Opinion
Nos. 40814, 40815 and 40877.
December 13, 1948.
INSURANCE: Attorney and Client: Escheat: Insurance Fund: Proviso in Escheat Statute: Claims Limited to Policyholders: Appropriation Required for Attorneys' Fees. The proviso in Sec. 5985a, Laws 1941, page 397, that claims against the impounded insurance fund escheated to the state might be filed within five years was limited to claims of policyholders and did not authorize payment of fees of attorneys who had been employed by the Superintendent of Insurance. Such fees may be paid only through an appropriation by the legislature.
Appeal from Cole Circuit Court. — Hon. Sam C. Blair, Judge.
AFFIRMED.
Ben W. Swofford, Robert L. Jackson, John H. Hendren and Henry P. Andrae for appellant Glenn Weatherby.
(1) The appellant's contract of employment has been ratified by legislative enactment. Sec. 5985a, R.S. 1939, Laws 1941, p. 397, Sec. 1; Aetna v. O'Malley, 343 Mo. 1232, 124 S.W.2d 1164. (2) Appellant is a "person" who is given the right to prove his "claim" in this proceeding, under the specific terms of Section 5985a. Sec. 5985a, R.S. 1939; Laws, 1941, p. 397, Sec. 1; City of St. Louis v. Senter Commission Co., 337 Mo. 238, 85 S.W.2d 21; Prigg v. Commonwealth of Pennsylvania, 41 U.S. 539, 16 Peters, 539, 10 L. Ed. 1060. (3) Section 5985a must be held to be a ratification of appellant's employment contract by the State of Missouri, since it was passed with full knowledge of the existence of such contract and its terms, and was a recognition of the State's obligation to appellant. Sec. 5985a, R.S. 1939; Laws, 1941, p. 397, Sec. 1; Aetna v. O'Malley, 343 Mo. 1232, 124 S.W.2d 1164; State ex rel. Lucas v. Blair, 346 Mo. 1017, 144 S.W.2d 106; State v. Eckhardt, 232 Mo. 49, 133 S.W. 321; 52 C.J. 1146, sec. 4; 59 C.J. 186, sec. 323; State v. McKay, 43 Mo. 594; State ex rel. Kelly v. Hackmann, 275 Mo. 636, 205 S.W. 161; State ex rel. Armontrout v. Smith, 353 Mo. 486, 182 S.W.2d 571; O'Hara v. State of New York, 112 N.Y. 146, 19 N.E. 659; U.S. v. Heinszen, 206 U.S. 370, 27 S.Ct. 742, 51 L.Ed. 1098. (4) The State of Missouri has further ratified appellant's contract by the very act of the State in accepting appellant's services and the benefits derived therefrom. Carr, Auditor, v. State of Indiana, 127 Ind. 204, 26 N.E. 778, 22 Am. St. Rep. 624, 11 L.R.A. 370; Hydraulic Race Co. v. Greene, 245 N.Y.S. 444, 230 A.D. 374, 178 N.E. 786; People ex rel. Chatterton v. Secretary of State, 58 Ill. 90. (5) The Legislature by the enactment of Sec. 5985a, R.S. 1939 (Laws, 1941, page 396, Section 1), in effect appropriated that portion of the escheat fund necessary to pay appellant. City of Montpelier v. Gates, 106 Vt. 116, 170 A. 473; McConnell v. Gallet, State Auditor, 51 Idaho, 386, 6 P.2d 143; State ex rel. v. District Court, 92 Mont. 587, 19 P.2d 226; California Toll Bridge Authority v. Kelly, 218 Cal. 7, 21 P.2d 425; People ex rel. McCauley v. Brooks, 16 Cal. 11. (6) By escheating the undistributed fund to the State of Missouri and subjecting it to claims filed in the Circuit Court of Cole County, the Legislature re-established the inherent equity powers of that court over the fund to pass upon such claims and this appellant's equitable lien against the fund (the enforcement of which had been theretofore impeded by the operation of the insurance code as decided by this court in Aetna v. O'Malley) became and now is enforcible in this equity proceeding. 17 C.J.S., p. 667, sec. 278, Subject C; Kusnetzky v. Old Colony Ins. Co., 281 S.W. 47; State ex rel. American Surety Co. v. Haid, 325 Mo. 949, 30 S.W.2d 100; Chesnutt v. Schwartz, 293 Ill. 414, 12 N.E. 912; Harris v. Runnells, 53 U.S. 79; Winton v. Amos, 255 U.S. 373, 65 L.Ed. 685; New York Ry. Co. v. Gray, 239 U.S. 583, 60 L.Ed. 451; 5 Am. Jur., 367, sec. 178; Aetna v. O'Malley, 343 Mo. 1232, 124 S.W.2d 1164. (7) Secs. 5789, 5795-8 and 5985, R.S. 1939, as applied to appellant to prevent his recovery under his employment contract are unconstitutional and void as impairing the obligation of his contract in violation of Article I, Section 10, Clause 1 of the Constitution of the United States and as being in violation of the due process and equal protection clauses of the Fourteenth Amendment to the Constitution of the United States. Nebbia v. New York, 291 U.S. 502, 54 S.Ct. 505, 78 L.Ed. 940; Weinberg v. Northern Pac. Ry. Co., 150 F.2d 645.
