Conway v. Imperial Life Ins. Co.

• Decision Date: 15 January 1945
• Docket Number: 37139.
• Citation: 21 So.2d 151,207 La. 285
• Court: Louisiana Supreme Court
• Parties: CONWAY, Secretary of State, v. IMPERIAL LIFE INS. CO. et al.

21 So.2d 151

207 La. 285

CONWAY, Secretary of State, v. IMPERIAL LIFE INS. CO. et al.

No. 37139.

Supreme Court of Louisiana

January 15, 1945

Rehearing Denied Feb. 19, 1945.

Appeal from First Judicial District Court, Parish of Caddo; Robert J. O'Neal, Judge.

Samuel O. Clark, Jr., Asst. Atty. Gen., A. F. Prescott and Helen Goodner, Sp. Assts. to Atty. Gen. (Malcolm E. Lafargue, U. S Atty., and John A. Patin, Asst. U. S. Atty., both of Shreveport, of counsel), for the United States, opponent and appellant.

Otis W. Bullock and Frank J. Looney, both of Shreveport, for receiver.

Hollingsworth B. Barret, of Shreveport, for intervenors-appellees.

HAMITER Justice.

On the present appeal, this case presents the single question of whether the claim of the United States Government for taxes due by an insurance company now in receivership should be paid by preference and priority, out of funds held by the receiver, over the policy obligations of that company.

The issue which was resolved against the United States by the district court, has the following described factual background:

For a number of years prior to April 1, 1937, the Imperial Protective Union and the American Benefit Association, which were organized under the laws of Delaware and Colorado respectively, sold life insurance in the State of Louisiana writing policies on the level premium plan, without complying with our statutory requirements relative to the doing of business. On the mentioned date these companies transferred all of their assets, valued at approximately $45,000, to the Imperial Life Insurance Company, a corporation organized under the laws of Louisiana, the transferee assuming all of the policy obligations of the transferors.

The officers of the three companies were identical; and their primary purpose in effecting the transfer was to provide means for qualifying the transferee company to do business in this state. In keeping with this purpose, $23,185 of the assets (in the form of bonds) thus transferred, which previously was a part of the mortuary or reserve funds of the transferors, was deposited, along with other bonds, by the transferee with the State Treasurer as qualifying security in accordance with the requirement of Act 169 of 1908.

On November 17, 1938, pursuant to the petition of E. A. Conway, the Secretary of State of Louisiana, a receiver was appointed for the Imperial Life Insurance Company (at that time admittedly insolvent) with full power to take possession of its property and to liquidate its affairs.

To the tableau of debts filed by the receiver, on which it was not listed as a creditor, the United States tendered an opposition, asserting that the insolvent company was indebted to it for unpaid social security taxes of $1364.24 and also for income taxes, in the amount of $41,647.97, assessed against the above named transferor companies for the years 1934 through 1937. That opposition, ultimately, came before this court, and its consideration resulted in a decree that the United States be recognized as a creditor on the tableau of debts as contended. We pointed out that the Imperial Life Insurance Company was directly obligated for the social security taxes claimed, and that its responsibility for the income taxes of the transferor companies arose, under the provisions of a federal statute, by reason of its being the transferee of their assets. Policyholders were not parties to that proceeding, and, consequently, no question of preference and priority between them and the United States was there presented or determined. See 198 La. 999, 5 So.2d 314.

Thereafter the receiver filed an amended tableau of debts, listing the United States as an ordinary creditor relative to the mentioned tax indebtedness. This amendment was opposed by the United States, it showing that its claim should be paid by preference and priority after the costs of administration. Also filing oppositions were certain policyholders who asserted that they should be granted preference in payment.

On these oppositions a trial was had in the district court, resulting in a judgment decreeing that 'the demands of the Government for priority of its claim on the funds in the hands of the receiver of the Imperial Life Insurance Company are denied, and the claims of the policyholders shall be first paid out of said funds.' From the judgment the United States perfected and is prosecuting the instant appeal.

As that judgment indicates, this appeal does not pose any question respecting individual recognition of policyholders of the several companies involved or the rights of those claimants as between themselves. The issue, as we appreciate it and which we attempt to determine, concerns solely the matter of preference and priority of payment, out of the funds in the hands of the receiver, as between the United States on the one hand and the policyholders on the other.

The claim of the United States is predicated upon Section 3466 of the Revised Statutes, 31 U.S.C.A. � 191, which provides:

'Whenever any person indebted to the United States is insolvent, or whenever the estate of any deceased debtor, in the hands of the executors or administrators, is insufficient to pay all the debts due from the deceased, the debts due to the United States shall be first satisfied; and the priority established shall extend as well to cases in which a debtor, not having sufficient property to pay all his debts, makes a voluntary assignment thereof, or in which the estate and effects of an absconding, concealed, or absent debtor are attached by process of law, as to cases in which an act of bankruptcy is committed.'

There can be no question that the company in receivership (Imperial Life Insurance Company) is indebted to the United States. As above shown, this court, on a previous appeal in the case, decreed that it was liable to the United States for social security taxes under a direct obligation and also, as transferee, for the income taxes originally due by its transferors. Moreover, it cannot be denied that such company has been insolvent since November 17, 1938, for on that date it admitted insolvency when the Secretary of State of Louisiana, alleging that ground, sought and obtained the appointment of a receiver for it. Hence, under the quoted statutory provision the claim of the United States must be first satisfied unless there exists some legal impediment arising out of the nature of the corporation's assets from which satisfaction is sought to be obtained.

According to the record the receiver has only $16,563.25 in his hands for distribution, an amount insufficient to pay both the claim of the United States and the indebtedness due to the policyholders. Those funds were obtained by the receiver from the qualifying securities of $25,000 (the difference was used in paying receivership expenses) deposited by the Imperial Life Insurance Company with the State Treasurer, and the source of such securities to the extent of $23,185 was the mortuary or reserve funds of the transferor companies, Imperial Protective Union and American Benefit Association.

The deposit was made pursuant to, and as required by, Act 169 of 1908, and the deposited qualifying securities, as that statute specifically provides, was 'held by the State Treasurer in trust for the benefit and protection of and as security for the policy holders of the corporation making the deposit.' � 4.

Thus, under the plain and unmistakable language of the statute, the funds now in the hands of the receiver are impressed...