Relfe v. Columbia Life Ins. Co.

• Decision Date: 31 October 1882
• Parties: RELFE, Superintendent of the Insurance Department, v. THE COLUMBIA LIFE INSURANCE COMPANY, Appellant.
• Court: Missouri Supreme Court

76 Mo. 594

RELFE, Superintendent of the Insurance Department,

v.THE COLUMBIA LIFE INSURANCE COMPANY, Appellant.

Supreme Court of Missouri.

October Term, 1882.

Appeal from St. Louis Court of Appeals.

AFFIRMED.

Geo. D. Reynolds and Wm. S. Relfe for appellant.

1. On general principles of equity it would seem that a loss which had accrued before the company was dissolved, and was entitled to full payment, even if the company in paying it exhausted all its assets, should have priority in the distribution, especially when it has been merged into a judgment, and, in the absence of a statute, was, at common law, entitled to priority as a debt of higher dignity than simple contract debts. Toller Execs., 258; Woodworth v. Paine, 1 Ill. (Breese) 294; Paschall v. Hailman, 9 Ill. 285; 2 Williams Execs., (6 Am. Ed.) p. 1065, § 2, chap. 2. But as our law, especially by sections 6032 and 6047, preserves the priority of judgments founded on death claims, considerations of the equities are not properly addressed to the court. Wilson v. Wilson, 1 Cranch C. C. 255; Co. Ct. of St. Louis v. Griswold, 58 Mo. 175.

2. Assuming that the provisions of the law of 1879 apply to companies dissolved and in course of administration when the law was passed, the priorities given by it are not invalid as contrary to article 1, section 10, Constitution United States, or article 2, section 15, constitution of Missouri. ( a) The order in which claims are to be paid is not a question affecting the contract, but relates solely to the remedy. Union Bank v. Smith, 4 Cranch C. C. 37; Com. v. Lewis, 6 Binney 271; Morse v. Goold, 11 N. Y. 286; Harrison v. Sterry, 5 Cranch 289. ( b) In the distribution of personalty the law of domicile determines the parties to the distribution; but the law of the forum in which the estate is being distributed, in force at the time of distribution, governs the order of classification and payment of demands. Story Conflict Laws, (6 Ed.) §§ 524, 525; Ennis v. Smith, 14 How. 424; Harrison v. Sterry, supra. Nor can parties contract away the right of the State to alter and repeal such laws. Cooley Const. Lim., (3 Ed.) §§ 287, 288, 289; Conkey v. Hart, 14 N. Y. 30; Youngblood v. Norton, 1 Strobh. (S. C.) Eq. 122; 2 Williams Execs., (6 Am. Ed.) p. 1058. ( c) It has never been held that rules of distribution conferred vested rights prior to an actual order of distribution. A vested right has been defined to be an “immediate fixed right of present or future enjoyment.”Fearne Cont. Rem., 1. “An estate is vested when there is an immediate right of present enjoyment, or a present fixed right of future enjoyment.” 4 Kent (*) 202. Even judgments have been deprived of their place in the classification of demands by changes of law made after their rendition. Cooley Const. Lim., (3 Ed.) § 361, and note 4; Swearingen v. Eberius, 7 Mo. 421; Prewitt v. Jewell, 9 Mo. 723; Miller v. Doan, 19 Mo. 650. The right of the State to control them and settle priorities has never been successfully denied. Harness v. Green, 20 Mo. 316; Gainey v. Sexton, 29 Mo. 449; McElmoyle v. Cohen, 13 Pet. 312; Watson v. R. R. Co., 47 N. Y. 160; Berry v. Marshall, 1 Blackf. (Ind.) 340; Paschall v. Hailman, 9 Ill. 300. Under laws of descent and distribution, no vested right is conferred; a mere right is given to inherit, according to the law of the land in force when the distribution is to be made. Marshall v. King, 24 Miss. 85. Mechanics' liens, given by statute, and under which work has been done, have been taken away. Woodbury v. Grimes, 1 Colo. 100. ( d) To come within the prohibitions of the constitution of the United States, the law must be one which impairs the obligation of a contract. Bennett v. Boggs, 1 Baldwin 60; Satterlee v. Matthewson, 2 Pet. 413; Waison v. Mercer, 8 Pet. 108. ( e) Being of the remedy, not of the contract, the priorities in order of payment may be altered, as between creditors, at the will of the legislature. Sturges v. Crowninshield, 4 Wheat. 122; Bronson v. Kinzie, 1 How. 311; Tennessee v. Sneed, 96 U. S. 69; Penniman's case, 103 U. S. 714; Woodbury v. Grimes, 1 Colo. 100. Nor do Curran v. Arkansas, 15 How. 304, and Edwards v. Kearzey, 96 U. S. 595, militate against this, for in these cases the effect was to take property from the reach of process of the creditor and give it to the debtor, at the expense of all the creditors. In the case at bar, it is a mere preference of one creditor over another, a right which has always been recognized as subsisting even in the debtor himself, Johnson v. McAllister, 30 Mo. 327; Clarke v. White, 12 Pet. 200; Tompkins v. Wheeler, 16 Pet. 118.

