Allstate Indemnity Company v. Collura et al
MEMORANDUM & ORDER ADOPTING REPORT AND RECOMMENDATION; For the foregoing reasons, BNY's objections are OVERRULED, and the R&R is ADOPTED IN PART and REJECTED IN PART. Plaintiff's motion to deposit funds (Docket Entry 56) is GRANTED IN PART and DENIED IN PART. Specifically, Plaintiff may proceed under Statutory Interpleader but must deposit $363,000 with the Court. At that time, Plaintiff may request that it be discharged from the case. Plaintiff is directed to file a letter indica ting if it is willing and able to deposit $363,000 with the Court within ten (10) days of the date of this Memorandum and Order. Additionally, Plaintiff's motion for a default judgment (Docket Entry 59) is GRANTED. The Clerk of the Court is directed to enter default judgments against Capital One Home Loans, LLC and Countrywide Home Loans, Inc. So Ordered by Judge Joanna Seybert on 3/22/2017. C/ECF (Valle, Christine)
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF NEW YORK
ALLSTATE INDEMNITY COMPANY,
MEMORANDUM & ORDER
PAUL COLLURA, CHRISTINE COLLURA,
BANK OF NEW YORK MELLON f/k/a BANK
OF NEW YORK AS TRUSTEE FOR CERTIFICATE
HOLDER CWALT, INC., UNITED STATES OF
AMERICA, CAPITAL ONE HOME LOANS, LLC,
and COUNTRYWIDE HOME LOANS, INC.,
Karen Maria Berberich, Esq.
Rosa M. Feeney, Esq.
Caroline Knoepffler Hock, Esq.
Lewis Johs Avallone Aviles, LLP
One CA Plaza, Suite 225
Islandia, NY 11749
Paul and Christine
Lloyd M. Eisenberg, Esq.
Eisenberg & Carton
535 Broadhollow Road, Suite M105
Melville, NY 11747
Donna Rosanne Ruggiero, Esq.
Eisenberg & Carton
1227 Main Street, Suite 101
Port Jefferson, NY 11777
Bank of New York
United States of
Sarah Joanne Greenberg, Esq.
10 Bank Street, Suite 700
White Plains, NY 10606
Wallace D. Dennis, Esq.
Department of Justice, Tax Division
Ben Franklin Station, PO Box 55
Washington, D.C. 20044
Capital One Home
Loans, LLC and
SEYBERT, District Judge:
Plaintiff Allstate Indemnity Company (“Plaintiff” or
“Allstate”) commenced this interpleader action against Paul and
(“BNY”), the United States of America (the “United States” or the
“Government”), Capital One Home Loans, LLC (“Capital One”), Bank
of America (“Bank of America”) and Countrywide Home Loans, Inc.
(“Countrywide” and collectively, “Defendants”) on August 28, 2015.
(Compl., Docket Entry 1.)
Currently pending before the Court is
Magistrate A. Kathleen Tomlinson’s Report and Recommendation dated
February 7, 2017 (the “R&R”, Docket Entry 83) with respect to
insurance policy with the Court (Docket Entry 56) and Plaintiff’s
motion for a default judgment against Capital One and Countrywide
(Docket Entry 59).
Judge Tomlinson recommends that this Court
grant Plaintiff’s motions.
(R&R at 2.)
Defendant BNY filed
objections to the R&R, (BNY Obj., Docket Entry 86), and the United
OVERRULED, and the R&R is ADOPTED IN PART and REJECTED IN PART.
Plaintiff’s motion to deposit funds is GRANTED IN PART and DENIED
IN PART, and Plaintiff’s motion for a default judgment is GRANTED.
Plaintiff issued a homeowners insurance policy (the
“Policy”) on a property owned by the Colluras (the “Property”) in
Southhampton, New York.
(Compl. ¶ 12.)
On March 16, 2015, the
Property sustained damage, and the Colluras subsequently filed a
(Compl. ¶¶ 2-3, 15.)
