Midland National Life Ins Co v. Agnew et al
Filing
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OPINION AND ORDER granting 31 Midlands motion for interpleader relief and DISMISSING Midland from this lawsuit WITH PREJUDICE. Moreover, Agnews declaratory judgment counterclaim against Midland is DISMISSED WITH PREJUDICE, and Midlands 29 Motion for judgment on the pleadings is DENIED AS MOOT. Signed by Chief Judge Philip P Simon on 7/11/11. (mc)
UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF INDIANA
HAMMOND DIVISION
MIDLAND NATIONAL LIFE INS. CO.,
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Plaintiff,
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v.
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BREONNA E. AGNEW and
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VIVIAN M. BENNETT,
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Defendants.
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____________________________________)
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BREONNA E. AGNEW,
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Counter-Claimant,
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v.
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MIDLAND NATIONAL LIFE INS. CO., )
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Counter-Defendant.
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____________________________________)
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VIVIAN M. BENNETT,
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Cross-Claimant and
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Third Party-Plaintiff,
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v.
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BREONNA E. AGNEW and
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LYNDA BENNETT-HARPER,
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Cross-Defendant and
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Third-Party Defendant.
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2:10-CV-247-PPS-PRC
OPINION AND ORDER
When an insurance company receives a change of beneficiary form from a family
member a couple days before an insured dies, eyebrows get raised and a dispute usually follows
over who is entitled to the life insurance money. To deal with potentially competing claims,
insurance companies can use the interpleader device, which allows them to pay the proceeds into
the court, extinguish their liability and allow the claimants to fight it out. That’s what Midland
National Life Insurance Company did here when it brought this statutory interpleader claim
pursuant to 28 U.S.C. § 1335 against defendants Vivian Bennett, an Indiana citizen, and Breonna
Agnew, a Missouri citizen [DE 1]. Now Midland seeks a final decree of interpleader, attorneys’
fees [DE 31] and also judgment on the pleadings [DE 29], which relates to a counterclaim
asserted against Midland by one of the defendants. For the reasons discussed below, the Court
GRANTS Midland’s motion for a final decree of interpleader, but DENIES Midland’s request
for attorneys’ fees. Moreover, Midland’s motion for judgment on the pleadings is DENIED AS
MOOT.
BACKGROUND
According to the pleadings, Midland issued a life insurance policy to Sylvester Bennett
who died on January 22, 2010 [Id.]. At the time the policy was issued, Mr. Bennett named his
then spouse (Vivian Bennett) as the primary beneficiary [Id.]. However, on January 18, 2010,
less than a week before the Mr. Bennett passed away, Midland received a general durable power
of attorney instrument for him, signed by third-party defendant Lynda Bennett-Harper, Mr.
Bennett’s daughter. The document appoints Bennett-Harper as Mr. Bennett’s attorney-in-fact
[Id. at 30, Ex. C]. On the same date, Midland received a beneficiary change request, also signed
by Bennett-Harper, which named Breonna Agnew as the beneficiary to the policy thus replacing
Vivian Bennett [Id. at 36, Ex. D]. Agnew happens to be Bennett-Harper’s daughter.
Not surprisingly, this last minute change in beneficiary has caused some discord with
both Bennett and Agnew asserting rights to the proceeds. Faced with conflicting claims,
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Midland filed this interpleader action, and the Court granted leave for Midland to deposit its
admitted liability, in the amount of $46,192.36, with the Clerk of this Court [DE 5]. The Court
then issued a restraining order, pursuant to 28 U.S.C. § 2361, enjoining Agnew and Bennett from
pursuing any separate proceedings concerning the disputed proceeds [DE 6].
Agnew answered Midland’s complaint and counterclaimed for declaratory relief, asking
the Court to find that Midland violated the beneficiary change approval process, and seeking,
among other things, punitive damages for Midland’s refusal to pay her the proceeds on the
policy [DE 11].
Bennett also answered, and filed a cross-claim against Agnew, and a third-party
complaint against Bennett-Harper [DE 14]. Bennett asks the Court to find that she is the proper
beneficiary, and she seeks damages against Agnew and Bennett-Harper for alleged wrongdoing
relating to their roles in the beneficiary change process [Id.].
