U.S. Supreme Court NEBLETT v. CARPENTER, 305 U.S. 297 (1938)

[Page 305 U.S. 297, 299]

for respondents.

Mr. Justice ROBERTS delivered the opinion of the Court.

The questions raised are whether proceedings for the rehabilitation of an insurance company, pursuant to the Insurance Code of California,1 unconstitutionally deprive policy holders of their property without due process of law, or impair the obligation of their contracts. [Footnote 2]

[Page 305 U.S. 297, 301]

ing, which lasted from November 19 to December 4, many officers, stockholders and policy holders who had intervened, including the petitioners, were heard. Plans of rehabilitation presented by some of them were considered; evidence was taken and argument was had. December 4 an order was entered approving the Commissioner's plan and agreement, ratifying the action he had taken, and authorizing him as conservator, and as liquidator, if he should be appointed as such, to carry out the rehabilitation agreement. The court retained jurisdiction to make further orders for the effectuation of the plan and agreement.

The Supreme Court of California affirmed the order. [Footnote 3] The action of that court in overruling certain of petitioners' contentions is claimed to have deprived them of their property without due process.

[Page 305 U.S. 297, 302]

It is said that the Code does not authorize the Commissioner to delegate to a corporation organized by him powers and duties in aid of his administration of the assets of an insolvent insurance company. The state court has held such procedure is in accordance with the Code provisions.

It is argued that the authority which the Code confers on the Commissioner to enter into rehabilitation or reinsurance agreements does not embrace a contract for assumption of the insolvent company's policies by a new company organized by the Commissioner. The court below held the provisions of the statute contemplated such action.

It is claimed that the Commissioner's action violated certain state statutes concerning fraudulent conveyances. The state court held the contrary.

All of these holdings concern matters of state law and amount at most to alleged erroneous constructions of the State's statutes by its own court of last resort. Such decisions would not be a denial of the due process guaranteed by the Fourteenth Amendment, U.S.C.A. Const. amend. 14. 4 We are, therefore, without jurisdiction to review the state court's decision of any of those questions.

It is argued that the Code unconstitutionally delegates legislative functions to the Commissioner, and that the Supreme Court erred in not so holding. This, again, is a question of state law the decision of which by the State's highest court is binding upon us. [Footnote 5]

[Page 305 U.S. 297, 303]

may, subject to the approval of said court, ... mutualize or reinsure the business of' an insurance company 'or enter into rehabilitation agreements.' Section 1043, p. 547. The petitioners assert that this language is so vague that no one can determine what powers are intended to be conferred upon the Commissioner and that the state courts, in construing the Code to authorize the plan and procedure here in question unconstitutionally attempted to read a meaning into the statute of which it is not susceptible, and thus deprived the petitioners of their property without due process. The court below fully considered the contention and overruled it. We think its decision was justified by the criteria approved by this court. [Footnote 6]

[Page 305 U.S. 297, 305]

The petitioners have no constitutional right to a particular form of remedy. 7 They are not entitled, as against their fellows who prefer to come under the plan and accept its benefits, to force, at their own wish or whim, a liquidation which under the findings will not advantage them and may seriously injure those who accept the benefit of the plan. They are not bound, as were the dissenting creditors in Doty v. Love, 295 U.S. 64, 55 S.Ct. 558, 96 A.L.R. 1438, to accept the obligation of the new company but are afforded an alternative whereby they will receive damages for breach of their contracts. They have failed to show that the plan takes their property without due process.

It is not contended that a statutory scheme for the liquidation of an insolvent domestic corporation is per se an impairment of the obligation of the company's contracts. The argument is that the impairment of contract arises from the less favorable terms and conditions of the new noncancelable policies which are to be substituted for the old ones and, in the case of the life policies, by the substitution of a new company as contractor in place of the old, without the consent of the policy holder. This position is bottomed upon the theory that the policy holders are compelled to accept the new company as insurer on the terms set out in the rehabilitation agreement. As has been pointed out, they are not so compelled but are given the option of a liquidation which on this record appears as favorable to them as that which would result from the sale of the assets and pro rata distribution in solution of all resulting claims for breach of outstanding policies.

Judgment affirmed.

Mr. Justice REED took no part in the consideration or decision of this case. Footnotes

Footnote 1 Statutes 1935, Chap. 145, pp. 540-553. The sections of the Insurance Code bearing upon the issues in the case are 1011-1016, inclusive, 1021, 1024, 1025, 1035, 1037, 1043.

Footnote 2 In the court below contentions were made under the equal protection clause of the Fourteenth Amendment, U.S.C.A.Const. Amend. 14, but neither the reasons stated in support of the petition nor the assignments of error in this court present any question under that clause.

Footnote 3 Carpenter v. Pacific Mutual L. Ins. Co., 10 Cal.2d 307, 74 P.2d 761.

Footnote 4 Arrowsmith v. Harmoning, 118 U.S. 194, 196, 6 S.Ct. 1023, 1024; Central Land Co. v. Laidley, 159 U.S. 103, 112, 16 S.Ct. 80, 82; Iowa Central Ry. Co. v. Iowa, 160 U.S. 389, 393, 16 S.Ct. 344, 345; West v. Louisiana, 194 U.S. 258, 261, 24 S.Ct. 650, 651; Standard Oil Co. v. Missouri, 224 U.S. 270, 287, 32 S.Ct. 406, 411, Ann.Cas.1913D, 936; McDonald v. Oregon R. & N. Co., 233 U.S. 665, 669, 34 S.Ct. 772, 773; American Ry. Exp. Co. v. Kentucky, 273 U.S. 269, 273, 47 S.Ct. 353, 354.

Footnote 5 State of Ohio v. Akron Met. Park District, 281 U.S. 74, 79, 50 S.Ct. 228, 230, 66 A.L.R. 1460.

Footnote 6 Connally v. General Construction Co., 269 U.S. 385, 391, 46 S.Ct. 126, 127.

Footnote 7 Gibbes v. Zimmerman, 290 U.S. 326, 332, 54 S.Ct. 140, 142; Doty v. Love, 295 U.S. 64, 70, 55 S.Ct. 558, 561, 96 A. L.R. 1438.