Plaintiff inspected the damage and
estimated the replacement cost value to be $75,460.04.
Compl. Ex. B, at 85.)
Plaintiff further estimated that the actual
cash value of the net claim was $65,582.18, after reductions for
(Estimate at 85.)
On August 11, 2015, Plaintiff provided the
estimate to the Colluras and advised that it would settle the claim
(Settlement Ltr., Compl. Ex. C, at 92.)
to the terms of the Policy, if the insured does not repair the
damage, payment will be made on an actual cash value basis and
depreciation is not recoverable.
64, at 40, ¶ 5(b).)
(Policy, Compl. Ex. A, at 22-
Conversely, the Policy provides that if the
insured repairs the damage within 180 days of receiving the actual
cash value payment, Plaintiff will “make additional payment to
reimburse [the insured] for cost in excess of actual cash value”
and depreciation is recoverable.1
(Policy at 40, ¶ 5(c).)
After forwarding the estimate to the Colluras, Plaintiff
discovered that there were multiple lienholders with potential
claims to the settlement proceeds, including: (1) Capital One,
which issued a mortgage and was on the deed for the Property; (2)
BNY, to which the mortgage was assigned by Capital One; (3) Bank
of America, the mortgage servicer; (4) the United States, which
had two federal tax liens on the Property of $75,690.80 and
$80,537.52; and (5) a third party who filed a Notice of Pendency
against the Colluras.
(Compl. ¶ 18.)
Plaintiff alleges that it
cannot determine which lienholders, if any, are entitled to the
proceeds and commenced this action to resolve the competing claims.
As stated, Plaintiff filed the Complaint on August 28,
The Government answered the Complaint on November 15, 2015
and acknowledged the tax liens.
(U.S. Answer, Docket Entry 21.)
Bank of America answered the Complaint on November 30, 2015 and
disclaimed any right to the settlement proceeds.
(Bank of America
Although not material to the pending motion, the Settlement
Letter states that “[y]ou may make a claim for additional
payment as described in the Building Structure Reimbursement
provision and, when applicable, the Personal Property
Reimbursement provision if you repair or replace the damaged,
destroyed or stolen covered property ‘within two years after the
date of the loss.’” (Settlement Ltr., at 92.)
Answer, Docket Entry 25.)
BNY filed its answer on November 30,
2015 and asserted cross-claims against each of the Defendants.
(BNY Answer, Docket Entry 24.) The same day, the Colluras answered
the Complaint and asserted a counter-claim against Plaintiff and
cross-claims against each of the Defendants.
Docket Entry 26.)
from the case.
On April 6, 2016, Bank of America was dismissed
(Stip. & Order, Docket Entry 54.)
On April 15, 2016, Plaintiff filed a motion to deposit
the proceeds with the Court and be released from this litigation.
(Mot. to Deposit, Docket Entry 56; Pl.’s Deposit Br., Docket Entry
immediately, and $4,013.86 at a later date should proof of repairs
be submitted (the “Settlement Amount”).
(Pl.’s Deposit Br. at 2.)
Finally, Plaintiff seeks dismissal of the Colluras’ counterclaim
(Pl.’s Deposit Br. at 2.)
BNY opposed the motion and
requested that the Court award the Settlement Amount to BNY.
Opp., Docket Entry 63, at 14-15.)
The Colluras filed a response
on May 19, 2016, advising that while they did not object to
Plaintiff’s motion, they opposed disbursement of the Settlement
Amount to BNY.
(Collura Reply, Docket Entry 70.)
On June 14,
2016, the Government also opposed BNY’s request for affirmative
(U.S. Reply, Docket Entry 74.)
Plaintiff filed its reply
in further support of its motion on May 17, 2016.
Docket Entry 69.)
On April 18, 2016, Plaintiff filed a motion for a default
judgment against Capital One and Countrywide.
Docket Entry 59.)
