Comm'r of Ins. v. Massachusetts Acc. Co.

• Decision Date: 08 May 1945
• Citation: 61 N.E.2d 137,318 Mass. 238
• Parties: COMMISSIONER OF INSURANCE v. MASSACHUSETTS ACC. CO.
• Court: United States State Supreme Judicial Court of Massachusetts Supreme Court

318 Mass. 238

61 N.E.2d 137

COMMISSIONER OF INSURANCE

v.MASSACHUSETTS ACC. CO.

Supreme Judicial Court of Massachusetts, Suffolk.

May 8, 1945.

Proceeding by the Commissioner of Insurance against Massachusetts Accident Company for liquidation of the company, wherein a receiver was appointed, and wherein a reinsurance agreement became effective on approval by the Supreme Judicial Court. From a decree of a single justice dismissing the petition of Coleman Silbert and another for compensation for legal services performed in the hearing and argument of the case, such petitioners appeal.

Affirmed.Appeal from Supreme Judicial Court, Suffolk County.

Before FIELD, C. J., and LUMMUS, DOLAN, and SPALDING, JJ.

C. Silbert and C. I. Peterson, both of Boston, for appellants Silbert and Foley.

A. B. Casson, of Boston, for receiver.

LUMMUS, Justice.

On August 23, 1939, the petitioner, the commissioner of insurance, filed a petition against the respondent, an accident and health insurance company, seeking his appointment as receiver ‘to rehabilitate such company and conserve its assets' under G.L.(Ter.Ed.) c. 175, §§ 180A-180L, inclusive, inserted by St.1939, c. 472, § 3. On that day he was appointed temporary receiver, and on August 30, 1939, permanent receiver. On February 2, 1940, the commissioner brought another petition under section 180C, alleging the insolvency of the respondent, and on February 23, 1940, a single justice ordered its liquidation by the commissioner as permanent receiver.

There were about thirty-five thousand holders of cancellable term policies, and four thousand nine hundred sixty-six holders of noncancellable term policies, about eleven hundred of which were renewable at the same premium for life and the remainder of which were so renewable up to a certain age. The cancellable business was profitable and desirable, but the non-cancellable business had become very unprofitable as the policyholders grew older, and was the major factor in causing the insolvency of the company.

By an agreement entered into by the receiver with the approval of a single justice on February 23, 1940, many of the outstanding policies issued by the respondent company to policyholders who assented to the agreement were assumed by a Maine corporation known as Union Mutual Life Insurance Company. The Union company assumed all cancellable policies, and was to be paid money representing a part of the unearned premium reserve on such policies, money needed to liquidate the liability for incurred and unpaid claims and the expenses thereof, and premiums which might be received thereafter on such policies. The holder of such a policy was given an option to refuse the novation provided for by the agreement and to take his share in liquidation.

The noncancellable policyholders were made the subject of a different provision, for the Union Company took the unprofitable noncancellable business only for the purpose of acquiring the profitable cancellable business, and would not assume such unprofitable business except with limitations. That provision was complicated, and need not be explained in detail. In substance the receiver turned over to the Union company, to form a ‘non-can fund,’ assets of the value of more than a million dollars, in which ‘non-can fund’ the noncancellable policy-holders were to have rights, not equal to those given them by the terms of the policies but smaller proportionate rights, which rights the Union company agreed to give them in the place of the respondent company. The holder of such a policy was given an option to refuse the novation provided for by the agreement and to take his share in liquidation.

The terms of the agreement are more fully stated in the opinion in Commissioner of Insurance v. Massachusetts Accident Co., 314 Mass. 558, 561-563, 50 N.E.2d 801.

The receiver retained about half a million dollars in part for the purpose of liquidation of claims not assumed by the Union company. Of the four thousand nine hundred sixty-six noncancellable policyholders, one hundred eighty-seven were then disabled. Of the one hundred eighty-seven disabled policyholders, one hundred eighty-two assented to the novation and five refused it. Of the remaining four thousand seven hundred seventy-nine nondisabled noncancellable policyholders, four thousand four hundred seventy-eight assented to the novation and three hundred one refused it. Proofs of claim were filed by one hundred fifty-eight of the nonassenting nondisabled noncancellable policyholders, and by the five nonassenting disabled noncancellable policyholders. Of these one hundred sixty-three claimants just mentioned, seventy-nine held policies renewable for life, and eighty-four held policies renewable to the age of sixty. More than sixty appearances were filed by counsel for different policyholders.

Whether any of the holders of cancellable policies refused to assent to the novation does not appear in the record. It does not appear that any of them sought to prove claims in liquidation. The questions argued when the case was here before concerned the rights of noncancellable policyholders.

