First Bank and Trust v. Scottsdale Insurance Company

Filing 92

ORDER granting in part and denying in part 69 Motion for Summary Judgment. FURTHER ORDERED that the motion is granted to the extent that it seeks: (1) a declaration that the interpleader action in this case is proper; (2) a finding that First Bank is not entitled to legal interest; and (3) Scottsdales dismissal from the case upon the deposit of the funds into the Courts registry. FURTHER ORDERED that the motion is denied to the extent that the motion seeks an award of attorneys fees for Scottsdale and an injunction against First Bank, Neely, and Binegar Christian, LLC from filing any additional actions against Scottsdale regarding the negotiable instruments at issue in this case and/or the amounts or proceeds listed on the negotiable instruments. Signed by Judge Nannette Jolivette Brown on 11/10/2015. (cms)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF LOUISIANA
FIRST BANK AND TRUST

CIVIL ACTION

VERSUS

NO. 14-2017

SCOTTSDALE INSURANCE COMPANY

SECTION: “G”(1)

ORDER
In this litigation, Plaintiff and Defendant-in-Interpleader First Bank and Trust (“First Bank”)
alleges that it is entitled to money due under Defendant-in-Interpleader Edward Neely’s (“Neely”)
insurance policy with Defendant and Plaintiff-in-Interpleader Scottsdale Insurance Company
(“Scottsdale”).1 First Bank asserts that, because money is due under the policy for damage to the
insured property, and because First Bank’s interest in the insured property as a mortgagee is superior
to that of Neely, under the terms of the policy, the money due is properly payable to First Bank.2
Pending before the Court is Scottsdale’s “Motion for Summary Judgment.”3 Having reviewed the
motion, the memoranda in support, the memoranda in opposition, the record, and the applicable law,
the Court will grant the motion in part and deny it in part.
I. Background
A.

Factual Background
In its complaint, First Bank alleges that Scottsdale issued an insurance policy to Edward

Neely covering seven properties in New Orleans (“Insured Properties”).4 First Bank contends that
1

Rec. Doc. 1.

2

Id. at p. 4.

3

Rec. Doc. 69.

4

Rec. Doc. 1 at pp. 2–3.

1

Scottsdale’s insurance policy designates it as the loss payee / mortgagee.5 First Bank maintains that
Neely is obligated to it, and granted it a multiple indebtedness mortgage on the insured properties
to secure his obligation.6 According to First Bank, Edward Neely and Sheryl Neely executed two
promissory notes to it on January 29, 2008: a note for $977,600 and a note for $465,000.7 Both
notes, First Bank asserts, are secured by the mortgage upon the insured properties; principal amounts
of $994,247.92 and $182,015.54, plus additional amounts, remain due on the notes.8
First Bank alleges that Scottsdale tendered two checks to Neely in connection with damage
to the insured properties, including a check in the amount of $89,750, dated June 30, 2014 (“Check
1”), made payable to Neely, Binegar Christian, LLC, and First Bank and a check in the amount of
$16,978.70, dated August 18, 2014 (“Check 2”), made payable to Neely and First Bank, both of
which First Bank possessed at the time it filed its complaint.9 First Bank asserts that the terms of
Scottsdale’s insurance policy with Neely entitle First Bank to the amounts due under the policy,
since its interest in the mortgage is superior to Neely’s.10 First Bank contends that, as the loss
payee/mortgagee, it is entitled to the proceeds of the checks plus legal interest from the date of the
filing of its original complaint.11

5

Id. at p. 3.

6

Id.

7

Id. Edward Neely and Sheryl Neely executed Note 1. Edward Neely executed Note 2. First Bank contends
that the amount of Note 2 was subsequently changed to $468,922.25. Id.
8

Rec. Doc. 54 at pp. 4–5.

9

Rec. Doc. 1 at p. 4. According to First Bank, it received the checks from counsel for Neely. Rec. Doc. 70

at p. 16.
10

Id.

11

Rec. Doc. 54 at pp. 6–7.

2

B.

Procedural Background
First Bank filed a complaint with this Court on September 4, 2014.12 The matter was initially

assigned to Section “A” of this Court, but Section “A” entered an “Order of Recusal”13 on
September 8, 2014, causing the matter to be reassigned to this Section, Section “G.”14 On September
9, 2014, First Bank filed an ex parte “Motion to Deposit Original Checks for Safekeeping.”15 The
Court granted First Bank’s ex parte motion on September 10, 2014, causing Checks 1 and 2 to be
deposited with the Clerk of Court pending the resolution of this matter.16 On December 11, 2014,
Scottsdale filed a “Motion to Dismiss Pursuant to Federal Rule of Civil Procedure 12(b)(6).”17
On May 1, 2015, First Bank and Trust filed a “Motion for Summary Judgment.”18 On May
27, 2015, the Court denied Scottsdale’s “Motion to Dismiss Pursuant to Federal Rule of Civil
Procedure 12(b)(6).”19 The same day, Scottsdale requested and was granted leave of Court to file
a “Third Party Complaint and Cross Claim for Interpleader,”20 in which it listed as defendants-ininterpleader First Bank, Neely, and Binegar Christian, LLC.
On August 4, 2015, Scottsdale filed a “Rule 67 Motion for Leave to Withdraw Negotiable

12

Rec. Doc. 1.

13

Rec. Doc. 5.

14

A previous Order in this case incorrectly stated that the case had originally been assigned to Section “J.”
Rec. Doc. 49 at p. 3.
15

Rec. Doc. 6.

16

Rec. Doc. 7.

17

Rec. Doc. 11.

18

Rec. Doc. 29.

19

Rec. Doc. 49.

20

Rec. Doc. 50.

3

Instruments and to Deposit Funds.”21
Scottsdale filed its own “Motion for Summary Judgment”22 on August 25, 2015. First Bank
filed an opposition to the motion for summary judgment on September 8, 2015.23 On September 16,
2015, with leave of Court, Scottsdale filed a reply memorandum.24 On September 21, 2015, with
leave of Court, First Bank filed a surreply.25 Pursuant to Local Rule 7.5, opposition to a motion must
be filed eight days before the noticed submission date. The instant motion was set for submission
on September 16, 2015. Neither Neely nor Binegar Christian, LLC, have responded to the motion
for summary judgment, timely or otherwise.
On September 14, 2015, Scottsdale filed a “Motion to Strike,”26 requesting that the Court
strike a document attached as Exhibit A to First Bank’s memorandum in opposition to the motion
for summary judgment.27 According to First Bank, the document Scottsdale sought to be stricken
was the copy of the backs of checks currently being held by the Clerk of Court.28 The Court
converted the motion to an objection and held that “[b]ecause the authenticity of the actual checks
filed into the registry of the Court is not disputed, the Court will examine them and disregard any

21

Rec. Doc. 67.

22

Rec. Doc. 69.

23

Rec. Doc. 70.

24

Rec. Doc. 83.

25

Rec. Doc. 90.

26

Rec. Doc. 73.

27

Rec. Doc. 71.

28

Rec. Doc. 76 at p. 2.

4

copies submitted into the record.”29
II. Parties’ Arguments
A.

Scottsdale’s Arguments in Support of its Motion for Summary Judgment
In Scottsdale’s “Motion for Summary Judgment,”30 it moves for an order: (1) holding that

the interpleader action filed on May 27, 2015 is proper; (2) dismissing Scottsdale as a disinterested
stakeholder; (3) enjoining First Bank, Neely, and Binegar Christian, LLC from filing any other
action against Scottsdale regarding the negotiable instruments at issue in this case and/or any
amounts or proceeds listed on such negotiable instruments; (4) denying First Bank’s claim for
judicial interest; and (5) granting Scottsdale attorney’s fees associated with this case.
First, Scottsdale asserts that the three prerequisites to sustain an action for interpleader
pursuant to Federal Rule of Civil Procedure 22 have been met: (1) that the amount in controversy
exceeds $75,000; (2) there is complete diversity of citizenship; and (3) the plaintiff-in-interpleader
is exposed to multiple liability.31 Scottsdale asserts that the amount in controversy is $106,728.70,
the parties are completely diverse, and all three defendants-in-interpleader have made claims for the
proceeds of the two checks issued by Scottsdale and are listed as payees on the checks.32
Second, Scottsdale contends that it should be dismissed as a disinterested stakeholder, the
requirements of which are that: (1) the amount at issue is deposited into the registry of the Court;
(2) the stakeholder disavows any interest in the funds; and 3) there is no material controversy

29

Rec. Doc. 87.

30

Rec. Doc. 69.

