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CLARK v. PREFERRED ACC. INS. CO. OF N.Y.

April 10, 1957

JOSEPH W. CLARK, SR., RESPONDENT,
v.
THE PREFERRED ACCIDENT INSURANCE COMPANY OF NEW YORK, AND STATE OF NEW YORK INSURANCE LIQUIDATION BUREAU, AND CHARLES E. WALSH, ASSISTANT SPECIAL DEPUTY SUPERINTENDENT, AND R. LEE KELLY, INSURANCE COMMISSIONER OF THE STATE OF SOUTH CAROLINA, RECEIVER, OF WHICH THE STATE OF NEW YORK INSURANCE LIQUIDATION BUREAU AND CHARLES E. WALSH, ASSISTANT SPECIAL DEPUTY SUPERINTENDENT, ARE APPELLANTS.



The opinion of the court was delivered by: Taylor, Justice.

April 10, 1957.

The question before the Court in instant case involves the right of a foreign Statutory Liquidator to withdraw from an insolvency proceeding certain funds of an insolvent insurance company, said funds having been deposited by the insolvent company as a prerequisite to doing business in this State, and now being administered in South Carolina by a South Carolina Receiver.

On July 7, 1952, respondent, Joseph W. Clark, Sr., brought an action against The Preferred Accident Insurance Company of New York, a foreign insurance company domesticated in South Carolina, in the Court of Common Pleas for Richland County, to recover disability benefits due him under a policy of insurance issued by such company. This action was accompanied by a restraining Order issued by the Honorable G. Duncan Bellinger enjoining the transfer of the assets located in South Carolina. On July 24, 1952, appellants removed this action to the United States District Court for the Eastern District of South Carolina.

Thereafter, on July 31, 1952, respondent, individually and acting on behalf of all others similarly situated, brought another action in the Court of Common Pleas for Richland County for the appointment of a Receiver to sequester the assets of the insurance company located in South Carolina upon the ground that said company was insolvent.

Hearing upon the application for appointment of the Receiver came on before the Honorable J. Frank Eatmon, and in the written return as well as the oral argument in opposition to the application, appellants resisted the appointment of a Receiver of the assets located in South Carolina on the ground that the appointment of a Receiver of appellant insurance company's assets located in South Carolina would be a violation of the full faith and credit clause of the United States Constitution because the Courts of New York had appointed the Assistant Deputy Superintendent of Insurance for the State of New York as the Statutory Liquidator of the insolvent insurance company with title and ownership of all assets of such company wherever situated.

On August 9, 1952, Judge Eatmon overruled appellants' contention and issued an Order appointing D.D. Murphy, the then Insurance Commissioner of South Carolina, as the Receiver of the property and assets in South Carolina of the insolvent insurance company, empowering the said Receiver to marshal all assets of such insurance company and directing him to advertise for claims, to be filed not later than November 15, 1952. No appeal was taken from this Order.

Included among the assets of the defendant insurance company in South Carolina were two statutory deposits in Federal Government Bonds: One in the amount of $20,000.00 to secure the payment of judgments in favor of policyholders upon insurance contracts as required by Section 37-184, Code of Laws of South Carolina, 1952; and the other in the sum of $50,000.00 to secure the payment of judgment upon surety bonds as provided by Section 37-605 and 37-607, Code of Laws of South Carolina, 1952.

The receivership proceeding was likewise removed by appellants to the United States District Court on August 19, 1952; but on March 25, 1953, the Honorable C.C. Wyche, Judge of the United States District Court, remanded the receivership proceeding and the action commenced by respondent, Clark, individually, to the Court of Common Pleas for Richland County.

Thereafter, within the time limited by the Order of Judge Eatmon, several claims, including one of a nonresident of South Carolina, were filed, and the proceeding was referred to the Master for Richland County under a general Order of Reference. The Master heard and allowed the claim of respondent in the amount of $22,706.50. Appellants filed exceptions to this claim which were overruled by Order of Special Circuit Judge B.E. Nicholson, dated April 12, 1955. Appeal was thereupon taken from this Order by appellants, which appeal was subsequently dismissed by Order of the Honorable G. Badger Baker, dated September 22, 1955.

After the time for filing claims expired, appellants filed an application in the receivership proceeding seeking to withdraw from the receivership proceeding the $50,000.00 which had been deposited with the Insurance Commissioner pursuant to the provisions of Section 37-605, of the Code of Laws of South Carolina, 1952, in lieu of the surety bond of a third party.

The application to withdraw the aforesaid bonds from the insolvency proceeding in this State came on for hearing before the Honorable Harry M. Lightsey, as Master of Richland County, under a general Order of Reference, and on May 3, 1955, he issued and filed his findings of fact and conclusions of law denying such application. Exceptions to the report of the Master were filed by appellants and overruled by Special Circuit Judge, Honorable Thomas H. Pope, in his Order dated May 2, 1956.

Appellants now appeal from the aforementioned Order with R. Lee Kelly, substituted as Receiver in the place and stead of D.D. Murphy, who is not an appellant but rather in the position of respondent opposing the withdrawal of funds from the insolvency proceeding.

The funds involved in this controversy are the $50,000.00 in Government Bonds which were deposited with the Insurance Commissioner as a condition precedent to engaging in the surety business in South Carolina pursuant to Section ...


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