Swofford, Jackson Shanklin, Hendren Andrae, Charles M. Howell, Jr., and Dean Wood for appellants Floyd E. Jacobs and Grace L. Henderson, Administratrix De Bonis Non of Estate of Mitchell J. Henderson.
(1) The circuit court erred in sustaining defendants' motion to dismiss plaintiffs' amended petition; for the reason that said court does have jurisdiction over the subject matter and the relief sought therein, under the Escheat Act of 1941. Sec. 5985a, R.S. 1939, as amended in 1941 in Laws 1941, p. 397, Sec. 1. (2) The Escheat Act provides that "any person or corporation" may file a claim in said circuit court. Plaintiffs are persons and therefore can file a claim. Said remedy is not limited to policyholders, as defendants contend. Aetna Ins. Co. v. O'Malley, 343 Mo. 1232, 124 S.W.2d 1164; Sec. 645, R.S. 1939; Cooper v. Kansas City Pub. Serv. Co., 202 S.W.2d 42; In re Duren, 200 S.W.2d 343; Graves v. Little Tarkio Drain. Dist. No. 1, 345 Mo. 557, 134 S.W.2d 70; Cummins v. Kansas City Pub. Serv. Co., 334 Mo. 672, 66 S.W.2d 920. (3) Plaintiffs' amended petition presents a "claim" under said Escheat Act; and the said circuit court has jurisdiction to determine its merits. Prigg v. The Commonwealth of Pennsylvania, 16 Peters, 539, 10 L.Ed. 1060; 1 Bouvier's Law Dictionary (Rawle's Third Rev. Ed.), p. 501; 6 C.J., Attorney and Client, sec. 394, p. 782. No. 71; 21 C.J., Escheat, sec. 17, p. 856. (4) The Circuit Court of Cole County, Missouri, does have jurisdiction to grant relief to plaintiffs on their amended petition; under said Escheat Act, expressly providing for said relief. Sec. 5985a. R.S. 1939, as amended in 1941 in Laws 1941, p. 397, Sec. 1. (5) The circuit court erred in sustaining defendants' motion to dismiss plaintiffs' amended petition: for the reason that said petition does state a cause of action against the defendants. Sec. 5985a, R.S. 1939, as amended in 1941 in Laws 1941, p. 397, Sec. 1; Aetna Ins. Co. v. O'Malley, 343 Mo. 1232, 124 S.W.2d 1164; 21 C.J., Escheat, sec. 17, p. 856. (6) This court has decided that plaintiff counsel and his co-counsel were lawfully employed by the State to render the services on behalf of the State, that created said fund; for which he now seeks compensation. Aetna Ins. Co. v. O'Malley, 343 Mo. 1232, 124 S.W.2d 1164. (7) Sec. 13337, R.S. 1939, applies to establish a lien on said fund in favor of the plaintiffs, now that the fund belongs to the State, subject to claims; since said fund represents the proceeds of the Restitution Case, which plaintiff counsel was employed to obtain for the State. State ex rel. Anderson v. Roehrig, 8 S.W.2d 998. (8) Because the fund is under the control of the Circuit Court of Cole County which is the very court where the fund was created in the said Restitution Case, by plaintiff counsel and his co-counsel, that court should recognize an equitable ownership or property right in said fund by said counsel for his compensation. 