Connecticut General Life Insurance Company v. Feldman et al

Filing 25

MEMORANDUM. Signed by Judge William M Nickerson on 7/1/2015. (bas, Deputy Clerk)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MARYLAND
CONNECTICUT GENERAL LIFE
INSURANCE COMPANY
v.
EDWARD S. FELDMAN
&
PENN MORTGAGE COMPANY, INC.

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Civil Action No. WMN-14-03670

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MEMORANDUM
Before the Court is a Motion to Dismiss Defendant Edward
Feldman’s Counterclaims, ECF No. 14, filed by Plaintiff
Interpleader Connecticut General Life Insurance Company (CGLIC)
and a Motion to Dismiss Cross-Claims and for Judgment, ECF No.
15, filed by Defendant Penn Mortgage Company (Penn).
motions are ripe.

The

Upon a review of the pleadings and the

applicable case law, the Court determines that no hearing is
necessary, Local Rule 105.6, and both motions will be granted.

I. FACTUAL AND PROCEDURAL BACKGROUND
CGLIC has filed a Complaint for Interpleader to seek
certainty regarding Defendants Mr. Feldman’s and Penn’s
respective rights to annuity payments for which CGLIC is the
issuer.

Mr. Feldman was awarded the Annuity in 1984 to fund

attorney fees due after resolution of a lawsuit throughout which

Mr. Feldman served as counsel.
schedules.

The Annuity included two payment

Mr. Feldman received “lifetime payments with period

certain,” consisting of 360 guaranteed monthly payments of
$1,000 and continuing monthly payments of the same amount for
the duration of his life.

Compl. Ex. B, ECF No. 1-5 at 3.

He

also received “guaranteed payments” consisting of four payments
in the amounts of $10,000, $20,000, $40,000, and $50,000 to be
paid on November 10 of 1994, 1999, 2004, and 2014, respectively.1
Id. at 4.
On August 16, 1989, Mr. Feldman assigned the Annuity to
Penn as security for an $115,000.00 loan.

Under the terms of

the loan, Mr. Feldman was to pay monthly interest-only payments
in the amount of $1,677.08 from October 1, 1989, until September
1, 1990.

At that time, the entire unpaid balance of the

principal sum ($115,000) and any unpaid interest would be due
and payable in full.
The Assignment identifies two types of payments:
“guaranteed periodic payments” and “guaranteed lifetime
payments.”

Compl. Ex. C at 1, ECF No. 1-6 at 1.

The terms of

the Annuity are incorporated by reference, as the agreement
notes these “guaranteed periodic payments” and “guaranteed

1

Mr. Feldman chooses to refer to the “guaranteed payments” as
the “lump-sum payments.” This Court will refer to the two types
of payments in the Annuity as they are designated in that
document.
2

lifetime payments” are “more fully set forth in the Annuity.”
Id.

In the Assignment, Mr. Feldman warranted that “the

guaranteed periodic payments remaining to be paid under said
Annuity are 320 payments of $1,000.00 each.”

Id.

The

Assignment further states that the “Assignor hereby assigns said
Annuity unto Lender.”

Id.

In addition, the Assignment provides that “[u]ntil the
occurrence of an Event of Default . . . Assignor shall continue
to receive and enjoy the periodic payments under the terms of
the Annuity.

No periodic or lifetime payment greater than

$1,000.00 each shall be received by Assignor.”

Id.

Default can

be triggered by the “failure of the Undersigned to pay when due
any of the installment payments.”

Id. at 12.

Upon such an

event, Penn had the option to either declare the entire unpaid
balance and interest accrued due immediately, or exercise the
remedies set forth in any of the loan documents.

Id. at 13.

In November of 1989, Mr. Feldman defaulted on the loan.
Upon default, Penn revoked Mr. Feldman’s right under the
Assignment to receive monthly Annuity payments.

Penn thereafter

alerted the owner of the Annuity, Aetna, of the default and
demanded receipt of all payments due under the Assignment until
the loan was satisfied.

In February of 1990, pursuant to this

correspondence, the owner directed CGLIC to issue all future
payments to Penn.

