitted upon
payment.  There is a risk, however, that the members of
the group may be treated disproportionately, for if the
first to come forward is fully served, there may be
nothing left for the tail-enders.  It is unfair that a
group similarly situated be treated dissimilarly, and
especially that preference among them be shown to the
hoggish.  There is still more at stake in the typical
case of the liability policy, for the claims in such a
situation, 
being 
personal 
injury 
claims, 
are
indeterminate in amount in advance of settlement or
adjudication.  Because settling one share cuts down the
pie available for another, the settlement process easily
breaks 
down 
into 
a 
circular 
interdependency.
Interpleader invites supervision of settlement, and
enhances the possibility that trials may be avoided to
fix the shares."
Id. at 759 (footnotes omitted).  
-11-
     One federal court rejected the argument that pie-slicing
5
interpleader would not lie because the claimants did not have
adverse claims to each other, by observing as follows:
"It might, by the same reasoning, be said that 100
persons adrift in the ocean with but one small lifeboat
in sight were not adverse to each other.  We fear,
however, that the concept of non-adversity would dwindle
in direct proportion to the number of swimmers reaching
the boat."
Commercial Union Ins. Co. v. Adams, 231 F. Supp. 860, 863 (S.D.
Ind. 1964).
This type of interpleader has been described as involving
"pie-slicing" adversity.  Note, Can Statutory Interpleader Be Used
As A Remedy By the Tortfeasor In Mass Tort Litigation?, 90 Dick. L.
Rev. 439, 445 (1985).   The Court of Special Appeals has recognized
5
the use of pie-slicing interpleader by an officers and directors
liability insurer that was faced with a number of suits against its
insureds following the collapse of a savings and loan association.
See Faulkner v. American Casualty Co., 85 Md. App. 595, 619-25, 584
A.2d 734, 746-48, cert. denied, 323 Md. 1, 590 A.2d 158 (1991).  
Inasmuch as pie-slicing interpleader is recognized, not to
protect the insurer from double liability on the same claim, but to
attempt to avoid a multiplicity of suits, the question arises
whether pie-slicing interpleader may be invoked by a liability
insurer in a state that does not recognize direct actions by tort
claimants against the tortfeasorUs liability insurer.  That question
was answered for the federal courts by State Farm Fire & Casualty
Co. v. Tashire, 386 U.S. 523, 87 S. Ct. 1199, 18 L. Ed. 2d 270
-12-
(1967).  State Farm had coverage of $20,000 per occurrence on a
pickup truck that had collided in California with a Greyhound bus,
resulting in the deaths of two persons and bodily injuries to
thirty-five persons in addition to the operator of the truck.  The
insurer filed in Oregon under the federal interpleader statute.
The United States Court of Appeals vacated an injunction issued by
the trial court because Oregon did not permit direct actions
against insurance companies until judgments were obtained against
the insureds.  Id. at 528, 87 S. Ct. at 1202.  The Supreme Court
reversed, holding that, under the language of the statute in effect
since 1948, interpleader would lie "where adverse claimants Umay
claimU benefits as well as where they Uare claimingU them."  Id. at
532, 87 S. Ct. at 1204.
Maryland, like Oregon, is not a direct action state.
Washington Metropolitan Area Transit Auth. v. Queen, 324 Md. 326,
331, 597 A.2d 423, 425 (1991).  Indeed, since Chapter 204 of the
Acts of 1924, the Maryland Insurance Code has provided that 
"if an execution upon any final judgment against the
assured is returned unsatisfied ... in an action brought
by the injured ... then an action may be maintained by
the injured ... against the insurer under the terms of
the policy for the amount of any judgment recovered in
such action, not exceeding the amount of the policy ...."
Md. Code (1957, 1994 Repl. Vol.), Art. 48A, § 481.  The statute has
been interpreted to permit a direct action "[o]nce there is a
verdict or judgment in the tort action."  Queen, 324 Md. at 332,
597 A.2d at 426; see Allstate Ins. Co. v. Atwood, 319 Md. 247, 257,
-13-
572 A.2d 154, 159 (1990).  See also Bass v. Standard Accident Ins.
Co., 70 F.2d 86, 87-88 (4th Cir. 1934).
Further, Md. Rule 2-221, like 28 U.S.C. § 1335 (but unlike the
text of Fed. R. Civ. P. 22(1)), permits interpleader against
"adverse claimants who claim or may claim to be entitled to
property."  This inclusion of the "may claim" language in Rule
2-221 produces the result approved in State Farm v. Tashire, supra.
