Lucas v. Manufacturing Lumbermen's Underwriters

• Decision Date: 05 May 1942
• Docket Number: 37663,37664
• Citation: 163 S.W.2d 750,349 Mo. 835
• Parties: Ray B. Lucas, Superintendent of the Insurance Department of the State of Missouri, Respondent, v. Manufacturing Lumbermen's Underwriters, a Reciprocal Insurance Exchange et al., Defendants, Central Surety & Insurance Corporation, a Corporation, and R. E. O'Malley, Appellants
• Court: Missouri Supreme Court

163 S.W.2d 750

349 Mo. 835

Ray B. Lucas, Superintendent of the Insurance Department of the State of Missouri, Respondent, v. Manufacturing Lumbermen's Underwriters, a Reciprocal Insurance Exchange et al., Defendants, Central Surety & Insurance Corporation, a Corporation, and R. E. O'Malley, Appellants

Nos. 37663, 37664

Supreme Court of Missouri

May 5, 1942

Rehearing Denied June 17, 1942. Motion to Transfer to Banc Overruled July 28, 1942.

Appeal from Jackson Circuit Court; Hon. Allen C. Southern Judge.

Reversed.

James P. Aylward, George V. Aylward and Terence M O'Brien for appellant R. E. O'Malley.

(1) The court's jurisdiction as to disbursements was limited to approving the compensation paid certain employees and, as that compensation had been approved by orders of court, the making of any surcharge for disbursements was erroneous. (a) Insurance Code is exclusive. Secs. 6052-6069, R. S. 1939; State ex rel. Carwood Realty Co. v. Dinwiddie, 343 Mo. 592, 596, 122 S.W.2d 912; Aetna Ins. Co. v. O'Malley, 343 Mo. 1232, 124 S.W.2d 1164; Robertson v. Mo. State Life Ins. Co., 136 S.W.2d 362; State ex rel. St. Louis Mut. Life Ins. Co. v. Mulloy, 330 Mo. 951, 52 S.W.2d 469; State ex rel. Mo. State Life Ins. Co. v. Hall, 330 Mo. 1107, 52 S.W.2d 174; O'Malley v. Prudential Cas. & Surety Co., 80 S.W.2d 896; State ex rel. Lucas v. Blair, 346 Mo. 1017, 144 S.W.2d 106. (b) Court's jurisdiction limited to approving compensation paid certain employees. Sec. 6065, R. S. 1939. (c) Court orders approved amounts of compensation paid. (d) Surcharge based upon court's erroneous view that proceeding was a receivership. Bushman v. Barlow, 328 Mo. 90, 40 S.W.2d 637; O'Malley v. Continental Ins. Co., 343 Mo. 382, 121 S.W.2d 834; Relf v. Rundle, 103 U.S. 222, 26 L.Ed. 337; State ex rel. Mo. State Life Ins. Co. v. Hall, 330 Mo. 1107, 52 S.W.2d 174; State ex rel. St. Louis Mut. Life Ins. Co. v. Mulloy, 330 Mo. 951, 52 S.W.2d 469. Robertson, Superintendent, v. Mo. State Life, 136 S.W.2d 362; Aetna Ins. Co. v. O'Malley, 343 Mo. 1232, 124 S.W.2d 1164; State ex rel. Carwood Realty Co. v. Dinwiddie, 343 Mo. 592, 122 S.W.2d 912. (2) The $ 85,264.44 surcharge was based upon the erroneous conception of the court below that O'Malley was without authority to attempt to rehabilitate or reinsure the exchange and was required to commence liquidation upon November 12, 1936, the date he was placed temporarily in charge. Sec. 6057, R. S. 1929; Secs. 6052-6069, R. S. 1939; Secs. 6052, 6059, 6061, 6964, R. S. 1939. (3) O'Malley, a public officer with discretionary powers, having acted in good faith, was not liable for alleged mistakes in judgment. (a) O'Malley acted in good faith and honestly. State ex rel. Ball v. Board of Health, 325 Mo. 41, 26 S.W.2d 773; State ex rel. Mo. State Life Ins. Co. v. Hall, 330 Mo. 1107, 52 S.W.2d 174; State ex rel. St. Louis