31

Rec. Doc. 69-1 at p. 5.

32

Id.

5

involving the stakeholder.33 Scottsdale avers that it has sought leave of Court to deposit the funds
into the Court’s registry, it has made no claims to the funds since the checks were issued, and there
is no material controversy involving Scottsdale because it met its duty under Louisiana law to First
Bank, Neely, and Binegar Christian, LLC upon the original issuance of the checks.34 Quoting
Louisiana Revised Statute § 10:3-310(b), Scottsdale asserts that when “an uncertified check is taken
for an obligation, the obligation is suspended to the same extent the obligation would be discharged
if an amount of money equal to the amount of the instrument were taken.”35 Scottsdale maintains
that the suspension “continues until dishonor of the check or until it is paid or certified” and that the
obligation is not enforceable during that time.36 Citing Deutsche Bank National Trust Co. v. Regions
Bank,37 a case from another section of the Eastern District of Louisiana, Scottsdale asserts that a
check issued to the named insured and the mortgagee has been found to be proper in Louisiana
federal courts and is proper under the terms of the policy.38 Scottsdale avers that its obligation will
be discharged when the funds are deposited into the registry of the Court.39
Third, Scottsdale asserts that any claims by First Bank against Scottsdale should be

33

Id. at p. 6 (citing Lexington Ins. Co. v. Guidos, No. 11-644, 2011 WL 3819664 (E.D. La. Aug. 29, 2011)
(Vance, C.J.).
34

Id. at pp. 6–7.

35

Id. at p. 7.

36

Id. (quoting La. Rev. Stat. § 10:3-310(b)(1)).

37

No. 12-2436, 2013 WL 192993 (E.D. La. Jan. 16, 2013) (Lemelle, J.).

38

Rec. Doc. 69-1 at p. 7.

39
Id. at pp. 8–9 (citing La. Civ. Code art. 1869; Cajun Elec. Power Co-op, Inc. v. Riley Stoker Corp., 901
F.2d 441 (5th Cir. 1990)).

6

dismissed and enjoined in light of the interpleader action.40
Fourth, Scottsdale contends that First Bank’s claim for judicial interest should be
dismissed.41 Scottsdale asserts that the Fifth Circuit has awarded interest against a stakeholder in
an interpleader action only when the stakeholder “makes use of the money while it is in his
possession, for the reason that a contrary rule would permit a person with no claim to a sum of
money to enjoy a greater benefit from its possession than a person who makes such a claim, when
the claim is later adjudged inferior to that of another person.”42 Scottsdale avers that it did not owe
interest to First Bank while the obligation was suspended by payment of the check and that any
interest was terminated by the deposit of the funds into the registry of the Court.43 Furthermore,
Scottsdale asserts that it was First Bank who had access to the funds at issue because Neely and
Binegar Christian, LLC state that they endorsed the checks and delivered them to First Bank.44
Fifth, Scottsdale contends that it is entitled to attorney’s fees.45 Quoting this Court’s opinion
in American General Life Insurance Co. v. Gibson,46 Scottsdale asserts that “[a] district court has
the authority to award reasonable attorney’s fees in interpleader actions. The award of attorney’s
fees is in the discretion of the district court, and fees are available when the interpleader is a

40

Id. at pp. 9–10.

41

Id. at p. 10.

42

Rec. Doc. 69-1 at p. 10 (quoting Phillips Petrol. Co. v. Adams, 513 F.2d 355, 369 (5th Cir. 1975)).

43

Id.

44

Id. at p. 11.

45

Id.

46

No. 13-5069, 2015 WL 280321, at *13 (E.D. La. Jan. 21, 2015) (Brown, J.).

7

disinterested stakeholder, and is not in substantial controversy with one of the claimants.”47
Scottsdale contends that attorney’s fees are proper in this case because “First Bank [has] made
misrepresentations to this Court since inception of the suit; has no valid cause of action against
Scottsdale; and, per the allegations of Neely and Binegar [Christian, LLC], use[d] this suit as a
vehicle to avoid the jurisdiction of the state district court.”48
B.

First Bank’s Arguments in Opposition
In its opposition, First Bank incorporates by reference the “Unsworn Declaration Under

Penalty of Perjury”49 of First Bank’s Vice President, James R. Noel (“Noel”) in which Noel explains
the terms and conditions of the promissory notes executed by Edward and Sheryl Neely.50 First Bank
also incorporates by reference the exhibits attached to Noel’s Declaration which include Promissory
Note 1, Change in Terms Agreement for Note 1, a Power of Attorney, a Forbearance Agreement,
Promissory Note 2, Change in Terms Agreement, Mortgage 1, Mortgage 2, “Partial Dation en
Paiement,” Check 1, and Check 2.51
First Bank first contests Scottsdale’s representation of itself as a disinterested stakeholder.52
According to First Bank, Scottsdale began its defense of the litigation with a motion to dismiss First
Bank’s claims, despite First Bank’s urging to consider the interpleader option.53 Next, First Bank

47

Rec. Doc. 69-1 at p. 11.

48

Id.

49

Rec. Doc. 29-4.

50

Rec. Doc. 70 at p. 1.

51

Rec. Docs. 29-5–29-15.

52

Rec. Doc. 70 at p. 1.

53

Id. at p. 2.

8

asserts that Scottsdale has misrepresented to the Court that the checks were sent to First Bank’s
counsel based on some agreement between Neely and First Bank to deposit the checks into the
registry of the Civil District Court.54 First Bank maintains that when counsel for First Bank received
the first check, it was not endorsed by anyone, nor was the second check it received endorsed by
anyone.55
First Bank contends that Scottsdale is not entitled to be dismissed until the money is
deposited into the registry of the Court and if it does not deposit the funds, it must be available to
stand in judgment for those funds.56 First Bank agrees, however, that Scottsdale has the right to seek
interpleader and that once Scottsdale deposits the disputed funds into the registry of the Court, it is
entitled to dismissal from the action and to an injunction, to the extent Scottsdale believes that an
injunction is necessary.57
First Bank also contends that Scottsdale should be required to pay interest in the sum of
$4,280.84, calculated at the Louisiana legal rate of 4% per year.58 According to First Bank, “the
issue of insurance companies failing to timely dispossess themselves of proceeds of policies has
always been a problem.”59 First Bank asserts that it is seeking legal interest from the date formal

54

Id. First Bank notes that Scottsdale has not submitted any summary judgment evidence in support of its
allegations and that First Bank has also submitted no summary judgment evidence as these allegations are not
relevant to the issue before the Court on the motion for summary judgment. Id.
55

Id. at pp. 2–3.

56

Id. at p. 7.

57

Id. at p. 8.

58

Id.

59

Id. at p. 9.

9

judicial demand was made to Scottsdale to pay the amount of the checks to First Bank.60 First Bank
contends that Scottsdale failed to initiate an interpleader action or deposit its funds into the registry
of the Court.61 Furthermore, First Bank avers that Scottsdale “was called upon to honor its
contractual commitment to pay the proceeds ‘as interests may appear’” when it was advised that the
checks it issued could not be deposited because the parties could not agree on how to distribute the
amounts.62 First Bank contends that it could not legally deposit the checks without Neely’s
endorsement which Neely was not willing to give.63
In response to Scottsdale’s argument pursuant to Louisiana Revised Statute § 10:3-310(b)
that the underlying obligation against it is suspended until the checks are certified or dishonored,
First Bank directs the Court’s attention to Louisiana Revised Statute § 10:3-110(d).64 First Bank
contends that the statute provides:
[i]f an instrument is payable to two or more persons alternatively, it is payable to any
of them and may be negotiated, discharged, or enforced by any or all of them in
possession of the instrument. If an instrument is payable to two or more persons not
alternatively, it is payable to all of them and may be negotiated, discharged, or
enforced only by all of them.65
First Bank asserts that, in order to deposit the check, First Bank “would have had to obtain the
endorsement of all of the payees of the checks, forged the missing endorsements, or deposited the

60

Id. at p. 13.

61

Id.

62

Id.

63

Id.

64

Id. at p. 14.

65

La. Rev. Stat. § 10:3-110(d).

