Case Name: The STATE of Louisiana v. The PREFERRED ACCIDENT INSURANCE COMPANY OF NEW YORK
Court: Louisiana Court of Appeal
Jurisdiction: Louisiana
Decision Date: 1963-01-18
Citations: 149 So. 2d 632
Docket Number: No. 5263
Parties: The STATE of Louisiana v. The PREFERRED ACCIDENT INSURANCE COMPANY OF NEW YORK.
Judges: Before ELLIS, LOTTINGER, HER-GET, LANDRY and REID, JJ.
Reporter: Southern Reporter, Second Series
Volume: 149
Pages: 632–648

Head Matter:
The STATE of Louisiana v. The PREFERRED ACCIDENT INSURANCE COMPANY OF NEW YORK.
No. 5263.
Court of Appeal of Louisiana. First Circuit.
Jan. 18, 1963.
Irwin Waldman, New York City, Porteous & Johnson by W. A. Porteous, Jr., New Orleans, for appellant.
Liskow & Lewis by J. L. Pelletier, Lake Charles, for appellee.
Before ELLIS, LOTTINGER, HER-GET, LANDRY and REID, JJ.

Opinion:
LANDRY, Judge.
This action emanates from ancillary receivership proceedings incident to liquidation of the defunct corporation known as The Preferred Accident Insurance Company of New York (sometimes hereinafter referred to and designated simply as "Preferred"), a foreign corporation domiciled in the State of New York but authorized to dc and doing business in this state.
Claimant, Arkansas Fuel Oil Corporation (hereinafter sometimes referred to simply as "Arkansas" or "Claimant") instituted the present proceeding against the Superintendent of Insurance of the State of New York, Domiciliary Receiver and Liquidator of Preferred (said Domiciliary Receiver and Liquidator being sometimes hereinafter referred to simply as "Liquidator") and Rufus D. Hayes, Insurance Commissioner of the State of Louisiana, Ancillary Receiver of Preferred (sometimes hereinafter referred to simply as "Ancillary Receiver"), seeking judgment against said Liquidator and Ancillary Receiver in the aggregate of $9,258.59, together with interest and costs. The demands asserted by claimant consist of subrogated claims of materialmen arising from the performance of two certain building contracts entered into by and between claimant and a now bankrupt partnership known as Albright and Talley Construction Company for the remodeling of two service stations owned by claimant— one in the Town of Delhi and the other in the Town of Bastrop, and on which said projects Preferred executed performance bonds in the capacity of Surety.
On May 27, 1958, the trial court rendered judgment in favor of Claimant and against both Liquidator and Ancillary Receiver ordering claimant's judgment paid from the proceeds of the special trust fund held by the Liquidator pursuant to an agreement between Liquidator and Ancillary Receiver approved by the court on February 4, 1954, which said agreement is hereinafter discussed in more detail.
Both Liquidator and Ancillary Receiver initially appealed the adverse judgment to this court wherein, upon appellee's motion to dismiss predicated upon the contention the amount in dispute then exceeded the jurisdiction of this court in matters of this nature, the matter was transferred to the Supreme Court. See State v. Preferred Accident Insurance Co. of N. Y., La.App., 110 So.2d 246.
In the Supreme Court claimant-appellee again moved to dismiss the appeal which motion was denied. State v. Preferred Accident Ins. Co. of New York, 238 La. 372, 115 So.2d 384. On July 1, 1960, the Supreme Court transferred the appeal to this court pursuant to the recent revision and amendment of the constitutional provisions governing appellate jurisdiction.
On January 3, 1962, Cities Service Oil Company was duly and properly substituted as claimant-appellee in place and stead of Arkansas Fuel Oil Corporation by virtue of the latter being assimilated into the former pursuant to merger. Henceforth in this opinion "claimant" shall be understood to be Cities Service Oil Company.
We believe a narration of the facts and circumstances culminating in the present action to be indispensable to a full understanding of the issues hereinafter set out and discussed.
