Hussey Tie Co. v. Knickerbocker Ins. Co.

• Decision Date: 28 July 1927
• Docket Number: No. 7747.,7747.
• Citation: 20 F.2d 892
• Parties: HUSSEY TIE CO. v. KNICKERBOCKER INS. CO.
• Court: U.S. Court of Appeals — Eighth Circuit

20 F.2d 892 (1927)

HUSSEY TIE CO. v. KNICKERBOCKER INS. CO.

No. 7747.

Circuit Court of Appeals, Eighth Circuit.

July 28, 1927.

Walter R. Mayne, of St. Louis, Mo. (John H. Holliday, C. P. Fordyce, and Fordyce, Holliday & White, all of St. Louis, Mo., on the brief), for plaintiff in error.

Rhodes E. Cave, of St. Louis, Mo. (Henry Davis, Thomas S. McPheeters, and Bryan, Williams & Cave, all of St. Louis, Mo., on the brief), for defendant in error.

Before KENYON, Circuit Judge, and MOLYNEAUX and JOHN B. SANBORN, District Judges.

JOHN B. SANBORN, District Judge.

The plaintiff in error, plaintiff in the court below, a Delaware corporation doing business in Missouri, brought suit against the defendant in error, defendant in the court below, upon its policy of fire insurance, in the circuit court of the city of St. Louis. Service of summons was made on January 26, 1926, upon "Lawton, Byrne & Bruner Insurance Agency Company," a corporation, and upon Charles H. Morrill, of "N. H. Markham & Co.," a copartnership, who, in the sheriff's return, are designated as agents of the defendant. There was also service of summons upon the superintendent of insurance of the state of Missouri. The case was removed by the defendant, a New York corporation, to the District Court of the United States for the Eastern District of Missouri. Thereupon the defendant moved to quash the service of process, the motion was granted, and the suit dismissed for want of jurisdiction. The plaintiff is here upon writ of error.

The sole question for review relates to the validity of the service of process upon the defendant. The defendant was not licensed in Missouri. It had never issued a policy covering property in that state; it had no agents there; it had appointed no one to accept service of process. None of the members of the firm of W. H. Markham & Co., a copartnership engaged in the business of soliciting insurance in the city of St. Louis, had any authority from the defendant to solicit insurance on its behalf, had never solicited insurance as its agent on property in the state of Missouri, and had never written insurance for it on property in that state. The firm had placed, with agents of the insurance company in states other than Missouri, insurance on property in other states, the policies being issued in states other than Missouri, and had collected premiums on such insurance, but had no authority to write, accept, or solicit insurance on behalf of the company. During the period of approximately five years prior to November 1, 1926, W. H. Markham & Co. had placed approximately 57 policies with the defendant company covering outside risks, the total premiums on which were about $14,213.92. The premiums were accounted for to Markham & Co. and paid in the usual course of business. The insurance was only placed upon orders for insurance at locations where Markham & Co. had no authority to write, and the insurance was placed either through New York or some other branch office of the insurance company. Policies were delivered through Markham & Co., and Markham & Co. would place upon them gummed labels containing their name and place of business, before delivery to the insured, as a matter of office practice and routine, and with no authority from the insurance company so to do. It was shown that substantially the same situation existed as to Lawton-Byrne-Bruner Insurance Agency Company, although the number of policies placed by it in the defendant insurance company and the amount of premiums received therefor are not shown. The affidavit of Mr. Reynolds, secretary of the insurance company, was to the effect that the company had never at any time done any business in the state of Missouri, and never authorized any one to solicit insurance, to receive or collect premiums, or to settle losses in that state.