10

checks without the endorsements of the missing payees.”66 According to First Bank, Scottsdale
would have First Bank commit the crime of forgery or the tort of conversion, violate the presentment
warranties of Louisiana Revised Statute 10:3-417 and Louisiana Revised Statute 10:4-208, or violate
the transfer warranties of Louisiana Revised Statute 10:4-207.67
First Bank also contends that Louisiana Revised Statute 10:3-310(b), cited by Scottsdale,
which provides that “if a note or an uncertified check is taken for an obligation, the obligation is
suspended,” does not apply in this case.68 First Bank asserts that it did not “take” Scottsdale’s checks
for the obligation Scottsdale owed to First Bank but rather received the check as a result of a
settlement agreement that Neely and Scottsdale has negotiated without First Bank’s knowledge.69
According to First Bank, the check was not payable to alternative payees and therefore could only
be negotiated, discharged, or enforced by all of the payees.70 First Bank asserts that there is no
indication in this case that First Bank agreed to accept Scottsdale’s checks in payment of its
obligation.71 Citing ViewPoint Bank v. Allied Property & Casualty Insurance Co., a Texas Court of
Appeals case and Versai Management Corp. v. Citizens First Bank, an Eastern District of Michigan
case, First Bank contends that although Neely and Binegar Christian, LLC accepted the checks in
this form, their acceptance cannot be imputed to First Bank.72 First Bank additionally asserts that
66

Rec. Doc. 70 at p. 14.

67

Id. at pp. 14–15.

68

Id. at p. 15.

69

Id.

70

Id.

71

Id. at p. 17.

72
Id. at pp. 17–18 (citing ViewPoint Bank v. Allied Prop. & Cas. Ins. Co., 439 S.W.3d. 626 (Tex. App.
2014); Versai Mgmt. Corp. v. Citizens First Bank, 08-15129, 2010 WL 1417798 (E.D. Mich. Apr. 5, 2010)).

11

“the concept of delivery of one joint payee being delivery to all is simply not relevant, when one of
the multiple payees rejects the form of payment and sues to enforce the obligation.”73 According to
First Bank, allowing Scottsdale to suspend its obligation to pay interest on checks it has known for
a year were in the physical possession of the clerk of this Court would mean that it has no obligation
to pay anyone as long as the checks remain undeposited.74
First Bank asserts that the situation in this case is not one the statute cited by Scottsdale was
designed to cover.75 First Bank contends that each payee of the check has to authorize that a check
be accepted in lieu of cash to pay the obligation due to him before the check can be said to have been
received for an obligation.76 First Bank contends that a tender must be unconditional and that it has
never actually received any tender because the tender was made only to Neely, without any
consultation with First Bank.77 According to First Bank, in order for there to have been a valid
tender, Scottsdale would have had to tender the full amount of both checks to First Bank alone,
unconditionally.78
In response to Scottsdale’s argument that interest should not be awarded because it has
initiated an interpleader action, First Bank asserts that interest stops accruing when there is a deposit
into the registry of the court.79 Citing Louisiana Civil Code article 2000, First Bank asserts that

73

Id. at p. 18.

74

Id.

75

Id. at p. 19.

76

Id.

77

Id. at p. 20.

78

Id.

79

Id. (citing Arete Partners, L.P. v. Gunnerman, 643 F.3d 410 (5th Cir. 2011)).

12

interest is due on Scottsdale’s obligation to pay money and that Louisiana Revised Statute 9:3500
has set a rate for interest at 4% per year.80 First Bank asserts, however, that to the extent that Neely
and Binegar Christian, LLC agreed to accept the checks and to the extent the Court determines they
are entitled to any portion of the interpleader funds, Scottsdale should be able to reclaim that
interest.81
Finally, First Bank contends that because Scottsdale has not acted as a disinterested
stakeholder in this action, it is not entitled to attorney’s fees.82 In support, First Bank asserts that
Scottsdale has resisted paying anything to First Bank and has still not paid any money into the
registry of the Court.83
C.

Scottsdale’s Arguments in Further Support of its Motion
Scottsdale contends that because First Bank agrees that interpleader is proper and that

Scottsdale should be dismissed as a disinterested stakeholder, the only remaining issues for the
Court’s consideration are: (1) whether Scottsdale must pay interest; and (2) whether Scottsdale is
entitled to attorney’s fees as a disinterested stakeholder.84
Scottsdale asserts that pursuant to Local Rule 67.2, an order signed by the presiding judge
is required for money to be sent to the Court or its officers for deposit in the Court registry.85
Therefore, Scottsdale contends that any suggestion by First Bank that Scottsdale is improperly

80

Id. at p. 21.

81

Id. at p. 22.

82

Id. at p. 23.

83

Id.

84

Rec. Doc. 83 at p. 1.

85

Id. at p. 2.

13

withholding funds is without support as Scottsdale has sought leave of this Court to deposit the
funds at issue.86
Scottsdale contends that it does not owe any interest because it fully performed its obligation
to Neely and First Bank under Louisiana law.87 Citing Louisiana Revised Statute § 10:3-310(b),
Scottsdale asserts that under Louisiana law, a payment by an uncertified check will suspend an
obligation.88 In response to First Bank’s argument that the statute does not apply because First Bank
did not agree to accept payment in the form of a check, Scottsdale asserts that neither the statute nor
Louisiana jurisprudence define the term “take” as used in the statute.89 Furthermore, Scottsdale
asserts that the comments to Louisiana Revised Statute § 10:3-420 state “[i]f a check is payable to
more than one payee, delivery to one of the payees is deemed to be delivery to all of the payees.”90
In support, Scottsdale also cites Louisiana Civil Code articles 1790 and 1791 which state that when
a single obligor owes an obligation to multiple obligees, performance to one obligee is considered
performance to all.91
Scottsdale also cites Deutsche Bank National Trust Company v. Regions Bank,92 a case from
another section of the Eastern District of Louisiana, asserting that, in that case, the court held an
insurer’s obligation under its policy was discharged pursuant to Louisiana Revised Statute 10:3-

86

Id.

87

Id. at p. 3.

88

Id.

89

Id.

90

Id.

91

Id.

92

No. 12-2436, 2013 WL 192993 (E.D. La. Jan. 17. 2013) (Lemelle, J.).

14

310(b) through its issuance of a check to the named insured and the mortgage holder, along with
delivery of the check to the named insured.93 Scottsdale contends that the only difference in this case
is that the check was not cashed and therefore the debt is only suspended, not discharged.94
Scottsdale also contends that the cases cited by First Bank from Texas and Michigan do not address
Louisiana law and provide no guidance for the Court to make its Erie guess.95 Therefore, it asserts
Deutsche Bank National Trust Company is the only case cited by either party which is on point.96
In response to First Bank’s argument that interest is owed pursuant to Louisiana Civil Code
article 2000, which provides for payment of interest if there is a delay in performance, Scottsdale
asserts that the argument raises the question of “whether when Scottsdale issued the checks to Neely
and First Bank it made a payment or rendered performance under the contract.”97 Scottsdale asserts
that the answer is yes.98
Scottsdale also asserts that it does not owe any interest as the plaintiff-in-interpleader.99
Scottsdale contends that although plaintiffs-in-interpleader are generally charged judicial interest
when they do not deposit the disputed funds into the registry of the court, courts in this circuit have
held that plaintiff in interpleader should not be charged if they are unable to deposit the money

93

Rec. Doc. 83 at p. 4.

94

Id.

95

Id.

96

Id.

97

Id. at pp. 4–5.

98

Id. at p. 5.

99

Id.

15

through no fault of their own or when a delay in making the deposit is reasonable.100 Scottsdale
contends that any delay in the deposit of funds in this case is reasonable and through no fault of
Scottsdale.101 According to Scottsdale, it was hauled into court by First Bank to defend its payment
to First Bank and Neely and then sought permission of the Court to deposit the funds into the
Court’s registry.102
Turning to Scottsdale’s request for attorney’s fees, Scottsdale reiterates its arguments in its
motion for summary judgment that it is not in any substantial controversy with First Bank, Neely,
or Binegar Christian, LLC.103
D.

First Bank’s Surreply
First Bank asserts first that the Court can take judicial notice of the checks at issue in this

case and can see that the checks bear no endorsement.104
In response to Scottsdale’s contention that the cases cited by First Bank are not probative of
Louisiana law, First Bank contends that “in construing the provisions of the Uniform Commercial
Code, the Louisiana Supreme Court has instructed that it is not only proper, but required, that
Louisiana courts look to cases decided in other states, so that the provisions of the Uniform
Commercial Code can be uniformly applied.”105 First Bank contends that in ViewPoint Bank v.
100

Id. (citing Auto Parts Mfg. Miss., Inc. v. King Constr. of Houston, L.L.C., 73 F. Supp. 3d 680 (N.D.
Miss. 2014)).
101

Id.

102

Id. at pp. 5–6.

103

Id. at p. 6.

104

Rec. Doc. 90 at p. 1.