Interpleader in Maryland includes pie-slicing adversity between
claimants for personal injury damages. 
The foregoing analysis highlights the inconsistency between
petitionersU claim for prejudgment interest and the Maryland law
governing the award of prejudgment interest.  A claim against the
tortfeasorUs insurer would not even be recognized prior to judgment
and outside of interpleader, because of the direct action bar.  In
addition, the claim of one claimant may be contingent as to
liability, if another claimant, seeking an increase in that
claimantUs share of the pie, demonstrates that the stakeholderUs
insured is not liable to the first claimant.  Most important,
where, as here, the adverse claims are based on personal injuries,
the claims are unliquidated.  Maryland law does not recognize
prejudgment interest on tort claims for personal injuries, and it
is not assessed at the time the claims are liquidated by judgment.
In Taylor v. Wahby, 271 Md. 101, 314 A.2d 100 (1974), we
recognized "that the usual tort rule in regard to unliquidated
-14-
claims for damages [is] that interest runs from the time of the
verdict."  Id. at 113, 314 A.2d at 106.  Taylor was an action by a
real estate broker who successfully claimed tortious interference
with his listing contract, and the tort damages included the amount
of lost commission on which the trial court allowed prejudgment
interest.  Because the "claim was unliquidated and not reasonably
ascertainable until the verdict," this Court applied the usual tort
rule and reversed the award of prejudgment interest.  Id.  See also
I.W. Berman Properties v. Porter Bros., 276 Md. 1, 16, 344 A.2d 65,
74-75 (1975) (recognizing general tort rule); 4 Restatement
(Second) of Torts § 913(2) (1979) ("Interest is not allowed upon an
amount found due for bodily harm, for emotional distress or for
injury to reputation, but the time that has elapsed between the
harm and the trial can be considered in determining the amount of
damages."); 1 D. Dobbs, Law of Remedies § 3.6(1), at 336 (2d ed.
1993) ("[T]he general rule ... apart from statute, [is that]
prejudgment interest is not recoverable on claims that are neither
liquidated as a dollar sum nor ascertainable by fixed standards.").
Pie-slicing interpleader, involving adverse personal injury
claimants, merely anticipates judgments in favor of those claimants
against the tortfeasor, and anticipates that claims on those
judgments will then be asserted against the stakeholder.  That is
not a basis for permitting the recovery in interpleader of a form
-15-
of damages, i.e., prejudgment interest, that the claimants could
not recover at the conclusion of the underlying tort claims.
Further, absent a right, absolute or discretionary, to recover
prejudgment interest on the underlying tort claim, we are unable to
discern any basis for the obligation, claimed by the petitioners,
of the stakeholder to pay prejudgment interest.  If the adverse
claimants to the insurance fund were unable to get service on Acton
or Powell, they would not even be able to reach the insurance fund
by an attachment on original process.  Belcher v. Government
Employees Ins. Co., 282 Md. 718, 387 A.2d 770 (1978).  By
initiating an interpleader over the fund, Employers acknowledged
that it would pay the policy limits, and that it would deposit the
fund when it was required to do so under Md. Rule 2-221, i.e., when
the court ordered the deposit to be made.  Requiring the
stakeholder to pay interest on the policy limits for a period prior
to the court ordered deposit may, depending on the terms of the
policy, require the insurer to pay more than it has promised to pay
on behalf of the insured.  
In Nationwide Mut. Ins. Co. v. Mabe, 342 N.C. 482, 467 S.E.2d
34 (1996), the claimants in a pie-slicing interpleader sought
prejudgment interest, but the policy defined damages to include
prejudgment interest awarded against the insured.  467 S.E.2d at
38-39.  The effect was that prejudgment interest was subject to the
cap of the policy limits.  Id. at 40.  Alternatively, the court
-16-
considered prejudgment interest to be, independently of the
contract, a part of tort damages and subject to the policy limits.
Id.  
In the policy that Employers issued to Beltran and its
subsidiaries the relevant promise of Employers is as follows:
"In addition to our limit of liability, we will pay for
the insured:  
....
"5.
All interest accruing after the entry of the
judgment in a suit we defend.  Our duty to pay interest
ends when we pay or tender our limit of liability."
In other words, Employers promises to pay post-judgment interest in
excess of limits, but only up to the date when the policy limits
are paid or tendered.  The interest claim in the instant matter
seeks more than the policy provides.
If the adverse claimants in this interpleader action had
pursued their claims against the tortfeasors to judgment and then
brought an action against Employers for the amount of the judgment
recovered in the tort action, the recovery against Employers could
"not exceed[] the amount of the policy."  Art. 48, § 481.