None of the parties opposed the motion.
motions to Judge Tomlinson for an R&R on whether the motions should
(Referral Order, Docket Entry 82.)
On February 7,
2017, Judge Tomlinson issued her R&R recommending that Plaintiff’s
motions be granted.
(R&R at 2.)
BNY has objected to Judge
Tomlinson’s recommendation that Plaintiff be permitted to deposit
the Settlement Amount with the Court and be discharged from the
(See, BNY Obj.)
The Government filed a response to BNY’s
(See, U.S. Reply.)
None of the Defendants objected
Plaintiff’s motion for a default judgment.
III. The R&R
At the outset, Judge Tomlinson summarized the two-step
process for analyzing interpleader actions under either Federal
Rule of Civil Procedure 22 (“Rule Interpleader”) or 28 U.S.C.
§ 1335 (“Statutory Interpleader”).
(R&R at 9.)
First, the Court
analyzes the basis for interpleader jurisdiction, and second, if
interpleader is permitted, the Court resolves the competing claims
and directs that the funds be disbursed accordingly.
(R&R at 9.)
concluding that it was inappropriate to adjudicate the claims to
the proceeds at this juncture.2
(R&R at 15-17.)
Judge Tomlinson began by analyzing the requirements of
(R&R at 15.)
She found that Plaintiffs
Interpleader based on the settlement amount and minimum diversity
between the parties.
(R&R at 17-23.)
However, she concluded
jurisdiction unless Plaintiff agreed to deposit the policy maximum
of $363,000, because Statutory Interpleader requires that the
plaintiff deposit the entire contested amount to proceed.3
Accordingly, she gave Plaintiff an opportunity to
deposit $363,000 before recommending dismissal of the case.
As an alternative, Judge Tomlinson analyzed whether
Plaintiff could maintain the action under Rule Interpleader.4 (R&R
Judge Tomlinson rejected BNY’s argument urging the Court to
award the proceeds to BNY, because, among other reasons, BNY
failed to comply with numerous procedural rules for seeking
affirmative relief. (R&R at 15-16.)
As Judge Tomlinson explained, “BNY has disputed the sufficiency
of th[e] [settlement] amount and instead invokes the Policy to
assert that Plaintiff should deposit the maximum amount of
dwelling coverage provided for.” (R&R at 27.)
In its motion, Plaintiff requested leave to amend the Complaint
to plead Rule Interpleader if necessary. Judge Tomlinson
concluded that the Court could sua sponte convert the case to an
Unlike Statutory Interpleader, Rule Interpleader requires
(R&R at 10.)
Judge Tomlinson determined that the
Court could exercise diversity jurisdiction based on complete
diversity between Plaintiff and Defendants and the amount in
(R&R at 28-31.)
She further found that Plaintiff’s
concerns regarding the proper allocation of the proceeds were
(R&R at 31-33.)
As a result, she concluded that the
action could be maintained under Rule 22 and recommended that
pursuant to Federal Rule of Civil Procedure 67.
(R&R at 34.)
regard to Plaintiff’s request to be discharged from the action,
Plaintiff was a neutral stakeholder and disclaimed any interest in
(R&R at 35-36.)
She recommends that the Court
discharge Plaintiff after it deposits $69,596.04 with the Court.
(R&R at 36.)
As to Plaintiff’s final request--that the Court dismiss
the Colluras’ counter-claim--Judge Tomlinson declined to consider
dismissal at this time.
(R&R at 33, n.12.)
Because the Colluras
action for Rule Interpleader, rendering the motion to amend
moot. (R&R at 28, n.9.)
This includes the actual cash value of the claim, $65,582.18,
plus the recoverable depreciation of $4,013.86. (R&R at 34.)
did not oppose the dismissal of their counter-claim, she advised
the parties to seek voluntary dismissal under Federal Rule of Civil
(R&R at 33, n.12.)
