O'Malley v. Continental Life Ins. Co.

• Decision Date: 19 November 1938
• Docket Number: 34921
• Citation: 121 S.W.2d 834,343 Mo. 382
• Parties: R. Emmet O'Malley, Superintendent of the Insurance Department of the State, Appellant, v. Continental Life Insurance Company, a Corporation, Defendant, Theodore Rassieur, Intervener-Respondent
• Court: Missouri Supreme Court

121 S.W.2d 834

343 Mo. 382

R. Emmet O'Malley, Superintendent of the Insurance Department of the State, Appellant, v. Continental Life Insurance Company, a Corporation, Defendant, Theodore Rassieur, Intervener-Respondent

No. 34921

Supreme Court of Missouri

November 19, 1938

Appeal from Circuit Court of City of St. Louis; Hon. O'Neill Ryan, Judge.

Judgment reversed.

James P. Aylward, James A. Waechter, Courtney S. Goodman, Charles L. Henson, Roberts P. Elam and Frank P Aschemeyer for appellant.

(1) This proceeding is governed exclusively by the provisions of Chapter 37, Revised Statutes 1929. In the absence of statutory authorization for the allowance of fees to counsel for defending the action, the court was without jurisdiction to make such an allowance out of the assets of the company. (a) Chapter 37, Revised Statutes 1929, is an exclusive code relating to the regulation and supervision of life insurance companies, both solvent and insolvent. 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; O'Malley v. Prudential Cas. & Surety Co., 80 S.W.2d 896; Relf v. Rundle, 103 U.S. 222, 26 L.Ed. 337; O'Malley v. Hankins, 194 N.E. 168; O'Malley v. Wilson, 185 S.E. 109, 195 S.E. 552; Relf v. Life Assn. of America, 9 Mo.App. 586. (b) Chapter 37, Revised Statutes 1929, does not authorize or sanction the allowance of fees to counsel for defending the action. Sec. 5954, R. S. 1929, amended Laws 1933, Ex. Sess., p. 65; State ex inf. v. Lincoln Trust Co., 144 Mo. 588; State ex rel. Barlow v. Holtcamp, 14 S.W.2d 646; In re Evenod Perfumer, 67 F.2d 878; In re Higgin Mfg. Co., 19 F.Supp. 120; In re Rothman, 14 F.Supp. 241; Laws 1869, p. 42; Chap. 119, R. S. 1879; Burns v. Ames Realty Co., 31 S.W.2d 275; Johnson v. United Rys. 247 Mo. 349, 152 S.W. 374. (2) On settled principles of equity the court was without jurisdiction to make an allowance of fees to respondent out of the assets of this estate, because: (a) The evidence fails to show that respondent brought any assets within the jurisdiction of the court, or conserved, enhanced or protected any assets as were already within the jurisdiction of the court. Standard Lbr. Co. v. Interstate Trust Co., 82 F.2d 350; In re Little, 47 A.D. 22, 62 N.Y.S. 27, affirmed 165 N.Y. 643, 59 N.E. 1125; Straus v. Baker Co., 87 F.2d 407; Culhane v. Anderson, 17 F.2d 559; Hobbs v. McLean, 117 U.S. 567, 6 S.Ct. 870, 29 L.Ed. 940; Holland Banking Co. v. Continental Natl. Bank, 9 F.Supp. 986; Ford v. Gilbert, 75 P. 138; People v. Amer. Loan & Trust Co., 75 N.Y.S. 563, affirmed 172 N.Y. 371; In re Evenod Perfumer, 67 F.2d 878; Trautz v. Lemp, 72 S.W.2d 104; Barker v. Southern B. & L. Assn., 181 F. 636; Eckford v. Atlanta, 173 Ga. 650, 160 S.E. 773; Lamar v. Hall & Wimberly, 129 F. 79; Christian Women's Benev. Assn. v. Atlanta Trust Co., 181 Ga. 576, 183 S.E. 551; In re Shon, 212 F. 797; Hempstead v. Meadville Theological School, 286 Pa. 493; Weed v. Central of Ga. Ry. Co., 100 F. 162; Commonwealth