Mutual Reserve Fund Life Assn. v. Phelps

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. •

APPEAL FROM THE CIRCUIT COURT OF APPEALS FOR THE SIXTH CIRCUIT. SbotioN 631, Kentucky statutes, 1899, (Laws 1893, cbap. 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 Beserve Fund Life Association, hereinafter called the association, acting under said section, by resolution of its board of direétors, 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 its-agents 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 Staté, 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. 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, and that on July 16, 1885, his application had been approved and a certificate of insurance issued to him. Breaches of the agreement on the part of the defendant were alleged, and a judgment asked for $1994.20. A summons was issued and served oh the insurance commissioner, ánd 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 de-. fendant taking no further action, judgment was rendered on May 19, 1900, in favor of the plaintiff for $1994 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 Iona; that the defendant had a large number of policy holders 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 policy holders and other debtors be Ordered paid to the receiver. Upon the • filing' of this amended and supplemental petition the court appointed the Fidelity Trust and Safety Yault 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 then owing • or thereafter to accrue to the said defendant, and ordered all debtors of the defendant to pay to such 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 policy holders of the defendant. On August 22, 19Ó0, 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 Fed. Pep. 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 coufrt the decision of the Circuit. Court was reversed February 4, 1902, 50 C. C. A.. 339; 112 Fed. Pep. 453, and the case remanded, with directions to dismiss the bill of complaint. From such decree the association appealed to this court. The allegations of the bill, which, undei deiendant’s motion must be taken as true, show that the relief squght by way "of injunction is to restrain the enforcement óf a void judgment entered iii a court without jurisdiction <f)f tbe'defendant who is the complainant in this action. The judgment on its face is valid, and under the pretended authority thereof the defendants in this action áre taking steps which will produce great and irreparable damages to complainant. I. The appeal is authorized by § 6 of the .act of March 3, 1891, because the jurisdiction of the Circuit Court rests not only on diverse citizenship but also, on a controversy arising under the Fourteenth Amendment. Loeb v. Columbia Township Trustees, 179 U. S. 472; American Sugar Refining Co. v. New Orleans, 181 U. S. 277; Huguley Mfg. Co. v. Galeton Mills, 184 U. S. 290. II. While § 720, Pev. Stat., prohibits an injunction to stay proceedings in any court of a State, it does not prohibit an in-. junction against parties who are attempting acts of trespass under color of a void order or judgment.-. If the order be void upon its face, ordinarily a defence thereto is ample at law; but if valid upon its face, as in this case, equity will relieve. York v. Texas, 137 IT. S. 15 ; Pennoyer v. 1Veff, 95 IT. S. 714 ;- Northern Pacific Py. Go. v. Kúrtzman, 82 Fed. Rep. 241, and cases cited on p. 243 ; Terre Haute etc. Ry. Go.- v. Peoria etc. Ry. Go., 82 Fed. Rep. 943. The difference between staying proceedings in a court and restraining trespass under a void, judgment or order of a court acting without jurisdiction is fundamen-' tal. Fitts v. McGhee, 172 IT. S. 516, 529; Osborn v. Bank, 9 Wheat. 