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BANKERS TRUST CO. v. CRAWFORD

March 28, 1983

BANKERS TRUST COMPANY Of WESTERN NEW YORK, Plaintiff,
v.
STUART L. CRAWFORD and KUTNER BUICK, INC. and CHALFONT INDUSTRIES, INC., Defendants



The opinion of the court was delivered by: ELFVIN

MEMORANDUM and ORDER

 This is an interpleader action brought by Bankers Trust Company of Western New York ("the bank"), a New York corporation, pursuant to the Federal Interpleader Statute, 28 U.S.C. § 1335, to settle a dispute as to a cashiers check in the amount of $50,023. Defendant Stuart L. Crawford is a resident of New York, and defendants Kutner Buick, Inc. ("Buick") and Chalfont Industries, Inc. ("Chalfont") are Pennsylvania corporations. Buick has now moved to dismiss the Complaint for lack of subject matter jurisdiction under Fed.R.Civ.P. rule 12(b)(1) or, alternatively, to transfer the action from this district to the United States District Court for the Eastern District of Pennsylvania pursuant to 28 U.S.C. § 1404(a). The bank seeks to permanently enjoin Buick and Crawford from initiating or further prosecuting any action other than the present one concerning the disputed funds. The bank also seeks to be discharged from the case before this Court determines whether venue should be changed.

 The facts of this case appear to be fairly extensive and have not yet been firmly established. After some preliminary dealings between Crawford and Chalfont in Bucks County, Pa., Crawford on February 17, 1982 secured a cashiers check from the bank's Jamestown, N.Y. branch. The check was in the amount of $50,023 and made payable to Chalfont. Upon receipt thereof on February 22nd, Jerome S. Kutner, President of Chalfont, purportedly endorsed the check to Buick in exchange for "valuable" consideration in the same amount. Buick alleges that it took the check as a holder in due course and then deposited it in a Philadelphia bank.

 On February 19, 1982 Crawford demanded that the Jamestown bank stop payment on the cashiers check and offered to indemnify the bank against any liability for doing so. On February 24th Crawford began an action against the bank in New York State Supreme Court, Chautauqua County, complaining of its refusal to honor his stop-payment order. Crawford also applied for and received an Order to Show Cause and temporary restraining order from the New York court restraining the bank from honoring its cashiers check until February 26th, the return date of the order to show cause. On February 25th Crawford signed an indemnification agreement holding the bank harmless from all liability arising out of the latter's refusal to make payment on the cashiers check. On that same day the New York State Supreme Court issued a preliminary injunction restraining the bank from honoring and making payment upon the cashiers check pending a trial and determination of the action. Apparently, neither Buick nor Chalfont was aware of the New York proceedings.

 On March 4, 1982, only ten days after it had received the cashiers check from Crawford, Chalfont filed a petition in the United States Bankruptcy Court for the Eastern District of Pennsylvania under Chapter 11 of the Bankruptcy Act. On April 5th Buick filed an action against the Bankers Trust Company of Western New York in the United States District Court for the Eastern District of Pennsylvania (Civil No. 82-1514) in which it alleged that the bank had breached a contract with it by not honoring the cashiers check because Buick was a holder in due course. Buick sought as relief damages in the amount of $50,023, interest thereon, attorneys fees, and expenses and costs. On April 28th the bank filed an answer to Buick's complaint, asserting as its first defense that it was not doing business in the Commonwealth of Pennsylvania.

 On May 4th the bank instituted this interpleader action, depositing the sum of $50,023 with this Court and naming as defendants/claimants Crawford, Buick and Chalfont. On May 5th I stayed all other proceedings affecting the funds, enjoining defendants from instituting or proceeding further in any proceeding in any state court or other federal district court. The bank seeks to permanently enjoin Buick from further prosecuting the action brought against it in the United States District Court for the Eastern District of Pennsylvania, to permanently enjoin Crawford from further prosecuting the action brought against it in New York State Supreme Court and to be discharged from the case as a disinterested stakeholder.

 Section 1335 requires the existence of five elements before interpleader relief is appropriate: the interpleader action must be brought by a stakeholder who has "custody or possession" of the funds that constitute the fund to be distributed; the action must concern the minimal jurisdictional amount of $500; there must be two or more adverse claimants asserting a right to the fund; the adverse claimant must be of diverse citizenship as defined in 28 U.S.C. § 1332; and the full amount disputed must be deposited in the court registry. See 3A Moore's Fed. Prac. para. 22.07 (1982 ed.). In the instant case all of these prerequisites have been met.

