Jacobs v. Leggett, 44254

• Decision Date: 12 November 1956
• Docket Number: No. 44254,44254
• Citation: 295 S.W.2d 825
• Parties: Floyd E. JACOBS and John T. Barker, Appellants, v. C. Lawrence LEGGETT, Superintendent of the Insurance Department of the State of Missouri; George H. Bates, Treasurer of the State of Missouri; Haskell Holman, Auditor of the State of Missouri; Mount Etna Morris, Director of Revenue of the State of Missouri, Respondents.
• Court: Missouri Supreme Court

Page 825

295 S.W.2d 825

Floyd E. JACOBS and John T. Barker, Appellants, v. C. Lawrence LEGGETT, Superintendent of the Insurance Department of the State of Missouri; George H. Bates Treasurer of the State of Missouri; Haskell Holman, Auditor of the State of Missouri; Mount Etna Morris, Director of Revenue of the State of Missouri, Respondents.

No. 44254.

Supreme Court of Missouri, En Banc.

Nov. 12, 1956.

William H. Becker, Columbia, Walter A. Raymond, Floyd E. Jacobs, pro se, John T. Barker, pro se, Kansas City, for appellants.

John M. Dalton, Atty. Gen., Harry H. Kay, Asst. Atty. Gen., for respondents.

STORCKMAN, Judge.

This is a suit for the recovery of attorneys' fees for services rendered by the plaintiffs pursuant to a contract with the superintendent of the Department of Insurance of the State of Missouri. The superintendent, the treasurer, the auditor and the director of revenue of the State of Missouri are sued in their official capacities. Plaintiffs' petition is in two counts: the relief sought in the first count is to recover the sum of $275,000 and to impress a lien on a specific fund, together with other relief; the second count is for a declaratory judgment. Defendants filed a motion to dismiss which the trial court sustained on the ground that plaintiffs' petition failed to state a claim upon which relief could be granted. In due course the plaintiffs appealed.

The essential allegations of Count I of plaintiffs' petition are: In June, 1930, Joseph B. Thompson, then superintendent of the Insurance Department of the State of Missouri, with the approval of the governor and the attorney general, employed the plaintiffs 'to institute proceedings against * * * stock fire insurance companies for restitution of excessive premiums collected and held by the companies in violation of the ten per cent rate reduction order' made by the superintendent on October 9, 1922. With respect to compensation, the contract provided that if the plaintiffs and their associates were successful in recapturing all or any part of the undistributed residue of the excess premiums collected by the companies in violation of the reduction order, the plaintiffs were to be paid a reasonable contingent fee out of the recaptured funds. Glenn C. Weatherby, a practicing attorney, was also employed under a similar agreement to assist in the collection of the residue of the unreturned excess premiums. The plaintiffs performed the duties of their employment and recovered from the insurance companies the sum of $2,751,000. Eventually this fund was placed in the custody of the superintendent of insurance.

The Circuit Court of Cole County allowed the plaintiffs and their associate Weatherby attorney fees in the aggregate sum of $412,500, being fifteen per cent of the fund recovered, to be paid out of the recaptured funds. On appeal the Supreme Court of Missouri reversed the award, holding that plaintiffs and their associate Weatherby were lawfully employed and had performed their services, but because of the insurance code the plaintiffs could not be paid out of the impounded restitution fund and could only be paid as other expenses of the insurance department were paid. Aetna Ins. Co. v. O'Malley, 343 Mo. 1232, 124 S.W.2d 1164, 1168.

In 1941 the General Assembly enacted the statute, which is now Section 379, 395 RSMo 1949, V.A.M.S., providing for the escheat to the State of Missouri of unclaimed funds held by the superintendent of insurance. Pursuant to the escheat law of the superintendent, in 1946, made a finding that no further owners or claimants were entitled to participate in said fund, and paid the residue of the fund, amounting to $2,160,871.32, to the state treasurer.

After the passage of the escheat act plaintiffs and Weatherby filed a suit in equity to impress a lien upon the fund. The trial court dismissed plaintiffs' petition, which action was affirmed on appeal, the supreme court holding that the plaintiffs were not entitled to present their claims by virtue of the provisions of Sec. 379.395. Weatherby v. Jackson, 358 Mo. 542, 215 S.W.2d 742.

In 1951 the Board of Fund Commissioners, acting as provided by law, undertook to transfer the fund to the general revenue fund of the state free and clear of all claims including that of the plaintiffs. Prior to the filing of the present case the plaintiffs repeatedly presented their claims to the defendants and to the General Assembly for payment without success.