At this point, Penn began collecting all
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$1,000 monthly payments. It also collected the $10,000 payable
on November 10, 1994, and the $20,000 payable on November 10,
1999.
In May of 2004, Mr. Feldman wrote to the Annuity owner.

In

this letter he indicated he had been unable to reach Penn to
inquire about the status of his loan and requested the owner
stop the Annuity payments to Penn or inquire itself about the
loan’s status.

Mr. Feldman forwarded this letter to CGLIC that

same month.
In June and July of 2004, Penn sent correspondence to CGLIC
indicating Mr. Feldman’s loan had not yet been satisfied and
demanding release of the $40,000 payment due on November 10,
2004.

CGLIC released this payment to Penn.

Penn sent similar

correspondences to CGLIC in September and November of 2014,
again indicating Mr. Feldman’s loan had not been satisfied and
demanding release of the $50,000 payment due on November 10,
2014.

On November 7, 2014, Mr. Feldman’s counsel at the time

wrote to CGLIC requesting it cease all payments to Penn and
asserting that Penn had never been entitled to the “guaranteed
payments” under the Assignment of the Annuity.2

ECF No. 1-15 at

3.

2

This letter refers to the “guaranteed payments” as the
“principal,” but again, this Court will refer to the payments as
they are designated in the Annuity.
4

As a result of the conflicting interests, CGLIC suspended
all Annuity payments beginning with the November 10, 2014,
“guaranteed payment,” and filed a Complaint for Interpleader on
November 21, 2014.

In response to the interpleader complaint,

Mr. Feldman filed two counterclaims for breach of contract and
breach of fiduciary duty against CGLIC.

He also filed seven

cross-claims against Penn for breach of contract (Count I),
fraudulent misrepresentation (Count II), fraudulent concealment
(Count III), negligent misrepresentation (Count IV), unjust
enrichment (Count V), unconscionable loan terms (Count VI), and
conversion (Count VII).
The causes of action for the counterclaims and cross-claim
Counts I-V and Count VII stem from Mr. Feldman’s belief that
under the Assignment of the Annuity Penn is entitled to collect
only the $1,000 monthly payments, but CGLIC has issued, and Penn
has accepted, the November 10 payments as well.

Because CGLIC

issued these payments, Mr. Feldman claims it breached the terms
of the Annuity and the Assignment,3 and breached its fiduciary
duty to deliver the “guaranteed payments” to Mr. Feldman.
Similarly, because Penn requested the “guaranteed payments” from
CGLIC, Penn either negligently or fraudulently misrepresented
its entitlement to these funds (Counts II and IV).
3

Further, by

As CGLIC points out, it could not have breached the Assignment
since it was not a party to that contract. CGLIC Mot. to
Dismiss, ECF No. 14-1 at 12.
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accepting the “guaranteed payments” Penn breached the terms of
the Assignment (Count I) and exercised control over these
payments without Mr. Feldman’s consent (Count VII).

Finally, by

its failure to communicate with Mr. Feldman regarding the status
of his loan, Penn intentionally concealed its receipt of the
“guaranteed payments” in order to prevent Mr. Feldman from
recovering these funds (Count III), which resulted in Penn’s
unjust enrichment through retention of these funds (Count V).4
On March 2, 2015, CGLIC filed a motion to dismiss on the
ground that Mr. Feldman’s counterclaims failed to state a claim
upon which relief could be granted.

CGLIC also asserted that

Mr. Feldman is precluded from filing a claim for the November
10, 2014 payment, since allowing a claim for the interplead
funds would defeat the purpose of an interpleader action.

Penn

filed its motion to dismiss on March 2, 2015, on the ground that
Mr. Feldman’s assignment to Penn granted all Annuity payments to
Penn.5

In addition, Penn filed a motion for judgment on the

4

Penn groups cross-claim Counts I-IV and Count VII as “contractrelated.” The Court will consider Mr. Feldman’s cross-claim for
unjust enrichment (Count V) in the same category, since its
resolution also turns on whether Penn was assigned all payments
under the Annuity. Mr. Feldman’s remaining cross-claim of
unconscionable loan terms is based on his belief that Penn
imposed an oppressively high interest rate without an
opportunity for bargaining.
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Penn and CGLIC also argue that Mr. Feldman’s claims are timebarred. For the reasons that follow, because the resolution of
Penn’s Motion for Judgment also resolves the question of Mr.
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interpleader requesting that the Court find Penn is entitled to
all payments under the Annuity.