Samuel C. Clubb was engaged in the business of soliciting insurance in the city of St. Louis. He solicited Mr. D. B. Hussey, president of the plaintiff, and secured from him an order for insurance on property known as the Busby Hotel, located at McAlester, Okl. He transmitted this order to Markham & Co. in St. Louis, with whom he placed all of his insurance, without designating any company in which it was to be written. Markham & Co. sent the order or application to the Central Insurance Agency at New York, who wrote a policy in the defendant company and sent it to Markham & Co., who placed upon it their gummed label and gave it to Clubb, who put his name upon it on the typewriter and then delivered it to Mr. Hussey. Markham & Co. sent the bill for the premium to the plaintiff on the usual form of statement, and paid Clubb his commission. The bill, which was stamped "Paid," was upon a bill head of W. H. Markham & Co., and showed the number of the policy, the name of the company, the property insured, the amount of insurance, and the premium. Mr. Hussey sent his check for the premium to Markham & Co., made payable to them. Attached to the policy, as a rider, was a standard use and occupancy form adapted to use in "Ill., Kans., Ky., Mo., Neb., No. Dak., Ohio, Okl., Tenn., Colo., Wyo., New Mex." At the bottom of the rider appeared the following words: "Attached to and forming part of policy No. 192313, Knickerbocker Insurance Company, issued at its W. H. Markham & Co. Agency. Signed Central Fire Agency, Inc., General Agent, by A. E. Haskell, Agent." It is apparent that Clubb was an insurance solicitor or broker, not engaged in writing contracts of insurance, but in placing insurance. Markham & Co., in placing insurance on risks outside of the state of Missouri, were also brokers. They had no authority to write policies on property in Oklahoma. Clubb, when he got the order for insurance from Hussey on the Oklahoma hotel, brokered it with Markham & Co. They were obliged to broker it with some agency representing a company either authorized to do or doing business in Oklahoma. They transmitted the order to the Central Insurance Agency of New York, general agents of the defendant, who wrote the policy and sent it to them. They, for advertising purposes, put their label on the policy, delivered it to Clubb, who, for the same reason, put his name on it. Markham & Co. billed Hussey for the premium, paid Clubb his commission, and undoubtedly accounted to the Central Agency of New York for the balance, less their commission. The record is silent as to whether Markham & Co. received a commission upon this insurance, and does not show whether the defendant company or the Central Agency charged the amount of the premium to the insured or direct to Markham & Co. It is more probable that the insurance company looked to the Central Agency, who looked to Markham & Co., for payment of the premium.

The question of the validity of the service of the summons on the superintendent of insurance is not argued, and so waived. The plaintiff stands upon the service made on Markham & Co. and on the Lawton-Byrne-Bruner Insurance Agency Company. The statute of Missouri upon which the plaintiff relies is Revised Statutes Mo. 1919, § 6312, which reads as follows:

"Service of summons in any action against an insurance company, not incorporated under and by virtue of the laws of this state, and not authorized to do business in this state by the superintendent of insurance, shall, in addition to the mode prescribed in section 6310, be valid and legal and of the same force and effect as personal service on a private individual, if made by delivering a copy of the summons and complaint to any person within this state who shall solicit insurance on behalf of any such insurance corporation, or make any contract of insurance, or collect or receive any premium for insurance, or who adjusts or settles a loss or pays the same for such insurance corporation, or in any manner aids or assists in doing either."

While it is somewhat aside from the question here involved, it may not be inappropriate to say that the various states of the Union have had great difficulty in making their laws taxing and regulating foreign insurance companies doing business within their borders effective. State insurance laws relating to foreign insurers are enacted to make those doing business in the state pay a just proportion of the taxes, to protect the citizens of the state from dishonest and irresponsible insurers, and from unfair and fraudulent contracts of insurance, and to enable those who contract with such insurers to sue them in courts located within the state. The states not only desire to protect their own citizens, but they naturally have an interest in seeing that companies domiciled within the state and those coming in and qualifying to do business under their laws shall be at no greater disadvantage, so far as the burden of taxes, license fees, and litigation are concerned, than other companies writing insurance on lives or property within their borders. Each state is primarily interested in insurance upon lives and property within the state, and most of the insurance codes contain the provision that such contracts shall be deemed to be made in the state. Taxes are assessed upon premiums received from business covering lives and property in the state.

In this case, however, the statute of Missouri referred to is not limited by its terms to companies writing contracts on lives and property in Missouri, but is broad enough to cover all foreign companies, regardless of where the risks written by them are located. The question is whether the statute was effective to confer jurisdiction upon the court.

In United States v. American Bell Telephone Co. (C. C.) 29 F. 17, 35, quoted with approval in Connecticut Mutual Life Ins. Co. v. Spratley, 172 U. S. 602, 618, 19 S. Ct. 308, 314 (43 L. Ed. 569) Judge Jackson stated the three conditions necessary to give a court jurisdiction in personam over a foreign corporation, as follows:

"(1) It must appear as a matter of fact that the corporation...