6 C.J., Attorney and Client, sec. 394, p. 782, No. 71. (9) After said fund was created by the services of plaintiff counsel and his co-counsel, and at the time it did go to the State on August 9, 1946, under said Escheat Act, the lien or charge of said plaintiff counsel attached in equity; just as in any other case of after-acquired property embraced in an agreement giving rise to a lien. 37 C.J., Liens, sec. 32, pp. 324-5. (10) When the State Legislature enacted the Escheat Act of 1941 and the State Treasurer received thereunder the fund, subject to claims, on August 9, 1946, there was a ratification of the provision in the contract of lawful employment of plaintiff counsel by the State, that his services on behalf of the State were to be paid out of the fund; notwithstanding that said payment was to be made by the Superintendent of Insurance out of said fund while it belonged to the policyholders, by the terms of said contract thereafter held illegal in such respect only. Aetna Ins. Co. v. O'Malley, 343 Mo. 1232, 124 S.W.2d 1164; State ex rel. Armontrout v. Smith, 353 Mo. 486, 182 S.W.2d 571. (11) Since the State has consented to be sued as the adversary party in said Escheat Act, and has provided the forum for claims to be paid out of the fund, the State is in court subject to the principles of law that determine the obligations of private persons, as to that fund. Hydaulic Race Co. v. Greene, 245 N.Y.S. 444; Carr, Auditor, v. State of Indiana, 26 N.E. 778, 11 L.R.A. 370. (12) Said contract of employment of plaintiff counsel by the State may now be carried out under said act, because it is a lawful contract for lawful services; and its illegal provision for payment by the Superintendent of Insurance of plaintiff counsel's compensation out of the fund while said fund belonged to the policyholders, is but incidental to the fundamental intent in the contract, that he be paid for his services out of the fund; which, it was understood at the time of contracting, was eventually to go, and did go under said act, to the State by escheat. 5 Am. Jur., Attorneys at Law, sec. 178, p. 367; 2 L.R.A. (N.S.) 261. (13) The State would be unjustly enriched by that part of the fund to be fixed by the circuit court, that the State promised to use to pay said plaintiff counsel for his services in creating the fund; if plaintiffs' claim in their amended petition be denied. Clifford Banking Co. v. Donovan Commission Co., 195 Mo. 262, 94 S.W. 527; Donovan v. Kansas City, 352 Mo. 430, 175 S.W.2d 874. (14) The State Legislature by said Escheat Act, has in effect appropriated said fund to the extent necessary to pay claims filed within five years after August 9, 1946. Aetna Ins. Co. v. O'Malley, 343 Mo. 1232, 124 S.W.2d 1164; State ex rel. S.S. Kresge Co. v. Howard, 208 S.W.2d 247; City of Montpelier v. Gates, 170 A. 473. (15) Secs. 5789, 5795-8 and 5985, R.S. 1939, as applied to plaintiffs under the facts and circumstances of this case, to prevent plaintiffs from being compensated out of said fund created by the efforts of plaintiff counsel and his co-counsel, under his contract of employment by the State, and from being compensated for his long, arduous, and successful services as aforesaid, are, in said respects, arbitrary and unreasonable, and unconstitutional and void, being in violation on that account of the due process clause of the Fourteenth Amendment to the Constitution of the United States; and further in violation of the equal protection clause in said Fourteenth Amendment, in unduly discriminating against these plaintiffs, so that they are prevented from receiving compensation for said services. Nebbia v. New Work, 291 U.S. 502, 54 S.Ct. 505, 78 L.Ed. 940; Weinberg v. Northern Pacific Ry. Co., 150 F.2d 645; Carr, Auditor, v. State of Indiana, 26 N.E. 778, 11 L.R.A. 370.
Clif Langsdale, Hendren Andrae and Clyde Taylor for appellant John T. Barker.