Preferred, a casualty insurance company domiciled in the State of New York, was duly authorized to do and was engaged in business in this state. In accordance with our statutes, particularly LSA-R.S. 22:1021 and 1025, Preferred made special deposits with the Treasurer of this State aggregating the sum of $70,000.00. On April 30, 1951, Preferred was placed in liquidation because of insolvency, pursuant to order of the Supreme Court of New York issued in conformity with the statutes of that State. Appellant herein, Superintendent of Insurance of the State of New York was appointed Domiciliary Liquidator and Receiver of the defunct corporation.
Subsequently, on May 28, 1951, upon petition of the Insurance Commissioner of the State of Louisiana, said Commissioner was appointed Ancillary Receiver of Preferred for the State of Louisiana, in accordance with LSA-R.S. 22: Part XVI, and in such capacity, assumed responsibility for the control, disposition and distribution of the assets of Preferred within this state including the aforesaid special deposits in the sum of $70,000.00.
On or about November 25, 1953, the Liquidator and Ancillary Receiver entered into an agreement designed to expedite liquidation of the assets of Preferred held by the Ancillary Receiver while at the same time recognizing the legitimate claims of residents of Louisiana against the bankrupt in question. The agreement provided, inter alia, that the aforesaid special deposits were placed in the custody of the Liquidator in trust to be so held by him until the amount paid by the Liquidator out of general funds of the debtor corporation in his possession to Louisiana creditors equalled or exceeded the amount of the aforesaid special deposits entrusted to the Liquidator, at which time the funds in trust would then be transferred to the general fund of the corporation in liquidation and the aforesaid trust would be dissolved. A significant provision of the agreement reserved to those Louisiana creditors of Preferred coming within the purview of LSA-R.S. 22:-757-22:763 (the Uniform Insurers Liquidation Act), the right to have their claims against Preferred adjudicated in the ancillary liquidation proceeding being conducted at Baton Rouge, Louisiana, it being further provided in said agreement that the ancillary proceeding in this state would remain open for that express purpose. The agreement further provided that adjudication of the claims of Louisiana creditors would be in accordance with the Uniform Insurers Liquidation act. The agreement adopted the provisions of the Uniform Insurers Liquidation Act with respect to claimants being required to give written notice to both the Liquidator and Ancillary Receiver at least 40 days prior to the date set for a hearing on their claims and also provided that within thirty days of date of such notice the Liquidator would give notice in writing to both claimant and the Ancillary Receiver of intention to contest the claim if the Liquidator intended to do so. The aforesaid agreement was duly approved by the Supreme Court of New York on December 15, 1953, and by the Honorable Nineteenth Judicial District Court, Parish of East Baton Rouge, Louisiana, on February 4, 1954.
A joint stipulation and agreement of facts appearing of record herein reveals that the events culminating in the filing of the present claim are not in controversy as between the adverse parties to this proceeding. For all practical purposes only questions of law are herein presented for resolution. Claimant, Cities Service (Arkansas) is a foreign corporation authorized to do and doing business in this state, its principal offices being situated in Shreveport, Louisiana.
