Owens v. Allied Underwriters

• Decision Date: 19 February 1945
• Docket Number: 37496.
• Court: Louisiana Supreme Court
• Parties: OWENS et al. v. ALLIED UNDERWRITERS.

21 So.2d 490

207 La. 437

OWENS et al. v. ALLIED UNDERWRITERS.

No. 37496.

Supreme Court of Louisiana

February 19, 1945

Appeal from Nineteenth Judicial District Court Parish of East Baton Rouge; G. Caldwell Herget, Judge.

Taylor, Porter, Brooks & Fuller, of Baton Rouge (Guy E. Williams, of Little Rock, Ark., and W. G. Randolph and Ada Mott, both of Baton Rouge, of counsel), for appellants.

Wilson & Abramson, of Shreveport, for appellee.

PONDER Justice.

Golden Owens administrator of the estate of Fannie E. Owens et al brought suit in the Nineteenth Judicial District Court for the Parish of East Baton Rouge, Louisiana, on August 23 1943, against Allied Underwriters for the recognition of a judgment they had obtained against the defendant in the United States District Court for the Eastern District of Arkansas, Western Division, calling for the amount of $10,000 with interest and costs. The plaintiffs asked for and obtained the issuance of a writ of attachment. Garnishment proceedings were issued to the State Treasurer with the view of attaching a cashier's check calling for $20,000 which had been deposited by the defendant for the privilege of doing insurance business in the State of Louisiana. The plaintiffs prayed for the recognition of a lien and privilege by virtue of the attachment and payment by privilege and priority out of the proceeds of the check over all other creditors.

The defendant, Allied Underwriters, an insurance company organized under the laws of the State of Texas, was placed in receivership in the State of Texas on August 17, 1943, prior to the institution of this suit. At the time this suit was filed, no receivership proceedings had been instituted in the State of Louisiana. However, a short time thereafter, September 7, 1943, a receiver was appointed by the Nineteenth Judicial District Court for the Parish of East Baton Rouge for the purpose of liquidating claims of citizens of Louisiana.

The Louisiana receiver, the Secretary of State and the State Treasurer interposed exceptions of no cause and no right of action to the plaintiffs' suit. They answered and asked for the dissolution of the attachment and the dismissal of plaintiffs' suit. On trial of the exceptions, the attachment was dissolved, and the plaintiffs' suit was dismissed with the reservation of plaintiffs' right to proceed against the defendant through the Louisiana receiver. The plaintiffs have appealed.

The cashier's check involved herein was deposited with the Treasurer of the State of Louisiana on March 30, 1940, allegedly to comply with the provisions of Act 158 of 1932 to protect the creditors of the defendant in this State. The defendant was then engaged in writing certain forms of insurance in Louisiana.

From the evidence, it appears that the defendant corporation was authorized to do business in this State until its certificate expired on March 31, 1942, and that since that time the defendant has not been authorized or licensed to do business in the State.

The exceptions and the motion to dissolve are based on the grounds that the appointment of the receiver in the State of Texas dissolved the defendant corporation, and any proceedings instituted against the insolvent corporation are null; that plaintiffs can only assert their rights in the receivership proceedings; that the Treasurer and Secretary of State are not subject to garnishment; that the appointment of the Secretary of State as agent for service of process by the defendant precludes the right of plaintiffs to an attachment; and that the deposit in the hands of the State Treasurer is restricted to claims arising and accruing by virtue of policies of insurance issued by the defendant upon the lives of persons or citizens of this State or upon property situated in this State.

The appellants contend that they have a right to proceed against the insolvent corporation under the holdings in the cases of Federico Macaroni Mfg. Co. v. Great Western Fire Ins. Co., 173 La. 905, 139 So. 1, 79 A.L.R. 1256, and Lichtenstein Bros. & Co. v. Gillett, 37 La.Ann. 522.

It is agreed in the stipulation of facts that the Allied Underwriters was sent into receivership in the State of Texas, and a receiver was appointed for the purpose of liquidating the corporation prior to the institution of this suit. The appellants do not dispute the fact that this operates as a dissolution of the corporation, but contend that the judgment dissolving the corporation in the State of Texas cannot be given extraterritorial effect.

