Court Opinion

ID: 3533270
Source: CourtListenerOpinion
Date Created: 2016-07-05 22:46:02.190637+00
Date Added: 2024-06-11T13:47:23.472422
License: Public Domain

I am unable to concur in that part of of the majority opinion which holds the final judgment of December 7, 1935, subject to collateral attack, and also that part of the opinion holding that the trial court had the power to appoint Messrs. Lauf and Cook only as referees and not as commissioners and custodians. I, therefore, deem it expedient to express my views thereon.
Appellant's main reasons why the order allowing the fees to respondents should be set aside are as follows: (1) the order appointing respondents Lauf and Cook is illegal and void because Section 5874, Revised Statutes 1929, designates appellant as custodian of any fund created by virtue of a rate reduction order, and respondents Lauf and Cook, as referees or custodians and commissioners, are controlled by the reference statutes, and by Section 996, Revised Statutes 1929, which limits their compensation to ten dollars per day; (2) any compensation allowed respondents should have been taxed as costs against the insurance companies and not against the fund; and (3) appellant's motion to quash the notice of the hearing for the purpose of allowing these fees should have been sustained.
[11] In regard to appellant's first assignment, the record shows that on December 14, 1934, the trial court made an order appointing respondents Lauf and Cook as custodians and commissioners, and, among other duties imposed upon them by this order, was the duty to receive and safely keep the moneys due from the insurance companies. *Page 821 
From time to time the court made additional orders enlarging their duties. On December 7, 1935, the court entered a final judgment in the restitution proceeding which directed the balance of the unrefunded premiums to be turned over to respondents Lauf and Cook. There was no appeal from that judgment, nor does this appeal involve directly the question of propriety of the appointments; that is, there was no appeal from the appointments, nor was there any motion to vacate the appointments involved in this appeal. The appointments are only collaterally attacked.
Section 5874, supra, among other things, provides that in a suit to review the action of the Superintendent of Insurance in ordering a rate reduction, the court shall have authority to sustain, set aside or modify such orders, and during the pendency of the action, such orders shall be suspended, and the insurance companies shall deposit with the Superintendent of Insurance "an amount equal to the difference between the rates fixed by the superintendent in his order and those in effect prior thereto, such funds to be held by the Superintendent of Insurance to await the result of such review, and in the event the orders and directions of the superintendent be set aside, such funds shall be returned to the companies pro rata, and in event his orders and directions shall be sustained, then such funds shall be turned over to the policyholders pro rata."
Appellant's contention on this point is stated in his brief as follows: "By virtue of the statute the power of the trial court was limited in determining the issues between the insurance companies (plaintiffs) and the Superintendent of Insurance, to ascertain the amount the companies had unlawfully collected from the policyholders which had not been refunded. The judgment of December 7, 1935, definitely fixed the amount due from the insurance companies, the judgment debtors. After having determined the amount due, the court had no power to divest the Superintendent of Insurance of custody and control of the funds; that is, the court's jurisdiction of the fund was limited to causing to be restored to the Superintendent the fund paid into court by the insurance companies."
In the original rate reduction case, Aetna Insurance Company et al. v. Hyde, 315 Mo. 113, 285 S.W. 65, we held it to be an equity proceeding. The restitution proceeding is likewise an equity proceeding and governed by the rules of equity. [Atlantic Coast Lines v. Florida, 295 U.S. 301.]
I agree with the majority opinion that Section 5874, supra, does apply to this proceeding. I also agree that the Superintendent of Insurance is not estopped to claim the custody of this fund, because he is a public official and represents the policyholders by virtue of his office, and his duties are defined by statute; he cannot waive them as they are for the protection of the public. *Page 822 
During the rate reduction litigation, the insurance companies collected the rate in effect prior to the rate reduction order, and probably did so because of the stipulation entered into between them and the then insurance superintendent. The object of the restitution proceeding was to obtain this sum for the benefit of the policyholders, and in this action it was necessary for the court to order this sum paid over to someone for their benefit. I am of the opinion that the court should have turned this sum over to the Superintendent of Insurance.
[12] This brings me to the question of whether the orders and judgment of the court ordering the moneys turned over to respondents is void or mere error. If void, the orders and judgment directing the moneys to be turned over to respondents Lauf and Cook are subject to collateral attack. On the other hand, if the orders and judgment are erroneous, then they can be set aside only on direct attack, which was not done in this case. As previously stated, there was no appeal from any of these orders or from the final judgment. The question is: Did the trial court have jurisdiction to enter these orders, and judgment? If not, they are subject to collateral attack.