Finally, Judge Tomlinson considered Plaintiff’s motion
for a default judgment against Countrywide and Capital One. (R&R
Based on the relevant factors, she recommends that the
Court enter a default judgment against both defendants.
Before considering the parties’ arguments, the Court
will summarize the relevant legal standards.
“When evaluating the report and recommendation of a
magistrate judge, the district court may adopt those portions of
the report to which no objections have been made and which are not
Walker v. Vaughan, 216 F. Supp. 2d 290, 291
(S.D.N.Y. 2002) (citation omitted).
A party may serve and file
specific, written objections to a magistrate judge’s report and
recommendation within fourteen days of being served with the
See FED. R. CIV. P. 72(b)(2).
recommendation, the district court “may accept, reject, or modify,
in whole or in part, the findings or recommendations made by the
28 U.S.C. § 636(b)(1)(C); see also FED. R. CIV.
A party that objects to a report and recommendation
recommendation to which they are objecting.
See Barratt v. Joie,
No. 96-CV-0324, 2002 WL 335014, at *1 (S.D.N.Y. Mar. 4, 2002).
When a party raises an objection to a magistrate judge’s
report, the Court must conduct a de novo review of any contested
sections of the report.
See Pizarro v. Bartlett, 776 F. Supp.
815, 817 (S.D.N.Y. 1991).
However, where a party “makes only
Recommendation only for clear error.”
Walker, 216 F. Supp. 2d at
291 (internal quotation marks and citation omitted).
stakeholders from undue harassment in the face of multiple claims
assessing which claim among many has merit.”
Servs., LLC v. Bank of China, 192 F. Supp. 2d 173, 177 (S.D.N.Y.
Mar. 18, 2002).
As discussed, interpleader actions may proceed
under Federal Rule of Civil Procedure 22 or 28 U.S.C. § 1335,
although the jurisdictional requirements differ slightly.
jurisdiction or federal question jurisdiction.
CF 135 Flat LLC v.
Triadou SPV S.A., No. 15-CV-5345, 2016 WL 1109092, at *2, n.1
complete diversity between the parties, along with an amount in
controversy exceeding $75,000, is required.
Penn. Public School
Emps.’ Ret. Sys. v. Morgan Stanley & Co., Inc., 772 F.3d 111, 11718 (2d Cir. 2014); see also 28 U.S.C. § 1332(a).
In other words,
“all plaintiffs must be citizens of states diverse from those of
Penn. Pub. School, 772 F.3d at 118.
under Section 1335, the interpleader plaintiff need only show
minimal diversity between the parties.
Hartford Life Ins. Co. v.
Simonee, No. 14-CV-7520, 2016 WL 6956726, at *3 (E.D.N.Y. Nov. 9,
Additionally, the interpleader plaintiff must also show
that the “claims in question may expose [that] party . . . to
double or multiple liability.”
CF 135 Flat LLC, 2016 WL 1109092,
at *2 (quoting FED. R. CIV. P. 22(a)(1)) (internal quotation marks
Generally, “[a] neutral stakeholder having no claim to
the subject matter of the action” may be discharged after the
Hohlweck, 223 F. Supp. 2d 510, 514 (S.D.N.Y. Sept. 3, 2002).
As an initial matter, the Court must address an argument
made by the Government that may implicate its subject matter
The R&R and BNY’s objections both relied on Rule
The Court has considered whether, as a procedural matter, the
Government waived this argument by failing to object to the R&R
in a timely manner. However, because a challenge to subject
matter jurisdiction can be raised at any time by either the
(BNY Obj. at 4; R&R at 34.)
Plaintiff is willing to deposit the policy maximum with the Court,
Rule Interpleader is the only basis for interpleader jurisdiction.
jurisdictional requirements of Rule 22 because complete diversity
is destroyed by the presence of the United States as a party.
(U.S. Reply at 4.)
The Court agrees.