738; Smyth v. Ames, 169 IT. S. 466; Balt. dé O. R. Co.,i. Wabash R. Go.,T19 Fed. Rep: 678. In fraud cases it. has always been argued that relief by injunction could not be granted owing to § 720, but this court has uniformly supported the jurisdiction. Marshall v. Holmes, 141 IT. S. 589, 599 ; other analogous cases are Trench v. Hay, 22 Wall. 238, 248; Robb v. Yos, 155 IT. S. 13, and see eases cited p. 38; Hietzsch v. Huide-kojoer, 163 IT. S. 494.; Wagner v.. Drake, 31 Fed. .Rep. 849; National Surety Go. v. State Bank, 120 Fed. Rep. 593. Section 720 is limited by the due process of law provision of the Fourteenth Amendment.' Decisions holding that replevin or injunction will not lie against an officer in possession of property-of a stranger to the proceeding, at the suit of such stranger, are entirely consistent- with the proposition that the property owner may maintain a suit to protect it agaiiist one assuming to act ■ under void process. Kern v. Huidekoper, 103 IT. S. 485, in which Taylor v. Oarryl, 20 How. 5S3; Freeman v. Howe, 24 How. 450; Buck v. Golbath, 3 Wall. 334, are distinguished; Gumbel v. Pitkin, 124 IT. S. 131, 146. See also Julian y. CJen-trod Trust Co., 115 Fed. Rep.’ 956 ; Shields v. Coleman, 157 U. S: 168, ,182; Central Nat. Bk. v. Stevens, 169 U. S. 432; Simpson v. Ward, 80 Fed. Rep. 561. The proposition that to determine the invalidity of, and give relief against, a state court order alleged to be void for want of jurisdiction it would be necessary to exercise appellate or re-visory jurisdiction over that court has been answered by this court. Johnson v. Waters, 111 U. S. 640, 667; Man'shall v. Holmes, 141 U. S'. 589, 599 ; Arrowsmith v. Gleason, 129 U. S. 86,98. Under § 285, Civil Code of Kentucky, the state courts are prohibited from enjoining the execution of a judgment of anothef court of the State even though, void, Jacobsen v. Wern-ert, 19 Ky. L. R. 662; and in a case like this no relief can be had except in the Federal courts, which are not bound by such a statute. Bcarrow v. Hunton, 99 U. S. 80. III. Although in every case of special appearance to contest jurisdiction ah, issue is raised as to facts'warranting jurisdiction, the defendant does not waive any right by the special appearance. Harkness v. Hyde, 98 U. S. 476; Mex. Cent. By. v. Pinkney, 149 U. S. 194, 209; Goldey v. Morning Hews, 156 U. S. 518, 526. There is no rule in Kentucky that such an appearance constitutes a general appearance, as was the case in York v. Texas, 137 TJ. S. 15, and Kauffman v. Wootters, 138 U. S. 285, but the rule is as above stated ; but an appeal cannot be taken without entering a general.appearance. Sun Mut. Ins. Co. v. Crist, 19 Ky. L. R. 305; Hewport Hews eta. Co. v. Thomas, 96 Kentucky, 613; Chesapeake etc. B. Co. v. Heath, 87 Kentucky, 651, 659; Maude v. Bodes, 4 Dana, 147. The ruling of a state court in determining its own jurisdiction is not conclusive in a direct proceeding to set aside a judgment or to enjoin its enforcement. Bose v. Himely, 4 Cranch, 241, 268; Elliott v. Peirsol, 1 Pet. 328, 340; Harris v. Hardeman, 14 How. 334, 341; Starbuck v. Murray, 5 Wend. 148, 158; Thompson v. Wallace, 18 Wall. .457, 468 ; and see also Cooper v. Hewell, 173. U. S. 555, and cases cited p. 565; and cases, supra. In cases of removal to the Federal courts the decision of the state court in favor of its own jurisdiction is regarded as a usurpation. Gordon v. Longest, 16 Pet. 97,104;' Insurance Co. v.. Dunn, 19 Wall. 214, 224; Bemoval 'Cases, 100 U. S. 457, 475; Bailroad Co. v. Mississippi, 102 U. S. 135. The authority of the insurance commissioner of the State to represent the association did not continue after its exclusion from the State. Home Ben. Soc. v. Muehl, 59 S. W. Rep. 520, .distinguished, and see Forrest v. Pittsburgh Bridge Co., 116 Fed.. Rep, 357. A state court cannot, under pretence of construing a statute, affect the right or duty of the Federal court to determine if a corporation was actually served witbin the jurisdiction. Swann y. Mut. Res. F. L. Assnl, 100 Fed. Kep. 922; Millan v. Mut. Res. F. L. Assn., 103 Fed. Kep. 764; Friedmann v. Empi/re L. Ins. Co., 101 Fed. Kep. 535;' Mut. Res. F. L. Assn. v. Boyer, 