"Jurisdiction may be defined to be the right to adjudicate concerning the subject-matter in a given case. To constitute this there are three essentials: First, the court must have cognizance of the class of cases to which the one to be adjudged belongs; second, the proper parties must be present; and, third, the point decided must be, in substance and effect, within the issue." [Stark v. Kirchgraber, 186 Mo. 633, l.c. 645, 85 S.W. 868; Gray v. Clements, 286 Mo. 100, l.c. 107, 227 S.W. 111, l.c. 113.]
Tested by these rules, the trial court had cognizance of restitution proceedings. There is no doubt that the court had the parties present, nor that the court had a right to order the excess premiums turned over to someone. The Superintendent of Insurance contends that the court should have ordered these sums turned over to him, relying upon Section 5874, supra, while respondents Lauf and Cook contend the court had power to order the sums turned over to them. If the court, in making its decision as to in whose hands the money should be placed, misconstrued Section 5874, supra, then it is mere error. The court may have come to the conclusion that that section applied only to rate reduction actions before the judgment became final. That is the contention of respondents in their brief. This section is susceptible of that construction because it says, "during the pendency of the action." The rate reduction action was terminated when this motion was fined. I think it is mere error. It is true equity follows the law, but if a court of equity misconstrues a statute in entering a final judgment, that does not make the judgment *Page 823 
void; to hold otherwise we would have to rule that every time a trial court misconstrued a statute, its judgment would be void. Certainly, that is not the law.
In the case of Rivard v. Mo. Pac. Railroad Co., 257 Mo. 135, l.c. 168, 165 S.W. 763, we said:
"A court is possessed of jurisdiction when is is permitted by the policy of the law to hear and determine cases of the same nature as the one with respect to which the complaint is made, and where it has jurisdiction of the persons of the parties to the suit. The judgment of the trial court lacking either of these essentials is open to any form of attack. It follows that thejudgment of a court of general jurisdiction with the partiesbefore it, and with the power to grant or refuse relief in thecase presented, though contrary to law as expressed in thedecisions of the Supreme Court or the terms of a statute, is atmost only an erroneous exercise of jurisdiction and as such isimpregnable to an assault in a collateral proceedings." (Italics ours.)
[13] I believe the majority opinion correctly holds Section 5874, supra, to be a procedural statute. The failure of the trial court to follow a procedural statute is an irregularity only and does not render the order void, merely voidable. [Smith v. Black,231 Mo. 681, 132 S.W. 1129, Schneiderheinze v. Berg, 269 Mo. 263, 190 S.W. 593.]
I believe that the court had power to require the fund to be paid over to respondents Lauf and Cook, even though in so doing it erred and, therefore, its orders and judgment are not open to collateral attack.
I do not think the case of Gray v. Clements, supra, cited by the majority opinion, is in point. In that case plaintiff was a life tenant and defendants owned the remainder. Plaintiff's petition alleged these facts and the judgment also recited them. We held that the court had jurisdiction of the parties, and had jurisdiction of partition suits, but that the judgment showed on its face that the relief granted was such as the court could not render in that class of cases. Therefore, the court did not have power to grant or refuse relief in the case presented, making the judgment subject to collateral attack. Clearly, that case is not in point, because in the case at bar the court did have jurisdiction of the parties and the subject matter; it did have the right to require the fund to be turned over to someone and if it designated respondents Lauf and Cook instead of the Superintendent of Insurance it was mere error.
[14] I think there is another reason why the orders and judgment appointing respondents Lauf and Cook as custodians and commissioners are not subject to collateral attack; their duties as custodians and commissioners are very similar to those of a receiver, and also those of a referee. This point will be discussed later. *Page 824 
In the case of Neun v. Blackstone B.  L. Assn., 149 Mo. 74, l.c. 80, 50 S.W. 436, we said:
"If all that is charged in the petition be conceded, it is still evident that plaintiffs have misconceived their remedy. When the court acted upon the Miller case, awarded him judgment, dissolved the corporation, appointed a receiver and directed him to wind up the affairs of the association, it became a judgment of a court of competent jurisdiction, and however erroneous or irregular it may have been, or however much it may have even rested upon perjured testimony, it is not subject to attack in this manner. There was no fraud perpetrated on the court in the very act of procuring the judgment, and hence cannot be set aside or annulled in this proceeding."
