Freed v. INLAND EMPIRE INSURANCE COMPANY
| Decision Date | 29 October 1958 |
| Docket Number | No. C-157-55.,C-157-55. |
| Citation | 166 F. Supp. 873 |
| Parties | David L. FREED, Daniel G. Freed and Peter Freed, d/b/a Freed Finance Company, a partnership, Plaintiff, v. INLAND EMPIRE INSURANCE COMPANY, an Idaho corporation, Defendant, Leo O'Connell, Commissioner of Insurance of the State of Idaho, Defendant and Intervenor, G. A. Bushnell, Receiver of Trans-Pacific Insurance Company, Intervenor. |
| Court | U.S. District Court — District of Utah |
David K. Watkiss and Calvin L. Rampton, of Pugsley, Hayes, Rampton & Watkiss, Salt Lake City, Utah, for receiver.
Donald E. Schwinn, of Van Cott, Bagley, Cornwall & McCarthy, Salt Lake City, Utah, for claimant.
This court ruled initially that the claim of the law partnership of Lewis, Roca, Scoville and Beauchamp against the receiver should be treated as an ordinary claim not entitled to preference. The United States Court of Appeals for the Tenth Circuit reversed, "* * * with instructions to allow the claim of the appellant as a preferred claim." Lewis, Roca, Scoville & Beauchamp v. Inland Empire Insurance Company, 10 Cir., 1958, 259 F.2d 318. Upon return of the mandate to this court the claimant prepared a form of judgment providing not only for the approval of its claim as a preferred one, but for its immediate payment by the receiver. Upon objection by the receiver, and the filing by it of a petition by way of counterclaim against the partnership, the court declined to order immediate payment (without prejudice to a further application), but entered judgment in accordance with the mandate of the appellate court as follows:
"* * * that the judgment of this Court heretofore entered on January 23, 1958, be and is hereby reversed and the claim of Lewis, Roca, Scoville & Beauchamp in the amount of Eleven Thousand Six Hundred Twenty-four Dollars and Seventy Cents ($11,624.70) plus interest at six per cent (6%) from October 29, 1957, to the date of payment, and costs * * * is hereby allowed and approved as a preferred claim arising out of a valid attachment lien on bonds deposited by Inland Empire Insurance Company with the Commissioner of Insurance of the State of Kentucky prior to the receivership, which bonds were removed from the State of Kentucky by the receiver after its appointment."
The claimant has now moved for an order requiring the receiver to immediately pay this preferred claim. The receiver resists on the ground that it has a valid counterclaim against the partnership, growing out of other affairs of the Inland Empire Insurance Company, for substantially more than the amount owing by virtue of the attachment.
A ruling on claimant's motion is deemed to depend upon the jurisdiction of this court to entertain such counterclaim, an interpretation of the appellate court's mandate in view of the claims heretofore filed by the claimant and a stipulation between the parties, and (if these factors are favorable to the receiver's position) the sound and reasonable discretion of the court.
Non-residents who present claims against corporate receivers subject themselves to all consequences that attach to an appearance, including the interposition of a counterclaim against them by the receiver. Alexander v. Hillman, 296 U.S. 222, 56 S.Ct. 204, 80 L.Ed. 192.
The petition for judgment filed by the receiver in the nature of a counterclaim alleges that members of the claimant partnership in the course of its legal representation of Inland Empire Insurance Company and as directors and officers thereof, were guilty of serious breaches of their fiduciary responsibilities, and that as a result of fraudulent acts and manipulations alleged in the petition the company suffered damages of $300,000, for which the receiver prays judgment. Without passing now upon the technical sufficiency of the petition to state a claim against the partnership as such, it does appear that it is one of the kind that could be decided in such a proceeding as this, and that if the allegations of the petition are true, the receiver would be entitled to relief.
The claimant says it has pending no claim against the receiver which affords the court jurisdiction of the counterclaim within the doctrine of Alexander v. Hillman, supra, for the reason (a) that the receiver's petition technically is not against the partnership but rather against only some of its members; (b) that any claim filed with the receiver was for specific bonds in which it had a special interest by virtue of its attachment, and was not a claim in the ordinary sense; (c) that the stipulation between the partnership and the receiver had the effect of requiring payment by this court forthwith upon a finding that the claimant's attachment was valid; (d) irrespective of the stipulation, the result of the circuit court's reversal of this court's decision was to entitle the claimant to a judgment for payment "and there can be no counterclaim against a judgment"; and (e) for the court to do anything other than to order payment of the claim forthwith would be to vitiate the judgment of the circuit court.
Most of these contentions can be resolved by references to the record.
On September 14, 1955 claimant filed suit against Inland Empire Insurance Company in Arizona for the amount of $20,127.12 and costs. On October 6, 1955 a default judgment was entered in Arizona.
On November 8, 1955, suit having been brought in Kentucky on this judgment, an attachment was served upon property in the hands of the Kentucky Department of Insurance, including the bonds mentioned in Lewis, Roca, Scoville & Beauchamp v. Inland Empire Insurance Company, supra.
On November 30, 1955 an order was entered by this court appointing a receiver for Inland Empire Insurance Company.
June 18, 1956, claimant filed with the receiver claim for $20,127.12, with interest and costs, based upon the Arizona judgment, and describing the status of an appeal from this judgment which was then pending but which later was dismissed. This was an ordinary claim upon a regular proof of claim form.
In 1956 subsequent to the date last mentioned, claimant filed a partial satisfaction of the Arizona judgment to the extent of $10,506.94.
Again in 1956 in a suit brought by the receiver against the Commissioner of the State of Kentucky (of which claimant had no notice) the bonds covered by claimant's attachment (of which attachment proceedings there is no proof that the receiver had notice) were ordered delivered to the receiver.
October 29, 1957, claimant and counsel for the receiver entered into a written stipulation reciting, among other things, the previous filing of the former's claim with the receiver, the proceedings in Arizona and Kentucky...
To continue reading
Request your trial
-
Freed v. Inland Empire Insurance Company
...as officers, directors and attorneys of Inland Empire Insurance Company prior to the receivership herein. Freed v. Inland Empire Ins. Co., D.C.D.Utah 1958, 166 F.Supp. 873. In ruling on a petition for writ of mandamus directed to this Court, the Circuit Court held that it was within the int......