Leggett v. General Indem. Exchange

• Decision Date: 14 July 1952
• Docket Number: 42464,Nos. 42463,No. 1,s. 42463,1
• Citation: 363 Mo. 273,250 S.W.2d 710
• Parties: LEGGETT v. GENERAL INDEMNITY EXCHANGE et al. LEGGETT v. ST. LOUIS CASUALTY & SURETY CO. et al
• Court: Missouri Supreme Court

Page 710

250 S.W.2d 710

363 Mo. 273

LEGGETT v. GENERAL INDEMNITY EXCHANGE et al.

LEGGETT v. ST. LOUIS CASUALTY & SURETY CO. et al.

Nos. 42463, 42464.

Supreme Court of Missouri, Division No. 1.

July 14, 1952.

Keyes & Bushman, Jefferson City, Lewis, Rice, Tucker, Allen & Chubb, Lyle M. Allen, Robert T. Burch, St. Louis, for appellants.

J. Porter Henry, St. Louis, for respondents Hardy and Brigham, Green, Hennings, Henry & Evans, St. Louis, of counsel.

Hendren & Andrae, John H. Hendren, Henry Andrae, Jefferson City, James Meredith, counsel, Division of Insurance, State of Missouri, Jefferson City, for respondent Leggett.

LOZIER, Commissioner.

These appeals are from two judgments on the pleadings ordering dissolution of a reciprocal insurance exchange and an insurance corporation for cessation of business for a period of one year. Plaintiffrespondent is the superintendent of the division of insurance, department of business administration (herein called the superintendent). As the superintendent is a 'state officer,' the appeals are properly here. Sec. 3, art. V, Mo.Const., 2 V.A.M.S., p. 31; Klaber v. O'Malley, Mo.Sup., 90 S.W.2d 396. The issue is the propriety of the sustention of the motions for judgment on the pleadings.

Defendant-appellant General Indemnity Exchange (herein called Exchange) is a reciprocal insurance exchange organized in 1917 and existing under what are now Secs. 375.790-375.920 RSMo 1949, V.A.M.S. (Subsequent statutory references are to RSMo 1949, V.A.M.S., unless otherwise indicated.) Defendant-appellant General Service Corporation (herein called General Service) is a business corporation organized and existing under what is now Chap. 351. Defendant-appellant St. Louis Casualty & Surety Company (herein called Casualty) is an insurance corporation organized in 1944 and existing under what is now Chap. 379.

The superintendent's actions were instituted, against Exchange and General Service in one case and against Casualty in the other, under Sec. 375.560. That section is in part: 'Whenever it shall appear to the superintendent * * * (1) That the capital stock or guarantee fund of any company heretofore or hereafter incorporated or organized under the laws of this state doing in this state any kind of an insurance business is impaired; or (2) * * *; (9) That such company has ceased to transact the business of insurance for a period of one year, said superintendent may institute a suit or proceedings * * * to enjoin said company from further prosecution of its business, either temporarily or perpetually or for a judgment dissolving such corporation or for both; and after the entry of such decree or judgment, the court upon the motion of the superintendent * * * may order the liquidation, settlement and winding up of the affairs of such company or the rehabilitation of such company * * *, together with such other decrees and orders in connection therewith as the court shall deem advisable.' Sec. 375.120 prohibits action by any person other than the superintendent 'for the winding up or dissolution of any insurance company'. (Our italics.)

The superintendent's petitions, respectively, alleged: his official position and right to maintain the actions; Exchange's organization and existence; that Exchange was licensed to operate as a reciprocal or inter-insurance exchange by the superintendent continuously from 1918 until March 1, 1945; General Service's organization and existence; that General Service served as attorney in fact to enable Exchange's subscribers to execute and exchange interindemnity agreements among themselves under what is now Sec. 375.800; that since March 1, 1945, Exchange had not been licensed by the superintendent to transact business and its subscribers had not been authorized to exchange inter-indemnity contracts through General Service; Casualty's organization and existence for the purpose of transacting the insurance business named in what is now Sec. 379.010; the superintendent's continuous licensing of Casualty to carry on such business between January 11, 1945, and March 1, 1949; that Casualty had not been so licensed after March 1, 1949; and that from information in his office, including statements filed by the three defendants, Exchange and its subscribers and Casualty had ceased to transact the business of insurance for a period of one year and more next prior to the filing of the petitions. The superintendent asked that Exchange and Casualty be restrained from further prosecution of their respective businesses and from disposing of properties or assets; that Exchange and Casualty be dissolved; and that General Service as attorney in fact for Exchange, be restrained 'from taking any action to sell, transfer or otherwise dispose of any property or assets held by General Service Corporation for the benefit of the subscribers of General Indemnity Exchange.'