McKeighan & Jones for Fannie Adelman, a death claimant.

If the position of counsel on the other side were granted, that at the date of the dissolution by the decree each holder of a running policy had an equitable and vested interest in the assets of the company to the extent of the value of his policy, still the owner of the death-loss claim has a superior interest, because he has not only the same equities in the assets of the company, but he has a ripened legal demand, which matured before the demand of the living policy-holder, and which in equity was a lien on the trust funds in the hands of the officers of the company. Qui prior est tempore, potior est jure. It follows from the well established doctrine of the decisions relative to life insurance, that corporations of this class hold their property in trust for the payment of death losses, for they have received the premiums for that purpose. The policy-holders of such a company stand nearer to its property than the creditors of any other class of corporations. When a policy-holder dies, it is the duty of the company to set apart a sufficient portion of money to pay the loss according to the terms of the contract. Equity will regard that as done which should have been done, and if not done will place the party in the same position as though it had been done, and not in a worse. So long as the company had any property it was its duty until a receiver was appointed to use it in paying its death losses, although it had taken every dollar and left nothing for living policy-holders. The same duty is also to be discharged by the court to the extent of funds in its hands. Insolvency was no defense to the claim of payment either at law or in equity, and payment of such claims could only be suspended, not stopped, by an injunction and dissolution under the statute. It was the duty of the directors to apply the funds of the company in payment of death claims as they accrued. The position of the receiver makes a breach of duty on the part of a trustee in the use of funds in its hands, placed there for that purpose, the occasion, if not the reason, for placing the beneficiary of the trust in a worse position than if the trustee had discharged its duty. Vanatta v. Ins. Co., 31 N. J. Eq. 15; Mayer v. Att'y Gen., 32 N. J. Eq. 815; Comm. v. Ins. Co., 112 Mass. 116; Comm. v. Ins. Co., 119 Mass. 45.

The ground of the insurance law of this State is, that when it appears in the mode prescribed that an insurance company has not enough funds in its possession to pay its simple contract debt, death losses, and keep intact its reserve for running policies, it shall be restrained from further doing business and be wound up. But this is to save living policy-holders from still greater impairment of the reserve part of the trust estate, and not to change the situation or present rights of those who have become entitled to be paid in full. The whole law is in the nature of a police regulation to protect policy-holders against dishonest or reckless management of life insurance companies whenever found to exist, but was not intended to divert any portion of the funds from their proper and legitimate disposition, the payment of the death losses as they matured. It was not the intention of the law to better the condition of the living policy-holders by distributing to them a portion of that which was wrongfully retained by the company from death-loss claimants, and thus make itself the special champion of the living against the dead.

W. L. Scott and E. B. Sherzer for Lydia A. King, a death claimant.

The payment of death losses is the paramount obligation of the company; and each policy-holder must be considered as so recognizing it, inasmuch as his own rights are dependent upon it. His own life may be the next one to fall in. As contrasted with the mere equity to the “reserve,” or value of his running policy on the dissolution of the company, resting, as it does upon the happening of a possible future event, he must be considered as recognizing its subordination to this higher right, which is of the very essence of life insurance. From the very nature of the contract, and of the co-relations growing out of it, therefore, every policy-holder is committed to the recognition of the paramount obligation to pay death claims first out of the funds of the company; for every policy-holder has himself contributed to the assets of the company for the very purpose of securing the payment of these claims. Payment of death losses is the end and object of life insurance. This is what life insurance companies are organized for. This is the very substance of the contracts entered into. Every one who takes out a policy has this as the ultimate, indeed the sole object. There is no other performance stipulated for on the part of the company, or within the contemplation of the parties. Comm. v. Ins. Co., 112 Mass. 116.

John D. Pope for respondent.

1. It has been uniformly decided that, without a statute, there is no priority. Wilson's case, L. R.. 9 Eq. Cas. 711, 720; People v. Security Life Ins. Co., 78 N. Y. 116, 128; s. c., 34 Am. Rep. 522. The case of Mayer v. Attorney General, 32 N. J. Eq. 815,“is not in point, as that was a mutual company, in the charter of which the holders of running policies were liable to assessment to pay death losses.” 78 N. Y....