Kelly v. Knott

• Decision Date: 24 June 1935
• Parties: KELLY, Com'r of Banking and Insurance, et al. v. KNOTT, State Treasurer, et al. LONDON OPERATING CO. v. NEW JERSEY FIDELITY & PLATE GLASS INS. CO. et al.
• Court: Florida Supreme Court

163 So. 64

120 Fla. 580

KELLY, Com'r of Banking and Insurance, et al. v. KNOTT, State Treasurer, et al.

LONDON OPERATING CO. v. NEW JERSEY FIDELITY & PLATE GLASS INS. CO. et al.

Florida Supreme Court

June 24, 1935

Rehearing Denied Sept. 18, 1935.

En Banc.

Suit by William H. Kelly, Commissioner of Banking and Insurance of the State of New Jersey, and another, against W. V. Knott, as State Treasurer and Insurance Commissioner of the State of Florida, and another, which was consolidated with a suit by the London Operating Company against New Jersey Fidelity &amp Plate Glass Insurance Company, and W. V. Knott, as Treasurer of the State of Florida. From an adverse order, William H Kelly, Commissioner of Banking and Insurance of the State of New Jersey, appeals, and the United States cross-appeals.

Modified and affirmed.

See also, 116 Fla. 362, 157 So. 22; Snedigar v. New Jersey Fidelity & Plate Glass Co., 163 So. 71. Appeal from Circuit Court, Leon County; J. B. Johnson, Judge.

COUNSEL

Herbert U. Feibelman, of Miami, for appellant.

Waller & Pepper, of Tallahassee, Evans, Mershon & Sawyer and Roland W. Granat, all of Miami, Sutton, Tillman & Reeves and Mabry, Reaves, Carlton & White, all of Tampa, and Giles J. Patterson, John W. Holland, U.S. Atty., and Wm. A. Paisley, Asst. U.S. Atty., all of Jacksonville, for appellees.

OPINION

DAVIS Justice.

This cause originated in the circuit court through the filing of a bill of complaint to prevent certain securities of an alleged insolvent surety company deposited with the state treasurer under sections 6302, 6303, C. G. L., sections 4339, 4340, R. G. S., from being exhausted and depleted to satisfy the judgments of only a few of the insolvent's creditors at the expense of the many.

While the original cause was pending undisposed of in the court below the Florida legislature enacted chapter 16248, Acts 1933, Laws of Florida (Senate Bill No. 288, approved May 10, 1933). By that act, section 6303, C. G. L., section 4340, R. G. S., was so amended as to provide that in cases of insolvency of any surety company having securities on deposit with the state treasurer as provided by section 6302, C. G. L., section 4339, R. G. S., and acts amendatory thereof, a court of chancery at the seat of government in Florida, upon a bill of complaint filed by any party in interest, should take charge of the securities so on deposit with the state treasurer, together with any other assets of such surety company which may be marshaled in the state of Florida, for the purpose of directing a sale thereof and making a distribution of the sale of said securities proportionally (among all Florida creditors) who might make proof of their claims against the insolvent surety company.

The enactment of the statute was followed by the institution of a suit under it filed by the London Operating Company as complainant, and naming the New Jersey Fidelity & Plate Glass Insurance Company and W. V. Knott, state treasurer, as defendants. This bill prayed the appointment of a receiver to take charge of the $75,000 worth of securities on deposit with the state treasurer by the New Jersey Fidelity & Plate Glass Company, and that the names of Florida creditors having claims against the same be ascertained and appropriate distribution made to them of such assets as their interests might appear. Subsequently D. M. Lowry was appointed receiver in the cause, and on May 25, 1933, pursuant to a motion to that effect filed by William H. Kelly, commissioner of banking and insurance of the state of New Jersey, the complainant in the suit originally begun by him on December 19, 1932, prior to the enactment of the 1933 liquidation statute, the first instituted suit of William H. Kelly, as Commissioner of Banking and Insurance of State of New Jersey, v. W. V. Knott, State Treasurer, and New Jersey Fidelity & Plate Glass Insurance Company was consolidated with the suit instituted on May 16, 1933, by the London Operating Company, as complainant, under the 1933 act.