In the case of Block v. Estes, 92 Mo. 318, l.c. 324, 4 S.W. 731, we said:
"Generally, the regularity of the appointment of a receiver cannot be questioned in collateral proceedings, but the remedy, in that behalf, is by motion to vacate the order."
In the case of Greeley v. The Provident Sav. Bank, 103 Mo. 212, l.c. 222, 15 S.W. 429, we said:
"But it is urged that the circuit court had no power to appoint a receiver. This objection, also, is without merit, even technically speaking, and is readily answered.
"It is a collateral attack on a valid judgment, to-wit, the appointment of the receiver, a judgment from which an appeal could have been taken and the matter righted, or the matter could have been reached and vacated by motion."
[See, also, the following cases: Cox v. Volkert, 86 Mo. 505; Thompson v. Greeley, 107 Mo. 577, 17 S.W. 962; State ex rel. Klotz v. Ross, 118 Mo. 23, 23 S.W. 196; State ex rel. Connors v. Shelton, 238 Mo. 281, 142 S.W. 417; Keokuk Northern Line Packet Co. v. Davidson, 13 Mo. App. 561.]
In the case at bar, appellant did not file a motion to vacate respondents' appointments, nor did he appeal from such orders. I think that under these circumstances their appointments are not open to collateral attack. As the trial court had custody of the funds, it had inherent power to protect those funds; in fact, it was its duty to do so, even though it came into possession of the funds by erroneous orders and judgment. I also think the court had power to protect the funds so long as they were in its custody, even though its orders obtaining them were void.
In the case of State ex rel. North British  Mercantile Ins. Co., Ltd., v. Thompson, 330 Mo. 1146, l.c. 1155,52 S.W.2d 472, l.c. 476, we said:
"The fund has been accumulated without authority of law. Policyholders *Page 825 
could not be forced to pay rates 16 2/3 per cent above the approved rate. The relator, having defied the restrictions of the rating statute, now seeks its protection for the fruits of that violation.
"Nevertheless the companies have put in effect and have collected those rates as increased. The circuit court has authorized the payment of the differences between those rates and the former rates to the superintendent of insurance. He has received and is still receiving the accumulation of those excess rates and he has that fund in his custody. The trial court hasinherent power to protect that fund. It is not bound by the provision of Section 5874 which applies only to a decrease of rates. The court may provide for the protection of the fund inany way which to the court seems feasible for the purpose." (Italics ours.)
Again in the case of the American Constitution Fire Assurance Company et al. v. R.E. O'Malley, Superintendent of the Insurance Department of the State of Missouri, 342 Mo. 139,113 S.W.2d 795, the author of that opinion, who is also the writer of the majority opinion in the case at bar, said:
"Although the impounded fund was accumulated without authority of law, and in a case of which the court did not have jurisdiction, yet, since the court has the fund in its custody, it is its duty to protect it. . . ."
[15] I am not undertaking to decide if the Superintendent of Insurance can get possession of the funds in question by some appropriate proceeding; that question is not before us. I do think, however, that so long as the court has the funds in its possession, it has the inherent power as a court of equity to protect those funds for the benefit of the rightful owners, and provide for the protection of the funds in any way which, to the court, seems feasible to accomplish that end.
For the purpose of ascertaining the amount due from each of the insurance companies, and for the purpose of protecting that amount and distributing it to the various policyholders, the court appointed respondents Lauf and Cook, with the title of custodians and commissioners.
The Superintendent of Insurance contends that regardless of the title the court gave them, it could appoint them only as referees. To sustain his position, he relies upon our case of State ex rel. Abeille Fire Ins. Co. v. Sevier, 335 Mo. 269,73 S.W.2d 361. "The statutes provide that the court may direct a reference in certain specified cases, and may appoint one or more referees, not exceeding three. The case in question falls within the class of cases specified in the statute in which the court would be authorized to direct a reference and appoint the required number of referees, not exceeding three. *Page 826 
[Secs. 975, 976 and 977, R.S. 1929.] There is, however, no authority for appointing four referees. . . ."
