United States District Court, D. South Carolina, Greenville Division
UBS FINANCIAL SERVICES, INC. Plaintiff,
BANCO POPULAR DE PUERTO RICO, MARIEL BABCOCK, and EDWARD WALTER SMITH, in his capacity as Personal Representative of the Estate of Mark Richard Babcock, Defendants.
MEMORANDUM OPINION AND ORDER
GEIGER LEWIS UNITED STATES DISTRICT JUDGE.
an interpleader action brought under 28 U.S.C. § 1335.
The Court has jurisdiction under that same statute.
before the Court are Plaintiff UBS Financial Services,
Inc.'s (Plaintiff) Motion to Interplead Bond, Discharge
Plaintiff from Liability, Enjoin Defendants from Other
Actions, and for Award of Attorneys' Fees and Costs
(Plaintiff's Motion to Interplead Bond), Defendant Edward
Walter Smith's, in his capacity as Personal
Representative of the Estate of Mark Richard Babcock (Mr.
Smith), motion to dismiss (Mr. Smith's Motion to
Dismiss), and Defendant Banco Popular de Puerto Rico's
(BPPR) Motion to Dismiss Crossclaims of Mariel Babcock (Mrs.
Babcock) (BPPR's Motion to Dismiss Crossclaims). Having
carefully considered the motions, the responses, the replies,
the record, and the applicable law, it is the judgment of the
Court: (1) Plaintiff's Motion to Interplead Bond will be
granted as modified in part, granted in part, dismissed
without prejudice in part, and denied in part; (2) Mr.
Smith's Motion to Dismiss will be granted; (3) BPPR's
Motion to Dismiss Crossclaims will be denied without
prejudice; and (4) Mrs. Babcock will be granted leave to
amend her crossclaim against BPPR.
FACTUAL AND PROCEDURAL HISTORY
interpleader action arises out of multiple claims to a
portion of the assets in a traditional individual retirement
account (IRA) managed by Plaintiff. The IRA account at issue
was originally owned by non-party Mark Richard Babcock (Mr.
Babcock). See ECF No. 33-4. It was titled the
“Mark Richard Babcock Traditional IRA” and bore
an account number ending in 13 (Mr. Babcock's Account).
See id. Mr. Babcock designated his wife, Mrs.
Babcock, as the sole beneficiary of his Account. See
ECF No. 33-6.
Babcock died on July 4, 2015, in Greenville, South Carolina.
See ECF No. 33-7. At the time of his death, Mr.
Babcock was a resident of Greenville County, South Carolina.
See Id. The estate of Mr. Babcock was opened in the
Probate Court for Greenville County, South Carolina on or
about July 14, 2015, and Mr. Smith is the personal
representative of Mr. Babcock's Estate. See ECF
No. 1 ¶¶ 4-5.
about July 16, 2015, Mrs. Babcock completed and submitted
Plaintiff's IRA Beneficiary Processing Form to request a
transfer of the assets in Mr. Babcock's Account.
See ECF No. 33-8. UBS subsequently opened a new
account named the “Mark Richard Babcock Traditional IRA
FBO Mariel Babcock” and ending in account number 32
(Mrs. Babcock's Account). See ECF No. 33-9. In
July 2015, UBS transferred all of the assets in Mr.
Babcock's Account to Mrs. Babcock's Account.
See ECF Nos. 33-4, 33-9. Mrs. Babcock's Account
remains active and is managed by Plaintiff's Greenville,
South Carolina location. ECF No. 1 ¶ 17.
about June 2, 2016, Plaintiff received an order (Account
Restriction Order) from the Puerto Rican Commonwealth Trial
Court, San Juan Division (Puerto Rico Court), in a collection
action brought by BPPR against Mr. Babcock (Puerto Rico
Action). See ECF No. 33-11. Neither Plaintiff nor
Mrs. Babcock nor Mr. Smith is a party to the Puerto Rico
Action. See id.
Puerto Rico Court entered the Account Restriction Order in
response to an emergency motion brought by BPPR requesting a
garnishment of Mr. Babcock's assets held by Plaintiff to
permit BPPR to collect the deficiency on a foreclosure
judgment it had obtained against Mr. Babcock. See
id.; see also ECF No. 33-16 at 3. The Account
Restriction Order directed UBS to prohibit withdrawals in
both Mr. and Mrs. Babcock's Accounts that would result in
an account balance of less than $399, 738.51 pending a
decision by the Puerto Rico Court on BPPR's motion to
garnish Mr. Babcock's assets. See ECF No. 33-11.
After receiving the Account Restriction Order, UBS restricted
Mrs. Babcock's Account and sent a letter addressed to Mr.
Babcock as the account holder notifying him of the
restriction and attaching a copy of the Account Restriction
Order. See ECF Nos. 1 ¶ 18, 1-1.
about June 29, 2016, Plaintiff received an order from the
Puerto Rico Court (Garnishment Order) directing it to sell
enough of the assets in Mr. Babcock's Account and/or Mrs.