Midland then filed its motion for interpleader relief, and a motion for judgment on the
pleadings as to Agnew’s counterclaim. In her response to these motions, Agnew concedes that
she and Bennett are in dispute as to which of them is entitled to the proceeds [DE 34]. But she
asserts that she has no dispute with Midland, and that she is only asking the Court to determine
the proper beneficiary [Id. at 3].
Bennett, in her response, asserts that she does not oppose Midland’s discharge from the
case, but objects to Midland’s request for attorneys’ fees [DE 37].
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DISCUSSION
Interpleader is “an equitable procedure that is used when the stakeholder is in danger of
exposure to double liability or the vexation of litigating conflicting claims.” Aaron v. Mahl, 550
F.3d 659, 663 (7th Cir. 2008) (citing Indianapolis Colts v. Mayor and City Council of Baltimore,
741 F.2d 954, 957 (7th Cir. 1984)). An interpleader action generally involves two stages. At the
first stage—the only stage at issue in the pending motions—the court determines whether
interpleader relief is warranted. Id.; see also 7 Fed. Prac. & Proc. Civ. § 1714 (3d ed. 2001).
The claimants then proceed to a second stage in which the merits of their claims are resolved.
Id.
Thus, a “successful interpleader suit results in the entry of a discharge judgment on
behalf of the stakeholder; once the stakeholder turns the asset over to the registry of the court, all
legal obligations to the asset’s claimants are satisfied.” In re Mandalay Shores Co-Op Housing
Ass’n, Inc., 21 F.3d 380, 383 (11th Cir. 1994); see also Equitable Life Assurance Soc'y v. Jones,
679 F.2d 356, 358 n.2 (4th Cir. 1982) (citing 7 Fed. Prac. & Proc. Civ. § 1702); Executive Risk
Indem. Inc. v. Speltz & Weis, LLC, No. 09 C 2750, 2009 WL 3380972, at *2 (N.D. Ill. Oct. 16,
2009).
I.
Midland’s Entitlement to Interpleader Relief
To obtain the discharge Midland seeks, it must first comply with the jurisdictional terms
set forth in the Interpleader Act. Those requirements are: (1) an amount in controversy of $500
or more; (2) diversity between any two contending claimants; and (3) a deposit of the money at
issue into the registry of the court. 28 U.S.C. § 1335(a); see also Executive Risk, 2009 WL
3380972, at *2.
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Midland meets these requirements. First, the amount in controversy, $46,192.36, is well
over the jurisdictional amount. Second, diversity exists between the two competing claimants,
which satisfies the “minimal diversity” requirement of the statute. State Farm Fire & Cas. Co.
v. Tashire, 386 U.S. 523, 530 (1967); see also Knox v. American General Life and Acc. Ins. Co.,
No. 1:03-cv-29, 2003 WL 22056301, at *2 (S.D. Ind. Aug. 28, 2003). Finally, it is undisputed
that Midland has deposited the amount in controversy with the clerk of the Court.
Because Midland meets these jurisdictional requirements, the question of whether it is
entitled to interpleader relief comes down to whether it has “a real and reasonable fear of double
liability or conflicting claims.” Aaron, 550 F.3d at 663 (citing Indianapolis Colts, 741 F.2d at
956); see also 7 Fed. Prac. & Proc. Civ. § 1704 (“The primary test for determining the propriety
of interpleading the adverse claimants and discharging the stakeholder (the so-called “first stage”
of interpleader) is whether the stakeholder legitimately fears multiple vexation directed against a
single fund.”).