On May 27, 1933, after the interlocutory judgment of restitution, the court appointed four masters to conduct hearings and report their findings to the court. The only thing we decided in that case was that, under the statutes, the court did not have power to appoint four masters or referees, and that the maximum number it could appoint was three. No other question was discussed in that opinion, and we did not rule in that case that only referees could be appointed.
It is to be noted that the sections of our statutes in regard to referees is no part of the Insurance Code, so it cannot be said that it was exclusively the only thing the court could do. Therefore, I think that the court could protect the funds for the benefit of the policyholders in any way it deemed feasible for that purpose. To determine whether respondents Lauf and Cook are referees, masters, or custodians and commissioners, we look to the orders and directions of the court to see their duties.
The court charged respondents Lauf and Cook with the duty of examining accounts and reports filed by the insurance companies for the purpose of determining whether such reports conformed to the requirements of the order and were true and correct accounting and to determine any objections that might be filed to the accounts and reports. They were authorized upon their own authority and independent of objections and exceptions to ascertain and determine whether or not the reports and accounts were true and correct and report their findings and conclusions of law. They were further authorized to receive the sums of money from the various insurance companies and deposit same in a bank or banks, to pass upon all claims filed against the funds, to hear testimony in that behalf, and to make any and all allowances against the funds. The orders provided the procedure to be followed by them in locating the policyholders who were entitled to refunds, and gave them power to pass on such claims and pay the amounts thereunder when established to be just and due. It also gave them power to sue and be sued.
A custodian has been defined as, "A manager of property under the direction of a court during the pendency of an action, for the benefit of whomsoever is ultimately found to be entitled to the property; one whose duty it is to watch, guard and account for that which is committed to his custody; an officer of the court." [17 C.J. 439.]
A commission is defined as, "An authority or writ issuing from a court, in relation to a cause before it, directing and authorizing a person or persons named to do some act or exercise some special function." [12 C.J. 144.] *Page 827 
"A referee is thus defined in 24 Am.  Eng. Ency. Law (2 Ed.), page 219:
"`A referee is a person to whom a cause pending in court is referred by the court, to take testimony, hear the parties, and report thereon to the court, and upon whose report, if confirmed, judgment is entered.'
"Another authority, 34 Cyc. 774, thus defines `reference' and `referee:'
"`A reference is a sending of a pending cause or some question therein by the court in which it is pending to a private person to hear and determine the cause or some question therein or to take evidence and report the same, with or without his opinion thereon, to the court. Before there can be a reference there must be an action pending, and generally only matters connected with the pending suit can be referred. The person to whom the reference is made is usually termed a referee; but various other names are given to such persons in different jurisdictions, there sometimes being, however, a difference between a referee and such other person. The terms auditor, commissioner, arbitrator, examiner, assessor, etc., are often used. A referee is to be distinguished from a master who is appointed only in equity suits pursuant to the old equity practice, although in some jurisdictions a referee in an equity suit appointed pursuant to statute is termed a referee rather than a master. In so far as such officers perform the duties of a referee, the difference in title may be disregarded and the title of referee is therefore used generically throughout this article except where there is a difference of importance between the particular officer and a referee.'" [State ex rel. Wright v. McQuillin, 252 Mo. 334, l.c. 338, 158 S.W. 652.]
Sections 975, 976 and 977, Revised Statutes 1929, deal with what may be referred and who may be appointed referees. These sections show that the statutory duties are very similar to those stated in the above quotation.
"Our statutes with regard to references and referees are butadditions to the old chancery ideas of masters in chancery. Thestatutes merely broaden the common-law field for references. Forthis reason the statutes are not full and complete, but much isleft to be gathered from the old chancery rules as to referencesin chancery." [State ex rel. Wright v. McQuillin, supra, 252 Mo. l.c. 341, 158 S.W. 652.] (Italics ours.)
Thus, we see the duties imposed upon respondents Lauf and Cook are more than those duties of a mere referee. They come within the definition of a commissioner and also that of a custodian, and are similar to the duties of both a referee and a receiver.
Section 998, Revised Statutes 1929, defines the duties of a receiver. *Page 828 
That section provides that, "The court, or any judge thereof in vacation, shall have power to appoint a receiver, whenever such appointment shall be deemed necessary, whose duty it shall be to keep and preserve any money or other thing deposited in court, or that may be subject of a tender, and to keep and preserve all property and protect any business or business interest entrusted to him pending any legal or equitable proceeding concerning the same, subject to the order of the court."