Babcock's Account to cover the deficiency of $399,
738.51, plus interest and costs, on BPPR's foreclosure
judgment against Mr. Babcock. See ECF No. 33-12. On
August 19, 2016, Plaintiff filed an Informative Motion with
the Puerto Rico Court informing it of certain information
Plaintiff deemed relevant to the Puerto Rico Action, such as
Mr. Babcock's death. See ECF No. 52-1. On
September 23, 2016, the Puerto Rico Court entered an order
(September 2016 Order) directing Plaintiff to deposit $399,
738.51 with the Puerto Rico Court from Mr. Babcock's
funds held by Plaintiff. See ECF No. 33-13.
October 11, 2016, Plaintiff filed a motion to reconsider in
the Puerto Rico Action requesting the Puerto Rico Court
reconsider its Garnishment Order and the September 2016
Order. See ECF No. 33-15; see also ECF No.
33-2 at 6. The Puerto Rico Court entered an order denying
Plaintiff's motion to reconsider on February 16, 2017.
ECF No. 33-15.
March 3, 2017, Plaintiff filed its interpleader complaint
(Complaint) in this action, naming BPPR, Mrs. Babcock, and
Mr. Smith as defendants. ECF No. 1. On or about that same
day, the Puerto Rico Court entered an order (March 2017
Order) instructing Plaintiff to comply with its prior orders
and pay the garnished sum into the Puerto Rico Court within
ten days or be subject to “severe penalties.”
See ECF No. 33-16.
Babcock filed a motion for a temporary restraining order in
this action on March 10, 2017, ECF No. 7, which the Court
granted on March 13, 2017, ECF No. 9. On March 17, 2017, Mrs.
Babcock filed a motion for a preliminary injunction
requesting the Court enjoin Plaintiff from transferring any
money from her Account to BPPR or the Puerto Rico Court or
acting in furtherance of any garnishment order in the Puerto
Rico Action. ECF No. 15. The parties fully briefed Mrs.
Babcock's motion for a preliminary injunction, and,
following a hearing, the Court entered an Agreed Preliminary
Injunction Order. ECF No. 51.
filed its Motion to Interplead Bond on March 22, 2017, ECF
No. 33, and Mr. Smith filed his Motion to Dismiss on March
23, 2017, ECF No. 35. Mrs. Babcock filed a response on March
27, 2017, informing the Court she does not oppose Mr.
Smith's Motion to Dismiss. ECF No. 38. On April 4 and 5,
2017, Mrs. Babcock and BPPR filed responses in opposition to
Plaintiff's Motion to Interplead Bond, respectively. ECF
Nos. 49, 50. BPPR filed a response in opposition to Mr.
Smith's Motion to Dismiss on April 6, 2017, ECF No. 52,
and, that same day, Plaintiff filed a response informing the
Court it does not oppose Mr. Smith's Motion to Dismiss,
ECF No. 54. Mr. Smith replied in support of his Motion to
Dismiss on April 13, 2017. ECF No. 57. On April 14, 2017,
Plaintiff filed a reply in support of its Motion to
Interplead Bond. ECF No. 59.
filed its Motion to Dismiss Crossclaims on June 9, 2017. ECF
No. 72. Mrs. Babcock responded in opposition to BPPR's
Motion on July 17, 2017, ECF No. 78, to which BPPR replied on
July 24, 2017, ECF No. 79.
Court, having been fully briefed on the relevant issues, is
now prepared to discuss the merits of Plaintiff's Motion
to Interplead Bond, Mr. Smith's Motion to Dismiss, and
BPPR's Motion to Dismiss Crossclaims.
PLAINTIFF'S MOTION TO INTERPLEAD BOND
Plaintiff's Motion to Interplead Bond, it requests an
order: (1) directing it to interplead a nominal bond
concerning the disputed assets; (2) relieving it of any
further liability regarding the disputed assets and
discharging it from this action; (3) enjoining Defendants
from instituting or prosecuting any proceeding in state,
including Puerto Rico, or federal court affecting Mrs.
Babcock's Account; and (4) awarding it reimbursement for
its attorneys' fees and costs incurred in this action.
The Court will address each of Plaintiff's requests in
Plaintiff's Request for an Order Directing it to
Interplead a Nominal Bond
Contentions of the Parties
contends it should be permitted to interplead a bond under 28
U.S.C. § 1335 because it faces multiple claims to the
assets in Mrs. Babcock's Account and takes no legal
position as to which Defendant is entitled to the assets.
Plaintiff submits permitting it to deposit a bond in a
nominal amount is appropriate under the circumstances.
Plaintiff posits that permitting it to deposit a nominal bond
conditioned upon its compliance with any final order of the
Court regarding the rightful owner of the assets avoids the
risk of irreparable harm to Mrs. Babcock, satisfies the
statutory interpleader requirements, and mitigates costs.
Plaintiff further explains § 1335 contemplates the Court
may exercise discretion regarding the amount of a bond to be
posted in an interpleader action.
argues the Court should require Plaintiff to deposit the
entire amount at issue or an equivalent bond. In support of
this position, BPPR avers the Court lacks jurisdiction over
this action if the money or bond deposited is unable to cover
the amount in controversy. BPPR maintains a nominal bond is
insufficient to confer jurisdiction or to protect its
Mrs. Babcock and Mr. Smith have failed to oppose the portion
of Plaintiff's Motion to Interplead Bond requesting the
Court direct Plaintiff to interplead a nominal bond.