Bryant v. United Shortline Inc. Assurance Services, N.A.

972 S.W.2d 26, 1998 WL 226460

• Court: Texas Supreme Court
• Decided: August 25, 1998
• Docket: 97-0093
• Status: Published

Opinions

ENOCH, Justice,

delivered the opinion of the Court,

in which PHILLIPS, Chief Justice, and GONZALEZ, SPECTOR and ABBOTT, Justices, join.

In this case, we consider whether a Tennessee chancery court order that gives that court exclusive jurisdiction over the assets of an insolvent insurer precludes a Texas lawsuit by a judgment creditor to satisfy the judgment from funds in a Texas bank, the ownership of such funds being in dispute. The court of appeals held that the Tennessee order exceeded the chancery court’s jurisdictional limits, and therefore affirmed the trial court’s refusal to enjoin or stay the Texas proceedings. We affirm the court of appeals’ judgment, but for reasons different than those expressed in the court of appeals’ opinion.

I. Background

A. The Tennessee Liquidation Order

Anchorage Fire & Casualty Insurance Company (“Anchorage”) is in liquidation in Tennessee. In March 1998, a Tennessee chancery court issued a conservation order placing Anchorage in receivership pursuant to the Tennessee Insurers Rehabilitation and Liquidation Act (“TIRLA”). Tenn.Code ANN. §§ 56-9-101 to -510 (1994). The conservation order directed the Tennessee Commissioner of Commerce and Insurance (the “Commissioner”) to take possession of and administer Anchorage’s assets; the order specifically authorized the Commissioner to act outside of Tennessee to marshal and conserve Anchorage’s assets. The order also temporarily enjoined all persons from transferring or disposing of Anchorage’s property, from interfering with the conservator or the conservatorship, from instituting or further prosecuting any actions or proceedings against Anchorage, and from obtaining preferences, judgments, attachments, or other liens against Anchorage or its assets.

The Tennessee court later converted the conservation order into a liquidation order, invoking section 56-9-402 of TIRLA as its jurisdictional basis. Section 56-9-402 allows liquidation of the “assets found in [Tennessee]” of a foreign or alien insurer not domiciled in Tennessee. TIRLA § 56-9-402. The liquidation order converted the temporary injunction into a permanent injunction. More importantly for purposes of this opinion, the order also empowered the liquidator to take possession of all Anchorage assets wherever located. The order named the Commissioner as the liquidator, and authorized him to act through petitioner Jeanne Barnes Bryant (the “Liquidator”).

B. The USI Suit

Meanwhile, United Shortline, Inc. Assurance Services, N.A. (“USI”) had a $2 million Florida judgment against MacGregor General Insurance Company (“MacGregor”), a foreign general casualty insurance company. Both MacGregor- and Anchorage had assets on deposit with Surety Bank, N.A. (the “Bank”) in Hurst, Texas. USI sued MacGre-gor in a Texas district court seeking to preserve MacGregor’s assets, including those deposited at the Bank.

The Bank intervened in this action, inter-pleading several entities, including Anchorage and the state of Tennessee, with claims to the disputed assets. The funds at issue originated from the Bank’s insurance premium financing business with MacGregor and Anchorage. The Bank was unsure about ownership of the disputed funds in part because of reinsurance agreements and correspondence between MacGregor and Anchorage suggesting that Anchorage may be entitled to insurance premium finance payments owed to MacGregor. The Bank had been collecting from insureds of both companies. The Bank deposited about $600,000 into the registry of the court pending resolution of the conflicting claims.

The Liquidator moved to dismiss or stay, arguing that the Texas court should afford full faith and credit to the Tennessee liquidation order and require the Bank to adjudicate ownership of the disputed funds in the Tennessee liquidation proceeding. The trial court denied the Liquidator’s motion to dismiss or stay and granted summary judgment for USI, awarding it the interpleaded funds.

The Liquidator appealed. The court of appeals affirmed in part and reversed in part the trial court’s judgment. The court of appeals held that the liquidation order showed on its face that it was void for lack of jurisdiction, and therefore the trial court did not err in refusing to dismiss or stay the action. However, the court of appeals held that a fact question remained about ownership of the disputed funds. The court of appeals therefore remanded the case for trial.

