Creditors' and Debtors' Rights

Bond Not Needed to Protect Claim to Assets in Sheriff's Sale

, The Legal Intelligencer


The plaintiff in a sheriff's sale interpleader action does not have to post bond in order to maintain a claim for the proceeds of the sheriff's sale, the state Superior Court has ruled.

In reversing an Allegheny County Court of Common Pleas judge, the frontline appeals court ruled in Sysco v. FW Chocolatier that Three Rivers Confections didn't have to post a bond to protect its stake in the assets up for sale because Pennsylvania Rule of Civil Procedure 3207 provides for an interpleader action to continue even if the plaintiff ends up buying its alleged property at the sheriff's sale.

According to the opinion, written by Judge Sallie Updyke Mundy, there is little case law on the issue.

The case was complicated by the fact that after Three Rivers failed to convince the sheriff's office it was in fact the third-party owner of the assets subject for sale to satisfy a debt against another party, Three Rivers ended up buying those assets at the sheriff's sale. The trial court found that the interpleader action Three Rivers initiated at the trial court before the sheriff's sale to get a determination as to who owns the property was rendered moot when Three Rivers bought the property.

"'Once Three Rivers purchased the property at issue, there was no other interested party to an interpleader action,'" the trial court had ruled, according to Mundy. "'Three Rivers could not claim that someone else was in possession of property that rightfully belonged to them.'"

Three Rivers argued on appeal that the trial court was wrong to find an interpleader action was between the claimant and the person who purchases the goods at the sheriff's sale. Three Rivers said the interpleader action is instead between the claimant and any interested parties, which in this case meant Sysco, according to the Superior Court opinion. Mundy said the crux of the argument is whether an interpleader action can commence if there is no third-party bidder.

Under Rule 3207(b), a plaintiff can file an objection to the determination of ownership with or without a bond. Once an objection is filed, an interpleader is at issue in which the claimant is the plaintiff and all other parties in interest are defendants, Mundy noted, citing the rule.

A claimant could either file a bond of double the value of the property at stake to stop the sheriff's sale or it could let the sheriff's sale continue with the proceeds held by the court until the interpleader action were to be resolved, according to the rule.

The trial court had determined Three Rivers did not preserve its interpleader claim because it did not post a bond and, by purchasing the property, essentially resolved the interpleader action.

Mundy said the trial court failed to cite any authority for its position.

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