Chicago Life Ins Co v. Needles

• Decision Date: 02 March 1885
• Citation: 28 L.Ed. 1084,5 S.Ct. 681,113 U.S. 574
• Parties: CHICAGO LIFE INS. CO. v. NEEDLES, Auditor, etc
• Court: U.S. Supreme Court

113 U.S. 574

5 S.Ct. 681

28 L.Ed. 1084

CHICAGO LIFE INS. CO. v. NEEDLES, Auditor, etc.

March 2, 1885.

C. C. Bonney, for plaintiff in error.

J. L. High and E. B. Sherman, for defendants in error.

Mr. Justice HARLAN, after stating the facts in the foregoing language, delivered the opinion of the court:

By an act of the general assembly of Illinois, approved February 16, 1865, certain named persons were created a body politic and corporate by the name of the Travelers' Insurance Company, with authority to carry on the business of insuring persons against the accidental loss of life or personal injury sustained while traveling by railways, steamers, and other modes of conveyance. Subsequently, by an act approved February 21, 1867, the provisions of which were formally accepted by the company,—its name was changed to that of the Chicago Life Insurance Company, and it was invested with power to make insurance upon the lives of individuals, and of persons connected by marital relations, to those applying for insurance, or in whom the applicant had a pecuniary interest as creditor or otherwise; 'to secure trusts, grants, annuities, and endowments, and purchase the same, in such manner, and for such premiums and considerations, as the board of directors or executive committee shall direct.' That, as well as the original act, was declared to be a public act, to be liberally construed for the purposes therein mentioned.

A general law of the state, approved March 26, 1869, and which took effect July 1, 1869, entitled 'An act to organize and regulate the business of life insurance,' provides, (section 10:) 'When the actual funds of any life insurance company doing business in this state are not of a net value equal to the net value of its policies, according to the 'combined experience,' or 'actuaries' rate of mortality, with interest at four per centum per annum, it shall be the duty of the auditor to give notice to such company and its agents to discontinue issuing new policies within this state until such time as its funds have become equal to its liabilities, valuing its policies as aforesaid. Any officer or agent who, after such notice has been given, issues or delivers a new policy from and on behalf of such company before its funds have become equal to its liabilities as aforesaid, shall forfeit, for each offense, a sum not exceeding one thousand dollars.' The same statute requires, among other things, every life insurance company incorporated in Illinois to transmit to the auditor, on or before the first day of March, in each year, a sworn statement of its business, standing, and affairs, in the form prescribed or authorized by law and adapted to its business; employers that officer to address inquiries to any company in relation to its doings or condition, or to any other matter connected with its transactions, to which it was required to make prompt reply; and makes it his duty to make, or cause to be made, an examination of its condition and affairs, whenever he deems it expedient to do so, or whenever he has good reason to suspect the correctness of any annual statement, or that its affairs are in an unsound condition. The provisions relating life insurance companies, incorporated in other states, and doing business in Illinois, need not be here examined, or their effect determined.

By another general statute, approved February 17, 1874, in force July 1, 1874, it is provided as follows:

'Section 1. If the auditor of state, upon examination of any insurance company incorporated in this state, is of the opinion that it is insolvent, or that its condition is such as to render its further continuance in business hazardous to the insured therein, or to the public, or that it has failed to comply with the rules, restrictions, or conditions provided by law, or has exceeded or is exceeding its corporate powers, he shall apply by petition to a judge of any circuit court of this state to issue an injunction restraining such company, in whole or in part, from further proceeding with its business, until a full hearing can be had, or otherwise, as he may direct. It shall be discretionary with such judge either to issue said injunction forthwith, or to grant an order for such company, upon such notice as he may prescribe, to show cause why said injunction should not issue, or to cause a hearing to be had on complaint and answer, or otherwise, as in ordinary proceedings in equity, before determining whether an injunction shall be issued. He may, in all such cases, make such orders and decrees, from time to time, as the exigencies and equities of the case may require, and in any case, after a full hearing of al parties interested, may dissolve, modify, or perpetuate such injunction, and make all such orders and decrees as may be needful to suspend, restrain, or prohibit the further continuance of the business of the company.'

'Sec. 5. When the charter of any such insurance company expires, is forfeited, or annulled, or the corporation is restrained from further prosecution of its business, or is dissolved, as hereinbefore provided, the court, on application of the auditor, or of a member, stockholder, or creditor, may, at any time before the expiration of said two years, appoint one or more persons to be receives, to take charge of the estate and effects of the company, including such securities as may be deposited with the auditor or treasurer of state, and to collect the debts due, and property belonging to it, with power to prosecute and defend suits in the name of the corporation, or in their own names, to appoint agents under them, and do all other acts necessary for the collection, marshaling, and distributing of the assets of the company, and the closing of its concerns; and, when necessary for the final settlement of its unfinished business, the powers of such receivers may be continued as long as the court deems necessary therefor.'

'Sec. 9. The mode of summoning parties into court, the rules of practice, course of procedure, and powers of courts, in cases arising under this act, shall be the same as in ordinary proceedings in equity in this state, except as herein otherwise provided.'

Under the authority conferred by the latter statute the auditor caused an examination to be made by the chief clerk of the insurance department of the state into the condition of this company. That officer reported that it had been doing a losing business for several years, was insolvent within the meaning of the statute, and that immediate steps should be taken to appoint a receiver, to the end that the affairs of the company be wound up as quickly as possible, as being for the best interests of its policy-holders. As the result of that examination, the present proceedings were commenced by the auditor in the circuit court of Cook county under the said act of 1874. The petition filed by him shows that, in his opinion, the condition of the company rendered its further continuance in business hazardous to the insured. He prayed that the company be enjoined from further prosecuting its business; that a receiver be appointed to take charge of its real estate and effects; and that such other relief be granted as should be meet. An injunction was issued, and a receiver appointed, with authority to take possession of the property of the company; the latter being directed to execute all conveyances necessary to vest in him full title to all its property, assets, and choses in action. The company, by its answer, put the plaintiff on proof of all the material allegations of the petition. At the final hearing, it moved the court, upon written grounds, for a final decree in its behalf; one of which was that the statutes of the state, under which these proceedings were had, were in violation of the constitution of the United States, in that they impaired the obligation of the contract between the state and the company, as well as of the contracts between the company and its policy-holders and creditors. This motion was denied, and a final judgment rendered perpetually enjoining the company from further prosecution of its business. From that judgment a writ of error was prose- cuted to the supreme court of the state, where, among other things, was assigned for error the refusal of the court of original jurisdiction to adjudge that the said statutes of Illinois were in violation of the constitution of the United States. The judgment of the inferior court was, in all things, affirmed by the supreme court of the state, and from that judgment of affirmance the present writ of error is prosecuted.

The supreme court of Illinois did not, in terms, pass upon the claim distinctly made there, as in the court of original jurisdiction, that the statutes in question...