105

Id. at p. 2 (citing Specialized Loan Servicing, LLC v. January, 2012-2668, p. 13 (La. 6/2/13); 119 So. 3d
582, 590; First Nat’l Bank of Picayune v. Pearl River Fabricators, Inc., 06-2195, p. 20 (La. 11/16/07); 971 So. 2d
302, 315; Cromwell v. Commerce & Energy Bank of Lafayette, 464 So. 2d 721, 730 (La. 1985)).

16

Allied Property and Casualty Insurance Company, a Texas Court of Appeals case, the insurer
argued that by issuing a check jointly to both the insured and the loss payee, it had discharged its
obligation to both payees and despite the fact that the insured endorsed the check and stole the
proceeds, the mortgagee had no further claim against the insured.106 According to First Bank, the
Texas Court of Appeals held that it takes the action of all joint payees to act in regards to an
instrument if the joint payees are not alternative payees and therefore the insurer’s obligation had
not been discharged by the deposit of the check by only one of the payees.107
First Bank also cites Versai Management Corp. v. Citizens First Bank,108 a case from the
Eastern District of Michigan in which First Bank asserts checks were issued to the named insured,
two mortgagees, and the public adjuster that assisted the named insured in presenting its case to the
insurers.109 First Bank contends that the endorsement of the named insured and the two mortgagees
were forged, and the checks were deposited in the account of the public adjuster.110 According to
First Bank, the court held that the forged endorsements were ineffective and because the action of
all four joint payees was needed to negotiate the checks, there had been a conversion.111 First Bank
avers that these cases support its contention that payees cannot bind another payee who does not join
in a particular action relating to a check if the payees are not alternative payees.112
106

Rec. Doc. 90 at pp. 2–3 (citing ViewPoint Bank v. Allied Prop. and Cas. Ins. Co., 439 S.W.3d 626 (Tex.
App. 2014)).
107

Id. at p. 3.

108

08-15129, 2010 WL 1417798 (E.D. Mich. Apr. 5, 2010).

109

Rec. Doc. 90 at p. 3.

110

Id.

111

Id. at p. 4.

112

Id.

17

Next, First Bank addresses Scottsdale’s citation of Deutsche Bank National Trust Company
v. Regions Bank for the proposition that First Bank did not have to agree to the method of
payment.113 First Bank contends that the case is inconsistent with the general principles of negotiable
instruments found in the Uniform Commercial Code.114 First Bank also cites to Graves v. Johnson,115
an Indiana Court of Appeals case that First Bank asserts was cited by the court in Deutsche Bank
National Trust Company. First Bank asserts that the court in Graves made an express finding that
both of the joint payees had agreed to be paid by way of a joint check because they had been
informed that the check would be made payable to both parties, no objection was made at that time,
and there was an acquiescence when the one of the parties received the check.116
Furthermore, First Bank contends that Louisiana Civil Code articles 1790 and 1791 are not
applicable in this case because they provide for only solidary obligations, payable to two or more
persons.117 First Bank contends that the obligation owed in this case is not joint or solidary because
if it were, the policy would not provide that the proceeds would only be paid “as interests may
appear.”118

113

Id.

114

Id. at p. 5.

115

862 N.E.2d 716 (Ind. App. 2007).

116

Rec. Doc. 90 at p. 5 (citing Graves v. Johnson, 862 N.E. 2d 716, 720–21 (Ind. App. 2007)).

117

Id. at p. 6.

118

Id.

18

III. Law and Analysis
A.

Legal Standard on a Motion for Summary Judgment
Summary judgment is appropriate when the pleadings, the discovery, and any affidavits show

that “there is no genuine dispute as to any material fact and the movant is entitled to judgment as
a matter of law.”119 When assessing whether a dispute as to any material fact exists, the court
considers “all of the evidence in the record but refrains from making credibility determinations or
weighing the evidence.”120 All reasonable inferences are drawn in favor of the nonmoving party, but
“unsupported allegations or affidavits setting forth ‘ultimate or conclusory facts and conclusions of
law’ are insufficient to either support or defeat a motion for summary judgment.”121 If the record,
as a whole, “could not lead a rational trier of fact to find for the non-moving party,” then no genuine
issue of fact exists and the moving party is entitled to judgment as a matter of law.122 The nonmoving
party may not rest upon the pleadings, but must identify specific facts in the record and articulate
the precise manner in which that evidence establishes a genuine issue for trial.123
The party seeking summary judgment always bears the initial responsibility of informing the
Court of the basis for its motion and identifying those portions of the record that it believes
demonstrate the absence of a genuine issue of material fact.124 Thus, the nonmoving party should
“identify specific evidence in the record, and articulate” precisely how that evidence supports his

119

Fed. R. Civ. P. 56(a); see also Celotex Corp. v. Catrett, 477 U.S. 317, 322–23 (1986); Little v. Liquid Air
Corp., 37 F.3d 1069, 1075 (5th Cir. 1994).
120

Delta & Pine Land Co. v. Nationwide Agribusiness Ins. Co., 530 F.3d 395, 398–99 (5th Cir. 2008).

121

Galindo v. Precision Am. Corp., 754 F.2d 1212, 1216 (5th Cir. 1985); Little, 37 F.3d at 1075.

122

Matsushita Elec. Indus. Co. v. Zenith Radio, 475 U.S. 574, 586 (1986).

123

See, e.g., Celotex, 477 U.S. at 325; Ragas v. Tenn. Gas Pipeline Co., 136 F.3d 455, 458 (5th Cir. 1998).

124

Celotex, 477 U.S. at 323.

19

claims.125 To withstand a motion for summary judgment, a plaintiff must show that there is a genuine
issue for trial by presenting evidence of specific facts.126 The nonmovant’s burden of demonstrating
a genuine issue of material fact is not satisfied merely by creating “some metaphysical doubt as to
the material facts,” “by conclusory allegations,” by “unsubstantiated assertions,” or “by only a
scintilla of evidence.”127 Rather, a factual dispute precludes a grant of summary judgment only if the
evidence is sufficient to permit a reasonable trier of fact to find for the nonmoving party. Hearsay
evidence and unsworn documents that cannot be presented in a form that would be admissible in
evidence at trial do not qualify as competent opposing evidence.128
B.

Applying Louisiana Law
When a federal court interprets a state law, it must do so according to the principles of

interpretation followed by that state’s highest court.129 In Louisiana, “courts must begin every legal
analysis by examining primary sources of law: the State’s Constitution, codes, and statutes.”130
These authoritative or primary sources of law are to be “contrasted with persuasive or secondary
sources of law, such as [Louisiana and other civil law] jurisprudence, doctrine, conventional usages,
and equity, that may guide the court in reaching a decision in the absence of legislation and
custom.”131 To make a so-called “Erie guess” on an issue of Louisiana law, the Court must “employ

125

Forsyth v. Barr, 19 F.3d 1527, 1537 (5th Cir. 1994), cert. denied, 513 U.S. 871 (1994).

126

Bellard v. Gautreaux, 675 F.3d 454, 460 (5th Cir. 2012) (citing Anderson v. Liberty, 477 U.S. 242,
248–49 (1996)).
127

Little, 37 F.3d at 1075.

128

Martin v. John W. Stone Oil Distrib., Inc., 819 F.2d 547, 549 (5th Cir. 1987); Fed. R .Civ. P. 56(C)(2).

129

Am. Int’l Specialty Lines Ins. Co. v. Rentech Steel LLC, 620 F.3d 558, 564 (5th Cir. 2010); Gen. Elec.
Capital Corp. v. Se. Health Care, Inc., 950 F.2d 944, 950 (5th Cir. 1991).
130

Shaw Constructors v. ICF Kaiser Eng’rs, Inc., 395 F.3d 533, 547 (5th Cir. 2004).

131

Id. (quoting La. Civ. Code. art. 1 rev. cmt. b).

20

the appropriate Louisiana methodology” to decide the issue the way that it believes the Supreme
Court of Louisiana would decide it.132 Although federal courts should not disregard the decisions
of Louisiana’s intermediate courts unless they are “convinced that the Louisiana Supreme Court
would decide otherwise,” they are not strictly bound by them.133
C.

