Keehn v. Stapleton

• Decision Date: 08 June 1946
• Docket Number: 36587.,36534
• Parties: KEEHN v. STAPLETON. SAME v. KELLEY.
• Court: Kansas Supreme Court

169 P.2d 811

161 Kan. 476

KEEHN v. STAPLETON.

SAME v. KELLEY.

Nos. 36534, 36587.

Supreme Court of Kansas

June 8, 1946

Appeal from District Court, Sedgwick County; Robert L. Nesmith Judge.

Appeal from District Court, Reno County; F. B. Hettinger, Judge.

Actions by Roy D. Keehn, as receiver of Central Mutual Insurance Company, of Chicago, against Tom Stapleton and against C. W Kelley to recover assessments adjudged necessary by Illinois court from defendants as policyholders of the insurance company. From judgment for defendants, plaintiff appeals.

Syllabus by the Court.

1. In actions wherein former policyholders in an insolvent Illinois mutual insurance company were sued in Kansas by its receiver to recover assessments fixed by a court in Illinois the record fails to show that any holders of policies issued in Kansas were made parties to the action in Illinois or that such court considered or construed the Kansas statute applicable to assessments held, the order or decree entered by the Illinois court fixing the assessments did not constitute a 'judgment' entitled to full faith and credit in Kansas, which deprived the holders of policies issued in Kansas of the right to assert a personal defense.

2. The right to plead G.S.1935, 40-1207, as amended, which reads in part: 'No member shall be liable for any part of such contingent premium in excess of the amount demanded within one year after the termination of the policy,' is a defense personal to Kansas policyholders.

3. The above statute relates to the remedy and is a remedial restriction, the noncompliance with which prevents recovery even within the period provided by the general statute of limitations. The statute is valid and will be upheld and enforced by the court.

4. The statute is binding upon and must be complied with by a receiver for a mutual insurance company.

5. The statute does not illegally regulate or unreasonably burden asserted interstate commerce.

Claude I. Depew, of Wichita (W. E. Stanley, Lawrence Weigand, William C. Book, L. E. Curfman, and Byron Brainerd, all of Wichita, on the brief; Wm. H. Beckman, Daniel N. Healy, and Chas. F. Hough, all of Chicago, Ill., of counsel), for appellant.

Irwin H. Stearns and Francis W. Prosser, both of Wichita, Wm. L. Cunningham, of Arkansas City, and Roy C. Davis, of Hutchinson (E. P. Villepigue, of Wichita, and O. C. Zwicker, of Eureka, on the brief; A. V. Roberts, of Wichita, of counsel), for appellee Tom Stapleton.

Warren H. White, Frank S. Hodge, Wm. H. Vernon, and Eugene A. White, all of Hutchinson (E. P. Villepigue, of Wichita, and Paul R. Wunsch, of Kingman, of counsel), for appellee C. W. Kelley.

A. B. Mitchell, Atty. Gen., and Leon W. Lundblade, Asst. Atty. Gen. (for Charles F. Hobbs, Commissioner of Insurance), and George K. Melvin and John J. Riling, both of Lawrence, as amici curiae.

BURCH Justice.

The two cases, consolidated here on appeal, involve the right of a receiver for an insolvent Illinois mutual insurance company to recover assessments, adjudged necessary by an Illinois court, from policyholders in the state of Kansas. The district courts of Sedgwick and Reno counties in Kansas entered judgments for the respective defendants upon the pleadings and agreed stipulations of facts. The receiver appealed. A statement of facts will be made only to the extent necessary to make clear the questions essential to decision.