II. LEGAL STANDARDS
The correct standard under which to analyze a motion to
dismiss asks whether the plaintiff’s claims include sufficient
factual allegations to plausibly suggest that the pleader is
entitled to relief.
555-57 (2007).6
requirement.

Bell Atl. Corp. v. Twombly, 550 U.S. 544,

The plausibility standard is not a probability

Id. at 556.

A judge will assume the claims’

factual allegations are true, even if “proof of those facts is
improbable.”

Id.

Even so, “[f]actual allegations must be

enough to raise a right to relief above the speculative level;”
“ a [claim] requires more than labels and conclusions, and a
formulaic recitation of the elements of a cause of action will

Feldman’s counter and cross-claims, the Court needs not address
the issue of timeliness. The Court notes that if it were to
reach the question of whether Mr. Feldman’s claims were timebarred, it would do so with a record that dates back twenty
years.
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Mr. Feldman suggests that a claim should not be dismissed
unless it is certain the party bringing the claim would not be
entitled to relief under any set of facts. Opp. to Penn Mot. to
Dismiss, ECF No. 18-1 at 5; Opp. to CGLIC Mot. to Dismiss, ECF
No. 19-1 at 4 (citing Mylan Labs., Inc. v. Matkari, 7 F.3d 1130,
1134 (4th Cir. 1993). The Supreme Court opined eight years ago
that this standard “is best forgotten as an incomplete, negative
gloss on an accepted pleading standard . . .” Twombly 550 U.S.
at 563.
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not do.”

Id. at 555.

From the claims, the court must be able

“to draw the reasonable inference that the defendant is liable
for the misconduct alleged.”

Ashcroft v. Iqbal, 556 U.S. 662,

678 (2009); see also Francis v. Giacomelli, 588 F.3d 186, 193
(4th Cir. 2009).

In evaluating the factual allegations, the

court may not look outside the pleadings, but may consider
documents attached to the complaint.

Whiting-Turner Contracting

Co. v. Liberty Mut. Ins. Co., 912 F. Supp. 2d 321, 332 (D. Md.
2012).
A Rule 12(c) motion for judgment on the pleadings is
appropriate if the pleadings are closed, but trial will not be
delayed by the motion. Fed. R. Civ. P. 12(c).

“Federal Rule

12(c) should be read in conjunction with several other federal
rules authorizing pretrial motions . . . .”

Geoghegan v. Grant,

No. CIV. A. DKC 10-1137, 2011 WL 673779, at *3 (D. Md. Feb. 17,
2011).

Because Rule 12(c) should be considered together with

any pretrial motion, the standard under which to evaluate a
12(c) motion depends on the type of relief being sought.

Id.

For example, if a party is seeking a final judgment on the
merits using a 12(c) motion, the standard should be the same as
that for a motion for summary judgment, since summary judgment
also concerns the substance of the party’s claim.

Id. Summary

judgment is appropriate “if the movant shows that there is no
genuine dispute as to any material fact and the movant is
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entitled to judgment as a matter of law.”
56(a).

Fed. R. Civ. P.

This standard requires there be no “sufficient evidence

favoring the nonmoving party for a jury to return a verdict for
that party.”
(1986).

Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249

“The key distinction between a Rule 12(c) motion and a

Rule 56 motion is that the court may not consider facts outside
the pleadings under Rule 12(c).”

Geoghegan, 2011 WL 673779, at

*3.

III. DISCUSSION
CGLIC filed its complaint for interpleader pursuant to 28
U.S.C. § 1335, which grants the district courts original
jurisdiction over interpleader claims involving at least $500 in
funds and claimants of diverse citizenship.
1335(a)(1).

