United States District Court, D. South Carolina, Greenville Division
ORDER AND OPINION
matter is before the court on competing Motions for Partial
Summary Judgment by Cross-Plaintiff Randall S. Hiller
("Hiller") and Cross-Defendant A.E. Pennebaker Co.,
Inc. ("Pennebaker"). (ECF Nos. 23, 35.) For the
following reasons, the court DENIES
Pennebaker's Motion for Partial Summary Judgment (ECF No.
23), and DENIES Hiller's Motion for
Partial Summary Judgment (ECF No. 35).
court has jurisdiction over this action pursuant to 28 U.S.C.
§ 1332. There is complete diversity between Plaintiff
Massachusetts Mutual ("MassMutual") and Defendants
Pennebaker and Hiller. (ECF No. 1 at 2.) The amount in
controversy exceeds $75, 000. (Id.) This court
retains jurisdiction over an interpleader insurance case,
even if the cross-complaining parties lack subject matter
jurisdiction, as long as the original plaintiff and
defendants had subject matter jurisdiction. Leimbach v.
Allen, 976 F.2d 912, 917 (4th Cir. 1992).
FACTUAL AND PROCEDURAL BACKGROUND
is a small family-owned corporation. (ECF No. 23-1 at 2.)
After several decades of being an independent
manufacturer's representative, Mr. A.E. Pennebaker, under
his corporate name, Pennebaker, began factoring accounts.
(Id.) Factoring is the buying of unpaid invoices at
a discount and collecting the sums due under the invoices.
(Id.) Therefore, the seller, in need of the payments
more quickly than the invoice terms provide, would receive
money instantly from Pennebaker for invoices that would not
be due for another 30, 60, or 90 days. (Id.)
late 1970s, Mr. A.E. Pennebaker's son, Edward C.
Pennebaker, began operating Pennebaker. (ECF No. 23-4 ¶
11.) One of the factoring customers was Durham Mechanical
Contractors, Inc. ("Durham"). (Id¶
12.) Carla Durham was a principal of Durham. (Id.
¶ 13.) Unbeknownst to Mr. A.E. Penenbaker, Ed Penebaker,
or Pennebaker, Durham began having severe financial
difficulties. (Id. ¶ 14.)
began a fraudulent scheme wherein it would present for
payment invoices to Pennebaker. (Id. ¶ 15.)
These were fraudulent invoices that were on jobs that did not
exist, for labor that was not expended, and material that was
not used. (Id.) Pennebaker paid many fraudulent
invoices until the scheme unraveled and came to light.
(Id. ¶ 16.) In an effort to resolve the
situation, it was agreed between Pennebaker and Durham that
Durham would purchase life insurance policies covering the
lives of its three principals, including Carla Durham.
(Id. ¶ 17; ECFNo. 23-5.) The policies were
purchased from MassMutual. (Id.) For purposes of
this action, only the Carla Durham policy is at issue.
1986, MassMutual issued policy number xxxx005, a term life
insurance policy insuring the life of Carla Durham. (ECF No.
1 ¶ 10.) According to counsel for MassMutual, the
materials relating to this policy were destroyed in the
normal course of business in accordance with MassMutual's
document retention policies on September 1, 2010, due to its
cancellation and the issuance of its replacement as explained
below. (ECF No. 23-6.) Therefore, it is unclear who the
beneficiary was at the time of the issuance.
December 5, 1986, policy number xxxx005 was assigned to
Pennebaker. (ECF No. 23-3.) On May 3, 1994, the beneficiary
was changed to Hiller. (ECF No. 23-7.) Shortly thereafter,
MassMutual's records indicate that Durham attempted to
cancel the policy, but in denying this request, MassMutual
identified that it had a legal obligation to recognize the
rights of the assignee. (ECF No. 23-8.)
about October 15, 1996, Pennebaker submitted to MassMutual an
application to convert the term policy number xxxx005 to a
whole life insurance policy. (ECF No. 1 ¶ 13; ECF No.
23-9.) On October 18, 1996, in response to the October 15,
1996 application, MassMutual issued policy number xxxx889
("Policy"), a whole life insurance policy with a
face value of $175, 000, insuring the life of Carla Durham.
(ECF No. 1 ¶ 14.) The Policy also includes a Life
Insurance Supplemental Rider with a value of $175, 000.
(Id.) Policy number xxxx889 replaced policy number
xxxx005. At the time of issuance, MassMutual's records
indicate that the owner of the Policy was the insured, Carla
Durham, the assignee of the Policy was Pennebaker, and the
primary beneficiary of the Policy was Hiller. (Id.
¶ 15.) Although MassMutual's records are unclear,
Pennebaker paid the Policy premiums until at least 2003. (ECF
January 12, 1990, a Decree of Foreclosure was entered by the
Greenville County Master in Equity, ordering that Pennebaker
was entitled to have its notes and mortgages foreclosed and
the encumbered premises sold, with the proceeds applied
toward the judgment. (ECF No. 23-4 ¶ 19.) The Master in
Equity entered judgment against Clause F. Durham, Carla
Durham, and Clause Anthony Durham in the amount of $ 1, 010,
969.45. (Id. ¶ 20.) After the judgment was
entered, no money was realized towards the debt from the sale
of the properties because the real estate was already
underwater. (Id. ¶ 21.)
Durham died on April 29, 2015, in Greenville County, South
Carolina. (ECF No. 1 ¶ 16.) At the time of Carla
Durham's death, the owner of the Policy was Carla Durham,
the assignee of the Policy was Pennebaker, and the primary
beneficiary of the Policy was Hiller. (Id. ¶
about February 11, 2016, Hiller submitted a Life Insurance
Claim Form to MassMutual requesting the life insurance
proceeds due ...