impelled to conclude that Shirley, by operation of law, is the legal beneficiary of the life insurance policy and the court order has no bearing on this determination.
At this juncture, we are obliged to consider Selma's counterclaim that Provident is independently liable to her for damages equal to the proceeds of the insurance policy. Her theory of recovery is one of negligent misrepresentation and/or contract estoppel. Prior to the evaluation of the substance of this counterclaim a discussion of our jurisdiction over this counterclaim seems appropriate.
Since Selma's counterclaim arises out of the transaction that is the subject matter of the plaintiff's suit, this counterclaim is a compulsory one and therefore no independent basis for jurisdiction need be established. Kaiser Aluminum & Chemical Sales, Inc. v. Ralston Steel Corp., 25 F.R.D. 23 (D.C. Ill. 1960); West Coast Tanneries, Limited v. Anglo-American Hides Co., 20 F.R.D. 166 (D.C.N.Y. 1957). The fact that this counterclaim is appended to an interpleader action presents no additional problem since an allegation by one or more claimants that the stakeholder in an interpleader action may be subject to an independent liability may be raised as a counterclaim pursuant to Fed. R. Civ. P. 13. United Benefit Life Ins. Co. v. Katz, 155 F. Supp. 391 (E.D. Pa. 1957); 3A J. Moore, Federal Practice PP 22.15, at 3129 (2d ed. 1970).
Furthermore we foresee no difficulty arising out of the fact that Provident deposited $25,630.26 into the registry of this Court in its interpleader action and now faces potential liability for double that amount due to Selma's counterclaim. Case law indicates that in a statutory interpleader action, for the court to have jurisdiction, the stakeholder must deposit the highest amount claimed by the defendants with the registry of the court. Metal Transport Corp. v. Pacific Venture Steam Corp., 288 F.2d 363 (2d Cir. 1961); Westinghouse Electric Corp. v. United Electrical Radio and Machine Workers, 194 F.2d 770 (3d Cir. 1952); United Benefit Life Ins. Co. v. Leech, 326 F. Supp. 598 (E.D. Pa. 1971).
In the instant case Provident did deposit the entire fund at issue in the interpleader action into the registry of this Court. Selma's counterclaim alleges a separate and independent liability. We do not believe that the law would require Provident to deposit the amount of damages claimed in the counterclaim into the registry of this Court over and above the fund originally deposited on the interpleader action. If we held to the contrary, any stakeholder would be reluctant to commence an interpleader action for fear of being compelled to deposit a large amount of his own funds as damages claimed in any counterclaim alleged. Provident did not raise this issue and as was in the case of United Benefit Life Ins. Co. v. Katz, 155 F. Supp. 391, 394 (E.D. Pa. 1957) we shall not permit this issue to impede our determination of all facts of the present case. It would be contrary to every notion of judicial economy to dismiss this counterclaim sua sponte because the plaintiff in the interpleader action did not also deposit the damages sought in a claimant's counterclaim into the registry of the court. If the counterclaim were dismissed, Selma would simply reassert it in a new cause of action. The efforts and time expended by this Court would be duplicated by this second forum. Not only would this be extremely wasteful of judicial resources but it would foster multiple litigation against the stakeholder which would be contrary to a stated purpose of an interpleader action. Cf. Farmers Elevated Mut. Ins. Co. v. Jewett, 394 F.2d 896 (10th Cir. 1968).
In addition, we are not unmindful of another important function of an interpleader action -- to protect the stakeholder from double liability on the fund which is at issue. Hallin v. C. A. Pearson, Inc., 34 F.R.D. 499 (D.C. Cal. 1963); Joseph F. Hughes & Co. v. Harry S. Mickey, Inc., 211 F. Supp. 298 (D.C. Md. 1962). We strongly emphasize that in the instant case Selma's counterclaim seeks damages as a result of Provident's actions and does not seek the fund deposited with the registry of this Court. By this Court entertaining this counterclaim we are still protecting the stakeholder from double liability on the fund deposited with this Court. The counterclaim simply is asserting a separate cause of action whose alleged damages happen to equal the amount of the fund deposited in the registry of this Court in the interpleader action. Having resolved any potential jurisdictional problems we now proceed to the substance of Selma's counterclaim.
