173 Ky. 304 | Ky. Ct. App. | 1917
Opinion of the Court by
Denying writ of prohibition.
The petitioners, J. S. Lock and others, seek in this case, by petition filed in this court, a writ of prohibition against the respondent, Robert L. Stout, as Judge of the Franklin Circuit Court, to prevent him from further proceeding in the hearing or determination of the matters in controversy between the petitioners and J. "W. Jeffers, receiver of the Central Life Insurance Company, raised by the answer and cross-petition of the latter filed in an action pending therein, brought by M. C. Clay, Insurance Commissioner of the State of Kentucky, against the Central Life Insurance Company, growing out of its insolvency and the liquidation of its business and affairs.
The Central Life Insurance Company was incorporated under the laws of the State of Kentucky on July 3, 1911, with an authorized capital stock of $100,000.00, which, on the 17th day of January, 1912, was increased to $500,000.00. The business for which the corporation ■was organized and in which it engaged, was that of insuring the lives of persons who might be found willing to purchase of it insurance and accept of it policies therefor.
In December, 1915, the action mentioned was instituted in the Franklin Circuit Court by the Insurance Commissioner under and by virtue of section 753, Ky. Statutes, it being alleged in the petition that the insurance company was insolvent, necessitating the winding up of its affairs, and praying that an injunction be
After overruling in that case the same objections to the jurisdiction of the court that are here urged by the petitioners, and quoting from the several authorities deemed sufficient to support our reasons therefor, we, in the opinion, said:
“It is apparent, therefore, that while a creditor of an insolvent corporation may sue a stockholder at law upon his statutory liability, as allowed in Williams’ Exor. v. Chamberlain, 123 Ky. 150, that fact does not militate against the right of the creditor to sue in equity an insolvent corporation and its stockholders to enforce the statutory liability of the stockholders. The right to bring such equitable action has been recognized and allowed not only in the case of Castleman v. Holmes (4 J. J. Mar. 1), supra, but also in the more recent case of Gamewell Fire Alarm Tel. Co. v. Police Tel. Co., 116 Ky. 759. The action last mentioned was instituted by the creditors in the chancery court, by judgment of which*308 the statutory liability of a non-resident stockholder was enforced.....
“It is our conclusion that in an action brought to settle the affairs of an insolvent corporation in the hands of a receiver and wherein the latter is seeking to enforce the statutory liability of the stockholders, a court of equity has jurisdiction to grant the relief here sought against the several stockholders, though the amounts sued for be less than $50.00, respectively, and they reside and were summoned in a county or counties other than that in which the action was brought; and further, that such jurisdiction exists notwithstanding the fact that the receiver had a concurrent remedy at law by instituting actions at law against each stockholder to enforce his liability, in the county of his residence. In other words, such jurisdiction is possessed and may be exercised by the court because the right of the receiver to recover of each stockholder is incident to the settlement, of the corporation’s affairs; and for the further reasons, that to do so will prevent a multiplicity of suits and enable the court to do complete justice in the action before it.
“If right in the conclusion that the Kenton Circuit Court, law and equity division, has the jurisdiction claimed and attempted to be exercised by it, it follows that the venue of the action is fixed by section 65, Civil Code. Moreover, the expenses incident to the enforcement of the equitable remedy invoked by the receiver will be insignificant as compared with what such expense would be if he were compelled to resort to suits at law against the several stockholders sought to be held liable. Manifestly, in a suit at law against each stockholder, in the county of his residence, when required, the costs resulting in each of such actions would amount to nearly as much, and, in some instances, more than the amount of the assessment owing, and, in any event, such costs, together with those in the main action, when paid, would leave nothing of consequence to be distributed to the creditors of the corporation.”
We fail to see the distinction attempted to be made by counsel for the petitioners between this case and1 that of White v. Harbeson, Judge, supra. In that case the recovery sought by the receiver on cross-petition against the stockholders respectively, who were also policyholders, was $3.00 on each $100.00 of insurance in force which the company had granted; and, as it was a
In the instant case the liability of the stockholders sought to be enforced by the receiver does not arise out of an assessment, but out of their voluntary subscriptions for stock in the insurance company, which, it is alleged, have not been paid. The liability thus incurred, like that of the stockholders in White v. Harbeson, supra, is several and distinct But the fact that it arises out of contract instead of an assessment, does not in principle differentiate this case from that of White v. Harbeson. In iether case the recovery may be had by the receiver for the purpose of paying the debts of the corporation and settling its affairs. The receiver may sue for unpaid stock subscriptions, for, under section 547, Ky. Statutes, they constitute assets of the insolvent corporation, and for that reason may be subjected to the demands of its creditors. Louisville Banking Co. v. Eiseman, 94 Ky. 83; Tiger Shoe Mfg. Co.’s Trustee v. Shanklin, 125 Ky. 715. The corporation might as such, by suit prior to its insolvency, have enforced the collection of these unpaid subscriptions (though not in a single action against all of them), and when, by reason of its insolvency, its property and affairs were put into the hands of the receiver, it became his duty to collect the unpaid subscriptions for the benefit of the creditors of the corporation and to settle its affairs; in doing which he may, for the reasons stated in White v. Harbeson, in the one action brought to settle the affairs of the corporation and in which he was appointed receiver, sue all stockholders for unpaid subscriptions owing by them to the corporation.