(1) The decisions by the Supreme Court upon the general subject matter here involved are not controlling nor are they even relevant to the issues here and now involved and presented. Aetna Ins. Co. v. O'Malley, 343 Mo. 1232, 124 S.W.2d 164; State ex rel. Garwood Realty Co. v. Dinwiddie, 343 Mo. 592, 122 S.W.2d 912; State ex rel. Lucas v. Blair, 346 Mo. 1017, 144 S.W.2d 106; State ex rel. Mo. State Life Ins. Co. v. Hall, 330 Mo. 1107, 52 S.W.2d 174. (2) The action of the governor in behalf of the state in employing the lawyers to recover from the companies for the benefit of the state all that surplus ultimately fixed at $2,160,871.32 which could not be paid to policyholders, was ratified by the state acting through the legislature by the Act of 1941 and the things done by the state through its proper officers directed and authorized to be done by said act. 1 Mechem on Agency (2 Ed.), sec. 347; 2 Am. Juris., p. 166; U.S. v. Heinszen, 206 U.S. 370, 27 S.Ct. 742; 1 Mechem on Agency, secs. 434, 435, p. 316; 2 Am. Juris, p. 181; Chicago Railroad Co. v. U.S., 244 U.S. 351, 37 Sup. Ct. 625; Ely v. U.S., 171 U.S. 220, 18 Sup. Ct. 840; Clark v. Reeder, 158 U.S. 505, 15 Sup. Ct. 849; Ruggles v. County of Washington, 3 Mo. 496; Matthews v. French, 194 Mo. 553, 92 S.W. 634; Kirkpatrick v. Pease, 202 Mo. 471, 101 S.W. 651; Davis v. Krum, 12 Mo. App. 279; O'Hara v. State of New York, 112 N.Y. 146, 19 N.E. 659. (3) The Act of 1941 was a ratification of the employment of the lawyers on behalf of the state to recover the fund in question for the benefit of the state. (4) The Act of 1941 is in legal effect an appropriation act for the payment to the lawyers from the fund in question. People v. Brooks, 16 Cal. 28; City of Montpelier v. Gates, 106 Vt. 116, 170 A. 473, and cases cited in the opinion in the City of Montpelier cases; McConnell v. Gallet, State Auditor, 51 Idaho, 386, 6 P.2d 143; State ex rel. v. District Court, 92 Mont. 587, 19 P.2d 226; Cal. Toll Bridge Authority v. Kelly, 218 Cal. 7, 21 P.2d 425.
J.E. Taylor, Attorney General, George W. Crowley and Harry H. Kay, Assistant Attorneys General, for respondents; Ralph C. Lashly of counsel.
(1) Insurance business in Missouri is regulated by the Insurance Code and courts are without power to interfere with the administration of that code. State ex rel. Mo. State Life Ins. Co. v. Hall, 330 Mo. 1107, 52 S.W.2d 174; Aetna Ins. Co. v. O'Malley, 343 Mo. 1232, 124 S.W.2d 1164; State ex rel. Carwood Realty Co. v. Dinwiddie, 343 Mo. 592, 122 S.W.2d 912; State ex rel. Lucas v. Blair, 346 Mo. 1017, 144 S.W.2d 106. (2) Appellants' employment, including the method of payment of their compensation is governed by the Insurance Code, and, therefore, the circuit court below was without power to provide any different compensation for appellants. Aetna Ins. Co. v. O'Malley, 343 Mo. 1232, 124 S.W.2d 1164; State ex rel. Lucas v. Blair, 346 Mo. 1017, 144 S.W.2d 106; Lucas v. Lamb, 348 Mo. 900, 156 S.W.2d 634. (3) The Escheat Act of 1941 in no way changes the position of appellants from what it was when this court held that they were not entitled to be paid out of the funds collected by litigation but could only be paid by an appropriation by the Legislature. Said act did not create new claims against the fund, but only provided a method by which those having claims (policyholders) could enforce them. Laws 1941, p. 397. (4) Said act did not amount to a ratification by the state of that part of the contract of appellants which undertook to provide a method of payment different from that provided by statute. 59 C.J., p. 186, sec. 323; State ex rel. Armontrout v. Smith, 353 Mo. 486, 182 S.W.2d 571. (5) Sections 5789, 5795-8 and 5985 are not unconstitutional and void as impairing the obligation of contracts, nor do they violate the due process and equal protection clauses of the Fourteenth Amendment to the United States Constitution. State ex rel. Lucas v. Blair, 346 Mo. 1017, 144 S.W.2d 106; State ex rel. v. Farm Home S. L. Assn., 338 Mo. 313, 90 S.W.2d 93.