v. Mechanics Mut. Fire Ins. Co., 122 Mass. 421; First Natl. Bank of Atlanta v. Southern Cotton Oil Co., 86 F.2d 33; Wallace v. Fiske, 80 F.2d 904, certiorari denied in Kleinschmidt v. Wallace, 56 S.Ct. 690, 80 L.Ed. 1397; In re Paramount-Publix Corp., 12 F.Supp. 826; Johnson v. United Rys. 247 Mo. 349, 152 S.W. 374. (b) In defending the officers and directors against charges of mismanagement, respondent was representing and protecting the individual and personal interest of such officers and directors, and must look to them for payment of his fees. Rochester v. Gonterman, 49 S.W.2d 71; Brock v. Automobile Livery & Sales Co., 68 So. 195; Witherspoon v. Hornbein, 70 Colo. 1, 196 P. 865; Barker v. Southern B. & L. Assn., 181 F. 636; Straus v. Baker Co., 87 F.2d 409; Trautz v. Lemp, 72 S.W.2d 104; Burroughs v. Toxaway, 185 F. 440; Kimball v. Atlantic States Life Ins. Co., 223 F. 464; Colket v. St. Louis Union Trust Co., 52 F.2d 390. (c) Since appellant, as Superintendent of the Insurance Department under the statutes of Missouri, represents the policyholders and creditors of defendant, respondent in resisting the action was representing only the stockholders of defendant who had employed him, and must look to them for his compensation. Authorities 1 (a), 2 (a) and 2 (b). (d) The evidence shows that the defense to the action was prejudicial to the best interests of the policyholders and creditors of the defendant, and that defendant by adversary litigation depleted and jeopardized the fund to the detriment of such policyholders and creditors. Authorities 2 (a), 2 (b). (e) Since the evidence established that respondent was retained by the president of the defendant insurance company after the service of a temporary restraining order appointing a receiver to take charge of the business and assets of the company, and since there is no evidence showing that the defendant insurance company, or anyone for it, ever thereafter made application for authority, or ever received authority, from the court to employ respondent to resist the action of the Superintendent of Insurance, any contract employing respondent under such circumstances would be voidable at the instance of the Superintendent of Insurance. Standard Roller Bearing Co. v. Hess-Bright Mfg. Co., 264 F. 516, affirmed 275 F. 916; Ohio & M. Railroad Co. v. Russell, 3 N.E. 561; Linn v. Dixon Crucible Co., 59 N. J. Law 28, 35 A. 2; Culhane v. Anderson, 17 F.2d 559. (3) There was no evidence justifying an allowance of any fee to respondent. Authorities 2 (a), 2 (b). (4) In any event, the court was without jurisdiction to make an allowance of fees to respondent, since the evidence establishes that the defense to the original action was interposed and continued in bad faith. 6 C. J. 871; Hamilton v. Menominee Falls Quarry Co., 176 Wis. 352, 81 N.W. 876; Rice v. Milwaukee, 100 Wis. 516, 76 N.W. 341; Bailey v. Hornthal, 154 N.Y. 648, 49 N.E. 56; Brigham v. Tillinghast, 13 N.Y. 218; McFadden v. Leeka, 48 Ohio St. 518; White v. Poole, 220 Mo.App. 982; Matter of the World's Ins. Co., 40 S.Ct. 499; Attorney General v. Atlanta Mut. Life Ins. Co., 53 How. 300; Duncans v. Landis, 106 F. 858; Stern v. Paper, 183 F. 230; Ziegler v. Thayer, 83 A. 266; In re Hines, 144 F. 142; Arnold v. Knapp, 84 S.E. 895; Maclean Life Insurance (2 Ed.); 18 American