On October 20, 1950, Arkansas (predecessor to Cities Service) entered into two separate contracts with Albright and Talley Construction Company, a partnership composed of Hey Paul Albright and Dolert Edward Talley (sometimes hereinafter referred to simply as "contractor") for the remodeling and renovation of two service stations then owned by Arkansas and situated in the Towns of Delhi and Bastrop, respectively. The contract for the Delhi job covered remodeling for which the contractor was to be paid the sum of $6,780.00, while the agreement for the Bastrop project stipulated the contractor was to receive $13,900.00 for the renovation provided for therein. Both of said contracts required the posting of performance bonds which were obtained by the contractor from Preferred who signed said bonds as surety. By verbal' agreement between Arkansas and the contractor, certain changes, alterations and' additions were made to the plans and specifications covering both said projects. The changes called for in the Delhi job increased the contract price from the initial' sum of $6,780.00 to $16,249.68, while those relative to the Bastrop project augmented' the initial contract sum of $13,900.00 tO' $24,618.15. Preferred had no. knowledge of the changes in question. Admittedly Preferred did not consent to any of the changes and neither did it receive any notice thereof from either Arkansas or contractor. The contractor subsequently defaulted in the performance of both projects. After the revised Delhi contract was completed and accepted and Arkansas had paid the contractor the original contract price of $6,780.-00 and the additional sum of approximately $7,000.00 on the amended agreement, there remained a balance due contractor in the sum of $2,395.16. The contractor, however, then owed outstanding material claims in the sum of $3,449.57, which were paid by Arkansas against which contractor was given credit for the $2,395.16 remaining unpaid under the enlarged contract, thereby leaving a balance due in the sum of $1,060.-41 which claimant seeks to recover herein. With regard to the Bastrop project, after paying all but $138.60 of the revised contract price of $24,618.15, Arkansas discovered that liens in the sum of $8,322.78 were outstanding against said work. Ar kansas then paid all said liens, credited contractor with the $138.60 balance due and herein seeks recovery from Preferred of the remainder. By written instrument Arkansas was legally subrogated to the rights of each materialman paid and herein seeks to enforce its rights as subrogee against Preferred.
The present action was initiated pursuant to the provisions of LSA-R.S. 22:760, it being conceded that notices and objections therein provided for were timely and properly given and made. It is important to note that Sections 7S7-763, Title 22 LSA-R.S. comprise and may be cited as the Uniform Insurers Liquidation law. It should be further noted that Paragraph A of LSA-R.S. 22:760 provides as follows:
Ҥ 760. Claims against foreign insurers
"A. In a delinquency proceeding in a reciprocal state against an insurer domiciled in that state, claimants, against such insurer, who reside within this state may file claims either with the ancillary receiver, if any, appointed in this state, or with the domiciliary receiver. All such claims must be filed on or before the last date fixed for the filing of claims in the domiciliary delinquency proceeding."
The above quoted paragraph of Section 760 is significant inasmuch as in the trial court the Liquidator and Ancillary Receiver moved to dismiss appellee's claim on the ground that claimant being a foreign corporation domiciled outside the State of Louisiana, may not prosecute these claims in this ancillary liquidation proceeding, said right and privilege being reserved, by the aforesaid provisions of the applicable statute, solely and exclusively to residents of this state. Appellants' said motion to dismiss was made after issue was joined and some evidence had been taken. The learned trial court referred the motion to the merits and subsequently overruled it. Appellants reurge the motion here. Ap-pellee maintains the motion, being essentially an exception to claimant's alleged lack of procedural capacity, is in reality a dilatory exception which must be filed in limine litis and that in the instant case it came too late considering it was filed after issue was joined herein. Appellants contend, however, that under the plain terms of the statute there is a total absence of legal right to file a claim against the ancillary receiver unless claimant is a resident of the state, therefore, its motion or exception does not address itself to claimant's alleged lack of procedural capacity but rather to absolute lack of a right to proceed under the statute which deficiency may be asserted at any stage of the proceedings.
The exception of lack of procedural capacity (now included in the general "dilatory exception" LSA-C.C.P. Article 926) was formerly, and still properly is, intended to challenge the authority of a plaintiff who appears in a purely representative capacity or raise the issue of want of capacity of the plaintiff to institute and prosecute the action and stand in judgment therein. Central Surety & Ins. Corp. v. Canulette Shipbuilding Co., La.App., 195 So. 114. It has been properly held, we believe, that while all objections to the personal capacity of a suitor to stand in judgment should be made in limine litis, a total want of legal .right in a litigant, in relation to the matters in controversy, should be taken into consideration at any stage of a proceeding. Wiseman v. Begnaud, La.App., 35 So.2d 836; Brown & Son v. Saul, et al., 4 Mart. (N.S.) 434, 16 Am.Dec. 175.
