Sandra Herzberg et al. v. Pine Bluff National Bank

ARKANSAS COURT OF APPEALS

NOT DESIGNATED FOR PUBLICATION ROBERT J. GLADWIN, JUDGE

DIVISION I

SANDRA HERZBERG, ET AL

APPELLANTS

V.

PINE BLUFF NATIONAL BANK

APPELLEE

CA02-701

April 16, 2003

APPEAL FROM THE JEFFERSON COUNTY CIRCUIT COURT

[NO. E 2001-224-2]

HON. LEON E. JAMISON,

JUDGE

AFFIRMED

This appeal arose after the Jefferson County Circuit Court allowed appellee, Pine Bluff National Bank (hereafter referred to as "the Bank"), to interplead the proceeds from three certificates of deposit held by it following notice of an adverse third-party claim. Appellants, Sandra Herzberg and Monica Winkler, were two of the named joint payees on the certificates of deposit. Appellants' sole argument on appeal is that the trial court erred in granting attorney's fees to the Bank in light of the protection afforded it pursuant to Ark. Code Ann. § 23-32-207(1)(B) (Repl. 2000). Appellants' contention is that the Bank was never exposed to double or multiple liability necessary for an interpleader action under Ark. R. Civ. P. 22 (2002) because the Bank would have been released from all liability under Ark. Code Ann. § 23-32-207 had it simply paid either one of the joint surviving payees named

on the certificates of deposit. We affirm the trial court's award of attorney's fees to the Bank.

In a letter opinion dated October 4, 2001, the Grant County Chancery Court found that Mary A. Hamilton, who had died on February 10, 2001, improperly deposited funds belonging to Rufus V. Wilson, with whom she had cohabited, into her own account pursuant to a power of attorney. The trial court imposed a constructive trust on Wilson's behalf. On February 12, 2001, an attorney for Dorothy Hall, one of Wilson's children, and Margaret May, a successor power holder, contacted the Bank to place it on notice that funds in any account in which Hamilton or her descendants might have had an interest should be frozen pending the outcome of litigation to decide to whom the funds belonged, as Hamilton might have improperly transferred funds traceable to the certificates of deposit held by the Bank.

As of February 12, 2001, the Bank held three certificates of deposit payable to: (1) Mary A. Hamilton or Sandra Herzberg in the amount of $13,246.35; (2) Mary Hamilton or Monica Winkler in the amount of $1,745.65; and (3) Mary Hamilton, Monica Winkler, or Sandra Herzberg in the amount of $1,759.75. The Bank filed an interpleader complaint pursuant to Ark. R. Civ. P. 22 in the Jefferson County Circuit Court, and the court permitted the Bank to interplead the funds in its order dated November 19, 2001. The funds were ordered to be placed with the registry of the court, and the Bank was to be discharged of all liability related to the funds. In addition, the court found that the Bank was entitled to anaward of attorney's fees from the interpleaded funds in the amount of $750 and $100 for costs.

On April 2, 2002, the trial court found that, because Wilson, May, and Hall had disclaimed any interest in the funds that were the subject of the interpleader action, the funds that remained in the registry of the court should be paid to appellants jointly. Further, the court awarded the Bank attorney's fees, and it is from this award that appellants appeal.

According to Ark. R. Civ. P. 22(a), persons having claims against the plaintiff may be joined as defendants and required to interplead when their claims are such that the plaintiff is or may be exposed to double or multiple liability. A plaintiff who disclaims any interest in the money or property that is the subject of the interpleader action shall, upon depositing the money or property in the registry of the court, be discharged from all liability. Ark. R. Civ. P. 22(b). The court may make an award of reasonable litigation expenses, including attorneys' fees, to such a plaintiff. Ark. R. Civ. P. 22(b).

Appellants argue that the interpleader action instituted by the Bank was unnecessary because Ark. Code Ann. § 23-32-207(1)(B) provides that payment of a certificate of deposit that is held in two or more names to any of the named account holders "shall be a valid and sufficient release and discharge of the federally or state-chartered savings and loan association for all payments made on account of the deposit or certificate of deposit." We feel compelled to point out that the section cited by appellants has not applied to banks since the enactment of Act 89 of 1997. Although Ark. Code Ann. § 23-47-204 (Repl. 2000) of "The Arkansas Banking Code of 1997" contains a similar provision, the particular statuterelied upon by appellants on appeal has applied only to savings and loan associations for nearly six years.

Appellants rely on the holdings in Hogan v. Hogan, 313 Ark. 374, 855 S.W.2d 905 (1993), and McIlroy Bank and Trust Co. v. Comstock, 13 Ark. App. 13, 678 S.W.2d 782 (1984), in support of their position. Appellants' reasoning is that, although Hogan and Comstock involved disputes among joint tenants and not third parties, if a bank could not be liable to one joint tenant for paying the proceeds of a joint tenancy account or certificate of deposit to another joint tenant, it certainly could not be liable to a third party. Not only are Hogan and Comstock distinguishable on the basis already pointed out by appellants, the court in Hogan did not discuss the bank's liability at all and the court in Comstock discussed the bank's liability pursuant to an indemnity agreement. As such, appellants' reliance on these cases is misplaced.

Even if we were to assume that appellants are correct when they state that the Bank would have been protected if it had chosen to pay either or both of them, we do not believe the Bank was precluded from taking the more prudent action in choosing to interplead the contested funds. Accordingly, because Ark. R. Civ. P. 22(b) clearly allows the court to award attorney's fees in an interpleader action, we cannot say that the trial court abused its discretion in having done so.

Affirmed.

Hart, j., agrees.

Pittman, j., concurs.

John Mauzy Pittman, Judge, concurring. I concur in the result reached in this case, but I express no opinion on the question of whether the appellee bank indeed was or might have been subject to multiple liability so as to be entitled to the benefits of Ark. R. Civ. P. 22, including an award of attorney's fees. The burden was on appellants to demonstrate reversible error by the trial court. Appellants' argument that appellee was protected from multiple liability appears to be based on the protections provided to financial institutions by Ark. Code Ann. § 23-32-207 (Repl. 2000). However, that section has not applied to banks since the enactment of Act 78 of 1997; for almost six years, that section has applied only to savings and loan associations. The majority correctly notes that a comprehensive banking act was also enacted in 1997 that contains somewhat similar protections for banks. See Act 89 of 1997, especially Ark. Code Ann. §§ 23-47-204 -- 205 (Repl. 2000). However, the provisions are not identical, appellants make no argument under this latter act, and we cannot make the argument for them.