Ohio Valley Fire & Marine Insurance v. Wash

Opinion of the Court by Commissioner Sandidge Affirming. The appellant, Ohio Valley Fire and Marine Insurance Company, is a Kentucky corporation and for some time prior to November 13, 1923, had been engaged in the business suggested by its name, with its principal office and place of business at Paducah, Kentucky. Prior to that date it had become involved in- financial difficulties which became so acute that it was admittedly insolvent. On that date, acting by its board of directors, at a meeting duly called and by resolution duly adopted and recorded in the minute books, it made a voluntary assignment for the benefit of its creditors and conveyed all its property to an assignee to effect its liquidation and a settlement of its affairs. On the following day A. M. Wash, then the insurance commissioner for the state of Kentucky, instituted in the Franklin circuit court a proceeding, under section 573, Kentucky Statutes, by which he sought, due to the insolvency of appellant, to have it enjoined from further doing business and to have a receiver appointed to take charge of its business, property and effects and to settle its affairs. A temporary restraining order was granted by that court and a summons issued against appellant — 820 — notifying it to appear before the judge of that court, at Paris, Kentucky, on November 19, 1923, for a full hearing upon the matters involved. On the hearing had pursuant to that notice, appellant filed an answer admitting its insolvency and pleading its prior assignment for the benefit of its creditors in bar of that court’s right to proceed further with the action instituted by the commissioner of insurance. The court below held that under the law an insolvent fire insurance company is without authority to make an assignment for the benefit of its creditors, and appointed a receiver to take charge of the business and property of appellant, with direction that he proceed with its liquidation in the proceeding instituted before it by the appellee insurance commissioner. This appeal is prosecuted from that judgment. It thus is obvious that the questions presented by the appeal may be answered by determining whether a fire insurance company, admittedly insolvent, created and doing business under the Kentucky Statutes, has the right to make a voluntary assignment for the benefit of its creditors; or whether the method provided by section 753, Kentucky Staiutes, by which the affairs of an insolvent fire insurance company may be wound up and settled, is exclusive of all other proceedings for that purpose; The insurance legislation now in force in Kentucky is embraced in article 4 of chapter 32, Kentucky Statutes, 1922, there being something over a hundred sections of same. It is contended by appellee that the insurance law of this state included therein is all inclusive or the whole law of the subject; that insurance companies have no rights beyond those provided for in those sections of our statutes; that since, among other things, there is provided a complete and an adequate remedy by which the affairs of an insolvent insurance company may be settled and its liquidation be accomplished for the benefit of its creditors, policyholders and stockholders, such proceedings, although not expressly declared to be so, by implication must be held to be the exclusive remedy for that purpose. On the other hand, it is contended by appellant that the sections of the statutes above relating to the question provide only a method by which the insurance commissioner may bring about the liquidation of ah insolvent fire insurance company; that the language of the statute providing for such remedy does .not expressly and is not broad enough to repeal by — 821 — implication the general law on the subject of assignments for the benefit of creditors; that such provisions were not intended to be the exclusive remedy for the liquidation of an insolvent fire insurance company; that it had the right under the general law on the question to make a voluntary assignment for the benefit of its creditors; and that having done so prior to the institution of the action by the insurance commissioner such action was barred and should have been dismissed. It will be admitted that at the time when the present statutes relating to fire insurance companies were enacted any business concern, whether individual, partnership or corporation, had the right at common law to make an assignment for the benefit of its creditors. To determine the question, then, presented by this appeal, we must determine whether or not by the statutes in question the common law right to make a voluntary assignment was either expressly or by implication repealed. From Grimes, et al. v. Central Life Insurance Company, 172 Ky. 118, we quote the following as embodying the general rules relative to the question here presented: ‘ ‘ The well established rule is, that where a right exists by the common law, and there is a remedy for a violation of that right by the common law, and the statute provides another remedy, the one provided by the statute is not exclusive of the common law remedy, unless the one created by the statute is expressly or by implication made exclusive by the statute. Wells v. Steele, 31 Ark. 219; People v. Craycroft, 2 Cal. 243; Washington, etc. v. State, 19 Md. 239; Bellant v. Brown, 