State v. Preferred Acc. Ins. Co. of New York

• Decision Date: 18 January 1963
• Docket Number: No. 5263,5263
• Citation: 149 So.2d 632
• Court: Court of Appeal of Louisiana — District of US
• Parties: The STATE of Louisiana v. The PREFERRED ACCIDENT INSURANCE COMPANY OF NEW YORK.

Page 632

149 So.2d 632

The STATE of Louisiana v. The PREFERRED ACCIDENT INSURANCE COMPANY OF NEW YORK.

No. 5263.

Court of Appeal of Louisiana, First Circuit.

Jan. 18, 1963.

Irwin Waldman, New York City, Porteous & Johnson by W. A. Porteous, Jr., New Orleans, for appellant.

Liskow & Lewis by J. L. Pelletier, Lake Charles, for appellee.

Before ELLIS, LOTTINGER, HERGET, LANDRY and REID, JJ.

LANDRY, Judge.

This action emanates from ancillary receivership proceedings incident to liquidation of the defunct corporation known as The Preferred Accident Insurance Company of New York (sometimes hereinafter referred to and designated simply as 'Preferred'), a foreign corporation domiciled in the State of New York but authorized to do and doing business in this state.

Claimant, Arkansas Fuel Oil Corporation (hereinafter sometimes referred to simply as 'Arkansas' or 'Claimant') instituted the present proceeding against the Superintendent of Insurance of the State of New York, Domiciliary Receiver and Liquidator of Preferred (said Domiciliary Receiver and Liquidator being sometimes hereinafter referred to simply as 'Liquidator') and Rufus D. Hayes, Insurance Commissioner of the State of Louisiana, Ancillary Receiver of Preferred (sometimes hereinafter referred to simply as 'Ancillary Receiver'), seeking judgment against said Liquidator and Ancillary Receiver in the aggregate of.$9,258.59, together with interest and costs. The demands asserted by claimant consist of subrogated claims of materialmen arising from the performance of two certain building contracts entered into by and between claimant and a now bankrupt partnership known as Albright and Talley Construction Company for the remodeling of two service stations owned by claimant--one in the Town of Delhi and the other in the Town of Bastrop, and on which said projects Preferred executed performance bonds in the capacity of Surety.

On May 27, 1958, the trial court rendered judgment in favor of Claimant and against both Liquidator and Ancillary Receiver ordering claimant's judgment paid from the proceeds of the special trust fund held by the Liquidator pursuant to an agreement between Liquidator and Ancillary Receiver approved by the court on February 4, 1954, which said agreement is hereinafter discussed in more detail.

Both Liquidator and Ancillary Receiver initially appealed the adverse judgment to this court wherein, upon appellee's motion to dismiss predicated upon the contention the amount in dispute then exceeded the jurisdiction of this court in matters of this nature, the matter was transferred to the Supreme Court. See State v. Preferred Accident Insurance Co. of N.Y., La.App., 110 So.2d 246.

In the Supreme Court claimant-appellee again moved to dismiss the appeal which motion was denied. State v. Preferred Accident Ins. Co. of New York, 238 La. 372, 115 So.2d 384. On July 1, 1960, the Supreme Court transferred the appeal to this court pursuant to the recent revision and amendment of the constitutional provisions governing appellate jurisdiction.

On January 3, 1962, Cities Service Oil Company was duly and properly substituted as claimant-appellee in place and stead of Arkansas Fuel Oil Corporation by virtue of the latter being assimilated into the former pursuant to merger. Henceforth in this opinion 'claimant' shall be understood to be Cities Service Oil Company.

We believe a narration of the facts and circumstances culminating in the present action to be indispensable to a full understanding of the issues hereinafter set out and discussed.

Preferred, a casualty insurance company domiciled in the State of New York, was duly authorized to do and was engaged in business in this state. In accordance with our statutes, particularly LSA-R.S. 22:1021 and 1025, Preferred made special deposits with the Treasurer of this State aggregating the sum of $70,000.00. On April 30, 1951, Preferred was placed in liquidation because of insolvency, pursuant to order of the Supreme Court of New York issued in conformity with the statutes of that State. Appellant herein, Superintendent of Insurance of the State of New York was appointed Domiciliary Liquidator and Receiver of the defunct corporation.

Subsequently, on May 28, 1951, upon petition of the Insurance Commissioner of the State of Louisiana, said Commissioner was appointed Ancillary Receiver of Preferred for the State of Louisiana, in accordance with LSA-R.S. 22: Part XVI, and in such capacity, assumed responsibility for the control, disposition and distribution of the assets of Preferred within this state including the aforesaid special deposits in the sum of $70,000.00.

