State of Missouri v. Homesteaders Life Ass'n

• Decision Date: 31 July 1936
• Docket Number: No. 9402,9411-9423,9432.,9402
• Citation: 16 F. Supp. 69
• Parties: STATE OF MISSOURI v. HOMESTEADERS LIFE ASS'N, and fourteen other cases.
• Court: U.S. District Court — Western District of Missouri

16 F. Supp. 69

STATE OF MISSOURI v. HOMESTEADERS LIFE ASS'N, and fourteen other cases.

Nos. 9402, 9411-9423, 9432.

District Court, W. D. Missouri, W. D.

July 31, 1936.

James P. Aylward and Jerome Walsh, both of Kansas City, Mo., for the State of Missouri.

John B. Gage, of Kansas City, for defendant Homesteaders Life Ass'n Harding, Murphy & Tucker, of Kansas City, Mo., and Rainey T. Wells, of Omaha, Neb., for defendant Sovereign Camp, Woodmen of the World.

Prescott Brown and Harding, Murphy & Tucker, all of Kansas City, Mo., and Rainey T. Wells, of Omaha, Neb., for defendant Supreme Forest Woodmen Circle.

Harding, Murphy & Tucker, of Kansas City, Mo., Edmund S. Cummings, of Chicago, Ill., and Rainey T. Wells, of Omaha, Neb., for defendant Catholic Order of Foresters.

Meservey, Michaels, Blackmar, Newkirk & Eager, of Kansas City, Mo., for defendants Yeomens Mut. Life Ins. Co., Standard Life Ass'n, Royal Neighbors of America, Ben Hur Life Ass'n, Independent Order of Foresters, Woman's Benefit Ass'n, and Security Benefit Ass'n.

J. Francis O'Sullivan, of Kansas City, Mo., and Otto C. Rentner, of Chicago, Ill., for defendant Aid Ass'n for Lutherans.

Nelson C. Pratt, of Omaha, Neb., and Arthur N. Adams, of Kansas City, Mo., for defendant Modern Woodmen of America.

Harzfeld, Beach, Steeper & Gordon, of Kansas City, Mo., for defendant Supreme Council Royal Arcanum.

John T. Barker and Frank Brockus, both of Kansas City, Mo., for defendant The Maccabees.

REEVES, District Judge.

The above-styled actions are suits by the superintendent of the insurance department of the state of Missouri for the statutory tax on premiums received on business transacted within the state of Missouri.

In due time after the suits were filed, each of the defendants, being a nonresident of the state, presented its petition for removal to this court.

The plaintiff has moved to remand. The several motions to remand are predicated upon the theory that the state of Missouri is the real plaintiff, and that as to it there could not be a diversity of citizenship, and therefore the cases should be remanded to the state court from which they were removed.

The cases are severally styled, "The State of Missouri, a Commonwealth, by and through its Superintendent of the Insurance Department, R. Emmet O'Malley, Plaintiff."

While the petitions of the plaintiff in each case affirm the right of recovery upon the theory that each of the defendants is a regular old line life insurance company, nevertheless, both from the petition and from the statement of counsel, and from other admitted facts, each of said defendants has heretofore been licensed to do business within the state of Missouri, and is even now permitted to carry on its appropriate business as a fraternal beneficiary association.

Because of a provision in the law in respect of fraternal beneficiary associations, exempting them from the application of the general insurance laws, plaintiff's petitions contain averments to the effect "that any such exemption would be unconstitutional as being violative of the Fourteenth Amendment of the Constitution of the United States." Whether a state can invoke on its behalf the Fourteenth Amendment need not be considered now.

It seems proper to quote pertinent and applicable statutory provisions. By article 12, chapter 37, § 5978 et seq., R.S.Mo.1929, as amended (Mo.St.Ann. § 5978 et seq., p. 4552 et seq.), relating to the subject of "Insurance," ample provisions are made for the taxation of nonresident insurance companies. This particular article is entitled "Taxation of Insurance Companies." Provision is made separately for the taxation of "Home companies."

Then, by section 5979, R.S.Mo.1929, as amended (Mo.St.Ann. § 5979, p. 4556), it is provided that: "Every insurance company or association, not organized under the laws of this state, shall, as hereinafter provided, annually pay tax upon the premiums received, whether in cash or in notes, in this state or on account of business done in this state, for insurance of life * * * at a rate of two per cent. per annum in lieu of all other taxes."