In her counterclaim, Selma charges that if she is determined not to be the legal beneficiary of the policy, then she is still entitled to recover an amount equal to the proceeds of the policy because of her reliance upon the communications of Provident to her attorney. In its letter of May 22, 1967, after having refused to act upon Dr. Ehrlich's requested change of beneficiary, Provident's attorney assured Selma's counsel that:
"Mrs. Ehrlich's [Selma's] rights are fully protected in that she is continued as beneficiary . . ."
Selma asserts that Provident should be estopped from denying its liability to her because she relied upon the advice of the insurer. If this advice had not been so positive and conclusive, she could have gone into court and secured a supplemental order to specifically include the insurance.
Under the Act of 1907 if Selma had gotten a supplemental order specifically including the insurance, she would have stood in her husband's stead regarding his rights in the insurance policy. See, Cook v. Cook Sr., 115 P.L.J. 165 (1966).
The law is clear that where an insured relies upon a representation of his insurer and changes his position or does nothing in reliance thereon and injury results, an independent liability may arise from the insurance company. Trowbridge v. Prudential Insurance Company of America, 322 F. Supp. 190 (S.D.N.Y. 1971); Smith v. Metropolitan Life Ins. Co., 222 Pa. 226, 71 A. 11 (1908); Phillips v. Continental Assurance Company, 210 Pa. Super. 178, 231 A. 2d 422 (1967).
In the Phillips case, the insurer, upon the insured's request and contrary to the provisions of the policy, changed the beneficiary of the insurance. Under the terms of the policy and the law the insurer was compelled to pay the original named beneficiary of the policy. In addition, the court sitting in judgment of this case indicated that the insurance company should have given its insured notice of the objection to the changing of the beneficiary so that the insured could have taken "whatever action he desired to obviate those objections." Id. at 182, 231 A.2d at 423. Failure to so act or making a contrary representation that the change is valid estopped the insurance company from denying liability to the subsequent beneficiary who could not collect solely under the terms of the policy. This resulted in the insurer twice paying out the proceeds of the policy.
We believe this legal theory to be applicable herein also. Provident through its representation that Selma was the beneficiary and her rights would be continued as such, made an assertion that Selma relied upon to her detriment. We can foresee no reason why the mere fact that she was not yet in the shoes of her husband, the insured, should require a different determination. Provident treated her as standing in her husband's stead and was at fault by negligently lulling her into a false sense of security which prevented her from securing a supplemental order to legally place her in the insured's stead. We can not permit Provident, through their misrepresentations to claim that Selma has no rights in the policy.
The Pennsylvania Supreme Court has set forth the element of equitable estoppel in the case of Northwestern National Bank v. Commonwealth, 345 Pa. 192, 196, 197, 27 A.2d 20, 23 (1942). The Court stated:
"Equitable estoppel arises when one of his acts, representations, or admissions, or by his silence when he ought to speak out, intentionally or through culpable negligence induces another to believe certain facts to exist and such other rightfully relies and acts on such belief, so that he will be prejudiced if the former is permitted to deny the existence of such facts. In this situation, the person inducing the belief in the existence of a certain state of facts is estopped to deny that the state of facts does in truth exist, aver a different or contrary state of facts as existing at the same time, or deny or repudiate his acts, conduct, or statements: 31 C.J.S., § 59, p. 237; Howe v. Mimm, 105 Pa. Super. 474, 161 A. 603, 605."
The Court further clarified this equitable doctrine in the case of Nesbitt v. Erie Coach, 416 Pa. 89, 95, 96, 204 A.2d 473, 476, (1964).
"Equitable estoppel applies where, because of something that has been done, a party is denied the right to plead or prove an otherwise important fact: 19 Am. Jr. Estoppel § 34 (1939). It is based upon the principal that 'a person is held to a representation made or a position assumed, where otherwise inequitable consequences would result to another who, having the right to do so under all the circumstances of the case, has in good faith relied thereon. '" (citations omitted).