The only question argued on this appeal is the correctness of the action of a single justice in dismissing the petition of Coleman Silbert and Henry E. Foley, Esquires, for compensation for legal services performed in the hearing and argument of the case reported as Commissioner of Insurance v. Massachussetts Accident Co., 314 Mass. 558, 50 N.E.2D 801. Those counsel first appeared before a single justice on behalf of one Newman Silbert and one Walter G. Schelker, Junior, who were holders of noncancellable policies, and later joined with a number of other lawyers in representing those two noncancellable policyholders and fourteen others. Before the full court they apparently represented the same sixteen noncancellable policyholders, out of one hundred sixty-three policyholders who filed claims.

The petitioners, on behalf of their clients, were successful in that the full court decided in accordance with their contentions (a) that the claims of nondisabled holders of noncancellable policies were not barred from participation in the distribution because ‘contingent,'(b) that they were entitled to share pari pessu with the claims of disabled policyholders, and (c) that the master was right in setting the value of the cancellable business at $200,000. Commissioner of Insurance v. Massachusetts Accident Co., 314 Mass. 558, 563-568, 576, 577, 582, 583, 50 N.E.2d 801. They were unsuccessful in two other contentions (d) that ‘each nondisabled holder of a noncancellable policy is entitled to damages equal to that sum of money which would have enabled him to purchase the same or a substantially similar policy from a solvent company,’ and (e) that the claims of assenting policyholders, assigned to the receiver, could not compete with the claims of nonassenting policyholders. Id., 314 Mass. 569-571, 578-582, 50 N.E.2d 801. If this last contention had been sustained, their clients would have been paid in full, and there might have been a ‘surplus' for distribution under section 180H.

We start with the general principle that a litigant must bear his own expenses, except so far as his burden is mitigated by a statute awarding him taxable costs. Fuller v. Trustees of Deerfield Academy, 252 Mass. 258, 147 N.E. 878;Boynton v. Tarbell, 272 Mass. 142, 144, 172 N.E. 340;Abrams v. Scandrett, 7 Cir., 138 F.2d 433, 436.

Besides a statutory exception applicable to cases originating in a Probate Court,¹ that general principle is subject to a number of exceptions in equity practice.

(1) Where in proceedings involving the liquidation and distribution of assets a question arises between one class of distributees and another, of such small financial consequence to any one distributee that he could hardly be expected to finance litigation concerning it, and yet of such importance to the correct distribution of the fund that the court request counsel to present the case for some class of distributees, the fees of such counsel may be ordered paid out of the fund. Petition of Commissioner of Banks (In re Prudential Trust Co.), 240 Mass. 478, 484, 134 N.E. 253, explained in Fuller v. Trustees of Deerfield Academy, 252 Mass. 258, 263, 147 N.E. 878;Robinson v. Mutual Reserve Life Ins. Co., 2 Cir., 189 F. 347;Clark v. Goldman, 2 Cir., 124 F.2d 491;In re New York Investors, Inc., 2 Cir., 130 F.2d 90.

(2) Where difficulty in the administration of an estate or trust is caused by some ambiguity or obscurity in a will or other instrument, the costs and expenses of litigation thereby caused, taxed as between solicitor and client, may be ordered paid out of the fund. Fuller v. Trustees of Deerfield Academy, 252 Mass. 258, 263, 147 N.E. 878;Sawyer v. Baldwin, 20 Pick. 378, 389;Bigelow v. Morong, 103 Mass. 287, 290;Barker v. Monks, 315 Mass. 620, 630, 53 N.E.2d 696.

(3) Where a litigant at his own expense has been successful in creating, preserving, protecting or increasing a fund in which others have a right to share, the court having control of that fund may order the payment of counsel fees or costs as between solicitor and client out of the fund, upon the petition of the litigant or in some jurisdictions upon the petition of his attorneys (compare Boynton v. Tarbell, 272 Mass. 142, 172 N.E. 340), or the court may make the right of others to share in the fund conditional upon their contributing proportionately to the expenses of the litigation. Davis v. Bay State League, 158 Mass. 434, 33 N.E. 591;Carlson v. Revere Beach County Fair & Musical R. Co., 227 Mass. 291, 116 N.E. 409;Shannon v. Shepard Mfg. Co., Inc., 230 Mass. 224, 236, 119 N.E. 768;Guay v. Holland System Hull Co., 244 Mass. 240, 247, 138 N.E. 557;Sagalyn v. Meekins, Packard & Wheat, 290 Mass. 434, 440, 441, 195 N.E. 769;Shaw v. Harding, 306 Mass. 441, 450, 28 N.E.2d 469;Central Railroad & Banking Co. v. Pettus, 113 U.S. 116, 5 S.Ct....