Neblett v. Carpenter
| Decision Date | 05 December 1938 |
| Docket Number | No. 21,21 |
| Citation | 83 L.Ed. 182,305 U.S. 297,59 S.Ct. 170 |
| Parties | NEBLETT et al. v. CARPENTER, Insurance Commissioner, et al |
| Court | U.S. Supreme Court |
See 305 U.S. 675, 59 S.Ct. 355, 83 L.Ed.—-.
Messrs. Wm. H. Neblett and R. Dean Warner, both of Los Angeles, Cal., for petitioners.
Messrs. Wm. Marshall Bullitt, of Louisville, Ky., and Hester W. Webb and U.S. Webb, both of San Francisco, Cal.,
[Argument of Counsel from page 298 intentionally omitted] for respondents.
The questions raised are whether proceedings for the rehabilitation of an insurance company, pursuant to the Insurance Code of California,1 unconstitutionally deprive policy holders of their property without due process of law, or impair the obligation of their contracts.2
For many years the Pacific Mutual Life Insurance Company of California has written life, health, and accident insurance. Since 1918 it has issued noncancelable health and accident policies. The Insurance Commissioner of California determined that, while the life and general health and accident business was in sound condition, there was an over-all deficit in reserves due to the unprofitable nature of outstanding noncancelable health and accident risks, with the result that the company was insolvent within the meaning of the Code. July 22, 1936, the Superior Court of Los Angeles County, on his application, appointed him conservator. On the same day he applied for and obtained an order which appointed him liquidator of the company. On the same day, as conservator, he petitioned for authority to rehabilitate the company and submitted a plan embodying an agreement, to be executed by the company and himself as Commissioner, with a new corporation, which he would form, all of whose capital stock he would purchase with the assets of the company, and to which he would transfer most of the assets, retaining the stock of the new company and certain other assets of the old. The new company was to assume the policies and obligations of the old company to the extent provided in the agreement. Policy holders were to have the option of taking insurance from the new company or proving their claims for breach of their contracts, provision for payment being made by covenants of the new company and the retained assets of the old. The court approved the plan and authorized the execution and performance of the agreement.
Shortly afterwards it was discovered that the judge who acted in the cause was probably disqualified by ownership of a policy issued by the company. August 11, 1936, another judge entered an order, which, after adverting to the possible disqualification of the judge who made the earlier orders, ratified, approved, and confirmed the order appointing the Commissioner conservator and, on the basis of the petition filed on July 22, independently, and as an original order, appointed the Commissioner conservator, invested him with title to all the company's assets, and authorized him to endeavor to consummate a rehabilitation or reinsurance plan. On September 25 the Commissioner presented a further petition for approval of the rehabilitation and reinsurance agreement, which recited his actions taken pursuant to the court's orders and to the plan of rehabilitation, and asked approval thereof. An order issued which directed all interested persons to show cause why the agreement, and what had been done pursuant to it, should not be approved and all the prior acts of the Commissioner ratified and confirmed, and fixed a hearing. At the hear- ing, which lasted from November 19 to December 4, many officers, stockholders and policy holders who had intervened, including the petitioners, were heard. Plans of rehabilitation presented by some of them were considered; evidence was taken and argument was had. December 4 an order was entered approving the Commissioner's plan and agreement, ratifying the action he had taken, and authorizing him as conservator, and as liquidator, if he should be appointed as such, to carry out the rehabilitation agreement. The court retained jurisdiction to make further orders for the effectuation of the plan and agreement.
The Supreme Court of California affirmed the order.3 The action of that court in overruling certain of petitioners' contentions is claimed to have deprived them of their property without due process.
The Court declared that the orders of July 22, 1936, were void because of the disqualification of the judge who made them. The petitioners argue that in consequence the Commissioner's transfer of assets to a new company pursuant to the approved plan was void and that its illegality could not be cured by subsequent court action. The Supreme Court held, however, that the court in which the Commissioner's original petition was filed thereby acquired jurisdiction and that the avoidance of the orders made by the disqualification of the judge who entered them did not disenable a qualified judge thereafter from entering valid orders based on the petition. It is further urged that as the old company's assets were transferred to the new pursuant to a void order there was nothing on which any later order could operate. The later order, which is the subject of review, ratified and confirmed the transfer, and the Supreme Court held the order affective under the Insurance Code.
It is said that the Code does not authorize the Commissioner to delegate to a corporation organized by him powers and duties in aid of his administration of the assets of an insolvent insurance company. The state court has held such procedure is in accordance with the Code provisions.
It is argued that the authority which the Code confers on the Commissioner to enter into rehabilitation or reinsurance agreements does not embrace a contract for assumption of the insolvent company's policies by a new company organized by the Commissioner. The court below held the provisions of the statute contemplated such action.
It is claimed that the Commissioner's action violated certain state statutes concerning fraudulent conveyances. The state court held the contrary.
All of these holdings concern matters of state law and amount at most to alleged erroneous constructions of the State's statutes by its own court of last resort. Such decisions would not be a denial of the due process guaranteed by the Fourteenth Amendment, U.S.C.A. Const. amend. 14.4 We are, therefore, without jurisdiction to review the state court's decision of any of those questions.
It is argued that the Code unconstitutionally delegates legislative functions to the Commissioner, and that the Supreme Court erred in not so holding. This, again, is a question of state law the decision of which by the State's highest court is binding upon us.5
The Insurance Code provides: 'In any proceeding under this article, the commissioner, as conservator * * * may, subject to the approval of said court, * * * mutualize or reinsure the business of' an insurance company 'or enter into rehabilitation agreements.' Section 1043, p. 547. The petitioners assert that this language is so vague that no one can determine what powers are intended to be conferred upon the...
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Applied Underwriters, Inc. v. Lara
...the plan. Id. at 331, 335, 341, 74 P.2d 761. The United States Supreme Court affirmed the decision as well. Neblett v. Carpenter, 305 U.S. 297, 59 S.Ct. 170, 83 L.Ed. 182 (1938). A number of other decisions by California Courts of Appeals illustrate that state appellate courts routinely hea......
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...statutory scheme" regarding "the rehabilitation and liquidation of insurance companies"), aff’d sub nom. Neblett v. Carpenter , 305 U.S. 297, 59 S.Ct. 170, 83 L.Ed. 182 (1938) ; see also Michael P. Duncan, The NAIC Model Property and Casualty Post-Assessment Guaranty Funds , in American Bar......
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...the prior exclusive jurisdiction analysis.8 Carpenter was then further affirmed by the U.S. Supreme Court in Neblett v. Carpenter , 305 U.S. 297, 59 S.Ct. 170, 83 L.Ed. 182 (1938).9 Just as in Younger , whether the party seeking to enjoin ongoing proceedings has "an adequate opportunity to ......