In support of its contention that the exception filed by appellants is dilatory and must be plead in limine litis, appellee has cited a single authority, namely, Outdoor Electrical Advertising v. Saurage, 207 La. 344, 21 So.2d 375. The quoted authority, however, appears readily distinguishable from the case at bar in that it involves a situation wherein a corporation instituted action in this state without having first qualified to do business within the state as required by law. The court therein very properly considered the exception was neither an exception of no cause of action nor one of no right of action since it had no connection with plaintiff's cause of action as such and neither did it show a want of interest in plaintiff as regarded the subject matter of the action. The court therein further pointed out that since the plaintiff did have an interest in the subject matter of the litigation, assuming its demand to have been dismissed on exception timely filed, plaintiff could have subsequently qualified to do business in this state and reprosecuted its said demand.
The case at bar presents a situation in which the courts of this state are fully open to claimant considering claimant has qualified to do business in this state. The question here is not whether the courts of this state are open to claimant as a matter of law because, having qualified to do business in this state, it is clear that claimant has thereby acquired the .right to access to our courts as regards all actions which claimant may prosecute in this state pursuant to our laws. In virtue of present claimant having qualified to do business in this state it cannot be seriously questioned that said claimant is sui juris and capable of standing in judgment before our courts. The immediate question presented for resolution is whether a foreign corporation, sui juris under the laws of our state, falls within the classification of litigants authorized to prosecute the particular cause of action herein sought to be enforced. To maintain the present action it is not sufficient that claimant merely be sui juris quoad our laws; in addition, claimant must establish that it is a resident since the terms of the applicable statute clearly and expressly provide that an action against the Ancillary Receiver herein may be brought only by residents of the state. It appears, therefore, that unless claimant is a resident of this state, it is totally without right to prosecute the present demand notwithstanding claimant is sui juris and capable of standing in judgment before our courts. From the foregoing we conclude appellant's said exception to be peremptory rather than dilatory and, in addition, was timely filed.
The basic question presented by appellant's said motion (exception) is whether the present claimant is given the right pursuant to the aforesaid LSA-R.S. 22:760 (A) to assert its demand against the ancillary receiver in this state at its option rather than being restricted to presenting same before the domiciliary liquidator in the domiciliary state of New York. The option of presentation is granted by the statute to a certain class of persons and unless claimant falls within the category of persons upon whom said right of option is conferred, claimant cannot invoke the provisions of the statute but is relegated solely to prosecution of its claim against the domiciliary liquidator. The precise issue, therefore, is simply whether claimant is a "claimant who resides within this state".
Interpretation of the statutory provision at issue herein must be accomplished in the light of certain rules of construction applicable pursuant to the jurisprudence and the statute itself. Firstly, the entire act must be construed to make it harmonize as a whole. Martin v. General American Casualty Company, 226 La. 481, 76 So.2d 537, 46 A.L.R.2d 1178. Secondly, the act itself provides that it "shall be so interpreted and construed as to effectuate its general purpose to make uniform the law of those states that enact it".
Accordingly, in interpreting the statute resort may be had to the jurisprudence of sister states which have adopted the statute and which are therefore "reciprocal states", as well as the jurisprudence of our own state. Unfortunately, however, neither counsel nor this Court has found any decision of any jurisdiction decisive of the issue of whether a foreign corporation authorized to do business in a state and having its principal office in said same state is a "claimant residing in the state" within the meaning of the term resident as used in LSA-R.S. 22:760 (Section 5 of the Uniform Insurers Liquidation Act, Uniform Laws Annotated).