By the same article, and specifically by section 5985 and section 5987 (Mo.St.Ann. §§ 5985, 5987, pp. 4560, 4561), the superintendent of the insurance department is authorized to sue. Note the following language (Mo.St.Ann. § 5987, p. 4561): "The superintendent of the insurance department may sue and recover, in his own name, in any court in this state having jurisdiction, from any such company, the amount of taxes and license properly chargeable against such company by law, together with costs and reasonable attorney's fees, to be taxed as costs; * * * and when such taxes are collected, the said superintendent shall pay the same to the officer entitled to receive the same."

By section 5985, supra, it is provided that: "The superintendent of the insurance department shall at once proceed to collect the same, and he is hereby empowered and authorized to employ such legal process as may be necessary for that purpose, and when so collected he shall pay the same into the state treasury."

The last provision is intended to cover those cases where the company shall fail or neglect to pay the tax provided by law.

In the Missouri legislative session of 1911 there was enacted into law a code for the regulation and supervision of fraternal beneficiary associations. This law was commonly referred to as the Mobile Act (Laws 1911, p. 284 Mo.St.Ann. § 5990 et seq., p. 4563 et seq.). Such legislation was prompted by an association or convention of insurance supervisors or commissioners of the several states. Such association met in convention in Mobile, Ala., in October, 1910. In conference with representatives of fraternal associations, the principles of the proposed law were agreed upon, and shortly thereafter many of the states enacted such principles into law. The General Assembly of the state of Missouri did this.

Among other provisions of the so-called Mobile Law was section 5993, R.S.Mo. 1929 (Mo.St.Ann. § 5993, p. 4565), as follows: "Except as herein provided, such societies shall be governed by this article and shall be exempt from all provisions of the insurance laws of this state, not only in governmental relations with the state, but for every other purpose, and no law hereafter enacted shall apply to them, unless they be expressly designated therein."

By the Mobile Law fraternal beneficiary associations, though limited in the selection of beneficiaries, were permitted to issue benefit certificates or insurance policies of various forms, including those upon which reserves were accumulative.

The plaintiff has endeavored to show by the averments of the several petitions that the business carried on by the several defendants is of such nature as properly to bring them within the classification of regular old line life insurance companies, and thus and thereby subject them to the payment of the taxes imposed upon such class by statute.

The question for immediate determination is whether the state of Missouri is the party plaintiff, and, if so, whether a federal question has been raised by it so that the several actions become removable from the state court in which the suits were brought.

1. The Eleventh Amendment to the Constitution of the United States specifically limits the judicial power of the United States where a state is a party. It says that such power "shall not be construed to extend to any suit in law or equity commenced or prosecuted against one of the United States by Citizens of another State." This constitutional provision becomes inapplicable if a federal question should be injected into litigation by a state where such state is plaintiff.

In considering the question as to whether the state is a party, it has been held uniformly in recent decisions that the parties named in the proceeding are not determinative of the question as to whether the state is a party or not. In other words, nominal parties in the proceedings are not controlling on the question. The sole question is whether the state is made responsible in some way by the proceedings.

In the case of Morrill et al. v. American Reserve Bond Co. et al. (C.C.) 151 F. 305, Judge Sanborn, in speaking for himself and Judge Hook, in the Western District of Missouri, very carefully pointed out the distinction between those cases where a state is made a party through one of its officers and where it is not. In substance, Judge Sanborn said, 151 F. 305, loc. cit. 308, that a suit of this nature may be maintained in the federal court even when its determination involves the pecuniary interest of the state, if the act of the officer is purely ministerial.

The Supreme Court of the United States, in Smith v. Reeves, 178 U.S. 436, loc. cit. 439, 20 S.Ct. 919, 44 L.Ed. 1140, substantially said the same thing.

Moreover, in Tindal v. Wesley, 167 U. S. 204, 17 S.Ct. 770, 42 L.Ed. 137, the court said in effect that an officer of the state could not by the mere assertion of a right close the door of the court against a litigant who otherwise would have a right to have his contentions heard in a federal forum.

2. This brings us to the important question as to whether the state of Missouri is in fact plaintiff in these cases.

In Ex parte State of Nebraska, 209 U. S. 436, 28 S.Ct. 581, 585, 52 L.Ed. 876, the Supreme Court quite directly said that, even though the state might be named as a party, unless its presence was indispensable, the jurisdiction of the federal court would not be defeated. Said the court: "If the nature of the case is such that the state is not a real party plaintiff, the Federal court will so decide for the purposes of jurisdiction, even though the state is named nominally as a party plaintiff."

Section 5985, R.S.Mo.1929 (Mo.St.Ann. § 5985, p. 4560), supra, is entitled, "Duty of Superintendent as to Delinquents, etc." This statute provides that: "If any insurance...