28 U.S.C. §

Because the action is brought based on diversity,

rather than a question of federal law, a federal district court
will apply the substantive law of the state in which it sits.
Erie R. Co. v. Tompkins, 304 U.S. 64, 78 (1938).

In this case,

therefore, Maryland law must be applied in order to interpret
the terms of the Assignment and the Annuity.
Maryland employs an objective test to interpret contracts.
Adloo v. H.T. Brown Real Estate, Inc., 686 A.2d 298, 304 (Md.
1996).

“A court construing an agreement under this test must

first determine from the language of the agreement itself what a
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reasonable person in the position of the parties would have
meant at the time it was effectuated.”

Gen. Motors Acceptance

Corp. v. Daniels, 492 A.2d 1306, 1310 (Md. 1985)).

The language

should be considered as part of the whole, so that each
provision is interpreted in the same way.
Human Res., 842 A.2d 53, 61 (Md. 2004).

Walker v. Dep't of

The parties’ intended

meaning is not relevant to the interpretation if not expressly
conveyed.

Daniels, 492 A.2d at 1310.

Specifically, an

assignment is presumed to convey the entire interest over which
an assignor has power if the assignment does not clearly state
that less than the entire interest has been granted.
Marshall, 152 A. 261, 264 (Md. 1930).

Case v.

If a reasonable person

could find the language has more than one meaning, the court may
decide that the contract is ambiguous.

Prison Health Servs.,

Inc. v. Baltimore Cnty., 912 A.2d 56, 61 (Md. Ct. Spec. App.
2006).

In the case of an ambiguous contract, extrinsic evidence

may be considered to interpret the contract’s meaning.

Id.

Mr. Feldman, in arguing that the Assignment did not
transfer the four “guaranteed payments,” relies on term
discrepancies between the Annuity and the Assignment.

In the

Annuity, two types of payments – “lifetime payments with period
certain” and “guaranteed payments” – are identified while the
Assignment uses the terms “guaranteed periodic payments” and
“guaranteed lifetime payments.”

Mr. Feldman asserts that the
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term “guaranteed periodic payments” in the Assignment is
intended to mean the 360 guaranteed monthly payments of $1,000,
and the term “guaranteed lifetime payment” is intended to mean
the continuing monthly payments of $1,000 he is entitled to for
the duration of his life.

ECF No. 18-1 at 7.

To support this

interpretation, Mr. Feldman points to the fact that he was
required to warrant that “the guaranteed periodic payments
remaining to be paid under said Annuity are 320 payments of
$1,000.00 each” but did not warrant to any other payment due.
Mr. Feldman’s interpretation would have the Court conclude that
both “guaranteed periodic payments” and “guaranteed lifetime
payments” refer to the “lifetime payments with period certain”
as defined in the Annuity, but do not include the “guaranteed
payments” to be made on the 10th of November of 1994, 1999,
2004, and 2014.

Thus, the Assignment entitles Penn to the

$1,000 monthly payments, but not the payments made every five
years on November 10.
In contrast, Penn asserts that the Assignment
“unqualifiedly” assigned the whole Annuity to Penn.

Penn points

to the main granting clause “Assignor hereby assigns said
Annuity unto Lender” and argues that such language contains “no
hint that less than the entire payment stream was being
assigned.”

Penn Mot. to Dismiss, ECF No. 15-1 at 7.

To support

its argument, Penn points to clause in which Mr. Feldman is
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granted the right to the $1,000.00 monthly payments in the
absence of default, arguing that this limited grant would
expressly indicate the treatment of the “guaranteed payments.”
Therefore, according to Penn, all payments awarded under the
Annuity are considered in the Assignment.
Although Mr. Feldman wishes to highlight the discrepancy in
terminology between the Annuity and the Assignment, a complete
reading of the Assignment shows that Mr. Feldman assigned the
whole Annuity to Penn.

The Assignment states unambiguously that

“Assignor hereby assigns said Annuity unto Lender.”
at 2.

ECF No. 1-6

In the absence of clear language to the contrary, a

reasonable person would interpret this language to convey the
entire Annuity to the lender.