 In support of its action to dismiss for lack of subject matter jurisdiction, Buick first contends that Chalfont has no interest in the present litigation and that Buick possesses the cashiers check as a holder in due course under Uniform Commercial Code § 3-302. Buick contends that the bank incurred contractual liability when it issued the cashiers check in the name of Chalfont and that the bank is now liable for breach of contract to Buick. These allegations are the underlying bases of Buick's action against the bank in Pennsylvania.

 Buick's alleged status as a holder in due course, however, is wholly irrelevant to the consideration whether this court has jurisdiction to entertain this interpleader action. Buick's alleged status as a holder in due course, which in itself is a question of fact, is relevant only in determining its eventual entitlement to the disputed funds. Interpleader jurisdiction is not dependent on the merits of the respective underlying claims. Hunter v. Federal Life Ins. Co., 111 F.2d 551, 556 (8th Cir. 1940); Stuyvesant Insurance Co. v. Dean Construction Co., 254 F. Supp. 102, 108 (S.D.N.Y. 1966), aff'd, 382 F.2d 991 (2d Cir. 1967). Thus although Buick, as any other claimant, may prevail on the ultimate disposition of this case, Buick's alleged status as a holder in due course is not germane to the jurisdictional question under consideration.

 Buick next claims that interpleader jurisdiction should not lie because a single interpleader action would not settle the entire dispute and because other actions are pending. The bank is currently defending two actions arising out of the issuance of the cashiers check.

 Despite Buick's contentions, this case is patently appropriate for interpleader relief. Section 1335 of Title 28 of the United States Code is to be liberally construed to protect a stakeholder from the expense of defending more than one action. Douglas-Guardian Warehouse Corp. v. Ramy Seed Co., 271 F.2d 24, 28 (8th Cir. 1959); John Rosenblum Inc. v. Gillespie, 187 F. Supp. 258, 260 (S.D.N.Y. 1960). Section 1335 is designed to protect stakeholders such as this plaintiff from multiple liability when there are conflicting claims of various litigants to the disputed property. Libby, McNeill & Libby v. City Nat. Bank, 592 F.2d 504, 509 (9th Cir. 1978). Moreover, despite Buick's arguments, injunctive relief in an interpleader action is "especially proper" when there are numerous claimants and where such relief would prevent a multiplicity of lawsuits. United States v. Major Oil Corp., 583 F.2d 1152, 1157 (10th Cir. 1978).

 Buick nonetheless asserts that its rights cannot be fully adjudicated in an interpleader action because it has claims "outside" the interpleader action and seeks damages "in excess of the deposited fund." An analysis of Buick's complaint in its action in Pennsylvania, however, demonstrates that Buick's assertions are not tenable. In that action, Buick seeks primarily to obtain damages in the amount of $50,023, as well as costs, interest and attorneys fees. The amount Buick seeks is the amount that the bank deposited initially with this Court. Moreover, a claimant in an interpleader action can recover costs and expenses (see Schirmer Stevedoring Co. v. Seaboard Stevedoring Corp., 306 F.2d 188, 194-95 (9th Cir. 1962)), interest (see Massachusetts Mut. Life Ins. Co. v. Central Penn. Nat. Bank, 372 F. Supp. 1027, 1035 (E.D.Pa. 1974), aff'd, 510 F.2d 969, 970 (3d Cir. 1975)) and attorney's fees (see Murphy v. Travelers Ins. Co., 534 F.2d 1155 (5th Cir. 1976)). Thus Buick has requested no relief in its action in the United States District Court for the Eastern District of Pennsylvania which cannot be obtained as well in this interpleader action.

 Buick's contentions that it has independent claims outside the scope of this interpleader action are also unpersuasive. Buick's "contract" action arose solely out of the bank's failure to honor the cashiers check. Buick's claims in that action are virtually indistinguishable from any claims that it would have in this action and the relief sought in the "contract action" is readily available if so warranted herein. It is clear from reading Buick's complaint in the contract action that a single interpleader action would indeed settle the entire dispute between itself and the bank.

 By merely presenting its claim as a contract action and purporting to have additional claims, Buick has not presented any claims outside of the fund itself. Nor does the fact that Buick proposes a "different" theory of recovery prevent it from being interpleaded with Crawford. It is clear that the bank, owing a single obligation, could settle in a single action who is its obligee. See ...


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