The Liquidator asserts that the court of appeals erred in several respects. First, the Liquidator contends that the court of appeals should have held that the liquidation order, was entitled to full faith and credit, and that, so entitled, the order required that the USI lawsuit be dismissed or stayed. Second, the Liquidator argues that principles of comity require staying or dismissing the suit. Finally, the Liquidator urges that intervention by the Bank was improper and that the interpleader action was inappropriate. We take up these arguments in turn.

II. Full Faith aot> Credit

The United States Constitution requires each state, to give full faith and credit to the public acts, records, and judicial proceedings of every other state. U.S. Const. art. IV, § 1; see also Barber v. Barber, 323 U.S. 77, 79, 65 S.Ct. 137, 89 L.Ed. 82 (1944). Both the United States Supreme Court and this Court have held that the full faith and credit clause applies to orders placing insurance companies into receivership. See Underwriters Nat’l Assurance Co. v. North Carolina Life & Accident & Health Ins. Guar. Ass’n, 455 U.S. 691, 707, 102 S.Ct. 1357, 71 L.Ed.2d 558 (1982); Bard v. Charles R. Myers Ins. Agency, Inc., 839 S.W.2d 791, 795 (Tex.1992). In Underwriters, the United States Supreme Court noted that the full faith and credit clause requires only that an order be given the same effect in the sister state that it has in the rendering state; thus, a void order is no more enforceable in a sister state under the full faith and credit clause than it is in the rendering state. See Underwriters, 455 U.S. at 704 n. 10, 102 S.Ct. 1357 n. 10 (“One State’s refusal to enforce a judgment rendered in another State when the judgment is void for lack of jurisdiction merely gives to that judgment the same ‘credit, validity, and effect’ that it would receive in a court of the rendering state.”).

The parties vigorously contest how the full faith and credit clause should be applied in this case. The Liquidator contends that the liquidation order precludes the Texas action, as the order requires all claims against the estate or the property of the estate to be brought in the Tennessee liquidation court.

The Bank and USI respond that the liquidation order is void insofar as it purports to authorize the Liquidator to marshal assets located outside Tennessee. They argue that TIRLA gives the Tennessee court jurisdiction over only those assets of Anchorage located in Tennessee. See TIRLA § 56-9-402(a) (authorizing chancery court to order commissioner to liquidate “the assets found in this state of a foreign insurer or an alien insurer not domiciled in this state”) (emphasis added). The court of appeals agreed with this argument, finding that the liquidation order “shows on its face that it was entered in excess of the jurisdiction granted to the court by [TIRLA].” The court of appeals therefore refused to give full faith and credit to the order. Id.

The Liquidator contends that such an argument is an improper collateral attack on the jurisdiction of the Tennessee chancery court, and that such an attack can be brought only on direct appeal in the Tennessee proceeding. Moreover, the Liquidator urges that TIRLA in fact affords jurisdiction to the Tennessee chancery court over Anchorage’s assets located in other states. See TIRLA § 56-9-402(c) (“If it appears to the court that the best interests of creditors, policyholders and the public so require, the court may issue an order to liquidate in whatever terms it deems appropriate.”) (emphasis added). The Texas Department of Insurance has filed amicus briefs in support of the Liquidator’s position, arguing that there is a strong public policy interest in affording full faith and credit to liquidation proceedings in other states, and that this Court recognized such an interest in Bard.

We agree with the Liquidator and the Department of Insurance that Texas recognizes a compelling policy interest in having claims against an insolvent insurer’s estate resolved in a single proceeding. See Bard, 839 S.W.2d at 797 (noting that adjudication in receivership proceedings of all claims against insolvent insurer’s estate ensures “fair and consistent treatment of all claims”); see also Tex. Ins.Code art. 21.28, § 8. Thus, we have no difficulty in stating that, had the Bank or USI proceeded against Anchorage or the Liquidator, the full faith and credit clause may very well have necessitated dismissal of such a sint. Bard, 839 S.W.2d at 795. What is overlooked in the parties’ and the amicus’s arguments about the full faith and credit clause, however, is the fact that the action at issue — the Bank’s interpleader of funds, the ownership of which is in dispute — is not within the scope of the Tennessee liquidation order.

