Mutual Reserve Fund Life Association v. Phelps/Opinion of the Court

by David Josiah Brewer

United States Supreme Court

190 U.S. 147

Mutual Reserve Fund Life Association  v.  Phelps

 Argued: April 24, 27, 1903. --- Decided: May 18, 1903

Many questions were elaborately discussed by counsel both orally and in brief, but we are of the opinion that the decisions of two or three will dispose of the case. First, the service of summons on the insurance commissioner was sufficient to bring the association into the state court as party defendant. It was stipulated between the parties that the outstanding policies existing between the association and citizens of Kentucky were continued in force after the action of the insurance commissioner on October 10, 1899, and that on said policies the association had collected and was collecting dues, premiums, and assessments. It was, therefore, doing business within the state. Connecticut Mut. L. Ins. Co. v. Spratley, 172 U.S. 602, 43 L. ed. 569, 19 Sup. Ct. Rep. 308. The plaintiff was a citizen of Kentucky, and the cause of action arose out of transactions had between the plaintiff and defendant while the latter was carrying on business in the state of Kentucky under license from the state. Under those circumstances the authority of the insurance commissioner to receive summons in behalf of the association was sufficient. Such was the ruling of the court of appeals of Kentucky. Home Ben. Soc. v. Muehl, 22 Ky. L. Rep. 1378, 59 S. W. 520. In that case the society while doing business in the state issued the policy sued on, but in April, 1894, before the action was brought, ceased to do business and withdrew all of its agents. Service on the commissioner was held good. The court, in its opinion, after referring to the statute of 1870 and the change made by § 631, under which this service was made, said (p. 1379, S. W. p. 521):

'It is sufficient to say that the agency created by the act of 1893 is, in its terms, broader than that created by the act of 1870. The words of the later statute express no limitation. Whatever limitation shall be applied to it must be by implication. And when we consider the purpose of the act it becomes clear that it would be frustrated by the construction contended for. There is no need of the right to serve process upon the insurance commissioner so long as the company has agents in the state, and we think the purpose of the section was to provide a means of obtaining service of process upon foreign companies which no longer had agents in the state upon whom process might be served in suits upon contracts made in this state, whatever may be held as to suits upon contracts entered into elsewhere.' See also Germania Ins. Co. v. Ashby, 23 Ky. L. Rep. 1564, 65 S. W. 611.

Such decision of the highest court of Kentucky, construing one of its own statutes, if not controlling upon this court, is very persuasive, and it certainly is controlling unless it be held to be merely an interpretation of a contract created by the statute. As an original question, and independently of any expression on the part of the court of appeals, we are of the opinion that such is the true construction. This and other kindred statutes enacted in various states indicate the purpose of the state that foreign corporations engaging in business within its limits shall submit to controversies growing out of that business to its courts, and not compel a citizen having such a controversy to seek the state in which the corporation has its home for the purpose of enforcing his claims. Many of those statutes simply provided that the foreign corporation should name some person or persons upon whom service of process could be made. The insufficiency of such provision is evident, for the death or removal of the agent from the state leaves the corporation without any person upon whom process can be served. In order to remedy this defect some states, Kentucky among the number, have passed statutes, like the one before us, providing that the corporation shall consent that service may be made upon a permanent official of the state, so that the death, removal, or change of officer will not put the corporation beyond the reach of the process of the courts. It would obviously thwart this purpose if this association, having made, as the testimony shows it had made, a multitude of contracts with citizens of Kentucky, should be enabled, by simply withdrawing the authority it had given to the insurance commissioner, to compel all these parties to seek the courts of New York for the enforcement of their claims. It is true in this case the association did not voluntarily withdraw from the state, but was in effect by the state prevented from engaging in any new business. Why this was done is not shown. It must be presumed to have been for some good and sufficient reason, and it would be a harsh construction of the statute that, because the state had been constrained to compel the association to desist from engaging in any further business, it also deprived its citizens who had dealt with the association of the right to obtain relief in its courts. We conclude therefore, that the service of summons on the insurance commissioner was sufficient to bring the association into the state court, and, there being nothing else to impeach the judgment, it must be considered as valid.

Again, the proceeding for the appointment of a receiver was not a new and independent suit. It was not in the strictest sense of the term a creditor's bill. It did not purport to be for the benefit of all creditors, but simply a proceeding to enable the plaintiff in the judgment to obtain satisfaction thereof, satisfaction by execution at law having been shown to be impossible by the return of nulla bona. It is what is known as a supplementary proceeding. It is a proceeding known to the jurisprudence of many states, and one whose validity in those states has been recognized by this court. Williams v. Hill, 19 How. 246, 15 L. ed. 570; Atlantic & P. R. Co. v. Hopkins, 94 U.S. 11, 24 L. ed. 48; Ex parte Boyd, 105 U.S. 647, 26 L. ed. 1200; Canal & C. Streets R. Co. v. Hart, 114 U.S. 654, 29 L. ed. 226, 5 Sup. Ct. Rep. 1127. It is recognized in some cases in Kentucky. Well v. Deposit Bank, 18 Ky. L. Rep. 156, 35 S. W. 625; Caldwell v. Deposit Bank, 22 Ky. L. Rep. 684, 58 S. W. 589. This proceeding was treated by the state court as one merely supplemental in its character. It was initiated by the filing of an amended and supplementary petition. It was a mere continuation of the action already passed into judgment, and in aid of the execution of such judgment. As such it was not subject to removal to the Federal court, the time therefor prescribed by the statute having passed. 24 Stat. at L. 552, chap. 373, U.S.C.omp. Stat. 1901, p. 507; Martin v. Baltimore & O. R. Co. 151 U.S. 673-684, sub nom. Gerling v. Baltimore & O. R. Co. 38 L. ed. 311, 315, 14 Sup. Ct. Rep. 533. Being a mere continuation of the action at law, and not removable to the Federal court, the latter had no jurisdiction to enjoin the proceedings under it. It is contended that such a supplementary proceeding is not warranted by the laws of Kentucky; that there is no statute of that state justifying it. But it has been sanctioned by the judgment of the court in which the proceeding was had, and cannot be treated by the Federal courts as unauthorized. Laing v. Rigney, 160 U.S. 531, 40 L. ed. 525, 16 Sup. Ct. Rep. 366. See also Leadville Coal Co. v. McCreery, 141 U.S. 475, 478, 35 L. ed. 824, 826, 12 Sup. Ct. Rep. 28. If not warranted by the law of the state relief must be sought by review in the appellate court of the state, and not by collateral attack in the Federal court.

For these reasons we think the decision of the Court of Appeals of the Sixth Circuit was right, and it is affirmed.

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