Defendants' respective answers specifically admitted: the superintendent's official position and his right to bring the actions; Exchange's, General Service's and Casualty's organization and existence; that General Service served as Exchange's attorney in fact; that Exchange had not been licensed since March 1, 1945, and Casualty not since March 1, 1949; and that both Exchange (and its subscribers) and Casualty had ceased to transact the business of insurance for a period of one year and more next prior to the filing of the petitions. (Thus, defendants' answers expressly admitted all of the factual allegations of the superintendent's petitions.)

The answers then pleaded a reinsurance agreement between Exchange acting through General Service, and Casualty in 1945, whereby Casualty assumed liabilities under Exchange's outstanding policies and agreed to hold Exchange harmless; that such agreement was approved by the superintendent under what is now Sec. 376.520; that Casualty had fully performed its obligations; that all claims under such policies had been settled; that other possible claims were barred by limitations; and that neither Exchange nor Casualty had any liability or obligation of any kind or character to any of Exchange's subscribers or former subscribers under any of such policies.

The answers then alleged that, when Casualty was organized, its entire capital stock was issued to General Service as attorney in fact in exchange for Exchange's assets 'by and with the consent of P. J. McGuire who, at the time of such exchange and at all times since then and now, was and is the only person who had, or now has, any interest in the assets or property of defendant General Indemnity Exchange'; and that 'at all times since its organization and now, the said P. J. McGuire was and is the owner and holder of all the issued and outstanding capital stock of defendant General Service Corporation.'

The answers further alleged that, subject to the approval of the trial court, defendants 'proposed to adopt and consummate a plan under and pursuant to which the said P. J. McGuire will transfer and assign to defendant General Service Corporation, as a contribution to the capital of said corporation, all his right, title and interest in and to the capital stock of said St. Louis Casualty & Surety Company, after which and in pursuance of said plan, said St. Louis Casualty & Surety Company shall be liquidated and dissolved and its assets transferred to defendant General Service Corporation in complete cancellation and liquidation of all the capital stock of said St. Louis Casualty & Surety Company; that such proposed plan has been discussed informally with the Bureau of Internal Revenue and that a written request is being made to the Commissioner of Internal Revenue for a formal ruling to the effect that such plan will qualify under the provisions of Sec. 112(b)(6) of the Internal Revenue Code [26 U.S.C.A.] and that defendants are informed and believe that such ruling can be obtained in approximately thirty days.'

Defendants then alleged that orders of dissolution of Exchange and Casualty at that time would be prejudicial to the interests of General Service and Casualty and Casualty's 'stockholder'; but if General Service and Casualty were permitted to adopt and consummate the plan, and if Exchange and Casualty were ordered dissolved only in conjunction with and pursuant to the plan, such dissolution would not be prejudicial to either General Service or Casualty ('and its stockholder') and the delay incident thereto would not be detrimental to the superintendent or to any other person whomsoever.

Defendants stated that they would consent to continuance of the temporary injunction pending the submission to and approval by the trial court of their plan. However, they asked modification of the temporary injunction so as to permit General Service and Casualty to take whatever corporate action might be necessary to adopt and submit to the court a plan qualifying under Sec. 112(b)(6). They asked postponement of further action in the proceedings to the extent necessary for General Service and Casualty to secure a ruling from the commissioner of internal revenue, and to prepare, adopt and submit to the trial court an 'appropriate' plan for Casualty's liquidation and dissolution and for the transfer of its assets, subject to its liabilities, to General Service.

T. Walter Hardy and J. W. Brigham filed joint intervening petitions as officials of two corporate subscribers and policyholders of Exchange and as a 'Subscribers and Policyholders Protective Committee to assert their rights and the rights of all others similarly situated.' They admitted the factual allegations of the superintendent's petitions, specifically denied the allegations of defendants' answers as to the nonexistence of claims and creditors and as to McGuire's sole beneficial ownership of Casualty's stock. They asserted that Exchange's assets were the property of, and that General Service held same as trustee for, Exchange's subscribers and...