These are actions in equity wherein each of the appellants, Weatherby, Barker and Jacobs, sought to have the Circuit Court of Cole County, Missouri, allow reasonable attorney fees for services rendered to the Superintendent of Insurance and impress a lien upon a certain fund now in the hands of the State Treasurer. The court dismissed the petitions and plaintiffs appealed.
In the petitions plaintiffs claimed the reasonable value of the services to be 5% of the total fund collected in certain insurance cases, making the fee in each case in excess of $130,000. The three cases were consolidated and argued together in this court because the issues were identical.
These same claims have been before this court on former occasions. See Aetna Ins. Co. v. O'Malley, 343 Mo. 1232, 124 S.W.2d 1164, where this court en banc reversed a judgment of the Circuit Court of Cole County, Missouri, allowing appellant Weatherby $137,000 and Barker and Jacobs [743] a total of $275,000. The trial court in that case had ordered the fees allowed to be paid out of the same fund against which the parties now seek to have the court declare a lien for their attorney fees. For a full statement and history of the case see the opinion in the Aetna case, supra. Appellants do not ask us to overrule the opinion in the Aetna case but rely upon an act of the legislature by which the fund in question was escheated to the state. See Sec. 5985a, Laws 1941, page 397.
We will make a very brief statement of the facts. In November, 1922, the Insurance Superintendent ordered a 10% reduction in the insurance rates. Many fire insurance companies contested the legality of the order. Pending the final outcome of the case the insurance companies collected the full rate. After the case was finally decided the companies were ordered to repay the policyholders the excess premiums collected. The companies, in compliance with the order, repaid to the policyholders approximately $11,000,000. It was found, however, that many who were entitled to payments out of the fund could not be located. A judgment was entered in the Circuit Court of Cole County ordering the companies to pay the balance, with interest, into the custody of the court for the benefit of the policyholders. This judgment was based on a motion filed by the attorneys who are the plaintiffs in the present action. They were employed by the Superintendent of insurance with the approval of the Governor. The amount paid into the custody of the court by the insurance companies was approximately $2,750,000. It was in connection with this restitution proceeding that the claims for legal services now before this court originated. While the fund was in the custody of the Circuit Court of Cole County further payments were made to policyholders.
It was held in the Aetna case, supra that the Superintendent of Insurance had authority to employ attorneys for the purpose of representing him in rate litigation. It was further held that the compensation of the attorneys could only be paid by an appropriation made by the legislature. See Aetna Ins. Co. v. O'Malley, supra, 124 549 S.W.2d 1164, l.c. 1168, where this court en banc, in the concluding portion of the opinion, said:
"The trial court being without authority to interfere with the insurance code of this state, it follows that it erred in allowing the respondents fees from the impounded fund. As above stated, Section 5678, supra, does give the superintendent of insurance, with the approval of the governor, authority to employ attorneys to enforce the insurance laws of this state, yet the only way such attorneys can be paid is like any other expense of the insurance department, that is, by an appropriation of the legislature." . . . "So, in the case at bar, the respondents must look to the legislature for the payment of their fees."
The same conclusion was reached by this court in Lucas v. Lamb, 348 Mo. 900, 156 S.W.2d 634, l.c. 637, 638 (9), where this court said:
"The record shows that respondent rendered diligent and valuable services, and incurred expense; that his efforts contributed to the collection of a much larger sum for the benefit of the policyholders, or of the State, than might otherwise have been recovered. However, for the reasons stated, we are unable to permit him to retain compensation out of the fund collected. If, as contended by respondent, the State shall become the ultimate beneficiary of a part of this fund, the question of respondents' reimbursement may be addressed to the General Assembly."