The statute which governs diversity
jurisdiction, 28 U.S.C. § 1332, states that “district courts shall
have original jurisdiction of all civil actions where the matter
in controversy exceeds the sum or value of $75,000 . . . between
. . . citizens of different states.”
See 28 U.S.C. § 1332(a)(1).
parties, the Court must examine the citizenship of each party.
See Penn. Public School, 772 F.3d at 118.
States is not a citizen of any state.
However, the United
See United States v. Dry
Dock Savings Institution, 149 F.2d 917, 918 (2d Cir. 1945).
Therefore, the presence of the United States as a defendant
destroys complete diversity.
See, e.g., United States v. Park
Place Assocs., Ltd., 563 F.3d 907, 919 n.7 (9th Cir. 2009) (“The
parties or the court, the Court is obligated to address it. See
Hammerstein v. Fed. Republic of Germany, 488 F. App’x 506, 508
(2d Cir. 2012).
United States, however, is neither a state nor a citizen of a
state, and may neither sue nor be sued under § 1332.”); Martin v.
Sallie Mae, Inc., No. 07-CV-0123, 2007 WL 4305607, at *3 (S.D. W.
Va. Dec. 7, 2007) (“[A] claim brought by a citizen of the United
States against the United States does not satisfy diversity or
citizenship.”); T M Sys., Inc. v. United States, 473 F. Supp. 481,
485 (D. Conn. 1979) (“Defendant United States, however, is not a
Further, because it is an indispensable party in this action,
the Court declines to dismiss the United States to preserve
diversity jurisdiction. See CP Solutions PTE, Ltd. v. General
Electric Co., 553 F.3d 156, 159 (2d Cir. 2009) (“Federal Rule of
Civil Procedure 21 allows a court to drop a nondiverse party at
any time to preserve diversity jurisdiction, . . . provided the
nondiverse party is not ‘indispensable’ under Rule 19(b).”); T M
Sys. Inc., 473 F. Supp. at 485 (“[D]iversity is destroyed unless
the United States is not an indispensable party to [the]
suit.”). To evaluate whether a party is indispensable, Federal
Rule of Civil Procedure 19(b) specifies several factors: “(1)
whether a judgment rendered in a person’s absence might
prejudice that person or parties to the action, (2) the extent
to which any prejudice could be alleviated, (3) whether a
judgment in the person’s absence would be adequate, and (4)
whether the plaintiff would have an adequate remedy if the court
dismissed the suit.” CP Solutions, 553 F.3d at 159 (citing FED.
R. CIV. P. 19(b)); see also Rubler v. Unum Provident Corp., No.
04-CV-7102, 2007 WL 188024, at *2 (S.D.N.Y. Jan. 25, 2007).
Because the purpose of this proceeding is to adjudicate the
competing claims to the insurance proceeds, and the United
States has asserted a claim to the proceeds, the Court finds
that allowing the case to proceed without the United States
would be prejudicial to its claims and such prejudice could not
be alleviated. Additionally, any judgment would not fully
resolve the claims to the proceeds, and as discussed infra,
there is an alternative basis for interpleader jurisdiction.
Therefore, Rule 22 is not a proper basis for interpleader
If Plaintiff wishes to proceed, it must do so under
Statutory Interpleader will be satisfied so long as Plaintiff is
willing to deposit the policy maximum of $363,000.9
III. BNY’s Objections
(BNY Obj. at 3.)
However, the majority of BNY’s
arguments are moot in light of the Court’s determination that
Plaintiff must deposit $363,000 to proceed.
(See, e.g., BNY Obj.
at 4 (discussing that Plaintiff could face further exposure up to
the policy maximum and that Plaintiff underestimated the damage to
As set forth in the R&R, there is no basis for federal question
jurisdiction at this juncture. (R&R at 31, n.11.)
