United States District Court, D. Maryland
MEMORANDUM OPINION
Date
Paula Xinis United States District Judge
This
interpleader action requires this Court to determine which of
two church factions - Jericho Baptist Church, Ministries,
Inc. (DC) (“Jericho DC”), or Jericho Baptist
Church Ministries, Inc. (Maryland) (“Jericho MD”)
- is entitled to the remaining funds in the Court's
Registry totaling $465, 629.84.[1] Citibank, as interpleader
Plaintiff, initially sought this Court's determination as
to which faction is entitled to the funds held in nine
separate accounts totaling $2, 178, 674.00.[2] At the summary
judgment stage, the Court awarded $1.7 million to Jericho DC
because the facts indisputably demonstrated that Jericho MD
had opened the Citibank account in question with $1.7 million
transferred from a Jericho DC account that existed prior to
Jericho MD assuming control over the church. Thus, the funds
properly reverted to Jericho DC.
The
remaining funds, however, were not indisputably traceable to
Jericho DC. At the summary judgment stage, Jericho DC did
indeed proffer that Jericho MD had also transferred an
additional $2.5 million which, like the initial $1.7 million,
rightfully belonged to Jericho, DC. The proof of ownership as
to this $2.5 million transfer, however, was less clear.
Accordingly,
the Court set the matter in for a bench trial to allow each
side the opportunity to demonstrate which faction is entitled
to the remaining funds. The parties acknowledge that this
interpleader matter is one of equity. See Sec.
Ins. Co. of Hartford v. Arcade Textiles, Inc., 40
Fed.Appx. 767, 769 (4th Cir. 2002). The Court, therefore,
retains broad discretion to determine which entity ought, in
fairness, to receive the funds as supported by the record
evidence. See Am. Fed'n of Labor v. Watson, 327
U.S. 582, 593 (1946) (“The power of a court of equity
to act is a discretionary one.”).
At
trial, Jericho DC demonstrated that on January 20, 2011,
Jericho MD transferred by wire $2.5 million into one of the
Citibank accounts from a PNC account owned and controlled by
Jericho MD. See Trial Exs. DC 10, MD 7. Jericho DC
also demonstrated that even though the PNC account was opened
by Jericho MD, the account was funded with the proceeds of
Jericho MD's sale of Jericho DC's treasury bills.
See Trial Exs. DC 5, 7, 9; MD 7. Jericho DC also
demonstrated - and Jericho MD did not dispute - that these
treasury bills were purchased by Jericho DC prior to Jericho
MD's formation. Id. Accordingly, the great
weight of the evidence at trial demonstrated that the
Citibank account was funded in January 2011 by an additional
$2.5 million traceable to the sale of a Jericho DC asset, the
treasury bills. Because $2.5 million is traceable to Jericho
DC, and is an amount far greater than the funds remaining in
the Court Registry from the Citibank account, the Court finds
that the remaining funds rightfully are awarded to Jericho
DC.
Jericho
MD lodges no meaningful challenge to the traceable stream of
funds described above. Rather, Jericho MD argues that it is
nonetheless entitled to the remainder of the funds because
Jericho MD used the Citibank account to operate the church
and so should receive “credit” for meeting the
church's financial obligations. Jericho MD, more
particularly, contends that while it operated the church, it
deposited tithes and offerings from Jericho MD's church
services into the Citibank account as well as funds collected
from parking fees charged to patrons who parked on church
grounds during football games and other events held at Fed Ex
Field. Jericho MD also demonstrated that it used the Citibank
account to pay general church operating expenses, but it
provided no further detail as to specifics of such expenses.
From this proof, Jericho MD argues that any funds remaining
in the Citibank account rightfully belonged to Jericho MD.
Although
the argument has some intuitive appeal, it is not supported
by the evidence. In theory, if Jericho MD demonstrated that
from the time it opened the Citibank account until Jericho DC
resumed control over the church, Jericho MD had turned a
profit on its independent church efforts and that
same profit was reflected in the Citibank account, then
perhaps an argument could be fronted that Jericho MD is
entitled to some or all of the funds to recoup the profit
derived from ventures independent of Jericho DC's
financial interests. However, Maryland did not even
demonstrate, on a most basic level, that its income outpaced
its expenses, leaving no possibility that any profit
attributable to Jericho MD remained in the account.
Further,
a sizeable portion of the income deposited into the Citibank
account came from parking fee revenues, the origin of which
was not the result of Jericho MD's independent efforts,
but derived from a pre-existing venture of Jericho DC's
which had been generating revenue for the church prior to
Jericho MD assuming control.[3] In fairness, the Court is not
prepared to credit the parking fees to Jericho MD when the
source of that income stream originated with Jericho DC.
However, based on Jericho MD's failure of proof in this
case, the Court is not convinced the analysis would be any
different even if credit was awarded to Jericho MD for such
parking fees.
Accordingly,
the Court finds that Jericho DC has demonstrated that an
additional $2.5 million in proceeds were used to fund the
Citibank account. Thus, because the remainder of the funds in
the Court Registry represent a fraction of the $2.5 million,
DC is entitled to the remaining Citibank account funds,
consistent with and for the reasons articulated in the
Court's prior opinion at ECF No. 61.
A
separate Order follows.
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Notes:
[1] The Court incorporates its factual
recitations and applicable legal analysis articulated in its
Memorandum Opinion at ECF No. 61.
[2] The funds from the Citibank accounts
were deposited into the Court's Registry at the inception
of ...