Opinion
No. 25213
Decided June 17, 1936.
Insurance companies — Foreign — Deposit of securities with Insurance Superintendent — Trust fund for Ohio policy holders and bond obligees — Insurance Superintendent under no duty to return deposit, when — Sections 9510-7 and 9510-10, General Code — Sections to be construed together, when — Deposit made prior to enactment of sections.
1. Sections 9510-7 and 9510-10, General Code, relative to deposit of securities by foreign insurance companies, being parts of the same act, must be construed together in determining the duty of the Superintendent of Insurance of Ohio to release a deposit of security made with him by a foreign insurance company prior to the enactment of such sections.
2. A deposit of securities made by a foreign insurance company with the Superintendent of Insurance of Ohio constitutes a trust fund for the benefit of its Ohio policy holders and bond obligees; and under Sections 9510-7 and 9510-10, General Code, the Superintendent of Insurance owes no duty to return such deposit until he is satisfied upon examination of the books of the company and affidavits of its principal officers and other evidence, that all of the obligations and liabilities which the deposit was made to secure have first been paid or extinguished.
IN MANDAMUS.
This is an action in mandamus originating in this court against the Superintendent of Insurance of the state of Ohio for an order compelling him to surrender bonds deposited by a foreign surety company, claimed to be illegally retained by such superintendent.
The Southern Surety Company of New York was licensed to do business in the state of Ohio on September 15, 1928, and on March 22, 1932, was declared insolvent by the Supreme Court of New York, and ordered dissolved and its charter cancelled. George S. Van Schaick, Superintendent of Insurance of the state of New York, was appointed liquidator of such company and was ordered to take possession of all its assets and property and to liquidate its business.
On or about April 23, 1918, the Southern Surety Company of Iowa was admitted and licensed to transact business in Ohio under Section 9510, General Code, and deposited with the Ohio Superintendent of Insurance, as a statutory deposit, securities of the value of $50,000. On June 11, 1927, the Southern Surety Company of Iowa deposited with the Ohio Superintendent of Insurance improvement bonds of the city of Euclid, Ohio, of the face value of $50,000 as a substitute for the specific, securities theretofore deposited. These bonds were registered in the name of the Superintendent of Insurance of the state of Ohio in trust for the policy holders of the Southern Surety Company of Iowa, and were deposited by the Superintendent of Insurance with the Treasurer of the state of Ohio, where they still remain.
The petition alleges that the Southern Surety Company of Iowa had on deposit with the Superintendent of Insurance of the state of Iowa, its domicile, the sum of $100,000 for the benefit of its policy holders and was, by virtue of the provisions of Section 9510-7, General Code, exempt from maintaining a deposit with the Superintendent of Insurance of the state of Ohio; that certificates were filed with the Superintendent of Insurance of the state of Ohio showing that the Southern Surety Company of Iowa had on deposit with the Superintendent of Insurance of Iowa an amount in excess of that required by Section 9510, General Code, and demand was made on the Superintendent of Insurance of the state of Ohio for the return of the $50,000 improvement bonds of the city of Euclid, Ohio, which demand was and ever since has been refused.
The petition further alleges that on August 13, 1928, the Southern Surety Company of Iowa sold and transferred to the Southern Surety Company of New York all its assets, business and good will, including said $50,000 par value of bonds of the city of Euclid, and that thereupon the Southern Surety Company of New York assumed certain policy and bond obligations of the Southern Surety Company of Iowa.
It is further alleged that both the Southern Surety Company of Iowa and the Southern Surety Company of New York have ceased to do business within the state of Ohio; that even though the Southern Surety Company of New York was exempt from maintaining a deposit in this state by reason of the fact that it had on deposit with the Superintendent of Insurance of the state of New York securities of the value of $100,000, nevertheless the Superintendent of Insurance of the state of Ohio refused its demand for the return of the deposit of the $50,000 par value of bonds of the city of Euclid, Ohio; that the Superintendent of Insurance retained the bonds without any legal right to do so, and that relator, as liquidator of the Southern Surety Company of New York, is entitled to possession of all such bonds.
