United States District Court, D. South Carolina, Beaufort Division
C. NORTON UNITED STATES DISTRICT JUDGE
following matters are before the court on plaintiff
Auto-Owners Insurance Company's (“AO”) motion
for interpleader, constructive trust, and to be dismissed,
ECF No. 10, AO's motion to dismiss defendant Quentin R.
Bolden, as personal representative of the Estate of Anna Mae
Bolden's (the “Estate”) counterclaims, ECF
No. 16, and defendant Reverse Mortgage Solutions, Inc. d/b/a
Vertical Lend ISAOA/ATIMA's (“RMS”) motion to
dismiss for lack of subject-matter jurisdiction, ECF No. 20.
For the following reasons, the court grants in part and
denies in part these motions.
instant action arises out of a dispute as to the proper payee
of proceeds owed by AO pursuant to a certain homeowners
insurance policy bearing the number 44-180-363-00 (the
“Policy”). ECF No. 1, Compl. ¶ 5. The Policy
was issued to Anna Mae Bolden (“Bolden”) for a
period beginning on February 3, 2015 and ending on February
2, 2016. Id. The Policy provided dwelling coverage
of up to $342, 000 for Bolden's home at 609 William
Hilton Parkway, Hilton Head Island, South Carolina (the
“insured property”). Id.; ECF No. 12,
Estate's Answer ¶ 26. The Policy lists RMS as a
mortgagee of the insured property, and provides that any loss
covered by the Policy “shall be payable to the
mortgagee, as their interest may appear, under all present or
future mortgages upon the property described in the
[d]eclarations of this policy in which the mortgagee may have
an interest.” ECF No. 16-1, Policy 3, 39.
22, 2015, RMS instituted a foreclosure action against Bolden
in state court (the “Foreclosure
Action”). Compl. ¶ 8. On November 27, 2015,
while the Foreclosure Action was pending, Bolden was killed
in a fire that destroyed the insured property. Id.
¶ 6. Both RMS and the Estate made claims for the
insurance proceeds due under the Policy. Id.
these competing claims were pending, the Foreclosure Action
moved forward, and on April 28, 2016, the state court entered
a Judgment of Foreclosure and Sale, Deficiency Judgment
Waived (the “Foreclosure Judgment”), ordering
that the insured property be sold at a foreclosure sale. ECF
No. 24-5, Foreclosure Judgment 5-8. AO attempted to resolve
the insurance payment dispute in July 2016 by first issuing
“an advance payment” of a portion of the dwelling
coverage limits to the Estate in the amount of $100, 000 on
July 15, 2016, and later issuing a check payable to
both the Estate and RMS for the balance of the
dwelling coverage limits-$242, 000-on July 29, 2016. Compl.
¶ 10, 12. The foreclosure sale occurred on August 1,
2016, at which time the insured property was sold to RMS.
Id. ¶ 11. On August 2, 2016, the Estate voided
AO's check for the $242, 000 balance, demanding that
payment of the Policy proceeds be made solely to the Estate.
Id. ¶12. On August 24, 2016, following
recording of the foreclosure deed, RMS demanded payment of
the same Policy proceeds. Id. ¶ 13.
believes that RMS may have an interest in the proceeds, even
following the foreclosure, and filed the instant action for
interpleader on August 29, 2016 in an effort to avoid
multiple liability from the Estate and RMS's (together,
the “defendants”) competing claims. Id.
¶¶ 14-16. AO wishes to pay the policy limits to the
court and be released from any liability in connection with
the defendants' competing claims. Id. ¶ 16.
The Estate answered on September 30, 2016, bringing
counterclaims against AO for breach of contract and bad
faith, and various crossclaims against RMS. ECF No. 12,
Estate's Answer ¶¶ 85-121.
September 29, 2016, AO filed a motion to pay the remaining
Policy balance of $242, 000 to the court pursuant to Federal
Rule of Civil Procedure 22, to place the $100, 000 previously
paid to the Estate into a constructive trust, and to be
dismissed from further participation in this action. ECF No.
10. The Estate filed a response on October 13, 2016, ECF No.
18, and AO filed a reply on October 18, 2016. ECF No. 19. AO
filed a motion to dismiss the Estate's counterclaims on
October 12, 2016. ECF No. 16. The Estate filed a response to
the motion to dismiss on October 28, 2016, ECF No. 23, and AO
filed a reply on November 11, 2016. ECF No. 24. RMS filed its
own motion to dismiss the Estate's crossclaims for lack
of jurisdiction on October 24, 2016. ECF No. 20. The Estate
filed a response to RMS's motion of November 10, 2016,
ECF No. 25, and RMS filed a reply on November 21, 2016, ECF
No. 26. The court held a hearing on February 2, 2017, ECF No.