The receiver is without power to collect of the stockholders of the insolvent corporation the double liability imposed upon them by section 547, Ky. Statutes, supra, because such double liability arises not only out of the insolvency of the corporation of which they are stockholders, but more particularly because of the fact that its assets have been exhausted and its debts in whole or in part left unpaid. In other words, the double liability imposed upon the stockholders of the corporation by the
Without further pursuing the analogy between the instant case and White v. Harbeson, Judge, supra, it is sufficient to say it would seem that all the reasons given in the latter case for the conclusion therein reached that the Kenton Circuit Court had jurisdiction in the one action brought to settle the affairs of the Kentucky Fire Insurance Company, at the suit of the receiver on cross-petition, to compel of the stockholders in the Kentucky Fire Insurance Company the payment of the amounts assessed against them respectively in behalf of the creditors of the insurance company, exist- and apply in behalf of the receiver in the instant case. In other words, the jurisdiction held to be in the Kenton Circuit Court in that case is, in the instant case, possessed and may be exercised by the Franklin Circuit Court, because the right of the receiver to recover of each stockholder is ancillary or incident to the settlement of the corporation’s affairs; and for the further reason that to allow the recovery by the receiver and here attempted will prevent a multiplicity of suits and enable the court to do complete justice in the one action before it.
In addition to his claim of jurisdiction for the reasons stated in White v. Harbeson, Judge, supra, the respondent contends that such jurisdiction is expressly conferred upon the Franklin Circuit Court by section 753, Ky. Statutes, which provides:
“If he is of the opinion, upon examination or other evidence, that a foreign insurance company is in an unsound condition, or if it has failed to comply with the law, or if its officers or agents refuse to submit to examination or to perform any legal obligation in relation thereto, or, if a life insurance company, that its actual funds are less than its liabilities, he shall revoke or suspend all certificates of authority granted to its agents, and shall cause notifications thereof to be published in some newspaper of this state having general circulation therein; and no new business shall thereafter be done by it or its agents in this Commonwealth while such default or*311 disability continues, nor until its authority to do business is restored by the commissioner. If, upon examination, he is of opinion that any domestic insurance company is insolvent, or has exceeded its powers, or has failed to comply with any provision of law, or that its condition is such as to render its further proceedings hazardous to the public or to its policyholders, he shall revoke or suspend all licenses issued to it or its agents, and cause notice thereof to be published in some paper having general circulation in the state; and it is hereby also made the duty of the commissioner to immediately notify the general agents of the foreign or domestic company suspended of the suspension, and it shall be the duty of said agents to immediately notify persons insured by them of such suspension by the commissioner, and for failure so to do upon the part of the commissioner or agent, he shall be fined not less than fifty nor more than one hundred dollars for each offense; he shall also apply to the judge of the Franklin circuit court, or the judge of the circuit court where the company is located, to issue an injunction restraining it in whole or in part from further proceeding with its business. Such judge may, in his discretion, issue an injunction forthwith, or upon notice and hearing thereon, and after a full hearing of the matter may dissolve or modify such injunction or make it perpetual; and may make all orders and decrees needful in the premises and may appoint agents or receivers to take possession of the property and effects of the company, and to settle its affairs subject to such rules and orders as the court may from time to time prescribe, according to the course of proceedings in equity: Provided, That if any injunction issued hereunder be dissolved, and the court or judge dissolving the same shall not state in the order or decree of dissolution that there were reasonable grounds for procuring such injunction, the cost of such proceeding shall be taxed and paid out of the funds of the insurance department.”
It will be observed that in addition to the other powers conferred upon him by the provisions of the section supra, the insurance commissioner of the state, in the event he discovers that any domestic insurance company is insolvent, or its condition is such as to render its further proceedings hazardous to the public or to its policy holders, has the power to revoke its license, and also to apply to the judge of the Franklin circuit court, or the judge of the court where the company is located, to issue an in
It is, therefore, our conclusion that the respondent, as judge of the Franklin circuit court, possesses and may rightfully exercise the jurisdiction asserted by him in this case. Therefore, his demurrer to the petition is sustained and writ of prohibition prayed by the petitioners is denied.