Mitchell v. Maurer

Citation293 U.S. 237,55 S.Ct. 162,79 L.Ed. 338
Decision Date03 December 1934
Docket NumberNo. 54,54
PartiesMITCHELL, Insurance Com'r, v. MAURER et al
CourtUnited States Supreme Court

Mr. Frank L. Guerena, of San Francisco, Cal., for petitioner.

Messrs. Edward D. Lyman and P. B. Plumb, both of Los Angeles, Cal., for respondents.

mr. Justice BRANDEIS delivered the opinion of the Court.

International Re-Insurance Corporation is organized under the laws of Delaware. It had a place of business and real and personal property in California. On April 19, 1933, the Court of Chancery of Delaware appointed Arthur G. Logan of that State, Carl M. Hansen of Pennsylvania, and George De B. Keim of New Jersey, primary receivers of all its property. The statutes of Delaware purport to vest in receivers so appointed title, as quasi assignees, to all property, wherever located, except real estate not situated within the State. Rev. Code Del. § 3884. The order appointing the primary receivers authorized them to apply in other jurisdictions for the appointment of ancillary receivers. On the day of their appointment, they filed, in the federal court for Southern California, a petition, or bill, praying that ancillary receivers be ap- pointed of property there located. The prayer was granted ex parte. W. H. Comstock of California and De B. Keim were appointed ancillary receivers. And an order issued enjoining all persons from interfering with their possession and control.

On the same day, E. Forrest Mitchell, the Insurance Commissioner of California, filed, in the Superior Court of that State, a petition praying that he be placed in the possession of the property and business of the Corporation. That court entered immediately an order temporarily enjoining the Corporation from disposing of its property in California; and ordered the Insurance Commissioner to take possession thereof. Its license to transact the business of workmen's compensation insurance in California had been revoked by the Commissioner prior to the appointment of the primary receivers.

Service was promptly made of the orders issued by the two courts. A dispute arose as to the exact times of the filing of the several proceedings; of the entry of the orders; of the service thereof; and of taking possession. To resolve the controversy, the Insurance Commissioner filed in the federal court, on May 2, 1933, a motion to vacate its order appointing the ancillary receivers; to dissolve the restraining order; and to dismiss the petition of the primary receivers. The motion alleged that, before the federal court assumed to act, the California court had acquired jurisdiction and the Insurance Commissioner had actually taken possession of the Corporation's property. It charged, among other things, that the petition of the primary receivers on which the appointment of the ancillary receivers had been made, did not state facts sufficient to give the court jurisdiction of the subject-matter or of the parties; and that both the order of appointment and the restraining order were, therefore, invalid.

At the hearing of the motion, it was admitted that 'the situation presented is within the California statute providing for proceedings against delinquent insurance companies'; that the California assets of the Corporation 'were in the possession of the Insurance Commissioner at the time of the appointment and qualification of the receivers appointed by the district court'; and that the proceeding brought by the primary receivers had been filed a few minutes before the Insurance Commissioner made his application to the state court. On these facts, the District Court held, that since the proceeding brought by the primary receivers ws 'first filed in this court, jurisdiction of the res is in the district court.' Upon a rehearing had on additional affidavits, the court re-affirmed its denial of the motion to vacate the order appointing the ancillary receivers.

From this judgment, the Insurance Commissioner appealed to the Court of Appeals. There he contended that the original proceedings, in which the primary receivers petitioned for the appointment of ancillary receivers, was not a bill of complaint and was insufficient to confer jurisdiction upon the District court, cf. McCandless v. Furlaud (C.C.A.) 68 F.(2d) 925;1 that the subsequent amendments purporting to state a cause of action against the Corporation, were inoperative to sustain the jurisdiction of the federal court because they were not filed until after the state court had acquired possession of the property; and that the bill, even as amended, did not state a cause of action in which a valid order appointing ancillary receivers could be made.

The Court of Appeals, in an elaborate opinion, affirmed the judgment of the District Court, 69 F.(2d) 233, 237. It did not pass upon the Commissioner's contention that the ancillary appointment could not be made upon the bill as it was originally filed, because it held that the subsequent amendments related back to the commencement of the proceedings. It overruled his objection that the bill failed to allege that the Corporation was insolvent or that the complainant in the primary suit was a judgment creditor, on the ground that any such defects were cured by the amendments or waived by the Corporation's answer. It held that the rule of Booth v. Clark, 17 How. 322, 15 L.Ed. 164, did not prevent the appointment of ancillary receivers, because here the primary receivers did not ask that they themselves be appointed ancillary receivers, and did ask specifically that the 'rights of creditors in the foreign jurisdiction be safeguarded.' It concluded that the state and federal courts had concurrent jurisdiction of the subject-matter; and that the federal court was entitled to exercise its jurisdiction, because of the prior filing in it of the proceedings for the appointment of ancillary receivers.

Although the Court of Appeals discussed, also, questions of federal jurisdiction and venue, it did not refer specifically to the fact that a lack of diversity of citizenship appeared affirmatively, on the amended pleadings, one of the primary receivers as well as the Corporation being a citizen of Delaware. Nor was this fact relied upon by the Insurance Commissioner in his petition for certiorari or in oral argument here. He prayed for the writ solely on the ground that the Court of Appeals should have decided that 'the original bill filed in the District Court was insufficient to state a cause of action or to ocnfer jurisdiction'; and that the amendments thereto filed after the commencement of the suit in the state court could not operate to cure the defects of the original bill. But, as the lack of diversity of citizenship appears upon examination of the record, we have no occasion to pass upon the contentions made. The order appointing the ancillary receivers must be set aside because the District Court lacked federal jurisdiction of the cause.

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