The opinion of the court was delivered by: POLLACK
This is a federal interpleader suit arising under 28 U.S.C. § 1335 to determine the conflicting claims to the proceeds of a $50,000 certificate of deposit issued by a Florida bank to Deductible (Deductible Coverage Agency, Inc.), an insurance agency.
Deductible pledged the certificate of deposit with a New York based insurer, American (American Fidelity Fire Insurance Company) as security for the former's liabilities under a contract between those companies.
While the certificate of deposit was still in American's possession in New York, Deductible was sued in the State of Washington by certain Trustees (named as defendants-claimants in this interpleader suit) on alleged obligations due them. Pending determination of the merits, the Washington Court issued a writ of garnishment at the instance of Trustees directed to American. The writ was served by delivery of it to the Washington State Insurance Commissioner whom American had designated as its agent for service of legal process when it qualified to do business as a foreign corporation in Washington. No steps were taken in the Washington proceedings to reduce any asset of Deductible to possession under this writ of garnishment.
While the Washington lawsuit remained unresolved, certain New York creditors of Deductible, viz., Paste-Ups and Harwyn, claimants herein, sued Deductible in New York and obtained money judgments in their favor. Executions were issued and levied under these judgments on the certificate of deposit held by American in New York. Faced with the conflicting claims thereto, American then brought the proceeds of the certificate to this Court and interpleaded the Washington Trustees and the New York creditors so that the ownership of the fund could be resolved among these rival claimants.
A hearing has been held and proofs were submitted in support of the claims asserted to the fund. For the reasons appearing hereafter, the rights of the New York attaching creditors, in the chronological order of their attachments, are entitled to satisfaction out of the fund, in priority to the claim of the Washington Trustees.
The undisputed facts in more detail are as follows:
On February 8, 1971, American and Deductible entered into a written insurance agency agreement. As security for Deductible's liabilities to American under this agreement the latter endorsed to and delivered to the former, in New York, a $50,000 certificate of deposit issued by the First American Bank of North Palm Beach, Florida, due July 13, 1972. This certificate of deposit remained located physically at American's home office in New York at all relevant times.
The agency agreement between American and Deductible was terminated December 23, 1971, effective March 31, 1972.
On February 18, 1972, G. O. Medack, R. W. Bishop, Jr., and Willis Serr, as Trustees for the Selling Shareholders of Modern Home Builders, Inc. ("Trustees") commenced an action for a monetary recovery, against Deductible and another, in the Superior Court of the State of Washington. On March 10, 1972, the defendants having failed to appear or plead, the Trustees obtained a default judgment against Deductible in the amount of $930,675.00. A Writ of Garnishment thereon was issued on March 27, 1972 addressed to and served on American as garnishee by service upon its local agent to receive service of process, the State Insurance Commissioner.
On April 21, 1972 the default judgment against Deductible was vacated by the Washington Court, which nonetheless directed American to "retain in its possession and under its control subject to further order of [the] Court or stipulation of the parties, all funds, credits and other property in its possession and subject to the Writ of Garnishment issued hereon on March 27, 1972, in which the defendants . . . have any ownership or interest . . . with the same force and effect as such funds and properties are now subject to under said Writ of Garnishment."
On April 26, 1972 American answered the Writ, alleging that, at the time of service thereof, it owed Deductible $1,223.89, representing commissions due Deductible based upon premiums recorded to that date. In response to a direction on the form answer to "list all personal property or effects of defendant in the garnishee's possession or control when the Writ was served," American further stated that it owned by assignment and was in possession of the aforementioned certificate of deposit,
pursuant to the agency agreement.
On June 16, 1972 Paste-Ups Unlimited, Inc. ("Paste-Ups") recovered a judgment against Deductible in New York Supreme Court in the sum of $12,480.25 and, on September 28, 1972, caused the Sheriff to serve on American an Execution with Notice to Garnishee based thereon. Similarly, Harwyn Litho, Inc. ("Harwyn") recovered a judgment against Deductible in New York Supreme Court in the sum of $22,741.06 on January 22, 1973, and caused the Sheriff to serve an Execution with Notice to Garnishee on American on February 6, 1973.
In the interim, on August 31, 1972, American had received the sum of $50,625.00 from First American Bank of North Palm Beach, Florida, as proceeds of the certificate of deposit, including interest. American thereafter held these proceeds in New York.
On February 8, 1973, American commenced the instant action by filing an interpleader complaint with the Clerk of the Court and simultaneously therewith depositing the sum of $33,625.00 into the registry of this Court.