Respondent filed an answer, alleging that long prior to the institution of this action there was filed in the Court of Common Pleas of Franklin county a case entitled "Gilbert Bettman, Attorney General of Ohio, on behalf of Charles T. Warner, Superintendent of Insurance of Ohio, plaintiff, v. Southern Surety Company of New York, Southern Surety Company of Iowa, et al., defendants," and that such action is still pending in that court; that such action was brought in accordance with the provisions of Sections 641, 642 and 643, General Code, for the purpose of determining the rights of all persons claiming any interest in the deposit of securities which is set forth in the petition filed by the relator herein, and for the purpose of distributing the same to such persons as may be found to be entitled thereto; that the Southern Surety Company of New York was duly notified of the institution and pendency of the action; that the deposit of securities which is the subject of this action, is the identical deposit of securities which is the subject of the action still pending in the Court of Common Pleas of Franklin county; that the petition in that case alleged, among other things, that the Southern Surety Company of New York, and others claim some right and interest in the fund and pray that the claimants to the fund be required to answer, setting forth their claims thereto or be forever barred, and that the distribution thereof be made to those who may be found entitled thereto; that the rights of plaintiff herein, as liquidator of the Southern Surety Company of New York, to such fund, can be fully determined in that action, and that he therefore has an adequate remedy therein.
The answer further avers that in the Common Pleas Court action approximately 175 cross-petitions have been filed setting forth claims to the fund; that said cross-petitioners are policy holders of the Southern Surety Company of Iowa and the Southern Surety Company of New York, and that their claims are adverse to those of plaintiff herein.
The answer admits the deposit of securities of the value of $50,000 for the benefit of Ohio policy holders and that such securities were later substituted by other securities, as set forth in the petition, but avers affirmatively, however, that at the time the Iowa company had made demand for the return of the deposit the Superintendent of Insurance of Ohio was not satisfied, nor has he ever been satisfied that the liabilities and obligations of the company, which the deposit was made to secure, were paid or extinguished, and that in fact, all of the liabilities and obligations of such company which the deposit was made to secure have never been paid or extinguished; that certain policy and bond obligations of the Iowa company which the deposit was made to secure were assumed by the New York company and have not yet been paid or extinguished; that the deposit has remained with the Superintendent of Insurance for the benefit of all of such obligations, as well as for the benefit of all the Ohio policy holders of the New York company, and that the deposit should be distributed to those found to be entitled thereto as provided by Sections 641, 642 and 643, General Code.
Messrs. Pomerene Boulger, for relator.
Mr. John W. Bricker, attorney general, and Mr. Thomas M. Miller, for respondent.
Is relator entitled to a writ of mandamus?
Respondent contends that relator is not entitled to the writ prayed for, first, because relator has another adequate remedy, and second, because relator is not entitled to the return of the deposit. We shall consider the second contention first.
On March 22, 1923, the General Assembly of Ohio enacted Section 9510-7, General Code, which provides that:
"An insurance company which is required by the provisions of paragraph two of section 9510, General Code, to deposit fifty thousand dollars of bonds with the superintendent of insurance may, in lieu of such deposit, make a deposit of one hundred thousand dollars, in securities in which the company may be permitted to invest its assets by the laws of the state in which it is incorporated, with the superintendent of insurance or other officer of another state designated or permitted by the laws of such state to receive such deposit, for the benefit and security of all its policy-holders. When the superintendent of insurance of this state is satisfied by the certificate of such superintendent of insurance or other officer of such other state that such deposit has been made as provided herein, he shall accept such certificate in lieu of the deposit required of such company by paragraph two of section 9510, General Code, and such company shall not then be required to maintain the deposit in this state provided for in said paragraph two of section 9510."
Simultaneously with the enactment of the above section, and as part of the same act, the General Assembly enacted Section 9510-10, General Code, which provides:
"Any deposit so made may be withdrawn by the company when the superintendent, upon examination of the books of the company and affidavits of its principal officers and other evidence, is satisfied and shall certify that all the obligations and liabilities which the deposit was made to secure have been paid or extinguished."
It is the contention of relator that immediately upon the receipt of a certificate from the Superintendent of Insurance of the state wherein the insurance company has its domicile to the effect that a deposit of $100,000 in securities has been made with him, Section 9510-7, General Code, makes it mandatory upon the Superintendent of Insurance of the state of Ohio to release the securities deposited with him.