Consequently, it would also be inconsistent with § 481 for us to
require prejudgment interest here.  
We glean from petitionersU arguments the contention that the
entire unpaid balance of the policy limits should be considered as
a fund in gross, that liability on the insurerUs part to pay the
fund is admitted by the filing of the interpleader, and that the
-17-
     Of course, once an interpleaded fund has been deposited,
6
"[t]he usual and general rule is that any interest on [it] follows
the principal and is to be allocated to those who are ultimately to
be the owners of that principal."  WebbUs Fabulous Pharmacies, Inc.
v. Beckwith, 449 U.S. 155, 162, 101 S. Ct. 446, 451, 66 L. Ed. 2d
358, 365 (1980).
fund in gross is a liquidated amount, so that interest in gross for
the period from the institution of the interpleader to the making
of the deposit should be included in the deposit, to be thereafter
distributed in accordance with the shares determined in phase two
of the interpleader proceeding.   This argument by petitioners is
6
inconsistent with the analysis set forth above.  It is also
inconsistent with Md. Rule 2-221.  Requiring interest from the date
of filing is the same as treating the owners in gross as the owners
of the fund from the time the interpleader is instituted.  Maryland
Rule 2-221 allows deferral of the deposit until the court has
determined that the case is an appropriate one for interpleader and
directs that the action proceed to phase two.  There is no
assurance 
that, 
simply 
because 
the 
stakeholder 
files 
an
interpleader, the adverse claimants and the court will agree that
the procedure is appropriate.  In addition, petitionersU argument
is contrary to one of the few liability insurance, pie-slicing
interpleader, bodily injury claimantsU cases that considers
prejudgment interest.  In Canal Ins. Co. v. Pizer, 183 Ariz. 162,
901 P.2d 1192 (1995), the court rejected the "in gross" analysis
-18-
because a court could find that the individual claims, once
liquidated, did not exhaust the policy limits.  
The only decision disclosed by our research that directly
supports petitionersU position is First of Georgia Ins. Co. v.
Riggle, 540 So. 2d 766 (Ala. App. 1989).  That court reasoned that,
"[o]nce the company pledged to deposit the stake with the court and
disavowed any rights in the stake, the interest earned thereon
became the property of the claimants."  Id. at 768.  For all the
reasons heretofore set forth, we are not persuaded by that
analysis.
Nor are we persuaded by the three federal cases cited to us by
petitioners.  Two of them do not involve liability insurers or pie-
slicing adversity.  Amoco Transport Co. v. Dietze, Inc., 582 F.
Supp. 804 (S.D.N.Y. 1984), involved the amount of $470,728.84 in
freight charges that the stakeholder had incurred in one month.
Three groups of claimants were joined.  One group did not appear,
the second was a broker whose commission was deducted from the
fund, and the balance was awarded to the third claimant, with
prejudgment interest on the principal amount of the bond that the
stakeholder had filed under 28 U.S.C. § 1335.  582 F. Supp. at 805.
Gelfgren v. Republic NatUl Life Ins. Co., 680 F.2d 79 (9th Cir.
1982), involved the sum of $30,000 in death benefits under a union
welfare fund in a Rule 22(1), federal question, interpleader.
Prejudgment interest was awarded.  Neither of these cases involved
-19-
underlying tort claims for personal injuries.  We do not have
before us the question of whether, under Maryland interpleader
practice, a liquidated claim, that could support prejudgment
interest when asserted independently by the claimant, continues to
bear that characteristic when the claim is joined in an
interpleader proceeding.  
The third case relied upon by petitioners is Unigard Mut. Ins.
Co. v. Abbott, 732 F.2d 1414 (9th Cir. 1984).  Primary and excess
liability insurers deposited the limits of their comprehensive
general liability policies with the court when they brought an
interpleader action under the federal statute.  Id. at 1416.
Because of the facts surrounding the accident, the claimants
successfully contended that the automobile liability policies
issued by the same insurers to the same insured also covered the
occurrence so that there was available to the claimants double the
amount of insurance deposited.  Id. at 1418.  There was also
evidence that, at the time of the institution of the interpleader,
the insurers were aware of the possibility of additional coverage
under the automobile policy.  Id.  When the claimants raised the
possibility of additional coverage under the automobile policy, the
court ordered the insurers to post a bond in the amount of the
automobile policy limits.  Id. at 1416.  After trial the court also
awarded interest in an amount equal to the amount earned in
interest on the deposit of the comprehensive liability policy
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     CJ § 11-301 reads:
7
"(a) Defendant causing unnecessary delay. -- In an
action for bodily injury arising from the operation of a
motor vehicle in which a money judgment is entered in
favor of the plaintiff, the court may assess interest
against the defendant at the rate of not more than 10
percent per annum on the amount of the judgment from a
time not earlier than the time the action was filed if it
finds that the defendant caused unnecessary delay in
having the action ready or set for trial.