30, and allowed AO and the Estate to pay their respective
portions of the disputed funds into the court on April 10,
2017, ECF No. 31. The court took all other issues in this
matter under advisement. Id. The matters are now
ripe for the court's review.
under Federal Rule of Civil Procedure 22 is a procedural
device that allows a disinterested stakeholder to bring a
single action joining two or more adverse claimants to a
single fund. See Chase Manhattan Bank v. Mandalay Shores
Coop. Housing Ass'n, (In re Mandalay Shores Coop. Housing
Ass'n), 21 F.3d 380, 383 (11th Cir. 1994); White
v. FDIC, 19 F.3d 249, 251 (5th Cir. 1994); Sec. Ins.
Co. of Hartford v. Arcade Textiles, Inc., 40 F.
App'x. 767, 769, 2002 WL 1473417 at *1 (4th Cir. July 10,
2002). Interpleader is an equitable remedy designed to
protect the stakeholder from multiple, inconsistent judgments
and to relieve it of the obligation of determining which
claimant is entitled to the fund. Sec. Ins. Co. of
Hartford, 40 F. App'x. at 769, 2002 WL 1473417 at *1
(citing 4 James Wm. Moore et al., Moore's Fed. Practice
§ 22.02 (3d ed. 2001)). “The propriety of
interpleader depends on whether the stakeholder
‘legitimately fears' multiple litigation over a
single fund.” Metro. Life Ins. Co. v. Vines,
2011 WL 2133340, at *2 (D. Md. May 25, 2011); ReliaStar
Life Ins. Co. v. Lormand, 2011 WL 900113, at *3 (E.D.
Va. Mar. 11, 2011).
Motion to Dismiss for Failure to State a Claim
Federal Rule of Civil Procedure 12(b)(6), a party may move to
dismiss for “failure to state a claim upon which relief
can be granted.” When considering a Rule 12(b)(6)
motion to dismiss, the court must “accept all
well-pleaded allegations in the plaintiff's complaint as
true and draw all reasonable factual inferences from those
facts in the plaintiff's favor.” Edwards v.
City of Goldsboro, 178 F.3d 231, 244 (4th Cir. 1999).
But “the tenet that a court must accept as true all of
the allegations contained in a complaint is inapplicable to
legal conclusions.” Ashcroft v. Iqbal, 556
U.S. 662, 678 (2009).
motion to dismiss, the court's task is limited to
determining whether the complaint states a “plausible
claim for relief.” Id. at 679. A complaint
must contain sufficient factual allegations in addition to
legal conclusions. Although Rule 8(a)(2) requires only a
“short and plain statement of the claim showing that
the pleader is entitled to relief, ” “a formulaic
recitation of the elements of a cause of action will not
do.” Bell Atl. Corp. v. Twombly, 550 U.S. 544,
555 (2007). The “complaint must contain sufficient
factual matter, accepted as true, to ‘state a claim to
relief that is plausible on its face.'”
Iqbal, 556 U.S. at 678 (quoting Twombly,
550 U.S. at 570). “Facts pled that are ‘merely
consistent with' liability are not sufficient.”
A Soc'y Without a Name v. Virginia, 655 F.3d
342, 346 (4th Cir. 2011) (quoting Iqbal, 556 U.S. at
AO's Motion for Interpleader and Motion to
parties do not dispute that the fire triggered coverage under
the Policy and that the Policy limits will be exhausted when
the proceeds are paid out. Compl. ¶ 7. However, the
Estate and RMS have both claimed entitlement to the proceeds.
Thus, AO argues, interpleader is appropriate here because it
has reason to fear multiple litigations over the
defendants' rights to the proceeds. ECF No. 10 at 3. The
Estate has no objection to AO interpleading the funds, and as
noted above, the court has already allowed AO to do so.
However, the Estate does object to AO's request to be
dismissed from this action, arguing that its counterclaims
against AO for breach of contract and bad faith seek damages
in excess of the Policy proceeds. ECF No. 18. Because the
Estate's opposition to AO's motion for interpleader
is tied to the viability of its counterclaims, it is
appropriate to turn to AO's motion to dismiss those
Estate alleges that, following the loss of the insured
property, it “properly demanded that AO pay the
dwelling policy limits of $342, 000.” ECF No. 12,
Estate's Answer ¶ 28. Despite the Estate's
“repeated demands, ” AO refused to deliver the
Policy proceeds to the Estate. Id. ¶ 31. The
Estate alleges that AO's refusal was accompanied by
“baseless excuses, request[s] [for] totally irrelevant
documents, and  even [the] institut[ion of] this
lawsuit.” Id. The Estate further alleges that
the Foreclosure Judgment in the Foreclosure Action-and the
subsequent sale of the insured property at the August 1, 2016
foreclosure sale-were directly and proximately caused by
AO's failure to deliver the Policy proceeds, id.
