Court Opinion

ID: 1008025
Source: CourtListenerOpinion
Date Created: 2013-07-04 19:34:06.507662+00
Date Added: 2024-06-11T15:26:12.381608
License: Public Domain

UNPUBLISHED

UNITED STATES COURT OF APPEALS
                FOR THE FOURTH CIRCUIT

SECURITY INSURANCE COMPANY OF          
HARTFORD,
                 Plaintiff-Appellee,
                 v.
ARCADE TEXTILES, INCORPORATED;
YORK COUNTY INDUSTRIES, LIMITED,
            Defendants-Appellants,
                and
NATIONSBANK, N.A.; ABSOLUTELY
TERRY COMPANY, INCORPORATED;
AMERICAN SPIRIT INDUSTRIES,
INCORPORATED; AMERICAN SPIRIT
FASHIONS, LIMITED; BARAS JERSEY,
INCORPORATED; BEATE REALTY
CORPORATION; BLOCK’S FASHION              No. 01-2101
FABRICS, INCORPORATED; BRASKINGS
INCORPORATED; BRITANNIA MILLS,
INCORPORATED; BROOKS TEXTILES,
INCORPORATED; C&L OF NEW YORK
CORPORATION; CHARLENE FABRICS
CORPORATION; CONTEMPORA FABRICS,
INCORPORATED; CREATIVE FABRIC
SERVICES, LLC; CYBER KNITS,
INCORPORATED; DYNASTY USA,
INCORPORATED; ESSEX FABRICS,
INCORPORATED; ETHNIX NEW YORK,
INCORPORATED; FABRIC AND FABRIC,
INCORPORATED; FAVRILE FABRICS OF
FLORIDA, INCORPORATED; KARMAR
FABRICS, INCORPORATED; KNIT IDEAS,
                                       
2             SECURITY INSURANCE v. ARCADE TEXTILES

INCORPORATED; KUTTNER PRINTS,         
INCORPORATED; LA CENTURY
TEXTILES, INCORPORATED; LEAMARK,
INCORPORATED; LIBA FABRICS
CORPORATION; PLAN B TEXTILES,
LLC; PAUL GOTTLIEB & COMPANY,
INCORPORATED; PLAZA TEXTILE
CORPORATION; RG TEXTILE COMPANY,
INCORPORATED; RPJ SPORTSWEAR,
INCORPORATED; ROSS SPORTS WEAR,
INCORPORATED; SPANTECH FABRICS
CORPORATION; SPORTSWEAR,
INCORPORATED; STARENSIER,
INCORPORATED; STYLETEX,
INCORPORATED; SUMMIT KNITTING
MILLS, INCORPORATED; SWINGTIME,
INCORPORATED; SYMPHONY FABRICS
CORPORATION; TODD KNITTING            
CORPORATION; TRIPLE TEX FABRICS;
UNIVERSAL MFG CORPORATION;
VERATEX, INCORPORATED; FABRIC
ZONE, INCORPORATED; AQUATIC KNITS,
INCORPORATED; D. FOXX & COMPANY,
INCORPORATED; EPIC TEXTILES
INTERNATIONAL, LLC; HAMPTON
TRANSFER PRINTS, INCORPORATED;
HLC INDUSTRIES; LJJ INCORPORATED;
MARKBILT INCORPORATED; PICADILLY
FASHIONS; RUBYS COSTUME COMPANY;
RUSSELL A. ROBERTS AND COMPANY;
VOGUE TEXTILES, INCORPORATED;
EUROPEAN AMERICAN BANK;
BASSIRAT, INCORPORATED, d/b/a
Styletex, Incorporated,
                        Defendants,
                                      
              SECURITY INSURANCE v. ARCADE TEXTILES             3

ATLANTIC MUTUAL INSURANCE             
COMPANY; COMMERCIAL UNION
INSURANCE COMPANY; FEDERAL
INSURANCE COMPANY; LIBERTY
MUTUAL INSURANCE COMPANY;
GENERAL ACCIDENT INSURANCE
COMPANY OF AMERICA; HARTFORD
FIRE INSURANCE COMPANY; VIGILANT      
INSURANCE COMPANY; ZURICH
INSURANCE COMPANY; GREAT
NORTHERN INSURANCE COMPANY;
TRAVELERS INDEMNITY COMPANY OF
AMERICA; ADJUSTERS INTERNATIONAL,
            Intervenors-Defendants.
                                      
