Under the statutes of Kentucky, service of a summons upon the
insurance commissioner in an action against an insurance company
doing business in the state is sufficient to bring the company into
court. This applies to a company whose license has been cancelled
by the commissioner but which after such cancellation has continued
to collect premiums and assessments on policies remaining in force.
A judgment based upon such service is, in the absence of anything
else to impeach it, valid.
A proceeding, based upon a judgment so obtained, for the
appointment of a receiver, is not a new and independent suit, but a
mere continuation of the action already passed into judgment, and
in aid of the execution thereof, and can be initiated by the filing
of an amended or supplementary petition. When such an amended
petition is filed, the action cannot be removed to the federal
courts, as the time prescribed therefor by the statute has already
passed. Nor has the federal court jurisdiction in an equity action
to enjoin proceedings under the supplementary petition, as it is a
mere continuation of an action at law. Where a proceeding is not
warranted by the law of a state, relief must be sought by review in
the appellate court of the state, and not by collateral attack in
the federal courts.
Page 190 U. S. 148
Section 631, Kentucky Statutes 1899 (Laws 1893, c. 171, sec.
94), reads as follows:
"SEC. 631. Before authority is granted to any foreign insurance
company to do business in this state, it must file with the
commissioner a resolution adopted by its board of directors
consenting that service of process upon any agent of such company
in this state, or upon the commissioner of insurance of this state,
in any action brought or pending in this state, shall be a valid
service upon said company, and if process is served upon the
commissioner it shall be his duty to at once send it by mail,
addressed to the company at its principal office, and if any
company shall, without the consent of the other party to any suit
or proceeding brought by or against it in any court of this state,
remove said suit or proceeding to any federal court, or shall
institute any suit or proceeding against any citizen of this state
in any federal court, it shall be the duty of the commissioner to
forthwith revoke all authority to such company and its agents to do
business in this state, and to publish such revocation in some
newspaper of general circulation published in the state."
On May 10, 1893, the appellant, the Mutual Reserve Fund Life
Association, hereinafter called the association, acting under said
section, by resolution of its board of directors, consented that
the Insurance Commissioner of Kentucky should be authorized to
receive service of process in any action brought or pending in
Kentucky, and also that like valid service of process might be made
upon every agent then or thereafter acting for it in Kentucky.
On October 10, 1899, the Insurance Commissioner cancelled the
license which had theretofore been issued to the association, and
gave it notice that from and after that date all authority granted
by his department to it, and all licenses issued to the agents of
the association to do business in the State of Kentucky, were
revoked. And from and after that date, the association had no agent
or agents in the State of Kentucky and did no new business whatever
in the state, but at one time, for the convenience of the holders
of certificates residing in Jefferson County, permitted them to
remit dues and assessments through the Western Bank, located in the
City of Louisville.
Page 190 U. S. 149
On February 28, 1900, James S. Phelps commenced an action in the
circuit court of Jefferson County, Kentucky, against the
association, alleging that, on July 8, 1885, he had made
application for membership in it, and that, on July 16, 1885, his
application had been approved and certificate of policy of
insurance issued to him. Breaches of the agreement on the part of
the defendant were alleged, and a judgment asked for $1,994.20. A
summons was issued and served on the Insurance Commissioner, and an
alias summons was also issued and served upon Ben Frese, as the
managing agent and chief officer and agent of the association in
Jefferson County. The defendant appeared specially and moved to
quash the service on each summons. The motion was heard on
affidavits, and overruled. The defendant taking no further action,
judgment was rendered on May 19, 1900, in favor of the plaintiff
and against it for $1,994 with interest.
On August 4, 1900, the plaintiff filed an amended and
supplemental petition, in which he alleged the filing of the
original petition, the judgment, the issue of execution, a return
of nulla bona; that the defendant had a large number of
policyholders in the state who at stated times and regular
intervals became indebted to it for premiums and assessments upon
its policies of insurance, and prayed for a general attachment, or
in lieu thereof the appointment of a receiver to take charge of the
business and property of the defendant in Kentucky, and that all
revenues and income accruing to it from policyholders and other
debtors be ordered paid to the receiver. Upon the filing of this
amended and supplemental petition the court appointed the Fidelity
Trust & Safety Vault Company, the other appellee, hereinafter
called the company, a receiver of all the property of the defendant
in Kentucky, directed it to receive and collect all moneys and
debts now owing or hereafter to accrue to the said defendant, and
ordered all debtors of the association to pay to the receiver all
premiums and assessments which might become due or owing to it;
such receivership to continue until the judgment of the plaintiff
and all costs and expenses had been paid, and then to terminate.
The company qualified as such receiver, and gave notice to the
policyholders of the defendant.
Page 190 U. S. 150
On August 22, 1900, the association applied by petition and bond
for a removal of the case to the circuit court of the United States
for the District of Kentucky, which application was denied. It does
not appear that any copy of the record was filed in the federal
court. But it commenced this suit in that court against Phelps (the
judgment creditor) and the company, to enjoin them from further
proceeding under the order made by the state court. The court
issued an injunction, as prayed for. 103 F. 515. On February 2,
1901, the defendants moved to dissolve the injunction, which motion
was overruled and an appeal taken to the United States Circuit
Court of Appeals for the Sixth Circuit. By that court, the decision
of the circuit court was reversed February 4, 1902, 112 F. 453, and
the case remanded with directions to dismiss the bill of complaint.
From such decree, the association appealed to this Court.
Page 190 U. S. 156
MR. JUSTICE B delivered the opinion of the Court.
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
Page 190 U. S. 157
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
Mutual Life Insurance Company v. Spratley, 172 U.
S. 602. 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
Benefit Society of New York v. Muchl, 22 Ky.Law. Rep. 1378. 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 section 631, under which this service was made, said (p.
1379):
"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.Law.Rep.
1564.
Page 190 U. S. 158
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
Page 190 U. S. 159
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;
Atlantic & Pacific
Railroad Company v. Hopkins, 94 U. S. 11;
Ex
Parte Boyd, 105 U. S. 647;
Street Railroad Company v. Hart, 114 U.
S. 654. It is recognized in some cases in Kentucky.
Caldwell v. Bank of Eminence, 18 Ky.Law.Rep. 156;
Caldwell v. Deposit Bank, 22 Ky.Law.Rep. 684. 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. 552;
Martin v. Baltimore & Ohio
Railroad, 151 U. S. 673,
151 U. S. 684.
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.
See also Leadville Coal Co. v. McCreery, 141 U.
S. 475,
141 U. S. 478.
If not warranted by the law of the state, relief must be sought by
review
Page 190 U. S. 160
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.