Analysis
In Scottsdale’s “Motion for Summary Judgment,”134 it moves for an order: (1) holding that

the interpleader action filed on May 27, 2015 is proper; (2) dismissing Scottsdale as a disinterested
stakeholder; (3) enjoining First Bank, Neely, and Binegar Christian, LLC from filing any other
action against Scottsdale regarding the negotiable instruments at issue in this case and/or any
amounts or proceeds listed on such negotiable instruments; (4) denying First Bank’s claim for
judicial interest; and (5) granting Scottsdale attorney’s fees associated with this case. First Bank
agrees that: (1) Scottsdale has the right to seek interpleader; (2) Scottsdale is entitled to dismissal
from the action once it deposits the disputed funds into the registry of the Court; and (3) Scottsdale
is entitled to an injunction to the extent it believes an injunction is necessary.135 Although neither
Neely nor Binegar Christian, LLC have filed oppositions to the motion for summary judgment, in
their answers to the third party complaint, both Neely and Binegar Christian, LLC assert that the
Court lacks subject matter jurisdiction.136 Neither party, however, explains its assertion that the
Court lacks jurisdiction. However, since the parties have challenged the Court’s jurisdiction, the

132

Id. (citation omitted).

133

In re Katrina Canal Breaches Litig., 495 F.3d 191, 206 (5th Cir. 2007).

134

Rec. Doc. 69.

135

Rec. Doc. 70 at p. 8.

136

Rec. Doc. 65 at p. 3; Rec. Doc. 66 at p. 3.

21

Court will address the issue of subject matter jurisdiction over the third party complaint first.
1.

Subject Matter Jurisdiction

A court has jurisdiction over a Rule 22 interpleader action when there is: “(1) complete
diversity of citizenship, which is met when the stakeholder is diverse from all the claimants, even
if citizenship of the claimants is not diverse; and [there is] (2) an amount-in-controversy that exceeds
$75,000 exclusive of interests and costs.”137 In this case, Scottsdale alleges that it is a citizen of Ohio
and Arizona and all defendants-in-interpleader are citizens of Louisiana.138 The amount in
controversy is asserted to be $106,728.80, the sum of the two checks at issue in this case.139
Accordingly, the Court finds that it has subject matter jurisdiction over the interpleader action.
2.

Whether the Interpleader Action Is Proper

Federal Rule of Civil Procedure 22 governs interpleader actions. It provides:
(a)

Grounds.
(1)

By a Plaintiff. Persons with claims that may expose a plaintiff to
double or multiple liability may be joined as defendants and required
to interplead. Joinder for interpleader is proper even though:
(A)

(B)

(2)

the claims of the several claimants, or the titles on which their
claims depend, lack a common origin or are adverse and
independent rather than identical; or
the plaintiff denies liability in whole or in part to any or all of
the claimants.

By a Defendant. A defendant exposed to similar liability may seek
interpleader through a crossclaim or counterclaim.

137

Hussain v. Boston Old Colony Ins. Co., 311 F.3d 623, 635 n.46 (5th Cir. 2002).

138

Rec. Doc. 52 at pp. 1–2.

139

Rec. Doc. 69-1 at p. 5.

22

(b)

Relation to Other Rules and Statutes. This rule supplements--and does not
limit--the joinder of parties allowed by Rule 20. The remedy this rule
provides is in addition to--and does not supersede or limit--the remedy
provided by 28 U.S.C. §§ 1335, 1397, and 2361. An action under those
statutes must be conducted under these rules.

The Fifth Circuit instructs that:
[a]n interpleader action typically involves two stages. In the first stage, the district
court decides whether the requirements for rule or statutory interpleader action have
been met by determining if there is a single fund at issue and whether there are
adverse claimants to that fund. If the district court finds that the interpleader action
has been properly brought the district court will then make a determination of the
respective rights of the claimants.140
Scottsdale requests that this Court find that the requirements for interpleader under Federal Rule of
Civil Procedure 22 (“rule interpleader”) have been met. At issue in this case is a single fund in the
sum of $106,728.70. There are adverse claimants to the fund as both Neely and First Bank assert that
they are entitled to the funds.141 Accordingly, the Court finds that the interpleader action is proper
and the Court will allow Scottsdale to deposit the funds into the registry of the Court.
3.

Whether First Bank is Entitled to Legal Interest

In First Bank’s answer to Scottsdale’s “Third Party Complaint and Counterclaim In
Interpleader,” First Bank asserts that it is entitled to legal interest from the date of the filing of its
original complaint, however, it does not assert the grounds on which it claims it is entitled to legal
interest.142 In First Bank’s opposition to Scottsdale’s motion for summary judgment, however, First
Bank asserts that it is entitled to legal interest pursuant to Louisiana Civil Code article 2000.143

140

Rhoades v. Casey, 196 F.3d 592, 600 (5th Cir. 1999).

141

Rec. Doc. 52; Rec. Doc. 54; Rec. Doc. 65; Rec. Doc. 66.

142

Rec. Doc. 54 at p. 7.

143

Rec. Doc. 70 at pp. 21–22.

23

Scottsdale contests that First Bank is entitled to interest pursuant to Article 2000 and additionally
contends that First Bank’s claim for legal interest should be dismissed because Scottsdale “did not
enjoy free use of the funds when they were pledged to First Bank, Neely, and Binegar Christian[,
LLC] through a valid negotiable instrument” and that interest was terminated by the deposit of the
funds into the registry of the court.144 The Court will address each of these arguments in turn.
a.

Louisiana Civil Code Article 2000

First Bank asserts that, pursuant to Louisiana Civil Code article 2000, it is entitled to interest
in the amount of $4,280.84, which it asserts it calculated from the date of formal judicial demand
through the one year anniversary of the filing of the suit.145 Article 2000 provides:
[w]hen the object of the performance is a sum of money, damages for delay in
performance are measured by the interest on that sum from the time it is due, at the
rate agreed by the parties or, in the absence of agreement, at the rate of legal interest
as fixed by [Louisiana Revised Statute] 9:3500. The obligee may recover these
damages without having to prove any loss, and whatever loss he may have suffered
he can recovery no more.146
First Bank contends that Check 1, in the amount of $89,750.00, was made payable to “Edward Neely
and Binegar Christian, LLC and First Bank and Trust” and that Check 2, in the amount of
$16,978.70, was made payable to “Edward Neely & First Bank & Trust.”147 According to First Bank,
Scottsdale tendered both checks to Neely and First Bank received the checks, which were not
endorsed, from Neely’s counsel, David Binegar.148 First Bank asserts that it has not been paid

144

Rec. Doc. 69-1 at pp. 10–11.

145

Rec. Doc. 70 at pp. 8–9.

146

La. Civ. Code art. 2000.

147

Rec. Doc. 70-2 at pp. 1–2.

148

Rec. Doc. 1 at p. 4; Rec. Doc. 70 at p. 16.

24

anything by Scottsdale, it did not agree to accept Scottsdale’s joint check, and therefore is entitled
to interest on its claim.149 First Bank contends that Scottsdale was advised at the time of formal
judicial demand that the checks could not be deposited because the payees could not agree on how
to distribute the amounts and therefore Scottsdale was called upon to honor its contractual
commitment to pay the proceeds “as interest may appear.”150 First Bank asserts that it calculated the
amount of $4,280.84 using the Louisiana rate of interest of four percent per year and that interest
should continue to accrue until Scottsdale deposits the principal sum into the registry of the Court.151
In opposition, Scottsdale asserts that any obligation against it was suspended by the issuance
of a check to defendants-in-interpleader.152 In support, Scottsdale cites Louisiana Revised Statute
10:3-310(b), which provides that “if a note or an uncertified check is taken for an obligation, the
obligation is suspended to the same extent the obligation would be discharged if an amount of
money equal to the amount of the instrument were taken . . . .” Citing Louisiana Revised Statute
10:3-310(b)(1), Scottsdale asserts that the “suspension of the obligation continues until dishonor of
the check or until it is paid or certified.” Scottsdale argues that its issuance of the check was valid
and delivery was made when it was delivered to any one of the payees.153
First Bank asserts that Scottsdale’s obligation was not suspended after the check was
issued.154 In support, First Bank cites Louisiana Revised Statute 10:3-110(d), which provides that:

149

Rec. Doc. 70 at pp. 22–23.

150

Id. at p. 13.

151

Id. at pp. 8–9 (citing La. Rev. Stat. 9:3500).

152

Rec. Doc. 69-1 at p. 7.

153

Id.

154

Id. at p. 14.