62 Kansas, 31, 37-42St. Clair v. Cox, 106-TJ. S. 350; People v. Com.'Alliance I. Ins. Co., 7 N. Y. App. Div. 297.. The inquiry as to whether the state court ácquires jurisdiction is a Federal question. Pennoyer v. Neff, 95 TJ. S. 714,' 733; Conn. Mut. L. Ins. Co. v. Spratley, 172 TJ. S. 602, 609; MeCord Lumber Co. v. Doyle, 97 Fed. Kep. 22.; Moredock v. Kirby, 118 Fed. Kep. 180; Cady v. Associated Colonies, 119 Fed-. Kep. 420. See also Williamson v. Berry, 8 How. 495, 540. As to the receivership proceeding, Davidson v. Simmons, 11 Bush, 330, does not apply, but a summons was requisite to jurisdiction. Caldwell v. Bank, 58 S. W. Rep. 589; Me Cab lister's Adm'r v/Savings BJc., 80 Kentucky, 684; Brownfield v. Dyer, 7 Bush, 505;..Hall v. Crotjan, 78 Kentucky, 11; Kelly v. Stanley, 86 Kentucky, 240; Redwine v. Underwood, 101 Kentucky, 191; §§ 70, 439, 441, Civil Code of Kentucky. Kentucky statutes, 1899, §§ 965,968-, limit the control of courts over judgments for sixty days. Louisville etc. Lime Co. v. ' Kerr, 78 Kentucky, 12. Judgments cannot be controlled by the court after the term is over. Brooks v. Railroad Co., 102 TJ. S.. 107; Muller v. Ehlers, 91 TJ. S. 249 ; City of Manning v. German Ins. Co., 107 Fed: Kep. 52; Elder v. Rickman etc. Min. Co., 58 Fed. Rep. 536 ; Van Dorn v. Penn. R. R. Co., 93 Fedr/ Rep. 260. See also Sibbald v. United States, 12 Pet. 488, 492 ; ' Bronson v. Schulten, 104 TJ. S. 410, 415; Phillips y. Negley, 117 TJ. S. 665, 672; Hickmam v. Ft. Scott, 141 TJ. S. 415; Morgan's S. S. Co. v. Texas etc. Ry. Co., 32 Fed. Rep. 525, 530 ; McGregor v. Vermont L. & T. Co., 104 Fed. Rep. 709; United States v. 1621 Lbs. of Fur Clippings, 106 Fed. Rep. 161; Reynolds v. Mcmhattam Trust Co., 109 Fed. Rep. 97. In Kentucky the filing of an amended or other pleading after judgment necessarily requires reopening the case and setting aside the judgment, and this can only be done in accordance with § 579. Brown v. Vancleave, 86 Kentucky, 381; Meadows v. Goff, 90 Kentucky, 540; Civil Code Kentucky, §§ 342, 414, 518, 520; Anderson v. Anderson, 18 B. Mon. 95; Hooker v. Gentry, 3 Met. 463, 469; Scott v. Scott's JExr., 9 Bush, 174; Coffey v. Proctor Goal Go., 14 Ky. L. B. 415; Maddox's JExr. v. Williams,' 87 Kentucky, 147. In Kentucky a void judgment binds nobody, but may be resisted collaterally as well as attacked directly. Spencer v. Parr-sons, 89 Kentucky, 577; Stevens v. Peering, 10 Ky. L. It. 393; Jacobsen v-. Wernert, 19 Ky. L. It. 662. There is nothing in these principles inharmonious with the rule that a court’s jurisdiction continues until the judgment is satisfied.' Weyman v. Southard, 10 Wheat. 1; Biggs v. Johnson County, 6 Wall. 166, ■187, 197; Oovell v. Heyman, 111 U. S. 176, 183; Bio Grande B. B. Co. v. Gomila, 132 TJ. S. 478,483. The determination of the state court as to form of procedure not involving jurisdiction is conclusive. Gornett v. Williams, 20 Wall. 226, 250; Laing v. Bigney, 160 U. S. 531; ílelcking v. Pfaff, 82 Fed. Bep. 403; Lynde v. JLynde, 181 U. B. 183; Fish v. Smith, 73 Connecticut, 377, 391. I. The judgment of the state court was valid, being based upon jurisdiction in the court both of the subject matter and of th e parties. The service on the insurance commissioner was sufficient. Conn. Mut. L. Ins. Co. v. Spratley, 172 -U. S. 602; Swann v. Mut. Bes. F. L. Assn., 100 Fed; Bep. 922; Kerr on Insurance, § 26 ; Home Ben. Soc. v. Muehl, 22 Ky. L. B. 1378; Germania Ins. Co. v. Ashby, 23 Ky. L. B. 1564. A state court can construe its own statutes. Commercial Ba/nk vi Buckingham, 5 How. 317; Lawler v. Walker, 14 How. 149; Central Land Co. v. Laidley, 159 H. S. 103. The second summons was properly served on one who was 'ascertained to be the local treasurer of the defendant. All questions raised and determined in the state court were in the Federal court res adjudicata. Mock v.. Insurance Co., 10 Fed. Bep. 696; Work on Courts and their Jurisdiction, p. 164; Black