Robinson v. Mutual Reserve Life Ins. Co.

• Decision Date: 07 November 1910
• Docket Number: 141.
• Citation: 182 F. 850
• Parties: ROBINSON v. MUTUAL RESERVE LIFE INS. CO. SCOVILL v. SAME.
• Court: U.S. District Court — Southern District of New York

182 F. 850

ROBINSON v. MUTUAL RESERVE LIFE INS. CO.

SCOVILL v. SAME.

No. 141.

United States Circuit Court, S.D. New York.

November 7, 1910

[Copyrighted Material Omitted] [Copyrighted Material Omitted]

William Beverly Winslow, for complainants.

Thomas L. Feitner, Sullivan & Cromwell, Joshua Matlack, John T McGovern, Sewell T. Tyng, Albert P. Massey, Miles M. Dawson, Robert Van Iderstein, Van Iderstein, Badger & Barker, Gilbert E. Roe, Wollman & Wollman, David J. Gallert, Clark Varnum, George W. Harper, Blandy, Mooney & Shipman, Morris Hillquit, Florence J. Sullivan, E. N. Dollin, and John M. Scoble, for exceptants.

Report Filed July 1, 1910.

WARD Circuit Judge.

The master presents the questions of fact and of law involved in this matter so clearly that there will be no advantage in restating them, and I will therefore give my conclusions only in disposing of the exceptions to it.

First. The exceptions filed on behalf of Lemarquis and others and of Mary Aline Duval Thiebaud, individually, etc., are overruled.

The French and Spanish statutes upon which these exceptions are founded have never been passed upon by the courts of those countries and have never been applied by those governments in the case of an insolvent insurance company. Nor is there in either country any statute or departmental regulation as to the distribution of the assets of an insolvent insurance company. Therefore the construction of the statutes is for the court.

I think the French statute was intended to create a fund out of which the insurance obligations of foreign insurance companies contracted in France and Algeria should, if necessary, be paid before any other debt of the companies. Statutes of a more or less similar nature are common in the states of this country. Though the amount of the fund under the French statute is determined as to one element by the mathematical reserve of outstanding policies, I think the fund itself was not intended to secure any particular policy, but was for the benefit of the whole body of French and Algerian insured, described by the French word 'assures,' in the plural. The word of the statute 'privilege' means a preference to holders of insurance obligations over other debts in the distribution of the fund. The fund is the property of the company, subject, however, to be applied by the French government to the protection of its insured.

France can hardly have intended to give partial protection to death claimants, but entire protection to claims of living policy holders for their mathematical reserves. If a person insured under a French policy for $10,000 had died during the first year of the insurance, and his estate had recovered a judgment for $10,000 in France which the company before insolvency refused to pay, I cannot believe that the government would simply have awarded it out of this fund the miserable pittance of the mathematical reserve of the policy before the death. The meaning of the Spanish statute is still clearer. It requires foreign insurance companies to deposit a fund for the security of insurances effected in Spain out of a percentage of premiums collected there.

In the absence of statutes or adjudications or departmental regulations covering the application of these foreign funds in the case of insolvency, I will presume that the foreign courts will apply it as we do; that is, pay the death claimants first as against the living policy holders, who are members of the association. Of course, the application would be different in the case of a stock corporation whose living policy holders would have a right as creditors to share in such a fund pro rata with the death claimants. If it were conceded that the purpose of the French statute was to give living policy holders a right which they did not possess under their contracts or by the American law, still these French claimants would not have the benefit of the statute because the Council of State May 28, 1910, held in the case of the Equitable Assurance Society that article 7 of the Law of 1905 is not retroactive and does not modify previously existing contracts.

If the funds in question are distributed in accordance with these views, the funds in France and Spain were sufficient to pay the death claimants in those countries in full, and they should not be allowed to recover anything out of the fund in this court.

It is objected that under the equity rule a secured creditor may collect what he can before realizing his collateral, provided that he collect from all sources no more than the amount of his claim. I do not think the above conclusion inconsistent with this contention. The proofs showing that these claimants have a security sufficient to pay them in full, they should not be allowed to delay or disturb the distribution of the fund in this country because they have not been at the pains of liquidating their security. When a creditor can look to two funds, he may be required to resort to that one on which other creditors have no claim if he will not be injured thereby. Story's Eq. Jur. 633.