On or about November 25, 1953, the Liquidator and Ancillary Receiver entered into an agreement designed to expedite liquidation of the assets of Preferred held by the Ancillary Receiver while at the same time recognizing the legitimate claims of residents of Louisiana against the bankrupt in question. The agreement provided, inter alia, that the aforesaid special deposits were placed in the custody of the Liquidator in trust to be so held by him until the amount paid by the Liquidator out of general funds of the debtor corporation in his possession to Louisiana creditors equalled or exceeded the amount of the aforesaid special deposits entrusted to the Liquidator, at which time the funds in trust would then be transferred to the general fund of the corporation in liquidation and the aforesaid trust would be dissolved. A significant provision of the agreement reserved to those Louisiana creditors of Preferred coming within the purview of LSA-R.S. 22:757--22:763 (the Uniform Insurers Liquidation Act), the right to have their claims against Preferred adjudicated in the ancillary liquidation proceeding being conducted at Baton Rouge, Louisiana, it being further provided in said agreement that the ancillary proceeding in this state would remain open for that express purpose. The agreement further provided that adjudication of the claims of Louisiana creditors would be in accordance with the Uniform Insurers Liquidation act. The agreement adopted the provisions of the Uniform Insurers Liquidation Act with respect to claimants being required to give written notice to both the Liquidator and Ancillary Receiver at least 40 days prior to the date set for a hearing on their claims and also provided that within thirty days of date of such notice the Liquidator would give notice in writing to both claimant and the Ancillary Receiver of intention to contest the claim if the Liquidator intended to do so. The aforesaid agreement was duly approved by the Supreme Court of New York on December 15, 1953, and by the Honorable Nineteenth Judicial District Court, Parish of East Baton Rouge, Louisiana, on February 4, 1954.

A joint stipulation and agreement of facts appearing of record herein reveals that the events culminating in the filing of the present claim are not in controversy as between the adverse parties to this proceeding. For all practical purposes only questions of law are herein presented for resolution. Claimant, Cities Service (Arkansas) is a foreign corporation authorized to do and doing business in this state, its principal offices being situated in Shreveport, Louisiana.

On October 20, 1950, Arkansas (predecessor to Cities Service) entered into two separate contracts with Albright and Talley Construction Company, a partnership composed of Iley Paul Albright and Dolen Edward Talley (sometimes hereinafter referred to simply as 'contractor') for the remodeling and renovation of two service stations then owned by Arkansas and situated in the Towns of Delhi and Bastrop, respectively. The contract for the Delhi job covered remodeling for which the contractor was to be paid the sum of $6,780.00, while the agreement for the Bastrop project stipulated the contractor was to receive $13,900.00 for the renovation provided for therein. Both of said contracts required the posting of performance bonds which were obtained by the contractor from Preferred who signed said bonds as surety. By verbal agreement between Arkansas and the contractor, certain changes, alterations and additions were made to the plans and specifications covering both said projects. The changes called for in the Delhi job increased the contract price from the initial sum of $6,780.00 to $16,249.68, while those relative to the Bastrop project augmented the initial contract sum of $13,900.00 to $24,618.15. Preferred had no knowledge of the changes in question. Admittedly Preferred did not consent to any of the changes and neither did it receive any notice thereof from either Arkansas or contractor. The contractor subsequently defaulted in the performance of both projects. After the revised Delhi contract was completed and accepted and Arkansas had paid the contractor the original contract price of $6,780.00 and the additional sum of approximately $7,000.00 on the amended agreement, there remained a balance due contractor in the sum of $2,395.16. The contractor, however, then owed outstanding material claims in the sum of $3,449.57, which were paid by Arkansas against which contractor was given credit for the $2,395.16 remaining unpaid under the enlarged contract, thereby leaving a balance due in the sum of $1,060.41 which claimant seeks to recover herein. With regard to the Bastrop project, after paying all but $138.60 of the revised contract price of $24,618.15, Arkansas discovered that liens in the sum of $8,322.78 were outstanding against said work. Arkansas then paid all said liens, credited contractor with the $138.60 balance due and herein seeks recovery from Preferred of the remainder. By written instrument Arkansas was legally subrogated to the rights of each materialman paid and herein seeks to enforce its rights as subrogee against Preferred.

The present action was initiated pursuant to the provisions of LSA-R.S. 22:760, it being conceded that notices and objections...