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When Third Parties Have Property, There Could be an Interpleader Action


Many times, two people have a dispute over money or property. That isn’t such a unique situation—in fact, it probably describes the majority of business related disputes. But sometimes there is an extra wrinkle in these kinds of cases: Neither party that claims ownership of the money or property, actually has that money or property. Rather, another, third party has it.

Typical in Real Estate

Traditionally, this happens in real estate disputes, but it isn’t limited to real estate. In real estate, an escrow agent holds (often, deposits) money for the parties. The agent doesn’t represent the buyer or the seller. So when buyer and seller get into a dispute, and both want the escrow money, the escrow agent is in a precarious situation.

Interpleader actions can happen when someone has control or possession of not just money, but of valuable jewelry, or valuable assets from an estate.

The agent on one hand knows someone is owed the money. The agent just doesn’t know who, and the agent doesn’t want to be the judge and jury of the dispute, and then risk his or her own liability, on the possibility of distributing funds to the wrong person.

The Interpleader Action

That’s why the law allows a third person that holds property on behalf of other people, to file a lawsuit that is called an interpleader action. An interpleader is where a third party tells the court “I have this property, they both want it from me, I don’t know which of these parties gets it, please tell me what to do with it.”

In this way, the third party actually forces the parties into court, to have the court determine who is entitled to the money or property being held, whether the parties like it or not.

The third party bringing the action—called the interpleader—only needs to show that he or she would be subject to liability if he or she distributed the money or property wrongfully. After that, the court moves on to determine who actually gets the money or property. The interpleader must be neutral–not associated with, or favoring, either party. The interpleader may even have a legal duty that is equally owed to both parties.

The interpleader will often give the property being held to the Court, pending the court’s decision. Although the interpleader brings the initial action, the interpleader is not an active part of the litigation. Still, all three parties—the interpleader, and the parties making the claim on the property—will all need attorneys to help them in court.

Interpleader Contracts

Many parties that know they could be in possession of disputed funds—such as escrow agents, or administrators of an estate, or trustees, will have contracts that give them the express right to bring interpleader actions. Those contracts may also allow for the payment of attorneys fees to the interpleader, if an action is needed.

Dispute over money or property? Call the West Palm Beach business litigation attorneys at Pike & Lustig today for help.





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