78 Mich. 294; State v. Bettinger, 55 Mo. 596; McKay v. Woodle, 28 N. C. 252; Goodrich v. Milwaukee, 24 Wis. 422. “If the right is a new one created by statute, and a remedy for its violation is provided by the statute, then the remedy provided by the statute is exclusive of any other. Russell v. Muldraugh’s Hill C. & C. Turnpike Road Co., 13 Bush 307; Ky. River Navigation Co. v. Commonwealth, 13 Bush 435; Roberts v. Landecker, 9 Cal. 262; Butler v. State, 6 Ind. 165; Ryan v. Ray, 105 Ind. 101; Chandler v. Hanna, 73 Ala. 390; Cole v. Muscatine, 14 Iowa 296. — 822 — “If a remedy for the violation of a right is given by statute, and it is not expressly declared, to be exclusive, no implication will arise that it is intended to be exclusive, where it is inadequate for the purpose, and in such cases the ordinary processes of the law may be resorted to. Johnston v. Louisville, 11 Bush 527; Fletcher v. State Capitol Bank, 37 N. H. 369; Murriam v. Moody, 25 Iowa 170.” The current history with reference to the subject then being legislated upon, the evils to be remedied, the objects to be promoted, the state of the laws at that time and the results which would follow from different constructions, all of which may be looked to by us as an aid to the construction of the statutes in question, were elaborately set forth in the learned opinion in the Grimes case, supra, and we feel that we need not lengthen this opinion-by their repetition. In that case a portion of the stockholders, one of whom was a policyholder in the Central Life Insurance Company, sought to have a receiver for that company appointed to settle its accounts, wind up its affairs and distribute its assets among its creditors, policyholders and stockholders according to their respective rights. The company resisted and, in support of its contention that its adversaries had no authority to institute the action, invoked the provisions of section 753, Kentucky Statutes, contending that by that section of the statutes the common law right of a stockholder and creditor of an insolvent life insurance company to have a receiver appointed and its assets liquidated had by implication been repealed and that that section of the statutes provided the exclusive remedy on the subject. In the opinion in the Grimes case, supra, the extent and comprehensiveness of the chapter on insurance was exhaustively set forth, and we feel that we may by reference to that opinion save ourselves the necessity of repetition. We held in that case that the statute in question by implication repealed the common law right of stockholders and policyholders of an insurance company to have a receiver appointed and the affairs of the company liquidated by their action for that purpose. The adequacy of the remedy provided by the statute above to protect the stockholders, policyholders and creditors of such corporations was assigned as the reason for holding that the remedy provided by section 753, Kentucky Statutes, was exclusive. — 823 — Appellant contends, however, that in as much as the Grimes case was an effort by a portion of the stockholders and policyholders of that life insurance company to have it declared insolvent and a receiver appointed to wind up and settle its affairs, and in as much as section 753 of the statutes expressly provides for such action by the insurance commissioner upon its being ascertained that the company in question is in an insolvent condition, the remedy there provided for being exactly the same as that sought by plaintiffs in the Grimes case, this court properly held the remedy provided for by the statutes to be exclusive and to be the only action authorized in an attack upon an insurance company to have it declared insolvent and its affairs settled by a court’s receiver. But it contends that there is a distinction between such a 'proceeding and the one instituted by appellant here, where it voluntarily made an assignment for the benefit of its creditors. It contends that the statute in question provided a remedy only for an attack upon an insurance company to have it declared insolvent and its affairs settled by a court’s receiver, but that neither expressly nor by implication do the provisions of the act in question repeal the common law or statutory right of this corporation voluntarily to make an assignment for the benefit of its creditors. By a study of the various provisions of our statutes with reference to the general subject of insurance and with reference to the particular subject of fire insurance and with reference to the creation of the office of insurance commissioner, with the duties and powers conferred upon him, we find that no insurance company, either fire or life, may be created or do business in Kentucky except with the consent and approval of the insurance, commissioner. Its charter or articles of incorporation and all the preliminary steps taken toward its creation must be submitted to and be approved by him before authority may be granted to it to do business in Kentucky. Throughout its existence its business and the conduct of its affairs are subject to the approval and supervision of the commissioner. The statutes provide for stated reports to be made to the commissioner by all such companies and for stated examination of the books and affairs of the company by the commissioner. It provides further that the commissioner in his