Reynolds v. Stockton

by David Josiah Brewer

United States Supreme Court

140 U.S. 254

Reynolds  v.  Stockton

• This case comes to us on error from the court of chancery of the state of New Jersey, and the question presented is whether that court gave full faith and credit to a judgment obtained in one of the courts of the state of New York. The facts are these: In the year 1872 there were two life insurance companies,-one the New Jersey Mutual Life Insurance Company, a New Jersey corporation, doing business at Newark, N. J., and the other the Hope Mutual Life Insurance Company, a New York corporation, doing business in the city of New York. In December of that year an agreement was made between the two companies by which the New Jersey company reinsured the risks of the New York company, took its assets, and assumed its liabilities. From that time the business of the two companies was done in the name of the New Jersey company, until January, 1877, when that company failed, and its assets were taken possession of by the New Jersey court of chancery, which appointed Joel Parker receiver. Subsequently he was appointed ancillary receiver by the supreme court of New York, in a suit instituted therein by the attorney general of New Jersey, and William Geasa, a creditor, and, as such ancillary receiver, received the sum of $17,040.59. Prior to 1886 he resigned his position as receiver under appointment of the court of chancery of New Jersey, and was succeeded by Robert F. Stockton, the present receiver. No substitution was made in New York in respect to the ancillary receivership. On March 22, 1886, an order was entered in the suit pending in the supreme court of New York, making certain allowances to counsel, referee, and receiver out of the funds in the hands of the ancillary receiver, and directing him to pay over the balance to the receiver appointed by the court of chancery of New Jersey, and discharging him, and the sureties on his bond as ancillar re ceiver, from all further liability, on compliance with this order. This order was complied with, and the balance of the funds turned over to the New Jersey receiver. Subsequently to these proceedings, and on the 11th day of October, 1886, a judgment was entered in the supreme court of the state of New York as follows: 'It is adjudged that the plaintiffs recover of Joel Parker, as receiver of the New Jersey Mutual Life Insurance Company, and against the New Jersey Mutual Life Insurance Company, the sum of one million and ten thousand four hundred and ninety-six dollars and twenty-nine cents, the money so recovered to be brought by the plaintiffs into court and distributed in accordance with the provisions of the original decree herein, and such further directions as may be made by the court herein on the application of any party in interest.' This is the judgment whose non-acceptance by the court of chancery in New Jersey produces the present controversy. The contentions of the defendant are that this judgment was entered in the absence of the defendant, and was not responsive to the issues presented by the pleadings, and therefore might rightfully be ignored by every other tribunal; and, secondly, that if by any strained construction of the pleadings it could be held responsive thereto, it was entered against a party who had ceased to have the right to represent the defendant's interest, and, because of the absence of the real representative of the defendant's interest, was a judgment in a suit inter alios, and not obligatory upon the defendant. For a clear understanding of the questions presented by these defenses a further statement of facts is necessary. Prior to the reinsurance, and when the New York company was acting as an independent company, it had, in obedience to the laws of New York, deposited with the superintendent of the insurance department of that state $100,000, in accepted securities, as a fund for the protection of its policy-holders. After the contract of reinsurance, after the failure of the New Jersey company, and the appointment of Parker as its receiver, and after his appointment as ancillary receiver by the court of New York, and on February 7, 1889, a suit was commenced in the supreme court of New York, entitled as follows: 'New York supreme court, Kings county. Henry E. Reynolds, individually, and Henry E. Reynolds, as executor, and Georgiana L. Reynolds, as executrix, of the last will and testament of Moses C. Reynolds, deceased, Hervey B. Wilbur, Harry A. Wilbur, Robert T. O'Reilly, Elizabeth M. O'Reilly, Margaret B. Detmar, Elizabeth S. Sprague, and John P. Traver, plaintiffs, against John F. Smyth, as superintendent of the insurance department of the state of New York, the Hope Mutual Life Insurance Company, of New York, Joel Parker, receiver of the New Jersey Mutual Life Insurance Company, and the said the New Jersey Mutual Life Insurance Company, defendants. Complaint.' The plaintiffs in that suit were policy-holders in the New York company, with one exception, and that is the lastnamed plaintiff, who was a stockholder therein. This suit was obviously quasi in rem,-one to seize and appropriate to the claims of these various plaintiffs the securities deposited by the New York company, as a trust fund, with the superintendent of the insurance department.