on Judgments, § 273. II. The appointment of the receiver was valid and the procedure adopted was legally sufficient. Caldwell v. Deposit Bank, 18 Ky. L. It. 156; Lewis v. Deposit Bank, 22 Ky. L. It. 684; Brown v. Vancleave, 86 Kentucky, 381; Meadows v. Goff, 90 Kentucky, 540; Leathe v. Thomas, 97 Fed. Rep. 136. Laing v. Rigney, 160 tí. S. 542, cited and distinguished. A court of equity has power to sequester property through the medium of a receivership when the circumstances of the cause appear to demand such action. Shields v. Coleman, 157 U. S. 178 ; Thompson on Corp, § 6880; Cook on Corp. § 863, p. 2017; Commercial Bank v. Corbett, 5 Sawyer, 172, The appointment of the receiver was a question of procedure only, and due process of law under the Fourteenth Amendment was not involved. Missouri v. Lewis, 101 U. S. 31;. Walker -v. ■Saumnet, 92 IT. S. 93 ; Brown v. New Jersey, 175 Ú. S. 172; Hurtado v. California, 110 U. S. 516; Hodgson v. Vermont, 168 IT. S. 262; Bolin v. Nebráska,' 176 IT. S. 83; Iowa Central v. Lowct, 160 U. S. 389. . - III. The proceedings subsequent to the rendition of the judgment were not removable'to the Federal court; the proceeding was in execution of a judgment. Dere v. Strother, 10 Fed. Kep. 406; Gookv. Whitney, 3 Woods, 715; Claftin v. McDermott, 12 Fed. Kep. 375 ; Cortes Co. v. Thannhausen, 9 Fed. Kep. 226; Desty’s Fed. Procedure, 9 th ed. p. 448. The petition came too late. Fidelity Trust Co. v. N. M. o& M. Co., 70 Fed. Kep. 403. The construction by the state court of § 631 of Kentucky statutes will be adopted- by the Federal court if it does not violate the Constitution. Com. Bank v. Buckingham, 5 How. 326 ; Murray v. Gibson, 15 How. 423; Guthrie on Fourteenth Amendment, p. 44. IY. The property impounded by the receivership, was not a trust fund exempt from process in this suit. Missionary Soc. v. Hinman, 13 Fed. Rep. 161; Beckett- v. Sheriff, 21 Fed. Kep. 32; Simpson v. Ward, 80 Fed. Kep. 561. The state court was the proper tribunal to decide.this question. Dere v. Strother 10 Fed. Rep. 406; Riggs v. Johnson County, 6 Wall. 198; Central Bank v. Stevens, 169 ÍT. S. 432. Y. No multiplicity of suits was threatened. VI, VII. The state court possessed jurisdiction, and the receivership was only a proceeding to aid execution of the judgment previously obtained ; and the Federal court was without authority to enjoin. § 720, U. S. Eev. Stat.; Diggs v. Walcott, 4 Cranch, 179 ; Taylor v. Carryl, 20 How. 583, and'English decisions there cited as to jurisdiction; Peak v. Jennes, 7 How. 612; Oovell v. Heyman, 111 IT. S. 179; Senior y. Pierce, 31 Fed. Eep. 628 ; Dohn v. Ryan, 31 Fed, Eep. 638; Rothschild v. Harbrook, 65 Fed. Eep. 284; In Re Hall, 73 Fed. Eep. 530 ; Leathe v. Thomas, 97 Fed. Eep. 136; Mills v. Provident Trust Co., 100 Fed. Eep. 344; Southern Bank v. Thornton, 75' Fed. Eep.-929; .Freeman v. Howe, 24 How. 450; Buck v. Colbath, 13 Wall. 334; Am. Assn. v. Hurst, 59 Fed. Eep. 5 ; Hutchinson v. Oreen, 6. Fed. Eep. 838 ; Rensselaer v. Bennington R. Co., 18 Fed. Eep. 617; Yick Wo v. Crowley, 26 Fed. Eep. 207; Rhodes Mfg. Co. v. Hew Hampshire, 70 Fed. Eep. 72; Dillon v. Kansas City R. Co:, 43 Fed. Eep. Ill; Missouri R. Co. v. Scott, 13 Fed. Eep. 793; Tarble's Case, 13 Wall. 401; Gates v. Bucki, 53 Fed. Eep. 964. Cases cited by appellant distinguished. VIII. The proper method of bringing to the attention of a Federal court the decision of a state court, involving the merits or jurisdiction is by-an appeal to the highest court of the State and then a writ of error to the Supreme Court of the United States. C. d¡ O. R. R. Co. v.' White, 111 U. S. 137,-and cases cited; Peck v. Jennes, 7 How. 612; cases cited in Judge Lurton’s opinion below. A writ of prohibition might have been secured from the Kentucky Court of Appeals if the lower coui’t was proceeding without jurisdiction. Weaver v. Toney, 107 Kentucky, 419, and see. Youngstown Bridge Co. v. White's Admr., 105 Kentucky^ 282.