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NEBLETT V. CARPENTER, 305 U. S. 297 (1938)

U.S. Supreme Court

Neblett v. Carpenter, 305 U.S. 297 (1938)

Neblett v. Carpenter

No. 21

Argued October 18, 1938

Decided December 5, 1938

305 U.S. 297


1. Decisions of the Supreme Court of California, to the effect --

(1) That a proceeding for rehabilitation of an insurance company, begun before a disqualified judge, could be carried on, and a transfer of assets made under his void order be ratified, by orders of a qualified judge who took his place;

(2) That the State Insurance Code authorized the Insurance 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;

(3) That the authority which the Code confers on the Commissioner to enter into rehabilitation or insurance agreements embraces a contract for assumption of the insolvent company's policies by a new company organized by the Commissioner; and

(4) That action of the Commissioner in this case did not violate certain state statutes concerning fraudulent conveyances --

held rulings on local law not reviewable by this Court. Pp. 305 U. S. 301-302.

2. Whether a state statute delegates legislative functions to the state insurance commissioner in contravention of the state constitution is a question of state law, the decision of which by the state's highest court is binding here. P. 305 U. S. 302.

3. The provisions of the Insurance Code of California authorizing he Commissioner, as conservator, and with the approval of the court, to "mutualize or reinsure the business" of the company "or enter into rehabilitation agreements" held not so vague that a plan of rehabilitation by the formation of a new company would deprive creditors of their property without due process of law. P. 305 U. S. 303.

4. A plan and agreement for the rehabilitation of a California insurance company (which became insolvent as a result of unprofitable noncancelable health and accident policies) provided for the formation by the Commissioner of a new company. The assets of the old company would be transferred to the new in exchange for the capital stock of the latter. The new company would assume the policies and obligations of the old company to the extent provided in the agreement. Policyholders were to have the option of taking

Page 305 U. S. 298

insurance from the new company or proving their claims for breach of their contracts, provision for payment being made by covenants of the new company and certain retained assets of the old. The plan and agreement were approved by the state court. Several holders of life and noncancelable health and accident insurance policies challenged the plan and court order approving it as denying them due process of law and impairing the obligation of their contracts. Upon review of a decision of the state court overruling their claims, held:

(1) The contention that dissenting policyholders do not have the option of proving their claims for breach of contract because no liquidator has been appointed must be dismissed, since no reason appears why action cannot, consistently with the plan, be taken upon a pending application for the appointment of the Commissioner as liquidator. P. 305 U. S. 303.

(2) The record before this Court in this case containing only the judgment roll, it must be presumed that the evidence supported the decree of the state court. P. 305 U. S. 304.

(3) The dissenting policyholders have no constitutional right to a particular form of remedy. P. 305 U. S. 305.

(4) As far as appears from the record in this case, the method of liquidation provided by the plan adopted was as favorable to dissenting policyholders as would have been a sale of the assets and pro rata distribution to all creditors, and they have therefore failed to show that their property is being taken without due process, or that the obligations of their contracts will be impaired in violation of the contract clause of the Federal Constitution. P. 305 U. S. 305.

10 Cal.2d 307, 74 P.2d 761, affirmed.

Certiorari, 304 U.S. 555, to review a judgment affirming an order of the Superior Court of Los Angeles County which approved a plan of the Insurance Commissioner for the rehabilitation of an insolvent insurance company.

Page 305 U. S. 299

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