In resisting claimant's right to proceed herein, counsel for the Liquidator relies upon the general rule that a corporation is a citizen of and domiciled in the State in which it was incorporated. Quoted by counsel is the following language appearing in Anderson v. Standard Accident Ins. Co., 36 F.Supp. 7 (D.C. of La.1941) :
"The coloration's place of residence can legally be nowhere else than within the limits of the sovereignty that created it. and although one may he permitted to transact business where its charter does not operate, this does not bring about a 'residence' beyond the limits of the State where the corporation had its legal birth."
In further support of this principle counsel for appellants has cited and quoted from several federal cases and cases from other jurisdictions, including the following quotation from Ward v. Southern Sand & Gravel Co.,4 Cir., 33 F.2d 773:
" a corporation cannot be a resident of another state than that in which it is created. Such is the uniform construction of statutes in which the term 'resident' or 'nonresident' is used, where the question is presented whether a foreign corporation is included in the term. It may be allowed to transact business outside of the home state, but it does not by doing so acquire a residence elsewhere."
Nevertheless, the construction of statutes upon this point is not so uniform as this quotation might lead one to believe.
The following statement, called to our attention by counsel for claimant-appellee, appears in 20 C.J.S. Verbo Corporations § 1794, p. 18:
"A natural person cannot have either a domicile in the true sense or citizenship in two states or countries at the same time, and the same is true of corporations. They can, no more than natural persons, be made ubiquitous,, and in this sense domicile and citizenship are equivalent. However, for some purposes and, within some statutes, foreign corporations with an office or doing business within the state are deemed to be resideiits of the state" Thus, foreign corporations may be found within a state other than that of their creation for the purpose of being served with process, as shown infra § 1919 et seq. Also, a migratory or tramp corporation, organized under the laws of a foreign state for the purpose of doing business in the domestic state where its property is situated and all its business is transacted has been held to be a resident of the domestic state." (Emphasis supplied.)
Our own courts have held that foreign corporations having their offices in this State and qualified to do business in this State by registering the names of its agents for service of process, are domestic corporations or residents of this State for the purposes and within the meaning of our attachment laws. Consequently the property of such corporations is not subject to non-resident attachment. Burgin Bros. & McCane v. Barker Baking Co., 152 La. 1075, 95 So. 227; Normann v. Burnham's Van Service, La.App., 73 So.2d 640.
We also quote with approval the following appearing in Volume 14 C.J. Verbo Corporations § 31, p. 66:
"As a Resident or Inhabitant. Since a corporation is a person in the law, it is also to be deemed a 'resident' or a 'nonresident' of a particular state, county, or district within the meaning of a statute, if it is within the purpose and m- tent of the statute, as in tlie case of statutes defining the jurisdiction of the courts, or relating to venue, taxation, etc. In like manner it may be an 'inhabitant.' But a corporation is neither a resident nor an inhabitant within the meaning of a statute, where it is not within the purpose and intent of the statute." (Emphasis supplied.) See, also, 18 C.J.S., Corporations § 8b.
It appears, therefore, the purpose and intendment of a statute determines whether its terms embrace a foreign corporation duly qualified to do business in this state in the capacity of a resident of this state.
It is, of course, within the right and authority of this state to protect its citizens and residents in their persons and property while at the same time protecting those who lawfully do business within this state. The act in question (Uniform Insurance Liquidation Law) does not appear to favor either residents or non-residents of the states in which it applies. Its primary purpose appears to be to prevent creditors who are better informed from obtaining unfair preference and advantage to themselves by instituting attachment or similar proceedings against such property of the bankrupt debtor as may be found in their states, before ancillary proceedings are commenced and before less well informed creditors may take action to preserve and protect their claims. 9-B Uniform Laws Annotated 196. "The purpose of the act is to secure equal treatment for all creditors wherever situated." 46 A.L.R.2d 1186.
Where the Uniform Insurer's Liquidation Law does not apply, such as where the domiciliary state is not a reciprocal state as defined therein, seizure by a creditor prior to appointment of a receiver confers upon the seizing creditor a lien which is preferred over the rights of the receiver as well as those of other creditors. Martin v. General American Casualty Company, 226 La. 481, 76 So.2d 537, 46 A.L.R.2d 1178; Hankins v. Sallard, La.App., 188 So. 411. Where the statute does apply, however, such a preference is specifically proscribed. See LSA-R.S. 22:762.
