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FIDELITY BANK v. COMMONWEALTH MARINE & GEN. ASSUR.

February 24, 1984

The FIDELITY BANK
v.
COMMONWEALTH MARINE AND GENERAL ASSURANCE COMPANY, LTD, J.E. Mamiye & Sons, Inc., Maurice L. Jackson, Floyd Fountain and Farmers State Bank of Center, Texas, George K. Lynch, Horizon Medical Administrators, Inc., G. A. Brown, Pak-Mor Manufacturing Company, Delan Townson and First Alabama Bank of Conecuh County, Phillips & Sons, Inc., Hutchinson Financial Corporation of Alabama, Neb, Ltd., Anne and Art Johnston d/b/a Treasure Harbor Sailing Yachts, and Reid, Inc.



The opinion of the court was delivered by: POLLAK

 Commonwealth Marine and General Assurance Company, Ltd. ("Commonwealth") is an insurance company incorporated in Belize, Central America. Commonwealth sold insurance policies in the United States for some period prior to the commencement of this action. As security for its customers in the United States, Commonwealth established a Trust Fund on deposit with plaintiff, The Fidelity Bank ("Fidelity"), by a Trust Agreement entered into on January 19, 1979 and attached to this Opinion as an appendix. Commonwealth initially deposited approximately five hundred thousand dollars ($500,000) in the Trust Fund.

 At some point prior to the commencement of this action, Commonwealth ceased paying on some or all of its insurance policies. Several of Commonwealth's creditors sought to perfect claims to the Trust Fund either under the Trust Agreement's terms or through Pennsylvania's attachment process. On April 29, 1983, Fidelity filed a complaint in interpleader initiating this action. Fidelity paid into this court's registry a sum of $440,891.61. On May 23 I ordered that the clerk place this fund into thirteen-week Treasury Bills and other interest-bearing accounts; the fund therefore now exceeds the initial $441,000. *fn1"

 In addition to Commonwealth, Fidelity listed eleven claimants to the money paid into court in the initial complaint. On June 28, I gave Fidelity leave to amend its complaint to add four additional claimants. These fifteen claimants, however, only assert twelve separate claims on the funds in court. In addition to these twelve claims, a further claimant, Reid, Inc., moved to intervene on August 29. The court thus has before it thirteen claims upon the interpleaded fund. The court has received correspondence (all filed of record) suggesting that outside the contours of this litigation there are a number of other disappointed Commonwealth customers.

 All of the claimants have filed statements of claim with this court. In lieu of having each claimant file an answer to all the others' statements of claim, on August 1 I ordered the parties to file motions for summary judgment, if they so desired, by August 29. Eight of the twelve claimants and Reid, Inc., moved for summary judgment by August 29. Two claimants, NEB, Ltd. and Hutchison Financial Corp. of Alabama, missed the August 29 deadline, but moved for summary judgment in any event. George K. Lynch, Floyd Fountain and The Farmers State Bank of Center, Texas have neither moved for summary judgment nor responded to the other parties' motions.

 In addition to its response to the other motions for summary judgment, claimant G. A. Brown moved to strike the pleadings and affidavits of several parties on a variety of grounds.

 On December 2, I heard oral argument on the pending motions: Reid, Inc.'s motion to intervene, Brown's motions to strike, and the motions for summary judgment. At the argument I granted Reid's motion to intervene and denied Brown's motions to strike. I did add, however, that with regard to those parties whose pleadings Brown had moved to strike for lack of compliance with Local Rule 13, I would strike no pleadings or affidavits, but I would require all counsel other than William Cattie, Esq., a member of this court's bar from Wilmington, to associate themselves with local counsel so as to comply with Rule 13. *fn2"

 Two issues arose at oral argument. First, Pak-Mor Manufacturing Company attacked the validity of J.E. Mamiye & Sons, Inc.'s New York judgment against Commonwealth. Pak-Mor has moved to intervene in the New York proceedings. I asked counsel for Pak-Mor to keep me abreast of developments in the New York suit. Second, some claimants have requested the court to award post-judgment interest out of the interpleaded fund. I asked counsel for further briefing on the propriety of such an award. Counsel have responded to both my requests. As part of its response, Pak-Mor has requested leave to submit an affidavit of Joseph Reiter, Esq., which I now grant. The motions for summary judgment are ripe for disposition, as the parties dispute few material facts. Where unresolved fact issues have appeared, I note them below.

