Robinson v. Mutual Reserve Life Ins. Co.

• Decision Date: 06 June 1908
• Citation: 162 F. 794
• Parties: ROBINSON v. MUTUAL RESERVE LIFE INS. CO. SCOVILL v. SAME.
• Court: U.S. District Court — Southern District of New York

162 F. 794

ROBINSON v. MUTUAL RESERVE LIFE INS. CO.

SCOVILL v. SAME.

United States Circuit Court, S.D. New York.

June 6, 1908

Robert L. Luce, for petitioners.

Byrne &amp Cutcheon and Wm. Beverly Winslow (James Byrne, of counsel) for respondents.

WARD Circuit Judge.

To two bills in equity filed by policy holders citizens of states other than the state of New York, charging the Mutual Reserve Life Insurance Company, a domestic corporation, with fraud and insolvency, and asking that certain fraudulent assessments be set aside, and that receivers be appointed to collect and distribute the assets of the defendant, the defendant company filed answers admitting insolvency and joining in the prayers of the bills.

February 17, 1908, this court appointed receivers and directed that all the company's property be conveyed and assigned to them, which was done. February 19th, the Attorney General of the state of New York began a proceeding in the state court to dissolve the defendant, in which temporary receivers were appointed, who were subsequently made permanent. April 10 1908, judgment dissolving the defendant was entered by default in the action pending in the state court. The state receivers now move that this court direct that the property in the hands of its receivers be turned over to the state receivers for distribution, and the appointment of the federal receivers be vacated.

It is the law of the federal courts, and, I believe, of all others, that the court which first takes possession of property cannot be disturbed or interfered with by any other court. Freeman v. Howe, 24 How. 450, 16 L.Ed. 749; Buck v. Colbath, 3 Wall. 334, 18 L.Ed. 257.

The state receivers, while admitting that the federal court has jurisdiction in equity to distribute the property of insolvent corporations, make several objections to the further exercise of the jurisdiction by this court in this cause. Before considering these objections, it may be pointed out that many objections which have been or might have been successfully made in the reported cases by a defendant corporation resisting the appointment of a receiver are waived when the corporation, as in this case, submits itself and joins in the prayer of the bill. Authorities cited are to be read with this consideration in mind.

It is said that by the decree of the state court dissolving the defendant causes pending in this court are abated, and that nothing further can be done in them. These actions, however, are in equity, and may be revived, and, indeed, without revivor, I think receivers are entitled to administer the trust fund in the hands of the court, because the court can operate upon the company's property even if it cannot operate upon the company itself. General Electric Co. v. West Asheville Improvement Co. (C.C.) 73 F. 386; Rio Grande Railroad Co. v. Gomila, 132 U.S. 478, 10 Sup.Ct. 155, 33 L.Ed. 400; Lake Superior Iron Co. v. Brown, Bonnell & Co. (C.C.) 44 F. 539; Leadville Coal Co. v. McCreery, 141 U.S. 475, 12 Sup.Ct. 28, 35 L.Ed. 824.

It is further said that there is no jurisdiction in equity to sequestrate the property of a corporation on the ground of insolvency merely; but the bills in this court allege not merely insolvency, but fraud, which is a recognized head of equitable jurisdiction.

It is further objected that a court of equity derives its power to sequestrate the property of a corporation entirely from the law of the state of incorporation. Jones v. Mutual Fidelity Co. (C.C.) 123 F. 506. Admitting for the purposes of argument that this is so, I proceed to inquire what the law of the state of New York upon the subject is:

Sections 1784, 1788, and 1793 of the Code of Civil Procedure authorize a judgment creditor whose execution has been returned wholly or partly unsatisfied to maintain an action to procure a judgment sequestrating the property of a corporation and providing for a distribution thereof among its fair and honest creditors, as in the case of a voluntary dissolution, and authorizes the court to appoint a receiver for that purpose.

Sections 1785, 1788, and 1793 of the same Code authorize the Attorney General to maintain an action to procure a judgment dissolving a corporation having power to make insurances and authorize the court to appoint a receiver to distribute its property among its fair and honest creditors, as in case of a voluntary dissolution.

Section 80 of the insurance law (Laws 1892, p. 1967, c. 690) subjects insurance companies which have taken advantage of the provisions of article 2, c. 15, tit. 2, as the corporation in this case has done, to the provisions of that article in relation to the distribution of its assets.

These provisions are that, if the Superintendent of Insurance shall be of the opinion that the company is insolvent, he shall so report to the Attorney General, who shall bring such action as may be authorized by law to be taken against an insolvent insurance company, viz., the above-mentioned provisions of sections 1785, etc., of the Code of Civil Procedure, and, if the court is satisfied of the insolvency, it shall appoint a receiver, who shall proceed in accordance with the provisions of sections 77 and 78 of the insurance law. There is nothing...