Although the Assignment makes

reference to “guaranteed periodic payments” and “guaranteed
lifetime payments,” the Assignment also sets forth that the full
definition of those payments stems from the text of the Annuity.
The provision following makes even clearer that Penn should
be awarded the “guaranteed payments” as defined in the Annuity.
The Assignment states, “Until the occurrence of an Event or
Default, Assignor shall continue to receive and enjoy the
periodic payments under the terms of the Annuity.

No periodic

or lifetime payment greater than $1,000.00 each shall be
received by assignor.”

ECF No. 1-6 at 2.

Thus, Mr. Feldman is

precluded from receiving any payment over $1,000.
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Since the

“guaranteed payments” begin at $10,000, the Assignment clearly
designates these payments to Penn.

Mr. Feldman confirmed this

in his letter to CIGNA dated the same day as the Assignment.

He

wrote, “There shall be no payments to me beyond the monthly
$1,000.00 guaranteed amount throughout the Assignment unless the
Penn Mortgage Company first consents thereto in writing.”
Compl. Ex. D, ECF No. 1-7.7

Mr. Feldman’s letter demonstrates

that the Assignment gave Penn control of the Annuity while Mr.
Feldman’s loan was unpaid.
In fact, Penn was to receive the “guaranteed payments” even
if Mr. Feldman had not defaulted on the loan.

Penn had allowed

Mr. Feldman to retain the rights only to the $1,000 monthly
payments, and only so long as he did not default on the loan.
Because the Assignment designates the “guaranteed payments” to
Penn, Penn was due the payments remitted on November 10 of 1994,
1999, and 2004.

Accordingly, Penn was also due to receive the

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Although it is not necessary for the Court to examine this
evidence extrinsic to the contract to interpret the meaning of
the Assignment, it is proper to consider it when ruling on a
12(b)(6) and 12(c) motion, since the letter was attached as an
exhibit to the Complaint. Mr. Feldman’s reliance on Bosiger v.
U.S. Airways to assert that it would be “fundamentally unfair”
for this court to consider this extrinsic evidence, ECF No. 18-1
at 8, is misguided, as the case reaffirms that a court cannot
consider matters outside the pleadings when considering a
12(b)(6) motion, but does not address any “unfairness” of a
court considering evidence attached to a complaint. Bosiger v.
U.S. Airways, 510 F.3d 442, 450 (4th Cir. 2007).

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payment on November 10 of 2014.
payment to Penn.

CGLIC should release this

Therefore, the Court will grant judgment on

the interpleader in favor of Penn.
Further, because Mr. Feldman assigned all rights to the
Annuity to Penn when he entered into the loan agreement and
signed the Assignment, CGLIC could not have breached the terms
of the Annuity, nor breached a fiduciary duty, by issuing these
payments to Penn instead of Mr. Feldman.

Mr. Feldman failed to

pay any of the monthly interest-only payments due during the
first year of his loan.

As a result, he defaulted on the loan.

Penn chose to exercise its rights granted in the event of
default.

It revoked Mr. Feldman’s remaining rights under the

Assignment to collect the $1,000 monthly payments.

Penn

therefore assumed the entire benefit of CGLIC’s obligation under
the Annuity.

Because CGLIC complied with the terms of the

Annuity, Mr. Feldman’s counterclaims for breach of contract and
breach of fiduciary duty will be dismissed.
Similarly, Mr. Feldman’s contract-related cross-claims
(Counts I-V and Count VII) fail.

Because Mr. Feldman assigned

the whole Annuity to Penn, Penn could not negligently nor
fraudulently misrepresent its entitlement to these funds (Counts
II and IV).

Likewise, it could not breach the terms of the

Assignment by accepting the “guaranteed payments” (Count I), nor
exercise dominion over the payments without Mr. Feldman’s
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permission (Count VII).

Further, since Mr. Feldman assigned

these payments to Penn, it could not have fraudulently concealed
its receipt of the payments (Count III) or have been unjustly
enriched by retaining those funds (Count V).

Therefore, Mr.

Feldman’s cross-claims Counts I-V and Count VII will be
dismissed.
Mr. Feldman’s remaining cross-claim of unconscionable loan
terms (Count VI) will also be dismissed.