The first paragraph of the complaint discloses the purposes and object of the suit. It is as follows: '(1) That the plaintiffs, the policy-holders hereinafter name, sue and bring this action on behalf of themselves and all others who are policy-holders in the Hope Mutual Life Insurance Company of New York, as well as all who are interested in the trust fund hereinafter mentioned, and who shall in due time elect to come in and seek relief by contributing to the expenses of this action.' It is true that the second paragraph in the complaint, which is as follows: 'That the plaintiff, the stockholder hereinafter named, sues and brings this action in behalf f h imself and all others who are stockholders in the said the Hope Mutual Life Insurance Company of New York, as well as in behalf of all who are interested in the assets of the said company or the trust fund hereinafter mentioned, and who shall elect to come in and seek relief by contributing to the expenses of this action,' suggests a broader field of inquiry and a larger demand; but the intimation therein contained of a proceeding in behalf of all interested in the assets of the New York company (and it is only an intimation) is so clearly limited by the subsequent wording of the complaint that a general reading of the whole complaint makes manifest the fact that the scope and object of the suit was to reach and appropriate this fund deposited with the superintendent of the insurance department of the state of New York. After this, we find in paragraphs 13 and 14 these allegations, the intermediate paragraphs simply disclosing the respective interests of various plaintiffs: '(13) These plaintiffs, on information and belief, further show that when the said the Hope Mutual Life Insurance Company of New York commenced business as such it deposited with the superintendent of the insurance department of this state, as provided by the provisions of the act under which it was organized, one hundred thousand dollars in certain securities belonging to said company, as a fund for the protection of its policy-holders, said securities comprising, as the plaintiffs are informed and believe, United States bonds, bonds and mortgages, and cash, being of the value of one hundred thousand dollars. (14) That the defendant John F. Smyth is the superintendent of the insurance department of the state of New York, and as such has the sole control and custody of the said securities and fund, and now has and holds the same and every part thereof as a fund for the protection and security of the policy-holders in the said the Hope Mutual Life Insurance Company of New York, with the increase and accumulations thereof and interest thereon which has been collected by the superintendent of the insurance department, and that the said fund, together with the increase, interest, and accumulations thereof, belong to the plaintiffs, the policy-holders, to the extent of the value of their respective policies, issued by the said insurance company as aforesaid.' Paragraph 15 alleges the contract of reinsurance. Paragraph 16 is as follows: 'These plaintiffs further aver, on information and belief, that the said insurance companies had no power or authority to enter into said contract; that the said contract is, and at the date thereof was, wholly null and void, but that if valid it conveyed and transferred to the defendant the New Jersey Mutual Life Insurance Company no interest whatever in the fund and securities on deposit as aforesaid, nor in any of the assets or property of the said company, except such as may remain after all the claims of the policy-holders in the said the Hope Mutual Life Insurance Company of New York are satisfied and discharged;' and contains the averment that the contract of reinsurance gave to the New Jersey company no interest whatever in the funds deposited with the insurance commissioner. Paragraphs 17 and 18 are in respect to the cessation of business by the New York company, and the assumption of its business by the New Jersey company. Paragraph 19 is in these words: 'The plaintiffs, the policy-holders, therefore claim and allege that they are entitled to receive the amount due on their respective policies of insurance issued to them by the said the Hope Mutual Life Insurance Company, out of the fund and securities in the hands of the defendant, the superintendent of the insurance department of the state of New York, and should be paid out of the said fund the value of their said respective policies, and that the respective amounts due to them on their said policies of insurance so issued as aforesaid are a lien on the fund and securities and on all the interest and accumulations thereof in the handsof the said superintendent of the insurance department to the extent of the value of each of their said policies, as the same shall be ascertained and determined by this court;' and discloses the contention of the policy-holders, and their claims upon simply the fund deposited with the insurance commissioner. Paragraphs 20 and 21 aver the appointment of the receiver by the court of chancery of New Jersey, and the lack of power in any one to collect the interest on the securities deposited with the insurance department since December 31, 1872. Paragraphs 22 and 23 set forth the interest of Traver, the lastnamed plaintiff, as stockholder in the New York company. Paragraph 24 alleges, in behalf of said last-named plaintiff, the invalidity of the reinsurance arrangement between the two insurance companies; the title of the plaintiff to his interest as stockholder in the New York company; and closes with the averment that he is 'rightfully entitled to be paid therefor, as such owner and holder of said stock, his distributive share out of any surplus which may remain of the said trust fund, and the accumulations thereof in the hands of the superintendent of the insurance department, after paying the policy-holders aforesaid in the said company.' Paragraphs 25, 26, and 27 are in respect to some other proceedings, which do not affect the question in controversy here. Paragraph 28 contains allegations in respect to the amount of the actual fund in the hands of the superintendent of insurance. And upon these various averments the complaint concludes with this prayer: 'Wherefore these plaintiffs demand judgment that the defendant John F. Smyth, the superintendent of the insurance department of the state of New York, be adjudged to account for all sums of money, bonds and securities which were deposited in his hands by the defendant the Hope Mutual Life Insurance Company of New York, and for all the interest, increase, and accumulations of the said fund, and every part thereof; that the said securities be ordered to be sold by order of this court; that the proceeds thereof be distributed among the plaintiffs and other policy-holders of the said the Hope Mutual Life Insurance Company in the proportion in which they are entitled to the same; that the said the Hope Mutual Life Insurance Company of New York may be dissolved and adjudged by this honorable court to have surrendered and abandoned all its rights, privileges, and franchises as an incorporate life insurance company, and that, after the payment of the policy-holders and creditors of the said company, any surplus that may be left of the said trust fund and accumulations thereof may be distributed among the stockholders of the said company, and that the plaintiffs may have such other, further, or different order or relief in the premises as may be just and equitable; and that the defendant John F. Smyth, the superintendent of the insurance department, his officers, servants, agents, and attorneys, and all other persons acting for or under him, be enjoined from converting the said securities, or paying or distributing or parting with the same, or any part thereof, except under and pursuant to an order or decree to be entered in this action.'