In speaking of a receiver the author, in 53 Corpus Juris, 17, says:
"A general receiver is one appointed by a court of chancery by virtue of its inherent power, independent of any statute, and the ordinary chancery receiver is a ministerial officer appointed by the court to take possession of and preserve the fund or property in litigation."
The duties imposed upon respondents by the court correspond closely to both those of a referee and a receiver, and I am of the opinion that the trial court in an equity case had authority to appoint respondents as custodians and commissioners to assist the court in ascertaining the amounts due from the various insurance companies, and also to aid the court in preserving these funds and in seeing that the policyholders received theirpro rata share of the excess premiums collected by the insurance companies.
I think that the court had the authority to appoint respondent Lamb as attorney and counsel for the custodians and commissioners.
[16] The expenses in determining the amounts that the insurance companies owed the various policyholders are litigation costs, and should have been taxed as such, but the cost of preserving the funds and paying to each policyholder the amount due him after the funds were paid into court are administration expenses, and become a trust fund in the hands of the court. This is an equity proceeding, and the equity doctrine is "that a trust fund of right should bear the expenses of its own administration." [Johnson v. United Railways Co. of St. Louis, 347 Mo. 326, l.c. 350, 152 S.W. 362.]
I think that the trial court, sitting as an equity chancellor, had a right to pay respondents a reasonable fee out of the funds in the court's custody for their work in preserving the funds and in paying each policyholder the amount due him.
[17] The Superintendent of Insurance contends that the trial court erred in overruling his motion to quash the notice of the hearing on the allowance of fees to respondents.
On February 7, 1936, the clerk of the circuit court wrote the Superintendent of Insurance that "the court will on March 2d 1936, at 9:00 o'clock A.M., take up the matter of allowing fees to Commissioners and Custodians and their counsel. . . ." On February 29, 1936, respondents filed their application for allowance of fees, *Page 829 
and on March 2, 1936, the Superintendent of Insurance, by special appearance, filed a motion to quash the notice of the hearing for the fee allowance. The court continued the hearing on the motion to quash until the next day and then overruled it. On that date it made the allowance to respondents.
It is to be remembered that the final judgment was entered December 7, 1935, during the October Term, and the allowance was made at a subsequent term to which the final judgment was entered, to-wit: the February Term. "A party over whom a court has obtained jurisdiction must take notice of all proceedings until final judgment is rendered, but, after judgment, he is not regarded as being before the court, and should have notice of any subsequent proceedings which affect his rights." [Roberts v. St. Louis Merchants' Land Improvement Co., 126 Mo. 460, 29 S.W. 584.]
Section 758, Revised Statutes 1929, provides that notices shall be in writing. Section 760, Revised Statutes 1929, provides that absent a court rule otherwise, notice shall be given at least five days before the hearing, and Section 761, Revised Statutes 1929, provides that a notice may be served by any sheriff, marshal or constable, or by any person who would be a competent witness. Section 1273, Revised Statutes 1929, states how a notice shall be served, and directs that a notice shall be served by "the delivery of a true copy of such notice to the person intended to be notified, or leaving of such copy at his usual place of abode, with some member of his family over the age of fifteen years."
The question presented is: Was the letter of the circuit clerk to the Superintendent of Insurance on February 7, 1936, a substantial compliance with the statutes? I think not.
"A statute directing the manner of serving a notice must be strictly complied with, especially where the notice affects property rights." [46 C.J. 557, sec. 64.]
It is probably true that the letter was mailed, and that it was received by the Superintendent of Insurance, but, "A notice as good as, or equivalent to, the one required by the statute will not do. The very notice which the law prescribes must be given." [City of St. Louis v. Bell Place Realty Co., 259 Mo. 126, l.c. 138, 168 S.W. 721.]
After appellant's motion to quash the notice was overruled, he took no part in the hearing of the application for allowance of fees. He, therefore, did not waive the giving of the notice. To hold that the letter was sufficient notice in view of the command of the statutes would violate the due process clause of our Constitution. As a matter of law, I think the latter constituted no notice whatsoever, and the court erred in overruling appellant's motion to quash.
For the above reasons, I think the order of the circuit court in allowing the fees should be reversed and remanded.
Leedy and Ellison, JJ., concur. *Page 830