Bard v. Charles R. Myers Insurance Agency, Inc.
36 Tex. Sup. Ct. J. 72, 1992 Tex. LEXIS 112, 839 S.W.2d 791 (1992)
Rule of Law:
Under the Full Faith and Credit Clause, a state court must enforce a final injunction issued by a foreign state's receivership court that bars litigation against an insolvent insurer, even if the receiver has initiated a collection suit in the forum state.
Facts:
- Ambassador Insurance Company was a specialized insurer chartered in Vermont that wrote excess policies for high-risk ventures.
- Charles R. Myers, a Texas resident, sold Ambassador's policies to customers under a correspondent's agreement.
- In 1983, a Vermont court placed Ambassador in receivership and later ordered its liquidation due to insolvency.
- The Vermont court issued a final liquidation order appointing the Vermont Commissioner of Banking and Insurance as liquidator.
- Crucially, the Vermont liquidation order contained a specific injunction prohibiting any actions, counterclaims, or set-offs against Ambassador or the Liquidator anywhere in the United States.
- The order required all claims against Ambassador to be filed through a specific administrative procedure in the Vermont receivership proceedings.
- The Vermont court retained jurisdiction to oversee the administration of the estate and discharge the receiver upon completion.
Procedural Posture:
- The Vermont Commissioner filed a lawsuit against Myers in the Texas trial court to recover unpaid premiums.
- Myers filed a counterclaim in the Texas trial court alleging conspiracy by Ambassador's management.
- The Commissioner moved for summary judgment on the counterclaim, arguing the Vermont injunction barred it.
- The Texas trial court denied the Commissioner's motion and allowed the counterclaim to proceed.
- The jury returned a verdict against the Commissioner on the counterclaim, awarding Myers over $1.6 million in damages and fees.
- The Texas trial court entered judgment in favor of Myers on the counterclaim.
- The Commissioner appealed the judgment to the Texas Court of Appeals.
- The Texas Court of Appeals affirmed the trial court's judgment, holding the Vermont order was not entitled to full faith and credit.
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Issue:
Does the Full Faith and Credit Clause require a Texas court to enforce a Vermont receivership court's injunction prohibiting counterclaims against an insolvent insurer, thereby barring a defendant in a Texas lawsuit from asserting such counterclaims?
Opinions:
Majority - Justice Cook
Yes, the Texas court was required to honor the Vermont order and dismiss the counterclaim. The Full Faith and Credit Clause of the U.S. Constitution mandates that a valid judgment from one state be enforced in others, regardless of the forum state's public policy, provided the judgment is final. The Court held that the Vermont order was final because the Vermont Supreme Court treated it as such, and the mere retention of jurisdiction to oversee the liquidation process did not render the injunction interlocutory. Furthermore, the Court rejected the argument that the Texas compulsory counterclaim rule overrode the injunction. The purpose of insurance insolvency statutes is to consolidate all claims in a single forum to ensure equal treatment of creditors. Allowing counterclaims in foreign jurisdictions simply because the receiver sued to collect assets there would defeat this purpose and deplete the estate's assets through disjointed litigation.
Analysis:
This decision reinforces the dominance of federal constitutional mandates (Full Faith and Credit) over state procedural rules (compulsory counterclaims) in the context of insurance insolvency. It establishes that receivership injunctions are powerful tools that cross state lines, preventing local courts from entertaining suits that could interfere with the centralized liquidation of an insurer. Practically, this protects the assets of insolvent companies by forcing all creditors to seek relief in a single domiciliary court, preventing a 'race to the courthouse' in other states where the insurer might have assets or business dealings.