On October 27, 1934, the chancellor entered an order recognizing and directing the payment of $28,476.28 in claims of Florida creditors that the court adjudged to be payable out of the proceeds of the securities deposited with the state treasurer by the New Jersey Fidelity & Plate Glass Insurance Company in accordance with section 4339, R. G. S., supra. The claims thus allowed represented claims of Florida creditors founded on surety bonds, but which claims had not been reduced to judgment before the insolvency and liquidation proceedings had been instituted against the surety company at its domicile in the state of New Jersey. By express provision in the court's decree, the question was reserved as to what should be done with the residue of funds remaining in the hands of the receiver after payment of the $28,476.28 in claims so expressly allowed. The present appeal is by William H. Kelly, as commissioner of banking and insurance of the state of New Jersey, the original complainant in the court below, who contends, in support of his appeal, that the foregoing order of the circuit court should be reversed by this court, because of an alleged superior right exhibited on his part, as domiciliary liquidator of the New Jersey Fidelity & Plate Glass Insurance Company in New Jersey, the state of its domicile, to have and receive from the state treasurer, free from any and all claims of Florida citizens not holding judgments obtained prior to the inauguration of the domiciliary insolvency proceedings, whatever securities may remain out of the original deposit made with the state treasurer by the New Jersey Fidelity & Plate Glass Insurance Company under sections 6302, 6303, C. G. L., sections 4339, 4340, R. G. S.

It appears from the record that New Jersey Fidelity & Plate Glass Insurance Company was a corporation chartered in 1868 under the corporation and insurance laws of the state of New Jersey; that it was taken over for liquidation in the state of its domicile on May 28, 1932; that such taking over was by the commissioner of banking and insurance of the state of New Jersey and was by virtue of the New Jersey statutes and without court action; that the taking over of said company for liquidation in the state of its domicile transpired long prior to the filing in Florida on December 19, 1932, of the New Jersey liquidator's original suit brought to conserve the company's Florida assets as hereinbefore related; that the Florida suit was filed by appellee William H. Kelly, as domiciliary liquidator, as an undertaking to judicially impound and conserve the securities that the New Jersey Fidelity & Plate Glass Insurance Company had previously placed on deposit with the state treasurer under sections 6302, 6303, C. G. L., supra; that such action was required for the protection of Florida creditors, because of the lack, at the time, of any statutory authority or method for their disposition or distribution, except in payment of judgments rendered against said New Jersey Fidelity & Plate Glass Insurance Company.

The laws of New Jersey, as established in the record, show that appellant is a statutory liquidator of the New Jersey Fidelity & Plate Glass Insurance Company, a New Jersey corporation, who, by virtue of such New Jersey statutes, and upon petition of the company itself filed thereunder, had taken charge of all the assets of the New Jersey company for the benefit of all creditors who had done business with said company, scattered in nearly every state in the Union, including creditors in Florida.

It is accordingly the contention of appellant that in determining the rights of the Florida creditors, whose claims have been ordered paid in full as directed in the Leon county circuit court's order of October 27, 1934, herein appealed from, that the Florida courts must look not only to sections 6302, 6303, C. G. L., sections 4339, 4340, R. G. S., as they existed at the time of the New Jersey corporation's deposit of securities with the state treasurer in order to entitle it to carry on its Florida business, but to the corporate charter of the New Jersey company, as well as to all statutes and prevailing laws of New Jersey relating to or providing for the company's liquidation, all of which laws it is contended were impliedly acceded to by Florida claimants when they dealt with the New Jersey Company, and are therefore to be followed and observed by the Florida courts in determining their creditors' rights against the domiciliary liquidator of the defunct New Jersey corporation. ^[1]

Since a decision of the controversy now before this court must depend largely if not entirely upon the proper judicial construction required to be placed upon the Florida statutes governing the transaction of business of surety companies in the state of Florida, as they existed at the time of the insolvency of the New Jersey Fidelity & Plate Glass Insurance Company, it is appropriate that the history of such Florida statutes, as appear to be applicable to this case, be herein set forth in order that the statutory background of the present controversy may be more clearly understood by the bench and bar to whose perusal and attention this opinion may come.

In 1885 chapter 3596, Acts of Florida, was enacted. The requirement of section 4 of this chapter was that the surety company be possessed of $500,000 capital or assets in specified securities, of which at least $100,000 shall be deposited with insurance commissioners, auditor, comptroller, or chief financial officer of any state of the United States or of the state under whose laws such company is incorporated, for the benefit 'of all obligees of such company.'

Section 4 of chapter 3596 appears in the Revised General Statutes of...