          Appeal from the United States District Court
         for the District of South Carolina, at Rock Hill.
          Joseph F. Anderson, Jr., Chief District Judge.
                        (CA-98-2545-0-17)

                   Argued: February 25, 2002

                     Decided: July 10, 2002

    Before WILKINS, NIEMEYER, and KING, Circuit Judges.

Affirmed by unpublished per curiam opinion.

                           COUNSEL

ARGUED: David J. Gundling, GUNDLING LAW FIRM, P.A., Paw-
leys Island, South Carolina, for Appellants. George Terrell Davis,
ROBINS, KAPLAN, MILLER & CIRESI, L.L.P., Atlanta, Georgia,
4              SECURITY INSURANCE v. ARCADE TEXTILES
for Appellee. ON BRIEF: R. Dennis Withers, ROBINS, KAPLAN,
MILLER & CIRESI, L.L.P., Atlanta, Georgia; John T. Lay, ELLIS,
LAWHORNE & SIMS, P.A., Columbia, South Carolina, for Appel-
lee.

Unpublished opinions are not binding precedent in this circuit. See
Local Rule 36(c).

                             OPINION

PER CURIAM:

   Appellants Arcade Textiles, Incorporated (Arcade) and York
County Industries, Limited (York), appeal the resolution of a dispute
over the amount of prejudgment interest owed in this statutory inter-
pleader action, see 28 U.S.C.A. § 1335 (West 1993). We affirm.

                                  I.

   Arcade owned and operated a textile mill in Rock Hill, South Caro-
lina. Located within the mill were equipment and machinery owned
by York and a large quantity of customer goods. On November 3,
1997, a fire destroyed the mill and its contents.

   In connection with its operation of the mill, Arcade had obtained
insurance from Security Insurance Company of Hartford (Security).
As is relevant here, Security insured the business personal property
of Arcade, York, and various other persons and companies for $4.42
million. The policy provided that "[a]n insured loss will be payable
30 days after a satisfactory proof of loss is received, and the amount
of the loss has been established either by written agreement with
‘you’ or the filing of an appraisal award with ‘us’." J.A. 115.
Although the parties dispute the exact date, by some time in the
spring of 1998 it was clear to all concerned that claims would exceed
the policy amount. However, a proof of loss was not filed until July
7, 1998.
               SECURITY INSURANCE v. ARCADE TEXTILES                   5
   On September 1, 1998, Security filed this statutory interpleader
action naming Arcade; York; NationsBank, N.A. (NationsBank); and
43 other companies as defendants. As was its option, see 28 U.S.C.A.
§ 1335(a)(2), Security provided the district court with a non-interest
bearing bond in the amount of the policy limit.

   In January 2001, NationsBank moved for an order requiring Secur-
ity to pay interest on the policy proceeds pending resolution of the
interpleader action. Following negotiations between NationsBank and
Security, Security deposited $5,107,849.12 with the court on March
19, 2001. This amount comprised the policy limit, plus $642,849.12
in interest, plus an additional $45,000. The interest amount was calcu-
lated by applying to the policy limit an annual rate of six percent,
compounded monthly, from September 1, 1998 to March 1, 2001.
NationsBank and Security agreed on a rate of six percent because it
closely approximated the rate at which interest would have accrued
on the policy proceeds had they been deposited with the district court
at the outset of the interpleader action.

   At a subsequent hearing, NationsBank and Security expressed their
satisfaction with this agreement, but Appellants protested. Appellants
maintained that interest should be calculated using the South Carolina
statutory rate of 8.75 percent and should run from mid-January 1998,
when (according to Appellants) Security knew that claims would
exceed the policy limit. The district court rejected these assertions.
The interpleader action was settled and the policy proceeds were dis-
tributed to the various claimants, subject to Appellants’ appeal of the
ruling regarding interest.

