Mutual Reserve Fund Life Association v. James Phelps

• Decision Date: 18 May 1903
• Docket Number: No. 263,263
• Citation: 190 U.S. 147,47 L.Ed. 987,23 S.Ct. 707
• Parties: MUTUAL RESERVE FUND LIFE ASSOCIATION, Appt. , v. JAMES S. PHELPS and Fidelity Trust & Safety Vault Company
• Court: U.S. Supreme Court

190 U.S. 147

23 S.Ct. 707

47 L.Ed. 987

MUTUAL RESERVE FUND LIFE ASSOCIATION, Appt.,

v JAMES S. PHELPS and Fidelity Trust & Safety Vault Company.

No. 263.

Argued April 24, 27, 1903.

Decided May 18, 1903.

Section 631, Kentucky Statutes 1899 (Laws 1893, chap. 171, § 94), reads as follows:

'Sec. 631. Before authority is granted to any foreign insurance company to do business in this state, it must file with the commissioner a resolution adopted by its board of directors consenting that service of process upon any agent of such company in this state, or upon the commissioner of insurance of this state, in any action brought or pending in this state, shall be a valid service upon said company; and if process is served upon the commissioner it shall be his duty to at once send it by mail, addressed to the company at its principal office; and if any company shall, without the consent of the other party to any suit or proceeding brought by or against it in any court of this state, remove said suit or proceeding to any Federal court, or shall institute any suit or proceeding against any citizen of this state in any Federal court, it shall be the duty of the commissioner to forthwith revoke all authority to such company and its agents to do business in this state, and to publish such revocation in some newspaper of general circulation published in the state.'

On May 10, 1893, the appellant, the Mutual Reserve Fund Life Association, hereinafter called the association, acting under said section, by resolution of its board of directors, consented that the insurance commissioner of Kentucky should be authorized to receive service of process in any action brought or pending in Kentucky, and also that like valid service of process might be made upon every agent then or thereafter acting for it in Kentucky.

On October 10, 1899, the insurance commissioner canceled the license which had theretofore been issued to the association, and gave it notice that from and after that date all authority granted by his department to it, and all licenses issued to the agents of the association to do business in the state of Kentucky, were revoked. And from and after that date the association had no agent or agents in the state of Kentucky and did no new business whatever in the state, but at one time, for the convenience of the holders of certificates residing in Jefferson county, permitted them to remit dues and assessments through the Western Bank, located in the city of Louisville.

On February 28, 1900, James S. Phelps commenced an action in the circuit court of Jefferson county, Kentucky, against the association, alleging that on July 8, 1885, he had made application for membership in it, and that on July 16, 1885, his application had been approved and certificate of policy of insurance issued to him. Breaches of the agreement on the part of the defendant were alleged, and a judgment asked for $1,994.20. A summons was issued and served on the insurance commissioner, and an alias summons was also issued and served upon Ben Frese, as the managing agent and chief officer and agent of the association in Jefferson county. The defendant appeared specially and moved to quash the service on each summons. The motion was heard on affidavits, and overruled. The defendant taking no further action, judgment was rendered on May 19, 1900, in favor of the plaintiff and against it for $1,994 with interest.

On August 4, 1900, the plaintiff filed an amended and supplemental petition, in which he alleged the filing of the original petition, the judgment, the issue of execution, a return of nulla bona; that the defendant had a large number of policy holders in the state who at stated times and regular intervals became indebted to it for premiums and assessments upon its policies of insurance, and prayed for a general attachment, or in lieu thereof the appointment of a receiver to take charge of the business and property of the defendant in Kentucky, and that all revenues and income accruing to it from policy holders and other debtors be ordered paid to the receiver. Upon the filing of this amended and supplemental petition the court appointed the Fidelity Trust & Safety Vault Company, the other appellee, hereinafter called the company, a receiver of all the property of the defendant in Kentucky, directed it to receive and collect all moneys and debts now owing or hereafter to accrue to the said defendant, and ordered all debtors of the association to pay to the receiver all premiums and assessments which might become due or owing to it; such receivership to continue until the judgment of the plaintiff and all costs and expenses had been paid, and then to terminate. The company qualified as such receiver, and gave notice to the policy holders of the defendant.

On August 22, 1900, the association applied by petition and bond for a removal of the case to the circuit court of the United States for the district of Kentucky, which application was denied. It does not appear that any copy of the record was filed in the Federal court. But it commenced this suit in that court against Phelps (the judgment creditor) and the company, to enjoin them from further proceeding under the order made by the state court. The court issued an injunction, as prayed for. 103 Fed. 515. On February 2, 1901, the defendants moved to dissolve the injunction, which motion was overruled and an appeal taken to the United States circuit court of appeals for the sixth circuit. By that court the decision of the circuit court was reversed February 4, 1902 (50 C. C. A. 339, 112 Fed. 453), and the case remanded with directions to dismiss the bill of complaint. From such decree the association appealed to this court.

Messrs. William D. Guthrie, Edmund F. Trabue, George Burnham, Jr., and Sewell T. Tyng for appellant.

[Argument of Counsel from pages 150-154 intentionally omitted] Messrs. Benjamin F. Washer, Frederick Forcht, W. H. Field, and Norton L. Goldsmith for appellees.

[Argument of Counsel from pages 154-156 intentionally omitted] Mr. Justice Brewer delivered the opinion of the court:

Many questions were elaborately discussed by counsel both orally and in brief, but we are of the opinion that the decisions of two or three will dispose of the case. First, the service of summons on the insurance commissioner was sufficient to bring the association into the state court as party defendant. It was stipulated between the parties that the outstanding policies existing between the association and citizens of Kentucky were continued in force after the action of the insurance commissioner on October 10, 1899, and that on said policies the association had collected and was collecting dues, premiums, and assessments. It was, therefore, doing business within the state. Connecticut Mut. L. Ins. Co. v. Spratley, 172 U. S. 602, 43 L. ed. 569, 19 Sup. Ct. Rep. 308. The plaintiff was a citizen of Kentucky, and the cause of action arose out of transactions had between the plaintiff and defendant while...