v. Priest, 152 S.W.2d 109; State ex rel. Johnson v. Clark, 288 Mo. 659, 232 S.W. 1031; St. Joseph v. Farrell, 106 Mo. 437; In re Moynihan, 332 Mo. 1022, 62 S.W.2d 410, 91 A. L. R. 74; Waterman v. Chicago Bridge & Iron Works, 328 Mo. 688, 697, 41 S.W.2d 575, 578; Spotts v. Spotts, 331 Mo. 917, 922, 55 S.W.2d 977, 983, 87 A. L. R. 660, 671; Hartwell v. Parks, 240 Mo. 537, 545, 144 S.W. 793, 795; State ex rel. Douglas v. Reynolds, 276 Mo. 688, 209 S.W. 100. (b) O'Malley was a public officer with discretionary power. State ex rel. Mackey v. Hyde, 315 Mo. 681, 286 S.W. 363; State ex rel. Funk v. Turner, 328 Mo. 604, 42 S.W.2d 594; Secs. 6052, 6057, 6058, 6060, 6064, R. S. 1939; O'Malley v. Continental Life Ins. Co., 343 Mo. 382, 121 S.W.2d 834; Relf v. Rundle, 103 U.S. 222, 26 L.Ed. 337; Fairleigh v. Fidelity Natl. Bank & Trust Co., 335 Mo. 360, 73 S.W.2d 248. (c) Having acted in good faith and honestly, O'Malley, a public officer with discretionary powers, was not liable for alleged mistakes in judgment as to law or facts. State ex rel. Funk v. Turner, 17 S.W.2d 986; 22 R. C. L. 485-6; Pike v. Megoun, 44 Mo. 491; Reed v. Conway, 20 Mo. 22; Sharp v. Kurth, 245 S.W. 636. (4) O'Malley was directed by orders of court to pay all of the disallowed items. Perrin & Smith Printing Co. v. Cook Hotel Co., 118 Mo.App. 44; Easton v. Houston Railway Co., 38 F. 784; Quincy v. Humphreys, 145 U.S. 82, 12 S.Ct. 787, 36 L.Ed. 632; Thomas v. Western Car Co., 149 U.S. 95, 13 S.Ct. 824, 37 L.Ed. 663; New York Security & Trust Co. v. Louisville, E. & St. Louis R. Co., 102 F. 382; Stokes v. Hoffman House Corp., 167 N.Y. 554, 60 N.E. 667, 53 L. R. A. 870; Sloan & Zook Co. v. Lyons Refining Co., 290 Pa. 442, 139 A. 133, 55 A. L. R. 275; Philadelphia Dairy Products Co. v. Summitt Sweets Shoppe, 113 N.J.Eq. 448, 167 A. 667; Pennsylvania Co. for Ins. on Lives and Granting Annuities v. Harr, 320 Pa. 523, 183 A. 37; Central Trust Co. v. Continental Trust Co., 86 F. 517, 525. (5) As there was no evidence that the expenditures disallowed were unnecessary credit for them should have been given because the presumption (in addition to the undisputed evidence) was that O'Malley, a public officer, acted lawfully and properly. State ex rel. St. Louis v. Priest, 152 S.W.2d 109; State ex rel. Mo. State Life Ins. Co. v. Hall, 330 Mo. 1109, 52 S.W.2d 174; State ex rel. Johnson v. Clark, 288 Mo. 659, 232 S.W. 1031; State ex rel. Ball v. Board of Health, 325 Mo. 41, 26 S.W.2d 773; St. Joseph v. Farrell, 106 Mo. 437; In re Moynihan, 332 Mo. 1022, 26 S.W.2d 410; Waterman v. Chicago Bridge & Iron Works, 328 Mo. 688, 41 S.W.2d 575; Spotts v. Spotts, 331 Mo. 917, 55 S.W.2d 977, 87 A. L. R. 660; Hartwell v. Parks, 240 Mo. 537, 144 S.W. 793; State ex rel. Douglas v. Reynolds, 276 Mo. 688, 209 S.W. 100. (6) Nothing could be charged against O'Malley for alleged failure to collect for services and materials used by other concerns because collection therefor had been made. St. Louis Gas Light Co. v. St. Louis, 84 Mo. 202; St. Louis Gas Light Co. v. St. Louis, 11 Mo.App. 55. (7) The surcharge was erroneous because the undisputed evidence showed that all of the disbursements were reasonable and proper.

McCune, Caldwell, Downing & Noble, R. B. Caldwell, H. M. Noble and John W. Oliver for appellant Central Surety & Insurance Corporation.