While the New York company was made party defendant, it does not appear that it was served with process; and it made no appearance and filed no answer. The only answers filed were that of the superintendent of the insurance department and the joint answer of Parker, as receiver, and of the New Jersey company. The last answer, containing many denials and some admissions, did not assume to put in issue the question of the indebtedness of the New Jersey company to any of the plaintiffs; but, accepting the obvious purpose of the complaint, it met its allegations with an assertion of right in the New Jersey company to the fund in the hands of the superintendent of the insurance department. The answer of the superintendent of the insurance department, admitting the receipt of the fund, put in issue several of the allegations of the complaint; and rested his denial of plaintiffs' right on the existence and validity of the proceedings referred to in paragraphs 25, 26, and 27 of the complaint. Upon these pleadings the case proceeded to trial. The preliminary order was one of reference, on January 15, 1880, to James W. Husted. After some interlocutory proceedings, a final report was made by the referee on February 24, 1885, and thereafter, on March 13, 1885, a decree was entered, which decree confirmed the report of the referee, and made final disposition of the funds in the hands of the superintendent of the insurance department in partial payment of the various claims presented. It also, in paragraph 8, contained this reservation: 'And it is further ordered that either party to this action, or any person interested in the subject-matter thereof, have liberty to apply for further directions on the foot of this decree, and the question of the indebtedness of Joel Parker, as receiver of the New Jersey Mutual Life Insurance Company, and the former superintendent, John F. Smyth, and William McDermott, and Messrs. Harris and Rudd, reported by referee Samuel Prentiss, be reserved.' Thereafter, and on October 11, 1886, as heretofore noticed, and apparently on the reservation in paragraph 8, as above quoted, and on notice to the attorney who had represented Parker, the receiver, and the New Jersey company, the judgment was entered in favor of the plaintiffs for one million and odd dollars, as heretofore stated. The court of chancery of New Jersey, when this judgment was presented, declined to recognize this as an adjudication against the existing receiver or the assets of the insurance company in his hands. On appeal to the court of errors and appeals of that state, this decision of the chancery court was affirmed, and the case remanded to that court for further proceedings. The opinion of the court of errors and appeals will be found in 43 N. J. Eq. 211, 10 Atl. Rep. 385.

A. Q. Keasbey and R. J. Moses, Jr., for plaintiffs in error.

[Argument of Counsel from page 262-263 intentionally omitted]

F. W. Stevens, for defendant in error.

BREWER, J.

Notes