Before the decision in Aetna Ins. Co. v. O'Malley, 343 Mo. 1232, 124 S.W.2d 1164, Weatherby had been paid from the fund on account of attorney fees the sum of $42,500 and Lauf and Cook for their services as custodians of the fund had been paid the sum of $100,000. Thereafter the attorney general sued these parties to recover the sum so paid, which actions were settled and disposed of by permitting Weatherby and Lauf and Cook the retain the sums so paid upon their leleasing the state from any further claims. The disposition of the claims against Weatherby, Lauf and Cook was accepted and approved by the Board of Fund Commissioners.

The plaintiffs allege that this handling and disposition of the claims against Weatherby, Lauf and Cook deprived the plaintiffs of equal protection of the laws. They also assert that their constitutional rights have been violated in that they have been deprived of their right to contract, have been denied due process of law, and their property has been taken without just compensation. Plaintiffs allege that the reasonable value of their services rendered 'to the Superintendent of the Insurance Department, and to the policyholders from whom the premiums had been wrongfully collected and had not been refunded is the sum of Two Hundred Seventy Five Thousand Dollars ($275,000.00).'

Other related decisions referred to in the petition are: State ex rel. Abeille Fire Ins. Co. v. Sevier, 335 Mo. 269, 73 S.W.2d 361; Aetna Ins. Co. v. Hyde, D.C., 34 F.2d 185; Aetna Ins. Co. v. Hyde, 327 Mo. 115, 34 S.W.2d 85; State of Missouri ex rel. and to Use of Abeille Fire Ins. Co. of Paris v. Sevier, 293 U.S. 585, 55 S.Ct. 99, 79 L.Ed. 680; Aetna Ins. Co. v. O'Malley, 342 Mo. 800, 118 S.W.2d 3.

Plaintiffs allege that they have no adequate remedy at law and that they have exhausted all remedies, judicial, legislative and administrative. By the prayer of the first count of the petition the plaintiffs sought: (1) An injunction against defendants transferring said fund to the General Revenue Fund prior to the time plaintiffs are paid therefrom. (2) An adjudication that plaintiffs' constitutional rights had been violated. (3) A determination that the fund is liable for payment to plaintiffs for services rendered. (4) An adjudication that defendants, and each of them, who transfer, deliver, withdraw or spend, any of said funds without payment to plaintiffs be held individually and collectively liable to plaintiffs for payment of their services. (5) Since no agency, person or court exercising judicial functions is open to plaintiffs for the preservation of their claims for services and no judicial remedy is provided therefor, that this court adjudge that plaintiffs are entitled to be paid out of this fund and that the court determine the amount the plaintiffs are entitled to and render judgment therefor. (6) An adjudication and declaration that that plaintiffs are entitled to have from said fund the sum of $275,000 and interest from the date of original allowance and their costs. (7) An injunction against the use of the restitution fund for any purpose until plaintiffs are paid; and (8) For other and further relief.

The plaintiffs' first contention is that they are entitled to a judgment impressing a lien upon the escheated funds in the hands of the state treasurer for the amount of their attorneys' fees. They say that they have heretofore been denied the right to recover because the unreturned premiums were a sacred fund which was required to be returned to the policyholders in full. They conclude that since the unrefunded portion of the fund has been paid into the state treasury pursuant to the escheat act, Section 379.395 RSMo 1949, V.A.M.S., 'the reason plaintiffs could not be paid from the fund has ceased to exist.'

The dominant and controlling reason the plaintiffs cannot be paid out of the fund is that the statutes constituting the insurance code have entirely supplanted the equitable lien for attorney fees and the method of collection upon which plaintiffs are relying. In Aetna Ins. Co. v. O'Malley, 343 Mo. 1232, 124 S.W.2d 1164, loc.cit. 1167, this court en banc held: 'the superintendent of insurance had a right to employ the respondents, but did not have the power to contract that their compensation should be paid out of this fund.' ¹

The opinion refers to the cases holding that courts have inherent power to allow reasonable attorneys' fees to an attorney, lawfully employed, through whose efforts a fund is created for the benefit of various claimants and to impress a lien on the funds to secure the payment of such fee. Those cases were ruled inapplicable, the court holding, 124 S.W.2d loc.cit. 1167: 'However, we do not believe these cases are in point for the reason that the above equitable principles have been superceded by the insurance code, of this state.'

Plaintiffs now undertake to avoid the force and effect of this holding by contending that the court used the word 'superseded' in the sense of 'suspended.' We intended no such limited or strained meaning. The decision, as well as others since rendered, shows an intent to use the word in the full vigor of its meaning: 'to make void or useless, especially by a superior power,' 'to cause to be set aside,' 'to render obsolete' and 'to take the place of.' See also Weatherby v. Jackson, 358 Mo. 542, 215 S.W.2d 742; Barker v. Leggett, D.C., 102 F.Supp. 642.

The statutory provisions of the insurance code with respect to the payment of the...