(1) The order of surcharge is based upon a completely erroneous theory of law. Bushman v. Barlow, 328 Mo. 90, 40 S.W.2d 637; State ex rel. Hyde, Superintendent of Ins v. Falkenhainer, 309 Mo. 381, 274 S.W. 722; O'Malley v. Continental Life Ins. Co., 343 Mo. 382, 121 S.W.2d 834. (2) The Insurance Code, Sections 6052-6069, Revised Statutes of Missouri, 1939, provides the exclusive method of handling an insurance company in financial difficulty. State ex rel. Mo. State Life Ins. Co. v. Hall, 330 Mo. 1107, 52 S.W.2d 174; State ex rel. St. Louis Mut. Life Ins. Co. v. Mulloy, 330 Mo. 951, 52 S.W.2d 469; Aetna Ins. Co. v. O'Malley, 342 Mo. 847, 118 S.W.2d 3; O'Malley v. Continental Life Ins. Co., 343 Mo. 382, 121 S.W.2d 834, 343 Mo. 410, 121 S.W.2d 850; State ex rel. Hyde, Superintendent of Ins., v. Falkenhainer, 309 Mo. 381, 274 S.W. 722; State ex rel. Carwood Realty Co. v. Dinwiddie, 343 Mo. 592, 122 S.W.2d 912 (en banc); American Constitution Fire Assur. Co. v. O'Malley, 342 Mo. 139, 113 S.W.2d 795; Aetna Ins. Co. v. O'Malley, 343 Mo. 1232, 124 S.W.2d 1164; State ex rel. Lucas, Superintendent of Ins., v. Blair, 346 Mo. 1017, 144 S.W.2d 106, en banc, certiorari denied 85 L.Ed. 662. (3) The remedial amendments of 1933 changed the duties of the Superintendent of Insurance by permitting and imposing the duty of rehabilitation instead of forced liquidation. Sections 6052-6069, inclusive, Revised Statutes of Missouri, 1939, enacted, Laws 1933, Extra Session, page 65. Purpose of old sections 5941-5958, Revised Statutes of Missouri, 1929, before 1933 amendments. Secs. 5941-5958, R. S. 1929. Purpose of new sections 6052-6069, Revised Statutes of Missouri, 1939, after 1933 amendments. Secs. 5941-5958, R. S. 1929; Secs. 6065-6069, R. S. 1939; Moss v. Kansas City Life Ins. Co., 96 F.2d 108. Comparison of "liquidation" and "rehabilitation." New York Title & Mtg. Co. v. Friedman, 153 Misc. 697, 276 N.Y.S. 72; 15 Fletcher, Cyclopedia Corporations (1938, Revised Volume), sec. 7359 (52). Historical background of 1933 amendments. Commentary on the Chandler Act for the revision of the Bankruptcy Act of 1898, 11 U.S. Code Annotated Supplement 6; Secs. 74, 75, 77, 77B, 78, 79, 80, 81 to 84 of the Bankruptcy Act of 1898, as amended; Ashton v. Cameron Water Improvement District, 298 U.S. 513; United States v. Bekins, 304 U.S. 27; Wright v. Vinton Branch of Mountain Trust Co., 300 U.S. 440; Continental Illinois Natl. Bank & Trust Co. v. Chicago, R. I. & P. Railroad Co., 294 U.S. 648; Wright v. Union Central Life Ins. Co., 304 U.S. 502; 8 Couch, Cyclopedia of Insurance Law, sec. 2045-1, of the Supplement thereto. Report of Superintendent of Insurance of New York, dated May 10, 1935; Carpenter v. Pacific Mut. Life Ins. Co., 10 Cal.2d 307, 74 P.2d 768, affirmed 305 U.S. 397; Laws, Extra Session, 1933-34, pp. 49, 136, 140, 144, 149; State ex rel. Wagner v. Farm & Home Savs. & Loan Assn., 338 Mo. 313, 90 S.W.2d 93. Analysis of Insurance Code, Sections 6052-6069, Revised Statutes of Missouri, 1939, inclusive. Secs. 6052-6069, R. S. 1939. (4) Expenditures made by O'Malley for which credit is claimed were entirely proper and reasonable and his final accounting should be approved in its entirety. Robertson, Superintendent of Ins. v. Manufacturing Lumbermen's Underwriters, 346 Mo. 1103, 145 S.W.2d 134; Sec. 6065, R. S. 1939; Davis v. Knox County Savs. Bank, 234 Mo.App. 736, 118 S.W.2d 52; Thatcher v. St. Louis, 343 Mo. 597, 122 S.W.2d 915. Salaries disbursed were for necessary services, were reasonable and should be allowed in full. Sec. 6065, R. S. 1939; Report of Alfred M. Best & Co., Inc.,...