25

If an instrument is payable to two or more persons alternatively, it is payable to any
of them and may be negotiated, discharged, or enforced by any or all of them in
possession of the instrument. If an instrument is payable to two or more persons not
alternatively, it is payable to all of them and may be negotiated, discharged, or
enforced only by all of them. If an instrument payable to two or more persons is
ambiguous as to whether it is payable to the persons alternatively, the instrument is
payable to the persons alternatively.
First Bank contends that in order to deposit the check, First Bank would have had to obtain the
endorsement of all of the payees of the checks, forge the missing endorsement, or deposit the checks
without the endorsements.155 This provision does not address, however, how a disagreement between
the payees as to the distribution of the funds affects the suspension of the obligation under Louisiana
Revised Statute 10:3-310(b)(1).
Scottsdale also cites Deutsche Bank National Trust Company v. Regions Bank,156 a case from
another section of the Eastern District of Louisiana. In Regions Bank, an insurance company issued
a check as payment for an insurance claim to the named insured and the sole mortgage holder.157 It
was alleged that the named insured forged the mortgage holder’s endorsement and deposited the
proceeds into his personal account.158 The court rejected the plaintiff’s argument that the insurance
company had not issued a check to a valid payee and held that when the check was delivered to the
named insured, the check was delivered to all of the payees.159 Citing Louisiana Revised Statute
10:3-310(b), the court held that because the insurance company had issued an uncertified check and

155

Id.

156

No. 12-2436, 2013 WL 192993 (E.D. La. Jan. 17, 2013) (Lemelle, J.).

157

Id. at *1.

158

Id.

159

Id. at *2.

26

it had been cashed, its obligation was discharged.160
In response, First Bank contends that the reasoning in Regions Bank is inconsistent with the
general rules of commerce because “[t]he first rule of payment of obligations is that payment must
be made in legal tender, that is, money” and “[n]o one can be required to accept payment of an
obligation in anything other than money.”161 In support, First Bank cites to a District of North
Dakota case, Frandson v. Oasis Petroleum North America, LLC,162 for the proposition that “in order
for payment in other than legal tender to have effect, there must be agreement of the parties, or at
least, a failure to object.”163 The court in that case did state that it was a “generally-accepted
common rule governing payment of monetary obligations [] that, absent an agreement providing
otherwise, an obligee can insist upon payment in legal tender . . . .”164 However, in the very next
sentence, not quoted by First Bank, the court clarified that “because use of checks and other
commonly-accepted means of payment is so pervasive, there has developed a corresponding rule
that use of one of these other methods of payment is sufficient to satisfy a monetary obligation
unless the obligee demands payment in legal tender and allows reasonable time to procure it.”165
First Bank does not cite to any Louisiana law in support of its assertion that in order for payment
to be properly made by check, First Bank had to explicitly agree to accept a check as payment.
First Bank also cites a Texas Court of Appeals case, ViewPoint Bank v. Allied Property and

160

Id.

161

Id. (citing Juilliard v. Greenman (The Legal Tender Cases), 110 U.S. 421 (1884)).

162

870 F. Supp. 2d 726 (D.N.D. 2012).

163

Rec. Doc. 70 at p. 17.

164

Frandson, 870 F. Supp. 2d at 731.

165

Id.

27

Casualty Insurance Company.166 In that case, an insurance company issued checks jointly payable
to the insured and the mortgagee, but the insured deposited the checks without the mortgagee’s
endorsement or consent.167 The insurance company argued that its obligation was discharged because
the checks were paid pursuant to the Texas statute which provides that “[p]ayment or certification
of the check results in discharge of the obligation to the extent of the amount of the check.”168 The
court found that payment to one payee without the endorsement of the other did not constitute
payment to a person entitled to enforce the checks and therefore the insurance company’s obligation
was not discharged.169
First Bank also cites a case from the Eastern District of Michigan, Versai Management Corp.
v. Citizens First Bank.170 In Versai Management Corp., two insurance companies issued checks
jointly to the insured, a public adjuster, and two other payees.171 The public adjuster forged the
endorsements of the other co-payees and deposited the funds into its own account.172 The court there
found that because the checks were payable jointly and not alternatively, the endorsement by one
payee was insufficient to permit the valid negotiation of the check on behalf of the other payees.173
First Bank contends that these cases support its assertion that “less than all payees cannot bind any
payee who does not join in a particular action relating to a check, if the payees are not alternative

166

439 S.W.3d 626 (Tex. App. 2014).

167

Id. at 628.

168

Tex. Bus. & Com. Code Ann. § 3.310(b)(1).

169

ViewPoint Bank, 439 S.W.3d at 631.

170

No. 08-1529, 2010 WL 141798 (E.D. Mich. Apr. 5, 2010).

171

Id. at *1.

172

Id. at *1–2.

173

Id. at *3.

28

payees.”174
Scottsdale asserts that these cases from Texas and Michigan do not address Louisiana law
and therefore do not provide any guidance for the Court to make an Erie guess.175 First Bank
contends, however, that the Louisiana Supreme Court has instructed that because the Uniform
Commercial Code was adopted in Louisiana in an effort to harmonize the commercial law of
Louisiana with that of other states, Louisiana courts should look to the jurisprudence of other states’
interpretation of corollary Uniform Commercial Code provisions.176 Accordingly, the Court finds
that the jurisprudence of other state courts is persuasive in its interpretation of Louisiana’s Uniform
Commercial Code provisions.
In McAllen Hospitals, L.P. v. State Farm County Mutual Insurance Company of Texas, also
cited by First Bank, the Supreme Court of Texas addressed the question of whether an insurer’s
obligation is discharged when a joint payee forges the endorsement of a copayee and deposits the
funds.177 The court held that delivery of a check to one copayee constitutes constructive delivery to
all; however, payment to one nonalternative copayee without the endorsement of the other does not
discharge the obligation.178 In its reasoning, the court cited a legal treatise, Williston on Contracts,179
which had evaluated a Texas Court of Appeals case, Benchmark Bank v. State Farm Lloyds,180 and

174

Rec. Doc. 90 at p. 4.

175

Rec. Doc. 83 at p. 4.

176

Rec. Doc. 90 at p. 2 (citing Specialized Loan Servicing, LLC v. January, 2012-2668 (La. 6/28/13); 119
So. 3d 58, 588–590).
177

433 S.W.3d 535 (Tex. 2014).

178

Id. at 540.

179

28 Williston on Contracts § 72:36 (4th ed.).

180

893 S.W.2d 649 (Tex. App. 1994).

29

a case from the Supreme Judicial Court of Massachusetts, General Motors Acceptance Corp. v.
Abington Casualty Insurance Co.,181

and found that the Massachusetts decision was

“unquestionably representative of the better view.”182
The Supreme Court of Texas, in McAllen Hospitals, L.P., quoting General Motors
Acceptance Corp. held that a finding that an obligation is discharged when one copayee deposits a
check after forging the endorsement of the other payee would result in “no assurance that all the
joint payees would receive payment.”183 The Supreme Court of Texas noted that other jurisdictions
had cited the Supreme Judicial Court of Massachusetts in General Motors Acceptance Corp. and
had adopted its reasoning.184 McAllen Hospitals, L.P. is also consistent with the comments to
Louisiana Revised Statute 10:3-310 which provide that “[i]f a payor bank pays a person not entitled
to enforce the instrument . . . the suspension of the underlying obligation continues because the
check has not been paid.”185
In this case, however, unlike in the cases cited above, the checks have not been paid. At issue
in this case is whether Scottsdale’s delivery of a check to Neely can constitute delivery of the check
to all copayees and whether the issuance of the check suspended Scottsdale’s obligation such that
it does not owe any interest. Louisiana Revised Statute § 10:3-420 states that “[i]f a check is payable
to more than one payee, delivery to one of the payees is deemed to be delivery to all of the payees.”
This is in accord with the decisions of other state courts discussed above. First Bank contends that
181

413 602 N.E.2d 1085 (Mass. 1992).

182

McAllen Hosps., L.P., 433 S.W.3d at 540.

183

Id.

184

Id. (citing State ex rel. N.D. Housing Fin. Agency v. Ctr. Mut. Ins. Co., 720 N.W.2d 425 (N.D. 2006);
Crystaplex Plastics, Ltd. v. Redev. Agency of City of Barstow, 77 Cal. App. 4th 990 (2000)).
185

La. Rev. Stat. 10:3-310(b) cmt. 4.