In determining the duties of the Superintendent of Insurance in that respect, Sections 9510-7 and 9510-10, General Code, must be construed together since they are parts of the same enactment. Section 9510-7, General Code, does not require the Ohio Superintendent of Insurance to release the securities deposited, but merely authorizes him to accept in lieu of the securities deposited the certificate from the Superintendent of Insurance of the state wherein the insurance company has its domicile. Section 9510-10, General Code, governs the question of release of such securities, and provides, in substance, that the securities deposited may be withdrawn by the company when the Superintendent of Insurance is "satisfied," upon examination of the books of the company and affidavits of its principal officers and other evidence, that all the obligations and liabilities which the deposit was made to secure have been paid or extinguished. Until the Superintendent of Insurance is thus satisfied, withdrawal of the deposit is not authorized.
The parties, by stipulation, agree that the Southern Surety Company of New York is an adjudicated insolvent, although when the demand for the release of the securities was first made insolvency was not apparent. It was the position of the Ohio Superintendent of Insurance then, which he justifiably still maintains, that the deposit of the securities constitutes a trust fund for the benefit of Ohio policy holders of both the Southern Surety Company of New York and the Southern Surety Company of Iowa, and that the deposit cannot be returned until all such claims against the company shall first have been paid or extinguished. Were the deposit now released, Ohio policy holders of both the Southern Surety Company of Iowa and the Southern Surety Company of New York would be required to go to New York to assert their right, notwithstanding the fact that the deposit was made and intended for their protection.
As to policies written prior to the deposit of the $100,000 in the state of its domicile, it appears that relator is satisfied to have the Ohio Superintendent of Insurance deduct from the deposit double the amount of the claims thereon for the protection of such claimants, but insists that the remainder must be released; that otherwise the deposit would be made to protect policy holders whose claims arose subsequent to the enactment of Section 9510-7, General Code. The Superintendent of Insurance, however, justifiably contends that since the company was unable to satisfy him that the liabilities for which the deposit was to serve as security were extinguished, it became obligatory for the deposit to remain in effect and that so long as under these circumstances the deposit was required to be maintained, all Ohio policy holders whose claims arose subsequent to the above mentioned enactment and while the deposit was maintained, dealt and contracted with the insurance company in reliance upon the deposit as security, and that their unextinguished claims against the company are therefore likewise claims against this deposit; that under the circumstances the deposit cannot be released until all of these claims, after they shall have first been established according to law, are paid or extinguished.
We are of the opinion that under Section 9510-10, General Code, respondent owes no duty to return the deposit until he is "satisfied" that all of the obligations and liabilities which the deposit was made to secure have first been paid or extinguished.
Is relator entitled to the writ prayed for?
To be entitled thereto, he must show that the Superintendent of Insurance refuses to perform a specific duty imposed upon him by law. What are the circumstances under which the Superintendent of Insurance refuses to surrender the deposit? The insurance company admitted being unable to "satisfy" the superintendent that all claims against it had been paid or extinguished. The insurance company subsequently became insolvent. To liquidate the deposit, suit was instituted in the Court of Common Pleas of Franklin county, as provided by Sections 641, 642 and 643, General Code. In that suit, which is still pending, 175 claims were filed against the deposit. Under the circumstances the Superintendent of Insurance is, by virtue of the provisions of Section 9510-10, General Code, authorized to refuse to release the securities until the rights of the claimants thereto shall have been judicially determined and disposed of. It is not within the power of this court, in an action in mandamus, to determine the rights of these claimants, this being the function of the Court of Common Pleas of Franklin county in the action now pending before it. It is there that the relator's right to the securities can be asserted and adjudicated. Relator is afforded other adequate remedy. When such is the case mandamus will not lie.
Relator contends that the action in the Court of Common Pleas of Franklin county was instituted after the insurance company had been adjudicated insolvent; that by virtue of its adjudicated insolvency and subsequent judicial dissolution, the insurance company ceased to exist and that therefore a suit against it is no more availing than a suit against a deceased person; that no service can be had upon it, nor judgment rendered against it. However, the action is not one in personam but one in rem. The action is against the securities deposited and not for personal judgment against the dissolved insurance company, and may therefore be maintained.
Writ denied.
WEYGANDT, C.J., STEPHENSON, WILLIAMS, JONES, MATTHIAS and ZIMMERMAN, JJ., concur.