See also State ex rel. Lucas v. Blair, 346 Mo. 1017, 144 S.W.2d 106, l.c. 109 (6-8). It may also be noted that the legislature has recognized its authority to compensate attorneys employed by the Superintendent of Insurance in these rate cases. It appropriated the sum of $150,000 to Mr. Barker and Mr. Jacobs for representing the Superintendent of Insurance in the 10% reduction litigation case which originated in 1922 and in which case the present case had its origin. See Laws 1931, page 69, Sec. 11. We understand that the Governor ordered the amount appropriated reduced to $100,000. The Aetna case, supra, was decided by this court in September, 1938. Motions for rehearing and to modify were overruled and the decision became [744] final on April 4, 1939. The case of State ex rel. Lucas v. Blair, supra, was decided in September, 1940, and became final November 9, 1940. Lucas v. Lamb, supra, was decided July 8, 1941, and became final December 12, 1941. The act of the legislature relied on by appellants was enacted in the year 1941 and was approved on July 30 of that year. It will be noted that the first two cases mentioned were decided before the 1941 legislature convened. Those two cases definitely held that the circuit court had no authority to allow appellants' claims and that the only way their claims could be paid was by an appropriation of the legislature. It will be noted that this court in Lucas v. Lamb, supra, 156 S.W.2d 634, l.c. 637 (9), anticipated that the fund in question would ultimately go to the state. The court there said:
"If, as contended by respondent, the State shall become the ultimate beneficiary of a part of this fund, the question of respondent's reimbursement may be addressed to the General Assembly."
That was written after the legislature had enacted the escheat statute, Sec. 5985a, supra.
Let us now examine the escheat statute and see if there is any expression which can be construed to mean that the circuit court was given authority to allow the attorney fees claimed and to order them paid out of this fund. After providing that the fund shall escheat to the state, the section contains a proviso, relied on by appellants, which reads as follows:
". . . provided, however, that within five years after such money has been paid into the State Treasury, any person or corporation who appears and claims the same may file his petition in the Circuit Court of Cole County, Missouri, stating the nature of his claim and praying that such money be paid to him, a copy of which petition shall be served upon the Superintendent of Insurance who shall file an answer to the same. The Court shall proceed to examine said claim and the allegations and proof, and if it find that such person is entitled to any money so paid into the State Treasury, it shall order the State Auditor to issue his warrant on the State Treasurer for the amount of said claim, but without interest or costs."
Appellants say the above proviso authorized the Circuit Court of Cole County to take jurisdiction of these claims, allow a reasonable fee and declare the allowance as a lien against the escheat fund. The reading of the statute does not justify such an interpretation. Note the proviso says, ". . . that within five years . . . any person or corporation who appears and claims the same . . ." The question is, claims what? The answer must be, claims the money that was escheated to the state. This fund, as has often been stated in the various opinions, belongs to the policyholders. The legislature, by the above section, simply allowed anyone who had not been repaid his money to make claim therefor within five years. This view is supported by what follows. The section provides that if the circuit court should find: ". . . that such person is entitled to any money so paid into the State Treasury," a warrant shall be drawn ". . . for the amount of said claim, but without interest or costs." Suppose numerous claims had been filed and the superintendent had employed an attorney to represent him in such litigation for the purpose of protesting the fund, could the court, by virtue of the statute, have allowed such attorney a reasonable fee for representing the superintendent? We think not. The legislature, it seems to us, was careful to protect the fund against any claims except those of persons and corporations to whom the money actually belonged; furthermore, that the cost of litigation establishing these claims should not be assessed against the fund.
We therefore hold that the only authority given to the circuit court by the section in question is authority to determine whether the fund, or any part thereof, belongs to any person or corporation making claim therefor. The word "claim," as used in the statute, was evidently used in such a restricted sense. Certainly, in view of the decisions of this court in the various cases, holding that the claimants in the present cases must look to the legislature for payment of their claims, and further, that the Circuit Court of Cole County has no jurisdiction to allow them, the legislature, had it intended to vest the court with such jurisdiction, [745] would have said so in plain and unmistakable language. Furthermore, there is no apparent reason why the legislature would vest the circuit court with such authority. The legislature in the past has appropriated money to pay attorneys and there is no reason why it cannot do so again if it deems the claims meritorious. Whether they are, or are not, we have no authority to say in this case.
We must again, as we have before, say to these plaintiffs, your claims must be presented to the legislature for consideration. The judgment of the trial court in each case is therefore affirmed. Bohling and Barrett, CC., concur.
The foregoing opinion by WESTHUES, C., is adopted as the opinion of the court. Ellison, J., and Tipton, P.J., concur; Leedy, J., absent.