Husbands v. Aetna Indemnity Co.

This appeal involves the question of the correctness of the ruling of the trial court sustaining the demurrer to the application. The first reason of demurrer, to wit, that the period of limitation for presentation of claims expired January 1st, 1912, is but an allegation of fact. However, as this was admitted to be true upon the argument, it will be assumed so far as necessary in considering the other causes of demurrer.

The fourth cause of demurrer which, in logical order, should be examined first, is that on January 7th, 1911, the date of the appointment of the receiver in this action, the claim of the applicant had not accrued, but was absolutely contingent and therefore not provable for a dividend in these proceedings. This claim is effectually answered in Bridgeport v. AEtna IndemnityCo., 91 Conn. 197, 99 A. 566. The authorities are there exhaustively examined, and the distinction between a contingent and an unliquidated claim is clearly pointed out. That was a case of a bond given by the Indemnity Company, and the court said (p. 207): "The event, whose happening was, by the terms of the contract, to constitute a breach of it, and create a consequent liability for the resulting damage to the city, occurred some months prior to the receivership proceedings, and the . . . Indemnity Company's liability thereby became an accrued and absolute one, remaining to be liquidated only. It was therefore provable in the receivership proceedings." In the present case the contingency which fixed the liability of the Indemnity Company happened in 1903, when Caldwell, the principal on the bond, defaulted and failed upon legal order to account and turn over to the applicant the assets he should have had on hand. At that time the obligation became absolute and the right of action accrued. Suit was at once brought and this suit was pending when the receiver was appointed. The liability was admitted by the Indemnity Company, and all that remained was an accounting to determine the amount of Caldwell's shortage and thus determine the exact amount due from the Indemnity Company to the estate in the hands of the receiver. The claim was then, upon January 7th, 1911, provable for a dividend. TheBridgeport case is so recent and so thorough in its discussion of what are and what are not accrued claims, that further citation of authorities is unnecessary in this jurisdiction. Attention should, however, be drawn to the fact that the present case is stronger for the claimant than was the Bridgeport case, for the latter case involved the liquidation of further damages, while in the present case all the damage had accrued prior to the bringing of the original action in Kentucky in 1903 and more than seven years prior to the receivership.

The second reason of demurrer is that the claimant did not present to the receiver any claim within the time limited by order of the court, and has never presented any claim or obtained any extension of time for so doing. Unlike the case of Bashford-Burmister Co. v.AEtna Indemnity Co., ante, page 165, there was here no order of compromise nor application therefor, and there is no Federal statute that controls the method of liquidation. The present case stands squarely upon the effect of the general order of January 18th, 1911, authorizing the receiver to defend actions in other States, and the actual defense of this action by the receiver through counsel employed by him from the beginning of the receivership to the date of final judgment thereon, December 4th, 1915, to which are to be added the allegations as set out in the application and admitted by the demurrer, that the applicant never was informed by the receivers or their counsel of the existence of a receivership nor had he such knowledge until after final judgment had been rendered in the Kentucky case, and that he had prosecuted the action to judgment in good faith supposing that the judgment would be valid and binding on the Indemnity Company. The receiver is the officer of the court. His action, within the scope of his authority, is the action of the court. The application shows that as matter of fact the receiver, within the time limited, had full knowledge of this claim and action, and, instead of withdrawing from further litigation and informing the plaintiff of the receivership, took cognizance of the claim by causing counsel to continue the defense in the Kentucky court under his direction and control, though in the name of the Indemnity Company, and he did this under authority of the order of the court which appointed him. It is not to be supposed that an order of this character, and action under it, are entitled to be, or will be permitted to be, given the effect of a trap for the ignorant or the unwary calculated to shut out claimants who may have assumed that when the receiver comes to defend he does so because he has knowledge of and recognizes the existence of the claim as fully as though it were formally presented, and elects to contest it in the court in which it is being litigated upon his appointment rather than transfer the litigation, which oftentimes would be attendant with great inconvenience to the receiver as well as to the defendants, to his home court. The sound and fair rule, which misleads no claimant and gives away no right of the receivership or its creditors, must be and is that where a receiver, acting under the authority of the court of his appointment, either in his own name as receiver, or in the name of the corporation, undertakes in other jurisdictions the defense of actions pending against the corporation of which he is the receiver, such receiver must be held to have recognized the claims against which he is defending as properly before him as receiver and must be bound by the result of such litigation. Unless such is the rule, the expenditure of the funds of the receivership in litigating and the action of the receiver in defending are without meaning. The undertaking of the defense of an action pending in another State under the authorization of the home court constitutes an election to liquidate the claim in the foreign jurisdiction; and it matters not that this defense is conducted in the name of the corporation, as allowed by the statutes, § 6083. The questions of presentation of claims and litigation in the name of the corporation without disclosing the fact of the receivership, are fully discussed in the opinion in theBashford-Burmister Co. application above mentioned, which was decided at the same time as the present case, and that opinion is referred to upon these points and need not be here repeated. Equitably the claim must be deemed to have been presented when the receiver, in his own name or in the name of the corporation, with full knowledge, undertook the defense and did defend to final judgment.

The remaining reason of demurrer is this: "It appears that the claim itself is based solely upon and consists of a judgment rendered in the Kentucky court on December 4th, 1915, and subsequent to the appointment of the receiver in these proceedings." If a claim which had accrued before the receivership had been liquidated and reduced to judgment, as it might, in the court of the receivership, as in the Bridgeport case, no objection could have been taken because the claim as finally allowed had taken the form of a judgment. The same result must follow where, in an action pending at the appointment of the receiver, the receiver, authorized by his court, steps in and defends to final judgment. If the view is right that such action in equity amounts to a presentation of the claim, and the defense in another jurisdiction is authorized, the resulting judgment must be as binding as though obtained in the home jurisdiction. The court of the receivership, in the absence of any statutory regulation, has full power to determine how the validity or amount of the claim may be ascertained, whether by itself or in a foreign jurisdiction. Ordinarily reasons of convenience will determine. Authorizing the receivers to contest in another jurisdiction is in no sense an abandonment of its jurisdiction or an infringement of the general doctrine that the court of the receivership has "full and exclusive jurisdiction over the assets of the estate within the limits of the State." It is rather a delegation of power just as valid as a reference to a committee of its own choosing. The foreign court is in effect a tribunal of its own choosing, although it may be located in another jurisdiction. The existence and recognition of this power of election and delegation is fully discussed and shown in the opinion in the Bashford-BurmisterCo. case to which reference is again made to avoid repetition. No one of the reasons of demurrer is valid, and the demurrer should have been overruled.

There is error, the judgment is set aside and the cause remanded to be proceeded with according to law.

In this opinion the other judges concurred.