We need not decide in this case whether TIRLA authorizes the Tennessee chancery court to order the Liquidator to marshal Anchorage assets located outside of Tennessee.¹ In this case, there has. been no adjudication, in Texas or in Tennessee, that the funds at issue belong to Anchorage.2 The liquidation order incorporates the conservation order, which by its terms applies to Anchorage’s property. Thus, even if we assume that the Tennessee court had jurisdiction over Anchorage assets located in other states, we are still left with the fact that we do not yet know if the funds at issue even are Anchorage assets.

None of the parties contest the court of appeals’ conclusion that the Bank’s inter-pleader action is quasi in rem. The funds were located in Texas and the Bank tendered them into the Texas trial court’s registry when it filed the interpleader. This gave the trial court jurisdiction over the funds to disburse them upon determining ownership. See Northshore Bank v. Commercial Credit Corp., 668 S.W.2d 787, 789 (TexApp.—Houston [14 th Dist.] 1984, writ ref'd n.r.e.); cf. State v. Approximately $2,000,000.00 in United States Currency, 822 S.W.2d 721, 726 (Tex.App.—Houston [1 st Dist.] 1991, no writ) (“The general rule of in rem jurisdiction is the court’s jurisdiction is dependent upon its control over the res.”). Nothing about the Tennessee liquidation order precluded the trial court from exercising jurisdiction over the disputed funds, nor did the liquidation order purport to give the Tennessee corad jurisdiction over funds located in another state that do not belong to Anchorage.³

The Liquidator argues that the result it seeks is compelled by two other decisions, one by the Dallas court of appeals in Bryant v. Shields, Britton & Fraser, 930 S.W.2d 836 (Tex.App.—Dallas 1996, writ denied), and the other by a United States District Court for the Northern Division of Texas in Tennessee ex rel. Sizemore v. Surety Bank, N.A., 939 F.Supp. 511 (N.D.Tex.1996). We disagree.

In Bryant, the law firm of Shields, Britton & Fraser (“SBF”) brought a direct action in Texas against Anchorage for fees allegedly incurred in representing an Anchorage insured. Relying on Bard, the Dallas court of appeals held that the liquidation order at issue in this case precluded SBF from bringing the Texas action, affording full faith and credit to the order. Bryant, 930 S.W.2d at 842 — 44.

We agree with the court of appeals’ conclusion in this case that Bryant is easily distinguishable. SBF made a direct claim against the undisputed assets of Anchorage; such a claim directly contravenes the liquidation order. No such claim is made here. Rather, the issue here is ownership of disputed funds that were located in Texas and are now in the possession of the trial court.

Sizemore, although it involved the same parties and the same assets, also is not determinative of this case. In Sizemore, the federal district court addressed only whether the Tennessee chancery court exceeded its jurisdiction in ordering the liquidation of Anchorage assets outside the state of Tennessee, and whether the order could be collaterally attacked in a Texas court. Sizemore, 939 F.Supp. at 516. It is significant that in refusing to entertain a collateral attack on the Tennessee court’s liquidation order, the court assumed for the purposes of its decision that the bank account funds were Anchorage assets. Sizemore, 939 F.Supp. at 516 (“assuming arguendo that the Chancery Court erred in liquidating [Anchorage’s] out-of-state assets ...”).

Unlike the issues presented in Sizemore, the issue in this case is precisely whether the funds in the Texas court’s registry are Anchorage’s assets. The liquidation order simply has no application to these funds until they are shown to be Anchorage’s. Accordingly, Sizemore is inapposite.

Finally, we note that nothing in our disposition of this case in any way conflicts with Bard. In Bard, a Vermont liquidation order required all claims, including counterclaims and set offs, against the insolvent insurer, Ambassador, or its liquidator to be brought in the Vermont receivership court. Bard, 839 S.W.2d at 792-93. The Vermont liquidator filed a claim on Ambassador’s behalf in a Texas district court against Charles R. Myers Insurance Agency (“Myers”), seeking to recover monies allegedly owed for insurance policy premiums. Myers filed a counterclaim in the Texas action. The Vermont liquidator moved to dismiss the counterclaim on the ground that the Vermont order was entitled to full faith and credit, and that the order required the counterclaim against the liquidator to be brought in the Vermont receivership court. We held that the trial court should have dismissed the counterclaim without prejudice. Id. at 795-97. We noted that the fact that the Vermont liquidator brought suit in Texas to recover assets belonging to Ambassador did not allow Myers to defy the liquidation order by proceeding directly against Ambassador by way of counterclaim. Id. at 796.