¶¶ 32, 33, and brings counterclaims for breach of
contract claim and bad faith, id. ¶¶
37-47. The Estate also claims that it is entitled to
attorney's fees pursuant to S.C. Code § 38-59-40.
Id. ¶¶ 48-52.
of Contract Claim
argues that the Estate's breach of contract claim must
fail because AO never breached the Policy, but instead,
attempted to comply with the Policy by determining the proper
recipient of the proceeds. ECF No. 16 at 5-6. AO points to
the Policy language allowing the mortgagee to receive
proceeds “as their interest may appear under all
present or future mortgages upon the property, ” Policy
at 39, and highlights the Court of Appeals of South
Carolina's decision in Jones v. Equicredit Corp. of
S.C., 556 S.E.2d 713 (S.C. Ct. App. 2001), to argue that
it was reasonable to question which party's claim to the
proceeds was valid. In Jones, the court indicated
that a mortgagee who waives a deficiency judgment in a
foreclosure action may still retain a right to
“insurance proceeds resulting from damage to the
property prior to [a foreclosure] sale.” 556 S.E.2d at
Estate does not address whether AO's confusion as to the
proper payee was reasonable, or even attempt to explain why
it-rather than RMS-was entitled to the proceeds. Instead, the
Estate simply argues that AO's duty to pay was triggered
by the fire and AO has yet to pay the full limits of the
policy. ECF No. 23 at 15. Concededly, this
argument has some intuitive appeal-the Policy certainly
required AO to pay the proceeds to someone, and
thus, it would seem that AO has at least breached that
obligation by failing to pay one of the two defendants.
in the context of an interpleader action, courts have
disallowed counterclaims that essentially echo the competing
claims to the interpleaded funds.Commerce Funding Corp. v.
S. Fin. Bank, 80 F.Supp.2d 582, 585 (E.D. Va. 1999);
see also Nat'l Life Ins. Co. v. Alembik-Eisner,
582 F.Supp.2d 1362, 1370 (N.D.Ga. 2008) (denying defendants
motion for summary judgment on state law counterclaims that
“relat[ed] directly to the reason for the interpleader
action, ” and dismissing plaintiff from the action). In
Commerce Funding Corp., for example, the court
dismissed a defendant's counterclaims for breach of
contract based on the interpleading plaintiff's failure
to pay funds allegedly owed to the defendant, where the
defendant's entitlement to those funds was the very basis
for the interpleader action. 80 F.Supp.2d at 586 (granting
summary judgment on interpleader defendant's counterclaim
for breach of contract where interpleader defendant
“simply argu[ed] that it and not [the other defendant]
[was] due the fund”). This situation is analogous to
the facts in this case. The Estate's breach of contract
claim simply alleges that AO “breached the [Policy] by
failing to properly and timely pay benefits due
thereunder.” Estate's Answer ¶ 38. Like the
breach of contract claim in Commerce Funding Corp.,
this allegation “begs the question” of whether
the Estate was truly entitled to such funds, which is the
entire reason AO brought the interpleader action in the first
place. 80 F.Supp.2d at 585. Thus, the breach of contract
claim should be dismissed.
Bad Faith Claim
to the Estate's bad faith claim, AO relies on
Kleckley v. Nw. Nat. Cas. Co., 498 S.E.2d 669 (S.C.
Ct. App. 1998), aff'd, 526 S.E.2d 218 (S.C.
2000), and Carter v. Am. Mut. Fire Ins. Co., 307
S.E.2d 227 (S.C. 1983) to argue that the Estate lacks
standing to bring a bad faith claim because it is a third
party to the Policy. ECF No. 16 at 6-7. However, neither case
provides strong support for AO's position.
Kleckley, the plaintiff sustained injuries from a
fall at premises owned by the underlying tortfeasor. 498
S.E.2d at 670. The court held that the plaintiff-as the
victim of a tort-lacked standing to bring a bad faith claim
against a tortfeasor's insurer. Id. at 674.
Here, the Estate does not stand in the position of a tort
victim, who would only benefit indirectly from the payment of
proceeds to the insured tortfeasor; ...