Pringle Square, LLC v. Berrey Family, LLC

Equitable doctrines do not apply to legal claims made by defendants in interpleader actions.

First-Citizens Bank and Trust Company (FCB) appealed a general judgment directing the payment of $407,772.51 in disputed funds to Berrey Family, LLC. FCB assigned error to, among other things, the trial court’s failure to apply the doctrine of unclean hands. On appeal, FCB argued that the trial court should have applied the unclean hands doctrine because interpleader is an equitable proceeding or, alternatively, because Berrey Family sought an equitable remedy. In response, Berrey Family argued that because its claim to the funds was based in contract, the proceedings were legal in nature and, therefore, could not be impacted by an equitable doctrine. Equitable doctrines do not apply to legal claims made by defendants in interpleader actions. The Court explained that interpleader actions have two phases: an equitable phase, where the plaintiff’s right to implead claimants and discharge its liability is determined, and a second phase, where defendants state their claims to the interpleaded funds, which may or may not be equitable. The action in the second stage is equitable “where the relief sought is a declaration or equitable rights and the principles invoked are equitable in nature.” Because Berrey Family’s claim was “based on an assertion [of] its contract rights,” the claim was legal in nature and thus did not permit the application of an equitable doctrine. Affirmed.