 II. FACTUAL BACKGROUND

 The claimants have attempted to perfect claims on the Trust Fund in three ways. First, some claimants have complied with the terms of the Trust Agreement. Second, some claimants have attempted to attach the assets of the Fund under the Pennsylvania procedure. Third, some claimants have merely filed a statement of claim in this suit without completely satisfying either the requirements of the Trust Agreement or the Pennsylvania rules.

 In order to explicate the disputes in this case, I first outline the procedures under the Trust Agreement and the attachment procedures under the Pennsylvania Rules of Civil Procedure which certain claimants assert apply here. I then detail the claims of each claimant and the extent to which each claimant has satisfied either set of procedures. With these factual matters in mind, I proceed to consider the legal issues involved in these motions for summary judgment.

 (A) The Trust Agreement

 The first paragraph of article II of the Trust Agreement provides that "the Trust Fund shall be exclusively available, but only as in this Agreement specifically provided, for the payment of claims under American policies" and for payment of expenses of the trustee. The second paragraph of article II defines the process by which a claimant can obtain payment from the Fund:

 
A claim against the Company under an American policy issued subsequent to the execution of this trust agreement shall be enforceable by the policy-holder against the Trust Fund when all of the following four conditions have been complied with and not otherwise.
 
(A) A judgment has been obtained by the policy-holder against the Company in any Court of competent jurisdiction within the United States of America in respect of the Company's liability under an American policy;
 
(B) Such judgment has become final in the sense that the particular litigation has been concluded either through the failure to appeal within the time permitted therefore or through the final disposition of any appeal or appeals that may be taken, the word "Appeal" being used herein to include any similar procedure for review permitted by the applicable law;
 
(C) A certified copy of the said judgment has been filed with the Trustee, together with such proof as to its finality and its conformance with the other conditions specified in this Article II as the Trustee shall require;
 
(D) A period of thirty (30) days from the date of the filing with the Trustee of the said certified copy of the said judgment and all of said proofs has expired, without such judgment having been satisfied, provided, however, that the expiration of such thirty-day period shall not be required in the event the same extends beyond the termination date of the Trust;
 
WHEREUPON the said judgment shall be forthwith satisfied by the Trustee out of the Trust Fund then in its hands, without regard to the rights of any other policyholder or policyholders, provided that the Company at its option may waive any or all of the foregoing conditions mentioned in Subdivisions (A), (B), (C), and (D) hereof and direct the Trustee in writing to pay from the Trust Fund the claim of any policyholder against the Company under an American policy without such claim having become enforceable as above defined, whereupon the said claim shall be forthwith satisfied by the Trustee out of the Trust Fund then in its hands without regard to the rights of any other policyholder or policyholders and provided further that the Trustee shall be absolutely protected in acting upon any such written direction from the Company without investigation and shall be under no obligation to see to the application of any such payment and shall not be concerned to ascertain or inquire as to the validity of such claim or the propriety of such direction.

 Under the Trust Agreement, then, only a holder of an "American policy" can ever obtain satisfaction from the Fund. Unless Commonwealth directed Fidelity otherwise, the policyholder would have to (a) obtain a judgment in the United States; (b) survive all appeals of that judgment; (c) file proof of the judgment and its finality with Fidelity; and (d) wait thirty days. As an alternative, a claimant under an American policy may obtain a direction from Commonwealth to Fidelity that Fidelity should pay the claimant without regard to the four conditions.

 The Trust Agreement defines "American policy" to mean "any contract or policy of insurance or reinsurance issued or any agreement to insure made by [Commonwealth] wherein the premiums and losses are expressed to be payable in U.S.A. currency." Trust Agreement, art. I, para. 2. The next paragraph defines "policyholders" as holders of American policies. Further, "'claim' means a ...


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