In this connection we cite with approval the following language appearing in 46 A.L.R.2d 1185, regarding the alleged purposes and intent of the statute herein concerned.
Validity, construction and effect of Uniform Insurers Liquidation Act
§ 1. Scope and introduction.
The Uniform Insurers Liquidation Act deals with certain problems peculiar to the forced liquidation or reorganization of insurance companies having assets and liabilities distributed in two or more states. While the assets of an insurance company naturally have their situs mainly in the state of domicil of the company, a substantial portion thereof is normally scattered over the entire territory within which the company carries on its business. This is particularly true of the special deposits required by the laws of nondomiciliary states and of balances in the hands of insurance agents and policy premiums due but unpaid. Similarly the liability of an insurance company, consisting primarily of policy obligations, are also distributed over the several states in which the company does its business. Such wide distribution of assets and liabilities creates a formidable array of problems when liquidation, rehabilitation, or reorganization proceedings become necessary, and the equitable and expeditious solution of those problems is rendered the more difficult by wide differences in the provisions of the statutes of the several states regarding such matters as special deposits, preferred claims, securities, setoff, and the administrative and judicial procedures to be followed.
The Uniform Insurers Liquidation Act, which was designed to facilitate delinquency proceedings by eradicating these difficulties, was approved by the National Conference of Commissioners on Uniform State Laws in 1939, and by the end of 1954 had been approved in fourteen states.
The Uniform Insurers Liquidation Law is a part of the Louisiana Insurance Code which code also provides for the deposit of security by foreign insurers as a prerequisite to issuing insurance policies in this State. (LSA-R.S. 22:1021 and LSA-R.S. 22:1025.) Such deposit is conditioned upon the "prompt payment of all claims arising and accruing to any person by virtue of any policy issued by any such insurer upon any property or other risk situated in this state," (LSA-R.S. 22:1022, emphasis supplied) and is "subject to any claims, liens or judgments that may be judicially obtained against any such company in the courts of this state, or arising from any contract of insurance, or indemnity, or fidelity, or guaranty entered into in this state (LSA-R.S. 22:1026, emphasis supplied).
It would seem therefore that a claimant who has been doing business in this State and, as a result of doing business in this State, has acquired an interest in such deposits equal to that of true residents and natural citizens of this State whose claims arise from any contract of guaranty entered into in this State. We see no valid reason why foreign corporations properly qualified to do business in this state should be discriminated against.
To hold as appellants urge, namely, that the Uniform Insurers Liquidation Law does not apply to foreign corporations notwithstanding their qualification to do business in a state in which the law is in force would lead to absurd and inequitable consequences as we shall forthwith attempt to demonstrate.
The Supreme Court of this state has established the rule that when the statute is not applicable, deposits in the hands of the Treasurer of this State are subject to attachment, garnishment or execution even during the period four months prior to commencement of delinquency proceedings. Martin v. General American Casualty Company, 226 La. 481, 76 So.2d 537, 46 A.L.R.2d 1178. The benefits and advantage of our attachment laws are available to foreign and non-resident corporations authorized to do business within this state. Jackson State Nat. Bank v. Merchants' Bank & Trust Co., 177 La. 975, 149 So. 539. If the statute does not apply to a non-resident corporation authorized to sue in the courts of this state such corporation would be in position to secure an advantage and preference over resident creditors by institution of proceedings forbidden and denied those creditors residing in this state. LSA-R.S. 22:762; Scott v. Baton Rouge Bus Co., La.App., 118 So.2d 486. Such a result is clearly contrary to the express purpose and intention of the Uniform Insurers Liquidation Law.
From the foregoing it follows that appellants' said motions (exceptions) were properly overruled.