Here, again, there was no direct action by the Bank against Anchorage, its assets, or the Liquidator. Rather, the Bank tendered funds to the registry of the court through an interpleader action to determine ownership of those funds. Nothing about this action violated the terms of the Tennessee liquidation order. Thus, there is no “full faith and credit” to be given. The assets at issue were located in Texas, and their ownership was unclear. The fact that the Liquidator has appeared in Texas to make a claim against the interpleaded assets does not make them Anchorage’s assets; indeed, that is precisely the issue to be determined in the interpleader action. Unless and until such a determination is made, the Tennessee order does not apply. Under these circumstances, the trial court properly refused to dismiss or stay the lawsuit.

III. Other Issues

A. Comity

The Liquidator argues that the trial court should have stayed or dismissed the lawsuit on comity grounds, contending that Texas courts should defer to the Tennessee court’s exercise of jurisdiction over Anchorage’s assets. We agree with the Liquidator that generally it is appropriate for courts to apply the comity doctrine where another court has exercised jurisdiction over the matter and where the states agree about the public policy at issue. See Twin City Bank v. Mutual Fire Marine & Inland Ins. Co., 646 F.Supp. 1139, 1141-42 (S.D.N.Y.1986), aff'd, 812 F.2d 713 (2d Cir.1987) (table). However, we see no reason for the doctrine to be applied here. Because we have found that the Tennessee court did not exercise jurisdiction over assets that do not belong to Anchorage, it would make no sense to find that the trial court erred in refusing to apply the comity doctrine in this case.

B. Intervention

The Liquidator asserts that the Bank was not a proper intervenor because it had no legal or equitable interest in the USI lawsuit, and because the intervention complicated the case by excessively multiplying the issues. See Guaranty Fed. Savings Bank v. Horseshoe Operating Co., 793 S.W.2d 652, 657 (Tex.1990). We agree with the court of appeals that the Liquidator waived this argument by failing to move to strike the plea in intervention. See id. The Liquidator urges that the court of appeals elevated form over substance; she contends that she brought her opposition to the Bank’s intervention to the trial court’s attention through her plea to the jurisdiction, her answer, and her motion to dismiss or stay. However, these pleadings did not address the impropriety of intervention; rather, they put forth the Liquidator’s general complaint that the action was brought in Texas rather than in the Tennessee liquidation court. The trial court did not err in failing to strike the intervention.

C. Interpleader

Finally, the Liquidator complains that there was no basis for the interpleader action. However, there is no record evidence showing that the trial court abused its discretion in ruling that the interpleader action was appropriate. See Danner v. Aetna Life Ins. Co., 496 S.W.2d 950, 953 (Tex.Civ.App.—Fort Worth 1973, no writ) (“Granting a party’s right to interplead is within the sound discretion of the trial court.”). We indulge every presumption in favor of the trial court’s findings in the absence of a statement of facts. See Commercial Credit Corp. v. Smith, 143 Tex. 612, 187 S.W.2d 363, 365 (1945). Moreover, every reasonable doubt should be resolved in favor of the stakeholder’s right to interplead. See Petro Source Partners, Ltd. v. 3-B Rattlesnake Ref. (1990), Ltd., 905 S.W.2d 371, 375 (Tex.App.—El Paso 1995, writ denied). Accordingly, we hold that the court of appeals did not err in affirming the trial court’s ruling that the interpleader was appropriate.

‡ ‡ ‡ ^ ‡

For the foregoing reasons, we affirm the court of appeals’ judgment.

BAKER, Justice, filed a dissenting opinion, in which HECHT and OWEN, Justices, join. HANKINSON, Justice, did not participate in the decision.

1 . Accordingly, we neither approve nor disapprove the court of appeals' finding that TIRLA precludes the Tennessee chancery court from exercising jurisdiction over Anchorage assets located outside of Tennessee.

2 . We express no opinion about the propriety of the court of appeals’ reversal of the summaiy judgment awarding the funds to USI. Neither USI nor the Bank has asked this Court to review that portion of the court of appeals’ opinion.

3 .We note that section 64.003 of the Texas Civil Practice and Remedies Code provides that "[a] court outside this state may not appoint a receiver for: ... (2) property located in this state.” Tex Civ. Prac. & Rem.Code § 64.003(2). Because of our disposition of this case, we need not determine whether or how this provision affects the Tennessee liquidation order.