Opinion ID: 414338
Heading Depth: 2
Heading Rank: 1

Heading: Interpleader Relief as to the Cash Surrender Value of the Policies

Text: 16 Under 28 U.S.C. Sec. 1335, a district court has jurisdiction of any civil action of interpleader involving money or property worth $500 or more where two or more adverse claimants, of diverse citizenship as defined in 28 U.S.C. Sec. 1332, 5 are claiming or may claim to be entitled to such money or property, if the plaintiff has deposited the money or property with the court. In such an action, the court is to hear and determine the case, and may discharge the plaintiff from further liability, may enter a permanent injunction restraining the claimants from proceeding in any state or United States court in a suit to affect the property, and may make all appropriate orders to enforce its judgment. 28 U.S.C. Sec. 2361. Normally an interpleader action is concluded in two stages, the first determining that the requirements of Sec. 1335 are met and relieving the plaintiff stakeholder from liability, and the second adjudicating the adverse claims of the defendant claimants; this bifurcation is not mandatory, however, and the entire action may be disposed of at one time. See 3A J. Moore & J. Lucas, Moore's Federal Practice paragraphs 22.14, (2d ed. 1982). 17 The proceedings below were largely within this framework. The insurance policies listed, on their respective faces, CDA and MECCO as beneficiaries, and New York Life's complaint alleged that CDA and MECCO had refused to release their interests. In response to New York Life's injunction motion, Sterling acknowledged that CDA and MECCO had refused to release their alleged interests in the policies. (Affirmation of Paulette M. Owens, dated May 28, 1982, at p 11 (Owens Aff.).) In these circumstances, CDA and MECCO were properly designated as adverse claimants who may claim the proceeds of the policies. Their subsequent defaults did not make the interpleader action inappropriate but merely expedited its conclusion by obviating the normal second stage. 6 18 Judgment discharging the stakeholder in an interpleader action may, of course, be delayed or denied if there are serious charges that the stakeholder commenced the action in bad faith. See 3A J. Moore & J. Lucas, supra, p 22.02, at 22-7; cf. Companion Life Ins. Co. v. Schaffer, 442 F.Supp. 826 (S.D.N.Y.1977). In the present action, Sterling's opposition to New York Life's injunction motion charged that New York Life had listed CDA and MECCO as beneficiaries of the policies without Sterling's knowledge or consent (Owens Aff. p 7), for reasons of its own greed and self-interest (id. p 23). Had CDA or MECCO participated in the action and contested Sterling's right to receive the cash surrender value of the policies, and had Sterling pursued his assertions as to New York Life's bad faith, the district court would have been required to deal with these contentions in determining whether New York Life was entitled to any discharge from liability. As matters developed, however, an adjudication as to Sterling's allegations of New York Life's bad faith was not required in order to determine entitlement to the cash surrender value of the policies, because CDA and MECCO defaulted and Sterling consented to the entry of an order extinguishing their claims and requiring New York Life to pay that value to Sterling. See note 2 supra. In these circumstances, the judgment was appropriate insofar as it determined the rights of the parties to the cash surrender value of the insurance policies and New York Life's liability to pay such value. We affirm the judgment to that extent. 19