discretion may make more frequent examinations than those required to be made by the statutes. It provides further that at any — 824 — time upon the request of five or more of the stockholders, creditors, policyholders or persons pecuniarily interested in such company, who shall make affidavit of their belief, spegifying their reasons therefor, that the company is in an unsound financial condition, it shall be his duty to examine the same to determine the question. By section 753 it is provided that if, upon information gained from any such sources, the commissioner has reasons to believe that an insurance company is insolvent, he shall thereupon institute an action either in the circuit court of the county wherein the chief office of the company is located or in the Franklin circuit court to enjoin its further engaging in business and have a receiver appointed for its liquidation and a distribution of its assets according to the respective rights of its creditors, policyholders and stockholders. It could not be maintained that an insurance company could be created in Kentucky other than in strict compliance with the provisions of the statutes relative to the duties of the insurance commissioner in respect to the creation of such corporations. It could not be maintained that such a corporation engaged in the insurance business could continue its business life in Kentucky in defiance of our statutory laws on the question without submitting to the constant supervision of its affairs by the insurance commissioner. It seems to us that our statutes just as effectively provide for supervision by the insurance commissioner of the liquidation of an insurance company that has become insolvent or financially ill as they do for his supervision of their creation and business life while in a state of financial health. It seems to us that the legislature intended by the chapter of the statutes in question to provide for the creation and the business life of insurance corporations and for their liquidation when they become insolvent, all to be under the supervision of the insurance commissioner. We cannot understand that there is to be drawn a distinction between an action by stockholders or creditors of an insurance company to have it declared insolvent and its affairs wound up by a court’s receiver and an action upon the part of such company when in an insolvent condition voluntarily to make assignment for the benefit of its creditors. The object sought is the same whether the action be one directed against an insolvent insurance corporation in a proceeding for the appointment of a receiver or be one by its voluntary assignment for the benefit of its cred — 825 — itors. The object of either proceeding is the liquidation of its assets. It seems to us that the legislature had in mind, taking into account the public nature of the business, the enaction of a complete law on the subject for the protection of the public, the policyholders, the stockholders and the creditors of insurance companies. It assumed that there would be appointed to the office it created, that of insurance commissioner, only men of character and business qualifications commensurate with the importance of the office. Evidently it was intended by the statutes in question to invest in the commissioner the supervision not only of the creation and business life of such corporations, but also such supervision of the liquidation and distribution of the assets of any such company as might become insolvent. The language of the statutes in question, considered with the evils to be remedied and the objects sought to be promoted, leave us in no doubt that such was the legislative intent. It would be inconsistent with that, as we think, clearly expressed legislative intent to hold that the provisions of the insurance statutes providing for the liquidation of an insolvent insurance company do not by implication repeal the general law with reference to voluntary assignments in so far as insurance companies are concerned. If we should so hold the clearly expressed legislative intent that the liquidation of an insolvent insurance company shall be under the supervision of the insurance commissioner is impotent. A voluntary assignment would defeat that express provision of the insurance statutes, because by a voluntary assignment all the assets of such a company would be conveyed to an assignee who would proceed to liquidate them independent of any character of supervision by the insurance commissioner. The remedy provided by sections 752 and 753, Kentucky Statutes, 1922, is amply adequate to protect the interests of the public, the policyholders, the creditors and stockholders of all insurance companies in the liquidation of an insolvent insurance company. We conclude that the remedy there provided was intended by the legislature to be exclusive or the “whole law” of the question, and that by implication the general law with reference to voluntary assignments was repealed in so far as insurance companies are concerned. It follows that the attempt on the part of appellant, when admittedly insolvent, to voluntarily assign — 826 — for the benefit of its creditors was without authority and that the deed of assignment was void. The judgment of the lower court being in accord with our conclusions herein expressed, is affirmed. The whole court sitting. Judge Thomas dissenting.