Parsons v. Charter Oak Life Ins. Co.

• Decision Date: 11 June 1887
• Citation: 31 F. 305
• Parties: PARSONS and others v. CHARTER OAK LIFE INS. CO. and others.
• Court: U.S. District Court — Southern District of Iowa

31 F. 305

PARSONS and others v. CHARTER OAK LIFE INS. CO. and others.

United States Circuit Court, S.D. Iowa, Central Division.

June 11, 1887

Gatch Connor & Weaver and Kauffman & Guernsey, for complainants and intervenors.

Cummins & Wright, for defendants.

SHIRAS J.

This cause was originally commenced in the circuit court of Polk county, Iowa, and, upon application of defendants, was removed to this court. In the bill filed by complainants it is averred that the Charter Oak Life Insurance Company is a corporation organized under the laws of the state of Connecticut, for the purpose of carrying on the business of life insurance; that it has been thus engaged for many years and has issued policies on the lives of many persons residing in Iowa, as well as on the lives of residents of many other states; that it has invested large parts of its assets in Iowa, now owning real estate and other property to the estimated amount of $100,000, situated in the state of Iowa that a short time since the said corporation became insolvent, and in a proceeding brought for that purpose in the superior court of the city of Hartford, Connecticut, the company was adjudged to be insolvent, and in September, 1886 a receiver was appointed by that court, and authorized to take possession of the property and assets of said corporation, in order that the affairs of the company might be legally wound up, and the corporation be dissolved; that the complainants herein are citizens of Iowa, holding policies of insurance in said company, and therefore creditors of said company, and as such they have an equitable interest in the property of the company situated in said state of Iowa prior and superior to the rights of creditors residing in other states, and for the protection thereof. Complainants pray for the appointment of a receiver to take possession of the property of the company in Iowa, the same to be held and disposed of by the court for the protection of complainants and the other Iowa policy-holders.

The state court appointed a receiver, who gave bond in the sum fixed by the order of appointment, and thereupon the cause was, upon application of the defendants, removed to this court. Several policy-holders have intervened for the protection of their interests, and the receivers appointed in Connecticut have likewise intervened, and ask that the order appointing the receiver in Iowa be set aside, that their right to the possession and control of the assets of the company in Iowa be recognized, and that, if deemed necessary, an ancillary appointment of a receiver for the common benefit of all creditors be made by this court.

Demurrers to the original bill and intervening petition of the policy-holders and to the petition of the receivers have been filed, presenting the question of the rights of the Iowa creditors to the assets in Iowa, and of the right of the receivers appointed in Connecticut to be heard in this court, and of their right to the possession or control of the assets of the company in Iowa. In the bill filed by complainants, and in the argument in support thereof, it is claimed that the creditors residing in Iowa have, by reason of such residence, a superior equity over non-resident creditors in and to the assets of the company found in Iowa, and, in support of the demurrer filed by complainants to the intervening petition filed by the receivers appointed in Connecticut, it is said that they are foreign receivers, and, as such, have no standing in the courts of Iowa, no authority to sue therein, and no right in or control over the property of the insurance company situated in any other state than Connecticut; and that the courts of Iowa will not compel citizens of Iowa to seek protection in the courts of other states, by permitting or aiding foreign receivers to take possession of the assets of the company found in Iowa, and remove the same into another jurisdiction.

The chief authority relied on by counsel for complainants is the case of Booth v. Clark, 17 How. 322, in which, after a very full consideration of the authorities, the supreme court held that a receiver appointed under a creditors' bill, for the benefit of one or more creditors, to the exclusion of all others, has no power or rights beyond the territorial jurisdiction of the court appointing him, and that such court could not confer upon him authority to go into a foreign jurisdiction to take possession of the debtor's property, or to maintain suit therefor outside the jurisdiction appointing him. The facts out of which the contest arose in that cause were somewhat peculiar; but it is not necessary to state the details thereof further than to quote the statement by the supreme court that 'this suit, then, is substantially between Hackett, as the assignee of Clark in bankruptcy, and Booth, the receiver under Camara's creditors' bill; that it may be determined by this court which of them has the official right to the Mexican fund, for the distribution of it between the creditors of Clark, or whether Booth, as receiver, shall have from that fund a sufficient sum to pay Camara's entire debt, leaving the residue of it for distribution between Clark's other creditors.'

Booth had been appointed receiver upon a creditors' bill filed in New York. His title depended solely upon the order of the court appointing him, as the debtor Clark had not, either voluntarily or by compulsion, executed any conveyance of his property to such receiver. Hackett was an assignee in bankruptcy, appointed under proceedings in bankruptcy filed by Clark in the United States court in New Hampshire, under the provisions of the bankrupt law of the United States passed August 19, 1841. The supreme court held that, as against the assignee in bankruptcy, the receiver had no title or right to the property. In discussing the case, the courts gives the rule as to the power and rights of ordinary receivers in terms broad enough to fully sustain the contention of complainants herein, and, if the facts of the present case were the same as in Booth v. Clark, there would be no doubt of the rule to be followed. The conclusion reached in that case was that the assignee in bankruptcy, representing the rights of the general creditors, had the superior right to the assets over the receiver representing one creditor only. In the present case the receivers appointed in Connecticut represent the general creditors, and the complainants their own claims only. If the latter are held to have the superior equity and right, then the few will be preferred over the many.

Again it will be remembered that in Booth v. Clark there was involved simply the question of the rights of creditors in and to the property of a single person. The case did not present the question of the rights and equities of creditors of a corporation. If the broad claim made on behalf of complainants, that creditors living in Iowa have the superior equity and right to the assets of the company found in Iowa, is well founded, the results, when applied to cases of insurance companies, will be most inequitable and unjust. A person living in Iowa, for instance, takes a policy upon his life, payable at his death, or under the endowment plan, payable in 15 or 20 years. When the policy is issued, a large part of the assets of the company is invested in Iowa property. In the progress of time the location of such investments is changed, the whole thereof being withdrawn from this state. The company becomes insolvent, and there are claims enough in the other states to absorb all the assets found in the several states. In such case, the Iowa creditors, under the rule advocated by complainants, would be wholly cut out from any participation in the proceeds of the assets of the insolvent company. Such a rule would also place it within the power of the managing officers of such companies, when they became aware of the probable insolvency of the corporation, to protect and prefer the policy-holders of one section or state at the expense of others holding equally meritorious...