"(b) Delay caused by defendantUs insurer or counsel.
-- For the purposes of this section, a delay caused by
the defendantUs insurer or counsel is deemed an
unnecessary delay caused by the defendant."
limits.  Id. at 1418.  The court reasoned that the insurers were
obligated by 28 U.S.C. § 1335 to post a bond or deposit when the
interpleader was instituted, id., and the relief granted seems to
have been a remedy for that violation.  In any event, under Md.
Rule 2-221 there is no similar requirement for deposit or bond when
the interpleader is filed.
Accordingly, petitionersU claim for prejudgment interest cannot
be founded on the Maryland law of interpleader.
II
The General Assembly has responded to the problem of delay in
the payment of automobile liability claims by CJ § 11-301 under
which the court may assess prejudgment interest for unnecessary
delay.   Petitioners assert that their claims were unnecessarily
7
delayed, but the circuit court concluded that the petitionersU
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contention could not withstand summary judgment, and the Court of
Special Appeals agreed.  We agree with the lower courts.
PetitionersU contention faces the insuperable hurdle that
ActonUs bankruptcy stayed the interpleader action.  The Federal
Bankruptcy Code provides that the filing of a bankruptcy petition
"operates as a stay, applicable to all entities, of -- (3) any act
to obtain possession of property of the estate or of property from
the estate or to exercise control over property of the estate[.]"
11 U.S.C. § 362(a)(3).  Property of the bankruptcy estate includes
"all legal or equitable interests of the debtor in property as of
the commencement of the case."  Id. § 541(a)(1).  Both the First
Circuit, where ActonUs bankruptcy case was filed, and the Fourth
Circuit, hold that a liability insurance policy of a debtor/insured
and the policy proceeds are property of the debtor/insuredUs
bankruptcy estate.  Tringali v. Hathaway Mach. Co., 796 F.2d 553,
560 (1st Cir. 1986); A.H. Robins Co. v. Piccinin, 788 F.2d 994,
1001 (4th Cir.), cert. denied, 479 U.S. 876, 107 S. Ct. 251 (1986).
Accordingly, because ActonUs bankruptcy petition predated EmployersU
filing of the interpleader action, Employers could not have legally
paid the funds into the court, even if it had elected to do so,
without an order from the bankruptcy court in Massachusetts lifting
the automatic stay.  
In their answer to the interpleader complaint petitioners
asked that Employers be ordered either to pay the funds into the
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registry of the court or to place them with a trustee for
investment in an interest bearing account(s).  The automatic stay
removed the courtUs power to order Employers to do so.  11 U.S.C.
§ 362(a)(3).  PetitionersU only recourse was to seek a lift of the
stay, see Tringali, 796 F.2d at 563, which they did some six months
after the interpleader was instituted.  Petitioners bore the burden
of proving cause for lifting the stay or that Acton did not have
equity in the proceeds and that the proceeds were not necessary to
ActonUs effective reorganization.  11 U.S.C. § 362(d).  
After ActonUs trustee opposed lifting of the stay, the
Lawhornes agreed to postpone a hearing on their motion to lift the
stay because settlement negotiations were in progress.  Although
those negotiations dragged on for more than one and one-half years,
the attorney for the Lawhornes stated in a deposition that he was
unaware of any action taken by Employers that "would constitute
less than best faith efforts to effectuate the contemplated
settlement."  
There was insufficient evidence of unreasonable delay on the
part of the stakeholder.
III
The remaining contention is that Employers was unjustly
enriched by the amount of interest earned on the net policy
proceeds in the period between commencement of the interpleader and
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the deposit of the funds.  Using the label, "constructive trust,"
petitioners seek a restitutionary remedy.
The argument rests on a theory that there is a conversion, in
equity, of the ownership of the fund in gross immediately upon the
filing of the interpleader action.  For the reasons stated in Part
I, we have held that that theory is not part of the Maryland law of
interpleader.  Consequently, there has been no unjust enrichment.
JUDGMENT OF THE COURT OF SPECIAL
APPEALS AFFIRMED.  COSTS TO BE PAID
BY THE PETITIONERS.