It is further objected that these funds are no longer the company's, but have been segregated and are the property of the persons for whose benefit they have been so segregated. If this be admitted, the segregation in accordance with the views heretofore expressed is for the benefit of death claimants in the first instance, and the funds, if regarded as theirs, are enough to pay the claims in full.

The question is to a large extent a practical one. There is a fund to be distributed in France in which only certain creditors are interested, and another fund to be distributed here in which all creditors are interested. The natural and reasonable course would have been for the French and Spanish creditors to first ascertain what they were entitled to receive out of the fund reserved for their exclusive benefit, and then make their claim upon the fund here. On the other hand, the fund in this country cannot be distributed with exact equity in the first place if it is not known how much the French and Spanish claimants will recover abroad. All this has been patent to them for some two years, but they have deliberately postponed the liquidation of the funds abroad. This court said in an opinion handed down December 28, 1909:

'The master properly excluded death claims of citizens and residents of foreign countries in which the government has sequestered deposits made by the association and the company for the benefit of the resident policy holders, and its free assets in banks, etc. It being found as a fact that the receivers have applied for the return of those funds for distribution here without avail, and that they are sufficient in amount to cover the death claims maturing in those countries before February 15, 1908, those claimants are properly relegated to the assets so sequestered. Presumably they will be paid in full. There is nothing to show that they have done anything to realize from the funds impounded abroad. It would not be fair to the domestic creditors either to postpone distribution until the foreign creditors have collected what they can abroad, or to permit the foreign creditors to prove their claims in full here and leave the receivers to collect any surplus there may be coming to the domestic creditors from abroad. The time is approaching when the assets should be distributed and claimants should know exactly what they have to expect as the outcome of this unfortunate business. ' Robinson v. Mutual Reserve Life Ins. Co., 175 F. 628.

Second. The exceptions filed by Victor J. Loring and others, Turley & Turley and others, Burns Bros., Frank J. Carroll, and Martin Fitzgerald, Ann Campbell, Edward I. Robinson and another, and the first, second, and third exceptions of Christina S. Dogge are overruled for reasons stated in a former opinion on exceptions to the master's report filed July 1, 1909, reported in 175 F. 624.

Third. The exceptions filed on behalf of A. E. Lloyd and others are overruled so far as they depend upon the North Carolina judgments, because the courts had no jurisdiction of the defendant after it was dissolved. Pennoyer v. Neff, 95 U.S. 714, 24 L.Ed. 565; Pendleton v. Russell, 144 U.S. 640, 12 Sup.Ct. 743, 36 L.Ed. 574; Rodgers v. Insurance Co., 148 N.Y. 34, 42 N.E. 515. The statute of North Carolina could no more give jurisdiction in such a case, at least as to assets without the state, than it could give jurisdiction over the estate of a dead defendant or of a nonresident not personally served. Cases which hold that service upon an official agent of the state brings the company into court, even after it has ceased to do business in the state, like Woodward v. Mutual Reserve Co., 178 N.Y. 485, 71 N.E. 10, 102 Am.St.Rep. 519, affirmed 200 U.S. 612, 26 Sup.Ct. 752, 50 L.Ed. 620, do not apply to a company which has ceased to exist.

If the causes of action on which these judgments were rendered are considered, the claims were rightly dismissed because by the law of this state no damages can be awarded for the refusal of an insurance company to continue its contract of insurance. The insured may either proceed in equity to compel the reinstatement of the policy, or he may leave the liability of the insurer to await its maturity by death or disability. Kelly v. Security Mutual Life Ins. Co., 186 N.Y. 16, 78 N.E. 584. These are the only remedies afforded in New York, and I do not think that the law of North Carolina which recognizes a living policy holder's claim for damages was incorporated into the contract so as to require the courts of this state which recognize no such remedy to enforce the foreign law. The law of the forum regulates the bringing of suits. Scudder v. Bank, 91 U.S. 406, 412, 23...