The Central Mutual Insurance Company of Chicago was incorporated under the laws of Illinois. It issued automobile insurance policies in some eighteen states, including Kansas, and the District of Columbia, until a receiver was appointed on January 11, 1937 in a liquidation proceeding instituted in the Circuit Court of Cook County, Illinois by the Illinois Director of Insurance. Such court found that the company was insolvent and ordered claimants and creditors to file their claims. Henry George Miller was appointed as statutory receiver for the company for the purpose of its liquidation and was succeeded by Roy D. Keehn, the appellant in these cases. On May 10, 1938 the receiver filed a petition in the liquidation proceedings, setting forth therein that the company was insolvent and that assessments on policyholders in the amount of 100% of their premiums were necessary. The insurance company resisted the petition and an answer resisting the petition also was filed by one large policyholder. Such policyholder was not a resident of the state of Kansas and the receiver does not contend that the policyholder which filed the answer had been issued its policy within the state of Kansas. A master in chancery heard evidence on the issues joined by the receiver's petition and the resisting answers. In March, 1940 an order was entered approving the master's report and directing the receiver to make the assessments of 100% of the expressed premiums on all individuals who and corporations which at any time from January 31, 1935 to January 11, 1937, both inclusive, were holders of a policy or policies of insurance issued by the company. Thereafter the receiver began the preparation of designated 'assessment rolls,' specifying therein the names of the policyholders and the amounts of assessments on groups of policies. As rapidly as these rolls could be prepared they were presented to the court and approved and demands mailed to the policyholders for the assessments due from them. The policies involved in these actions were included in assessment roll No. 8, which was approved January 29, 1941. On March 21, 1941 the receiver mailed to Tom Stapleton, appellee, two notices and demands for assessment, one on a certain policy for the amount of $132.50, and the other on another policy in the amount of $144.00. Both of these policies were in force for some time between January 31, 1935 and January 11, 1937. Each of the policies was to extend for one year from date. One was dated October 17, 1935, and the other June 13, 1936. The material facts are the same in the case against C. W. Kelley, appellee, except that his assessment was in the amount of $2846.79. The two policyholders did not pay the assessments. The receiver sued them and we are informed, by stipulation, that he also brought separate similar suits against some six hundred other residents of Kansas. Such cases are pending, waiting our decision in these appeals.

The suit against Kelley was filed February 19, 1945. The one against Stapleton was filed March 6, 1945. From the admissions in the pleadings and in the stipulations of facts filed in the cases arise certain salient, conceded facts which command cognizance. They follow.

On August 10, 1933 the company was first authorized to do business in Kansas. Then and thereafter the policies which it issued in the state of Kansas contained the following provision:

'Any and all provisions of this Policy, which are in conflict with the statutes of the State wherein this policy is issued are understood, declared and acknowledged by this Company to be amended to conform to such statutes.'

When the company started doing business in Kansas there was and at all times since has been in full force and effect G.S.1935, 40-1207, which reads in part as follows:

'* * * No member shall be liable for any part of such contingent premium in excess of the amount demanded within one year after the termination of the policy.' (An amendment to the statute did not alter the part quoted. See G. S. 1945 Supp. 40-1207.)

The statute applies to mutual insurance companies without distinction as to whether they are foreign or domestic. In addition it should be noted that at all times while the company was doing business in the state of Kansas G.S.1935, 40-1210, was in full force and effect and it provides that a foreign mutual insurance company 'shall be authorized to transact business in this state, to the extent and with the powers and privileges specified in this article.' Therefore, the only power and privilege which the company had of collecting assessments on policies issued in Kansas were limited by the statutory provision that no member should be liable for any part of a contingent premium in excess of the amount demanded within one year after the termination of the policy. The power and privilege also were limited by reason of the provisions of G. S. 1935, 17-505, which reads:

'Any corporation organized under the laws of another state, territory, or foreign country, and authorized to do business in this state, shall be subject to the same provisions, judicial control, restrictions, and penalties, except as herein provided, as corporations organized under the laws of this state.' (Emphasis supplied.)

The phrase 'except as herein provided,' in the statute does not refer to any statutory immunities granted foreign mutual insurance companies. No amount was demanded by the company or by its receiver as a contingent premium from the appellees within one year after the termination of the policies involved in these cases.

In addition to the statutory contractual obligations, other significant factors develop. The involved policies were purchased in Kansas, were delivered in Kansas and the last act concerning their execution prior to delivery occurred when an agent for the company in Kansas countersigned the policies. In connection with the proceedings in the Illinois court, neither of the appellees was made a party and the receiver does not contend that any person who had purchased a policy in Kansas was a party to such proceeding. Of course therefore, there was no service by publication upon either of the appellees and no other constructive service of any kind was made upon them. Whether they had any actual notice of the pendency of the actions remains undisclosed. It is...