It’s not uncommon for someone or something holding money to find themselves in a situation where many parties claim ownership of the monies. Given the opposing claims to the funds, the holder has two options: wait for the parties to settle their differences or bring an interpleader action requesting the court to decide who should receive the cash.
Interpleader Action
An interpleader action “is an equitable proceeding” brought by a third party to have a court determine the ownership rights of multiple claimants to the same asset or property that is held by that third party. The property in question is called the stake or “res”, and the third party who has custody of the stake is called the stakeholder. In the absence of an interpleader action, the stakeholder must either give the asset or property to one of the parties claiming ownership or face a lawsuit for wrongfully giving the asset or property to the other claimant. An interpleader action, therefore, enables the stakeholder to turn the dispute over to a court. It is designed to eliminate multiple lawsuits over the same stake and to protect the stakeholder from actual or potential liability.
HCEO enforcement interpleader action
In the case of HCEO enforcement, there are two main scenarios in which interpleader action may be taken. If a defendant is being sued or expects to be sued, for debt by two or more different parties, they might ask the court to issue an interpleader summons.
A third party frequently claims ownership of the money or items that have been or will be seized once the creditor obtains a judgment and the required writ.
If the creditor contests the third party’s claim, the Court will issue an interpleader summons requiring all parties to appear in court to determine lawful possession.
If a third party wants to file a claim, they must notify the HCEO who is enforcing the action, providing their name and address (the address must be the address for service).
When the HCEO gets this claim, they must notify their client, the original creditor, and the creditor must tell the HCEO whether they are admitting or disputing the claim within seven days. If the creditor agrees to settle the claim, they are only responsible for the costs and expenses incurred by the HCEO before receiving the notice.
Creditor challenges
If the creditor challenges the claim or does not answer within seven days, the HCEO can file an interpleader summons with the court.
When seeking an interpleader summons, the creditor must show that they are owed money:
- Claim no interest in the subject matter in dispute other than for charges or costs
- Do not collude with any of the claimants to that subject-matter
- Are willing to pay or transfer that subject matter into court or to dispose of it as the court may direct.
If the applicant is an HCEO, however, they do not need to present this evidence until the Court requests it.
Summing-up
Contact Shergroup if you want to enforce an Interpleader Action on someone or if you want to discuss the matter with our legal team, please feel free to talk to our business solutions advisors and will get you connected.
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