                                   II.

   Interpleader is a procedural device that allows a disinterested stake-
holder to bring a single action joining two or more adverse claimants
to a single fund. See Chase Manhattan Bank v. Mandalay Shores
Coop. Housing Ass’n (In re Mandalay Shores Coop. Housing Ass’n),
21 F.3d 380, 383 (11th Cir. 1994); White v. FDIC, 19 F.3d 249, 251
(5th Cir. 1994). Interpleader is an equitable remedy designed to pro-
tect the stakeholder from multiple, inconsistent judgments and to
relieve it of the obligation of determining which claimant is entitled
6                SECURITY INSURANCE v. ARCADE TEXTILES
to the fund. See 4 James Wm. Moore et al., Moore’s Federal Practice
§ 22.02[1], at 22-8 to 22-9 (3d ed. 2001).

   Statutory interpleader—the type involved here—rests on diversity
of citizenship. See 28 U.S.C.A. § 1335(a)(1); Whirlpool Corp. v. Rit-
ter, 929 F.2d 1318, 1320-21 (8th Cir. 1991) (characterizing statutory
interpleader as "a special brand of diversity jurisdiction"). Accord-
ingly, state substantive law applies under Erie R.R. Co. v. Tompkins,
304 U.S. 64 (1938). See Atlin v. Sec.-Conn. Life Ins. Co., 788 F.2d
139, 142 (3d Cir. 1986) ("Although federal interpleader is rooted in
equitable grounds, use of that procedure does not justify a diversity
court’s rejection of controlling state substantive law."). And, because
prejudgment interest is a matter of state substantive law, see Hitachi
Credit Am. Corp. v. Signet Bank, 166 F.3d 614, 633 (4th Cir. 1999),
South Carolina law governs the award of prejudgment interest here,1
see, e.g., Hartford Accident & Indem. Co. v. Sharp, 87 F.3d 89, 92-
93 (3d Cir. 1996) (concluding that claimant to interpleaded fund was
entitled to prejudgment interest under territorial law); Murphy v.
Travelers Ins. Co., 534 F.2d 1155, 1164-65 (5th Cir. 1976) (looking
to Texas law to determine if prejudgment interest was owed in diver-
sity interpleader action).

   Under South Carolina law, prejudgment interest on an obligation
to pay money accrues at the rate of 8.75 percent per annum "from the
time when, either by agreement or by operation of law, the payment
is demandable, if the sum is certain or capable of being reduced to
certainty, even if the parties do not agree on the amount of the obliga-
tion." Brooklyn Bridge, Inc. v. S.C. Ins. Co., 420 S.E.2d 511, 513
(S.C. Ct. App. 1992); see S.C. Code Ann. § 34-31-20(A) (Law. Co-
op. 1987). The decision whether to award prejudgment interest lies in
the discretion of the court. See Jacobs v. Am. Mut. Fire Ins. Co. of
Charleston, 340 S.E.2d 142, 143 (S.C. 1986).

   Here, Security agreed to pay interest of six percent per annum from
the date it filed the interpleader action until the date it deposited the
policy proceeds with the court. The question presented to the district
court was whether Security should have been required to deposit an
additional sum to equal the amount that would have been earned if
    1
     The parties agree that the substantive law of South Carolina applies.
                SECURITY INSURANCE v. ARCADE TEXTILES                  7
interest had been calculated at a rate of 8.75 percent. However,
although the dispute of the parties concerned only the rate of interest,
their arguments were posed in terms of the broader question of
whether Security should be obligated to pay prejudgment interest at
all. Having considered the lengthy arguments of the parties, the dis-
trict court denied Appellants’ request. We cannot say that this ruling
was an abuse of discretion.2

                                  III.

  For the reasons set forth above, we affirm the district court.

                                                            AFFIRMED
  2
   Thus, the six percent interest paid by Security pursuant to its agree-
ment with NationsBank was more than Appellants were entitled to, not
less.