There is minimal diversity despite the presence of the United
States as a defendant because minimal diversity requires
“diversity of citizenship between two or more claimants.” (R&R
at 18 (citing Metro. Life Ins. Co. v. Little, No. 13-CV-1059,
2013 WL 4495684, at *1 (E.D.N.Y. Aug. 17, 2013).) In this case,
the requirement is met because the Colluras are citizens of New
York and Bank of America, a party to the action at the time it
was filed, is a citizen of Delaware and North Carolina. (R&R at
21.) See also Cayuga Const. Corp. v. United States, No. 91-CV4883, 1993 WL 258738, at *1 (S.D.N.Y. July 6, 1993) (holding
that minimal diversity existed in statutory interpleader action
when United States was a party).
It is unclear if Plaintiff will seek dismissal
from the case if it elects to deposit the $363,000.
In light of
declines to hold that Plaintiff is entitled to discharge at this
BNY maintains that Plaintiff is obligated to deposit
interest under the terms of the policy.
(BNY Obj. at 6-7.)
“Additional Protection,” the Policy states that Plaintiff “will
pay, in addition to the limits of liability . . . interest accruing
on damages awarded until such time as we have paid, formally
offered, or deposited in court the amount for which we are liable
under this policy; interest will be paid only on damages which do
not exceed our limits of liability.”
(Policy at 47.)
It is worth
depositing the Settlement Amount of $69,596.04--not the policy
Moreover, BNY has failed to request a particular rate of
interest or a specific amount of interest.
Regardless, the Court
finds that consideration of this issue is premature.
As set forth in the R&R, if the Colluras agree to dismiss the
counterclaim, they may seek dismissal under Rule 41(a)(2). (R&R
at 33, n.12.)
The Court finds BNY’s objections regarding the amount in
controversy and Plaintiff’s willingness to deposit the policy
maximum to be moot. (See BNY Obj. at 5-6.)
elects to deposit the $363,000 to proceed, BNY may renew its
request at that time.
BNY also provides additional evidence that purportedly
shows that BNY has a superior interest in the proceeds.
The Government disputes that BNY’s claim is superior.
(U.S. Reply at 7-10.)
As Judge Tomlinson noted, the appropriate
inquiry at this stage is to determine whether the Court has
(R&R at 15-16.)
If Plaintiff deposits
$363,000 with the Court, the Court will begin the process of
adjudicating the claims and distributing the proceeds.
request is premature and procedurally defective at this stage.12
Plaintiff’s Motion for a Default Judgment Against Capital One
If no timely objections have been made to an R&R, the
“court need only satisfy itself that there is no clear error on
the face of the record.”
Urena v. New York, 160 F. Supp. 2d 606,
609-10 (S.D.N.Y. 2001) (internal quotation marks and citation
None of the parties have objected to Judge Tomlinson’s
recommendation that a default judgment be entered against Capital
One and Countrywide. Accordingly, all objections are hereby deemed
to have been waived.
The Court finds Judge Tomlinson’s R&R to be
As noted, BNY failed to comply with several procedural rules.
(See R&R at 15-17.)
comprehensive, well-reasoned, and free of clear error in this
respect, and it adopts her recommendation.
OVERRULED, and the R&R is ADOPTED IN PART and REJECTED IN PART.
Plaintiff’s motion to deposit funds (Docket Entry 56) is GRANTED
IN PART and DENIED IN PART.
Specifically, Plaintiff may proceed
under Statutory Interpleader but must deposit $363,000 with the
At that time, Plaintiff may request that it be discharged
from the case.
Plaintiff is directed to file a letter indicating
if it is willing and able to deposit $363,000 with the Court within
ten (10) days of the date of this Memorandum and Order.
Additionally, Plaintiff’s motion for a default judgment
(Docket Entry 59) is GRANTED.
The Clerk of the Court is directed
to enter default judgments against Capital One Home Loans, LLC and
Countrywide Home Loans, Inc.
/s/ JOANNA SEYBERT______
Joanna Seybert, U.S.D.J.
22 , 2017
Central Islip, New York
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