30

the concept of delivery to one payee being delivery to all payees is not relevant in the case where
a payee rejects the form of payment and sues to enforce the obligation.186 As noted above, however,
First Bank has not cited to any Louisiana authority to support its contention that in order to be valid,
First Bank had to explicitly agree that it would accept a check as payment in lieu of legal tender.
Accordingly, the Court finds that Scottsdale, in delivering the check to Neely, constructively
delivered it to all co-payees.
Next, therefore, the Court must address whether this delivery of the check suspended
Scottsdale’s obligation such that it does not owe any legal interest pursuant to Louisiana Civil Code
article 2000. As noted above, Louisiana Revised Statute 10:3-310(b) provides that “if a note or an
uncertified check is taken for an obligation, the obligation is suspended to the same extent the
obligation would be discharged if an amount of money equal to the amount of the instrument were
taken . . . .” Louisiana Revised Statute 10:3-310(b)(1) provides that “suspension of the obligation
continues until dishonor of the check or until it is paid or certified.” First Bank contends that it did
not “take” Scottsdale’s checks for the obligation that Scottsdale owed to First Bank, but rather that
the check was received by Neely’s attorney based upon a settlement agreement.187 According to First
Bank, “[o]nly all payees, acting together could agree to take the checks in lieu of the obligations
otherwise owed.”188 First Bank asserts that it was not willing to “take” Scottsdale’s tendered checks
because they were made payable to parties who it contends had no interest in the proceeds.189
Furthermore, First Bank asserts that, contrary to Scottsdale’s representation, the checks were not
186

Rec. Doc. 70 at p. 18.

187

Id. at p. 15.

188

Id. at p. 16.

189

Id.

31

endorsed when First Bank received them.190
In response, Scottsdale asserts that neither Louisiana Revised Statute 10:3-310(b) nor
Louisiana jurisprudence define the term “take” as used in the statute.191 Scottsdale contends that
comment 1 to Louisiana Revised Statute 10:3-420 provides that “if a check is payable to more than
one payee, delivery to one of the payees is deemed to be delivery to all of the payees.” In addition,
Scottsdale cites Louisiana Civil Code articles 1790 and 1791 which provide that “[a]n obligation is
solidary for the obligees when it gives each obligee the right to demand the whole performance from
the common obligor” and “[b]efore a solidary obligee brings action for performance, the obligor
may extinguish the obligation by rendering performance to any of the solidary obligees.” First Bank
contends, however, that articles 1790 and 1791 only provide for the discharge of solidary obligations
which are payable to two or more persons.192 According to First Bank, the obligation owed in this
case is not joint or solidary because the policy provides that the proceeds would be paid “as interests
may appear.”193
Given the Court’s finding that the delivery of the payment of the check to Neely constituted
delivery of the check to all co-payees, First Bank’s only remaining argument is that First Bank did
not agree to “take” the check for the obligation pursuant to Louisiana Civil Code article 2000.
However, First Bank’s argument appears to be based upon its assertion that it had to explicitly agree
to accept a check in lieu of legal tender for the obligation. As discussed above, the Court does not
find this argument persuasive. Accordingly, the Court finds that Scottsdale’s obligation was
190

Id.

191

Rec. Doc. 83 at p. 3.

192

Rec. Doc. 90 at p. 6.

193

Id.

32

suspended pursuant to Article 2000 upon its delivery of the check to Neely. Therefore, the Court
finds that Scottsdale is not required to pay legal interest on the obligation on these grounds.
b.

Interest as a Plaintiff-in-Interpleader

Scottsdale asserts that it is not responsible for interest as a plaintiff-in-interpleader because
any delay in its deposit of funds into the registry of the Court is reasonable and through no fault of
Scottsdale.194 Scottsdale contends that it was brought into this suit to defend its payment to First
Bank and Neely, not as part of an interpleader and that upon filing of its petition for interpleader,
it sought leave from the Court to deposit the funds.195 First Bank does not explicitly state that
Scottsdale should be required to deposit an amount of prejudgment interest due to a failure to deposit
funds in a timely manner. However, in its opposition, First Bank asserts that “[h]ad Scottsdale, upon
receipt of the suit, provoked an interpleader, or even deposited its funds into the registry of court,
any interest would have been so negligble as to not have generated this controversy. However, it
chose not to do that.”196 Furthermore, First Bank asserts that Scottsdale has “had the use of the funds
since the checks were issued, and knew that it had use of the funds since suit was filed against it.”197
First Bank also avers, throughout its memoranda, that Scottsdale has not yet made a deposit of the
funds. In light of the fact that Scottsdale’s arguments appear to fit within the three factors the Fifth
Circuit has identified as factors courts may use in determining whether interest should be awarded
in interpleader actions, discussed below, the Court will address these arguments for an award of
interest as well.
194

Rec. Doc. 83 at p. 5.

195

Id.

196

Rec. Doc. 70 at p. 13.

197

Id. at p. 19.

33

In Aetna Casualty & Surety Co., the Fifth Circuit observed that in determining whether
interest should be awarded in an interpleader action, the district court had considered: “(1) whether
the stakeholder unreasonably delayed in instituting the action or depositing the fund with the court[;]
(2) whether the stakeholder used the fund for his benefit and would be unjustly enriched at the
expense of the claimants who have claim to the fund[;] and (3) whether the stakeholder eventually
deposited the fund into the court’s registry.”198 The Fifth Circuit, however, did not explicitly adopt
the three-factor test. In Gabarick v. Laurin Maritime (America), Inc., the Fifth Circuit noted that this
three-factor test had been mentioned in Aetna Casualty & Surety Co., but noted that the Fifth Circuit
had not adopted it and held that the district court had erred in holding the defendant liable for
prejudgment interest on the interpleaded funds on other grounds.199 The Court will consider these
factors in its determination of whether interest should be awarded in this case.
This action was instituted by First Bank on September 4, 2014.200 Scottsdale filed a motion
to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6) on December 11, 2014.201 In ruling
on the motion to dismiss, the Court found that neither party had cited to a case directly addressing
the issue of whether an insurer could satisfy its obligation to proceeds “as interests appear” by
issuing a joint check to two parties who dispute their respective entitlement to the proceeds.202 The
Court, however, found that, taking First Bank’s factual allegations as true, First Bank had plausibly

198

No. 95-60152, 1995 WL 581567 (5th Cir. Aug. 24, 1995).

199

649 F.3d 417, 422 (5th Cir. 2011).

200

Rec. Doc. 1.

201

Rec. Doc. 11.

202

Rec. Doc. at p. 22.

34

stated a claim for the proceeds of the checks.203 The same day the motion to dismiss was denied,
Scottsdale requested and was granted leave to file a “Third Party Complaint and Counterclaim in
Interpleader.”204 Two months later, Scottsdale requested leave to deposit funds into the Court’s
registry.205
Although Scottsdale cannot be said to have acted diligently in depositing the funds or
instituting the action, nor does the Court find that it acted unreasonably as to merit an award of legal
interest. Scottsdale has in fact requested leave to deposit the funds,206 and is properly waiting for
Court approval before doing so. First Bank has not articulated why the two-month delay is
unreasonable. Furthermore, although Scottsdale did initially contest liability, the motion to dismiss
was not frivolous. Accordingly, the Court finds that Scottsdale is not required to pay legal interest
on these grounds.
4.

Attorney’s Fees

Scottsdale also contends that it is entitled to attorney’s fees as a disinterested stakeholder.207
It asserts that it was forced to expend attorney’s fees and litigation costs to defend itself in a dispute
that is really between First Bank and Neely.208 In addition, it contends that First Bank has “made
misrepresentations to this Court since the inception of the suit; has no valid cause of action against
Scottsdale; and per the allegations of Neely and Binegar, use[d] this suit as a vehicle to avoid the

203

Id. at p. 24.

204

Rec. Doc. 52.

205

Rec. Doc. 67.

206

Id.

207

Rec. Doc. 69-1 at p. 11.

208

Rec. Doc. 83 at p. 6.

35

jurisdiction of the state district court.”209 In opposition, First Bank asserts that Scottsdale is not
entitled to attorney’s fees because it has not acted as a disinterested stakeholder in this action.210 First
Bank asserts that Scottsdale first resisted paying anything to First Bank and only filed its
interpleader action after the Court determined that First Bank had stated a cause of action.211 In
addition, First Bank argues that Scottsdale has not stated a valid reason for not depositing any
money into the registry of the court.212
Attorney’s fees are available in an interpleader action when the interpleader is a disinterested
stakeholder and not in substantial controversy with one of the claimants.213 An award of attorney’s
fees is in the discretion of the district court.214 In Royal Indemnity Co. v. Bates, the Fifth Circuit
identified five factors as relevant to a determination regarding whether to award attorney’s fees and
costs to an interpleader-plaintiff: “(1) whether the case is simple; (2) whether the interpleaderplaintiff performed any unique services for the claimants or the court; (3) whether the interpleaderplaintiff acted in good faith and with diligence; (4) whether the services rendered benefited the
interpleader-plaintiff; and (5) whether the claimants improperly protracted the proceedings.”215 In
Phillips Petroleum Co. v. Hazlewood, the Fifth Circuit affirmed a trial court’s denial of attorney’s
fees for a stakeholder who the trial court had found “actively took a position opposing” one

209

Rec. Doc. 69-1 at p. 11.