Midland is clearly entitled to the equitable relief of discharge here. Midland faces not
just a “real and reasonable fear” of conflicting claims, but the reality of being placed in the
middle of irreconcilable demands by Bennett and Agnew on the policy proceeds. Indeed, the
pleadings filed by Bennett and Agnew establish that those parties have already begun litigating
those competing claims. One or both of these competing claims may ultimately be determined to
be without merit. But the Court is not required to assess the merits of these claims in
determining whether interpleader is appropriate because “the stakeholder should not be obliged
at its peril to determine which of two claimants has the better claim.” Aaron v. Merrill Lynch
Pierce, Fenner & Smith, 502 F. Supp. 2d 804, 809 (N.D. Ind. 2007) (quoting John Hancock
Mutual Life Ins. Co. v. Kraft, 200 F.2d 952, 954 (2d Cir. 1953)); see also 7 Fed. Prac. & Proc.
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Civ. § 1704 (“It is immaterial whether the stakeholder believes that all claims against the fund
are meritorious. Indeed, in the usual case, at least one of the claims will be quite tenuous.”).
Accordingly, because Midland meets the statutory requirements, and has established that
it faces a real and reasonable fear of conflicting claims, it is entitled to the equitable relief of
dismissal from this suit.
As for Agnew’s declaratory judgment counterclaim against Midland, the Court finds that
Agnew voluntarily dismissed that claim by asserting in her response that she has no dispute with
Midland [DE 34, ¶ 2], that she is only asking the Court to decide which party is entitled to the
insurance proceeds at issue [Id., ¶ 5], and that Midland’s motion for judgment on the pleadings
was therefore unnecessary [Id., ¶ 7]. Because Agnew’s counterclaim against Midland has been
deemed voluntarily dismissed, Midland’s corresponding motion for judgment on the pleadings is
now moot.
II.
Attorneys’ Fees and Costs
Midland does not specify the amount of attorneys’ fees and costs it seeks. However, its
attorney’s declaration, which Midland attaches to its supporting brief, indicates that Midland
incurred fees and costs in the amount of $8,561.50 [DE 32-1].
Courts may award attorneys’ fees and costs to the plaintiff-stakeholder in an interpleader
action under their equitable powers. The Seventh Circuit has observed that “a court may award
attorneys’ fees and costs to a prevailing stakeholder in an interpleader action if the costs are
determined to be reasonable and the stakeholder’s efforts are not part of its normal course of
business.” Aaron, 550 F.3d at 667 (citing Union Cent. Life Ins. Co. v. Hamilton Steel Prods.,
Inc., 493 F.2d 76, 79 (7th Cir. 1974)); see also 7 Fed. Prac. & Proc. Civ. § 1719. These awards
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typically are drawn from the interpled fund. Aaron, 550 F.3d at 667 (citing First Trust Corp. v.
Bryant, 410 F.3d 842, 856 (6th Cir. 2005)).
However, courts have declined to award attorneys’ fees and costs in cases involving
insurance policy proceeds because “it is unfair to transfer the insurance company-stakeholder’s
normal costs of doing business to the claimants, at least one or more of whom is rightfully
entitled to the stake.” Life Ins. Co. of North America v. Park, No. 01 C 2835, 2002 WL 908139,
at *4 (N.D. Ill. May 6, 2002); see also Mandalay Shores, 21 F.3d at 383 (“Unlike innocent
stakeholders who unwittingly come into possession of a disputed asset, an insurance company
can plan for interpleader as a regular cost of business and, therefore, is undeserving of a fee
award.”); Minnesota Mut. Life Ins. Co. v. Gustafson, 415 F. Supp. 615, 617 (N.D. Ill. 1976). The
Court finds it would be unfair to transfer Midland’s costs of doing business to the rightful
claimants. Therefore, the Court declines to award attorneys’ fees and costs to Midland.
CONCLUSION
For the foregoing reasons, the Court GRANTS Midland’s motion for interpleader relief
[DE 31] and DISMISSES Midland from this lawsuit WITH PREJUDICE. Moreover,
Agnew’s declaratory judgment counterclaim against Midland is DISMISSED WITH
PREJUDICE, and Midland’s motion for judgment on the pleadings [DE 29] is therefore
DENIED AS MOOT.
SO ORDERED.
ENTERED: July 11, 2011
/s/ Philip P. Simon
PHILIP P. SIMON, CHIEF JUDGE
UNITED STATES DISTRICT COURT
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