To state a claim for

unconscionable loan terms, a plaintiff must allege sufficient
facts to show that “[a]n unconscionable contract involves
extreme unfairness, made evident by (1) one party’s lack of
meaningful choice, and (2) contractual terms that unreasonably
favor the other party.”
394 (Md. 2007).

Barrie School v. Patch, 933 A.2d 382,

Mr. Feldman does not allege a lack of

meaningful choice beyond a general allegation that he lacked an
“opportunity for bargaining.”

Feldman Ans., ECF No. 8 ¶ 56.

Mr. Feldman, however unfortunate his business affairs at the
time, was not forced to enter into a loan agreement with Penn,
nor was Mr. Feldman an unsophisticated party.

See Walther v.

Sovereign Bank, 872 A.2d 735, 744 (Md. 2005) (quoting Williston
on Contracts § 18:10 (4th ed. 1998)) (stating that the concept
of unconscionability was meant to counteract abuse when the
imposed-upon party did not have “meaningful choice about whether
and how to enter the transaction”).
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Further, although Mr.

Feldman alleges that he was still suffering from post-concussion
syndrome when he entered into the contract with Penn, three
years after his accident, he fails to demonstrate that the
dizzinesss and vertigo he experienced resulted in the mental
incapacity to enter into contract.

As to the actual loan terms,

Mr. Feldman makes only conclusory statements regarding
unreasonable contract terms, stating only that Penn imposed “an
oppressive and unconscionable rate of interest, among other
terms.”

Id.

Finally, the Court will award attorney’s fees and costs to
CGLIC, which are to be drawn against the interpleaded funds.
CGLIC, in its response to Penn’s Motion for Judgment, moves this
Court to grant it attorney’s fees and costs.

ECF No. 20 at 4.

“Despite the lack of an express reference in the federal
interpleader statute to costs or attorney’s fees, federal courts
have held that it is proper for an interpleader plaintiff to be
reimbursed for costs associated with bringing the action
forward.”

Trustees of Plumbers and Pipefitters Nat. Pension

Fund v. Sprague, 251 F. App’x 155, 156 (4th Cir. 2007).

Courts

have the discretion to award fees when “the party initiating the
interpleader is acting as a mere stakeholder, which means he has
admitted liability, has deposited the fund in court, and has
asked to be relieved of any further liability.”

Rapid

Settlements, Ltd. V. U.S. Fidelity and Guar. Co., 572 F. Supp.
16

2d 714, 722 (D. Md. 2009).

CGLIC has met the requirements of a

disinterested stakeholder, as it acknowledges that it has an
obligation to pay under the annuity, has placed the interpleaded
funds with the Court, and requested that the Court resolve the
dispute of to whom payment is owed.

CGLIC does not take a stake

in the Court’s determination of whether Penn or Mr. Feldman is
due the payments under the annuity.

Accordingly, CGLIC’s

request for attorney’s fees and costs will be granted.
Penn has requested in the issuance of costs and fees that
the Court charge Mr. Feldman rather than take from the
interpleaded funds.

The practice of this Court, however, is to

deduct fees and costs from the interpleaded funds.
F. App’x at 156.

Sprague, 251

And although the Fourth Circuit has discussed

the possibility of charging fees to the losing defendant in an
interpleader claim, such a situation could only be considered in
the case of bad faith, fraud, or the like.

Id.

The Court finds

that there is no conduct on the part of Mr. Feldman that
justifies an order to pay CGLIC’s fees and costs.

Therefore,

CGLIC’s attorney’s fees and costs will be deducted from the
interpleaded funds prior to disbursement to Penn.

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IV. CONCLUSION
For the above-stated reasons, the Court will enter judgment
on the interpleader in favor of Penn Mortgage Company, Inc., and
dismiss Counts I and II of Mr. Feldman’s counterclaims and
Counts I-VII of Mr. Feldman’s cross-claims.

A separate order

will issue.
____________/s/___________________
William M. Nickerson
Senior United States District Judge

DATED: July 1, 2015.

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