210

Rec. Doc. 70 at p. 23.

211

Id.

212

Id.

213

Rhoades v. Casey, 196 F.3d 592, 603 (5th Cir. 1999).

214

Id.

215

307 F. App’x 801, 806 (5th Cir. 2009) (citing 7 Charles Alan Wright & Arthur R. Miller, Federal
Practice and Procedure § 1719 (3d ed.)).

36

claimant’s claims and supporting the claims of another claimant.216
At the commencement of this case, Scottsdale contested liability entirely. On December 11,
2014, Scottsdale filed a motion to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6),
arguing that it had satisfied its duty under the insurance policy by its issuance of a check jointly
payable to Neely and First Bank.217 It was not until the Court denied Scottsdale’s motion to dismiss
on May 27, 2015,218 that it requested leave to file a “Third Party Complaint and Cross Claim for
Interpleader.”219 Despite being granted leave to file its interpleader cross claim on May 27, 2015,220
however, Scottsdale did not file a motion for leave under Federal Rule of Civil Procedure 67 to
deposit the sum of the checks into the Court’s registry until August 4, 2015.221 Although the Court
finds that this conduct was not unreasonable, it cannot find that Scottsdale has acted with diligence
as a disinterested stakeholder. Therefore, the Court denies Scottsdale’s motion for attorney’s fees.
5.

Dismissal of Scottsdale

Both Scottsdale and First Bank agree that Scottsdale should be dismissed from the case upon
deposit of the disputed funds into the registry of the Court.222 “A district court has broad powers in
an interpleader action.”223 A district court may issue an order discharging a stakeholder if the

216

534 F.2d 61, 63 (5th Cir. 1976).

217

Rec. Doc. 11-1.

218

Rec. Doc. 49.

219

Rec. Doc. 50.

220

Rec. Doc. 51.

221

Rec. Doc. 67.

222

Rec. Doc. 69-1 at p. 5; Rec. Doc. 70 at p. 8.

223

Rhoades v. Casey, 196 F.3d 592, 600 (5th Cir. 1999).

37

stakeholder is disinterested.224 Scottsdale asserts that it is disinterested because it makes no claim
to the funds and that no material controversy involving Scottsdale exists.225 No party disputes this.
Accordingly, the Court will grant Scottsdale’s motion to dismiss it from the case upon Scottsdale’s
deposit of the funds into the registry of this Court.
6.

Injunction Against Defendants-in-Interpleader

Scottsdale and First Bank also agree that Scottsdale is entitled to an injunction against
Defendants-in-Interpleader, enjoining them from filing any other action against Scottsdale regarding
the negotiable instruments at issue or the proceeds of the instruments.226 Scottsdale does not identify
any pending state court actions or federal court proceedings outside of this case that it seeks this
Court to enjoin, asking only that the Court enjoin Defendants-in-Interpleader from “filing any other
action against Scottsdale with regarding [sic] to the subject negotiable instruments and/or any
amounts or proceeds listed on such negotiable instruments.”227
In support of its motion for an injunction, Scottsdale cites the Fifth Circuit in Auto Parts
Manufacturing Mississippi, Inc. v. King Construction of Houston, LLC228 in which it quotes 28
U.S.C. § 2361 for the proposition that a district court can enjoin the institution or prosecution of any
proceeding in state or federal court affecting the property involved in the interpleader action.
However, the statute authorizing a district court to restrain claimants from instituting or prosecuting

224

Auto Parts Mfg. Miss., Inc. v. King Const. of Houston, L.L.C., 782 F.3d 186, 195 (5th Cir. 2015) (citing
7 Charles Alan Wright, Arthur R. Miller & Mary Kay Kane, Federal Practice and Procedure § 1714 (3d ed.)).
225

Rec. Doc. 69-1 at p. 6.

226

Rec. Doc. 69-1 at p. 9; Rec. Doc. 70 at p. 8.

227

Rec. Doc. 69 at p. 1.

228

782 F.3d 186, 195 (5th Cir. 2015).

38

further proceedings in state or federal courts is limited to statutory interpleader actions.229
In Holland America Insurance Company v. Succession of Roy, the Fifth Circuit found that
a motion for an injunction in a Federal Rule of Civil Procedure 22 interpleader action must be
evaluated under the standards of Federal Rule of Civil Procedure 65.230 The Fifth Circuit explained
that a district court may issue an injunction under Rule 65 “if the court finds that irreparable injury
would result to the movant in its absence, that the threatened injury to the movant outweighs the
harm that the injunction may cause the nonmovant, that there is a likelihood of success on the merits,
and that the public interest would not be adversely affected by the injunction.”231 The Fifth Circuit
noted that injunctive relief is “an extraordinary and drastic remedy, not to be granted routinely, but
only when the movant, by a clear showing, carries the burden of persuasion.”232
Regarding its motion for an injunction, Scottsdale asserts only that it “filed an interpleader
action, has joined the proper parties, and unconditionally deposited the funds at issue into the
registry of the court. Scottsdale should be dismissed as a party to this suit and any claim of First
Bank (or any other party) against Scottsdale with regard to the funds should be dismissed and
enjoined.”233 The Fifth Circuit in Holland observed that “[s]peculative injury is not sufficient; there
must be more than an unfounded fear on the part of the applicant.”234 Scottsdale does not allege any

229

Holland Am. Ins. Co. v. Succession of Roy, 777 F.2d 992, 996–97 (5th Cir. 1985); Pan Am. Fire & Cas.
Co. v. Revere, 188 F. Supp. 474, 484 (E.D. La. Sept. 30, 1960) (Wright, J.); 7 Charles Alan Wright & Arthur R.
Miller, Federal Practice and Procedure § 1717 (3d ed.).
230

777 F.2d 992, 996–97 (5th Cir. 1985).

231

Id. at 997.

232

Id.

233

Rec. Doc. 69-1 at p. 10.

234

777 F.2d at 997.

39

irreparable injury that it would suffer in the absence of an injunction. First Bank has agreed that
Scottsdale is entitled to dismissal from this action and to an injunction.235 First Bank has also stated
that it has “no intent to proceed against Scottsdale once this case is fully resolved.”236 Furthermore,
Scottsdale has not identified any pending litigation filed against it by either Neely or Binegar
Christian, LLC nor has Scottsdale provided the Court with any reason to believe that litigation
pertaining to the checks at issue in this case will be filed in the future. Accordingly, the Court finds
that Scottsdale has not met its burden of showing that it will suffer irreparable injury in the absence
of an injunction. Therefore, the Court denies Scottsdale’s motion for an injunction against
Defendants-in-Interpleader.
IV. Conclusion
For the foregoing reasons, the Court finds that the Court has jurisdiction over the interpleader
action and the interpleader action is proper. In addition, the Court finds that Scottsdale is entitled
to be dismissed from the case following the deposit of funds into the Court’s registry but that
Scottsdale is not entitled to an injunction against the claimants from filing any additional actions
against Scottsdale regarding the negotiable instruments at issue in this case and/or the amounts or
proceeds listed on the negotiable instruments. Finally, the Court finds that First Bank is not entitled
to interest on the sum of the checks nor is Scottsdale entitled to attorney’s fees in connection with
this case.

235

Rec. Doc. 70 at p. 8.

236

Id.

40

Accordingly;
IT IS HEREBY ORDERED that Scottsdale’s “Motion for Summary Judgment”237 is
GRANTED IN PART AND DENIED IN PART.
IT IS FURTHER ORDERED that the motion is granted to the extent that it seeks: (1) a
declaration that the interpleader action in this case is proper; (2) a finding that First Bank is not
entitled to legal interest; and (3) Scottsdale’s dismissal from the case upon the deposit of the funds
into the Court’s registry.
IT IS FURTHER ORDERED that the motion is denied to the extent that the motion seeks
an award of attorney’s fees for Scottsdale and an injunction against First Bank, Neely, and Binegar
Christian, LLC from filing any additional actions against Scottsdale regarding the negotiable
instruments at issue in this case and/or the amounts or proceeds listed on the negotiable instruments.
NEW ORLEANS, LOUISIANA, this ______ day of November, 2015.
10th

________________________________
NANNETTE JOLIVETTE BROWN
UNITED STATES DISTRICT JUDGE

237

Rec. Doc. 69.

41