At the time this suit was brought, the corporation had no legal existence. Such being the case, this suit could not be successfully instituted against a nonexisting corporation, and no action could be thereafter maintained against it. The dissolution of the corporation, under the insurance laws of Texas at the domicile of the corporation in that state, brought about the civil death of the corporation, and it no longer had the capacity to be sued. Pleasant H. Pendleton v. Charles H. Russell, Receiver of the Knickerbocker Life Insurance Co., 144 U.S. 640, 12 S.Ct. 743, 36 L.Ed. 574; Oklahoma Natural Gas Co. v. State of Oklahoma, 273 U.S. 257, 47 S.Ct. 391, 71 L.Ed. 634; Riehle v. Margolies, 279 U.S. 218, 49 S.Ct. 310, 73 L.Ed. 669; Chicago Title & Trust Co. v. Forty-One Thirty Six Wilcox Bldg. Corporation, 302 U.S. 120, 58 S.Ct. 125, 82 L.Ed. 147; Walling, Administrator of Wage and Hour Division, U. S. Dept. of Labor v. James Reuter, 321 U.S. 671, 64 S.Ct. 826, 88 L.Ed. 1001; National Surety Co. of New York v. Cobb, 5 Cir., 66 F.2d 323; United States v. Leche, D.C., 44 F.Supp. 765; Germain Musson v. Henry D. Richardson, 11 Rob. 37; Michel v. Southern Ins. Co., 128 La. 569, 54 So. 1012; McCoy v. State Line Oil & Gas Co., Inc., 180 La. 579, 157 So. 116; Cognovich v. Sun Indemnity Co. of N. Y., 176 La. 373, 145 So. 774; Tangipahoa Bank & Trust Co. v. Guwang, La.App., 15 So.2d 148; Levy v. Union Indemnity Co., La.App., 146 So. 182; U. S. Truck Co. v. Pennsylvania Surety Corporation, 259 Mich. 422, 243 N.W. 311; Livingston, Insurance Com'r v. Southern Surety Co. of N. Y., 262 Mich. 438, 247 N.W. 712; McBride v. Clayton, 140 Tex. 71, 166 S.W.2d 125; Turner v. Browne, 351 Mo. 541, 173 S.W.2d 868; 97 A.L.R. 477.

The effect of the dissolution of a corporation at its domicile is discussed at length in many of the cases cited herein. We quote from the following decisions:

'Looking at the judgment of the circuit court of the United States, we are satisfied that the ruling of the court of appeals was correct. That judgment purports to be against the insurance company, but that company, at the time, had no legal existence. It had been dissolved, and its franchises, rights, and privileges declared for feited, by a decree of the supreme court of New York, in a proceeding brought by the attorney general of the state, in the name of the people, and a receiver appointed of the effects of the corporation. The judgment was therefore no more valid against a nonexisting corporation than it would have been if rendered for a like amount against a dead man. The receiver was not substituted in the place of the dissolved corporation. No process or citation was issued by that court to bring him before it, or any proceeding taken for that purpose. Nor would such a proceeding have any effect, for, the corporation having expired, the suit itself had abated. It ceased to be a pending suit; and, if it were otherwise, the receiver could not take charge of any proceeding in a foreign jurisdiction by commencing an action, or defending an existing action, without the express authority of the court, whose officer he was, so as to bind any property or effects in his hands as receiver. Booth v. Clark, 17 How. 322 [58 U.S. 322, 15 L.Ed. 164]; Reynolds v. Stockton, 140 U.S. 254, 11 S.Ct. 773 .' Pleasant H. Pendleton v. Charles H. Russell, supra [144 U.S. 640, 12 S.Ct. 745].

'There is no specific provision in our rules for the substitution as a party litigant of a successor to a dissolved corporation. It is well settled that at common law and in the federal jurisdiction a corporation which has been dissolved is as if it did not exist, and the result of the dissolution cannot be distinguished from the death of a natural person in its effect. * * * It follows, therefore, that as the death of the natural person abates all pending litigation to which such a person is a party, dissolution of a corporation at common law abates all litigation in which the corporation is appearing either as plaintiff or defendant. To allow actions to continue would be to continue the existence of the corporation pro hac vice. But corporations exist for specific purposes, and only by legislative act, so that if the life of the corporation is to continue even only for litigating purposes it is necessary that there should be some statutory authority for the prolongation. The matter is really not procedural or controlled by the rules of the court in which the litigation pends. It concerns the fundamental law of the corporation enacted by the state which brought the corporation into being.' Oklahoma Natural Gas Co. v. State of Oklahoma, 273 U.S. 257, 47 S.Ct. 391, 392, 71 L.Ed. 634.

'The decisions of this court are all to the effect that a private corporation in this country can exist only under the express law of the state or sovereignty by which it was created. Its dissolution puts an end to its existence, the result of which may be likened to the death of a natural person. There must be some statutory authority for the prolongation of its life, even for litigation purposes. * * *

'How long and upon what terms a statecreated corporation may continue to exist is a matter exclusively of state power. Horn Silver Mining Co. v. New...