Bar Assn. Journal 521; State ex rel. v. State Board of Health, 65 S.W.2d 950; State ex rel. Garman v. Offutt, 223 Mo.App. 1172, 26 S.W.2d 831; State v. Schwartzman Service, Inc., 40 S.W.2d 479; Richards on The Law of Insurance (4 Ed.), sec. 17, p. 24; Cutting v. Amer. Ins. Co., 197 Mass. 131, 83 N.E. 396; Fidelity & Deposit Co. of Maryland v. Commonwealth Tr. Co., 119 N.Y.S. 598; Cochran v. United States, 157 U.S. 286; State ex rel. Natl. Mut. Ins. Co. v. Conn., 115 Ohio St. 607, 155 N.E. 138, 50 A. L. R. 479; Andre v. Beha, 208 N.Y.S. 65; Matter of People, 238 N.Y. 156, 144 N.E. 486; Application of People, 266 N.Y.S. 603; Chicago Life Ins. Co. v. Auditor, 101 Ill. 82; Provident Relief Assn. v. Vernon, 19 F.2d 709; Davis Savs. Trust Co. v. Hardee, 85 F.2d 571; United States Savs. Bank v. Margenthau, 85 F.2d 811; Covey v. Pierce, 82 S.W.2d 592; Cashman v. Pontiac Trust Co., 269 Mich. 68, 256 N.W. 807. (5) If the court was vested with judicial discretion to make an allowance of fees to respondent, the court improperly classified the same as a preferred claim, because: (a) Article X of Chapter 37, Revised Statutes 1929, provides an exclusive method for the allowance and classification of claims against, and the distribution of, the assets of an insolvent life insurance company. Secs. 5951, 5954, R. S. 1929, amended by Laws 1933, Ex. Sess. p. 65; Little River Drain. Dist. v. Lassater, 29 S.W.2d 718; Blyston & Spenser v. Railroad Co., 152 Mo.App. 118, 132 S.W. 1175; 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. (b) Article X, Chapter 37, Revised Statutes 1929, has no provision giving respondent's claim a preferred status. Relf v. Life Assn. of America, 9 Mo.App. 586; O'Malley v. Prudential Cas. & Surety Co., 80 S.W.2d 896; In re Evenod Perfumer, 67 F.2d 878; In re Higgin Mfg. Co., 19 F.Supp. 120. (c) Since Section 5951, Revised Statutes 1929, establishes priority in favor of death claimants, the court was without jurisdiction to make an allowance of fees to respondent as a preferred claim from funds going to prior creditors. Louisiana Oil Exporting Co. v. Pelican Oil & Refining Co., 99 So. 226; Buell v. Kanawha Lbr. Corp., 201 F. 762; Hand v. Savannah & C. Ry. Co., 21 S.C. 162; Morton v. New Orleans & S. Ry. Co., 79 Ala. 590; Adams v. Kehlor Min. Co., 38 F. 281; Muskegon Boiler Works v. Tennessee Valley Iron & L. Co., 274 F. 836; Kelly v. Mountain City Club, 101 Tenn. 286, 47 S.W. 426; First Natl. Bank of Atlanta v. Southern Cotton Oil Co., 86 F.2d 33.

Rassieur & Rassieur for respondent.

(1) In a suit under the insurance statutes by the Superintendent of Insurance against an insurance company, to have such company declared insolvent and turned over to the superintendent for liquidation, the court, as a court of equity, may, in its discretion, grant an allowance for legal services to the attorney defending such action at the request of the company even though the company was not successful in its defense, if the company acted in good faith, and not merely captiously and vexatiously, and the attorney also acted in good faith in defending the case. Watson v. Johnson, 24 P.2d 594, 89 A. L. R. 1527; Barnes v. Newcomb, 89 N.Y. 108; Attorney General v. North Amer. Life Ins. Co., 91 N.Y. 62; People v. Commercial Alliance Life Ins. Co. 42 N.E. 1044; Goodyear Tire & Rubber Co....