Reply Brief — Hinze v. Duel

- rome Uerurt. Fi

FIL.)

MAY 7 1943

CHARLES Clues C2OPLEY

MS fe

SUPREME COURT OF THE UNITED

OCTOBER TERM, 1942

No. 862

HERMAN A. HINZE, CARL E. STURM, ENDRE A.

SHARPEE, ET AL.,

Petitioners,

vs.

MORVIN DUEL, Commissioner or Insuranog, as Ligut-

DATOR OF THE Wisconsin Muruau Insurance CoMPANny.

REPLY BRIEF OF PETITIONERS

Avustixn H. Forknsr,

JoHN Warttawa,

* Counsel for Petitioners.

Supyecr INDEX

PORT. ORSON. 6.0. c os han ns Oud Fees bss

Federal Questions Were Adequately Advanced at

Earliest Opportunity and Properly Preserved for

Review ty Writ Of OCGrelOrOeh oni oss cee sci kes bevnns

POINT A.

POINT B.

Appellants’ Brief in Support of Motion

for Rehearing is Properly a Part of the

Record Under Wisconsin Supreme Court

acho. ecn eva ks co ea eee ees

In This Case the Record Shows That the

Motion Brief Has Been Sufficiently Certi-

fied to Be a Part of the Wisconsin Record

POINT C. Not Only is the Motion Brief a Part of

the Record Under the Practice as it Exists

in Wisconsin and was Necessarily So Cer-

tified By the Clerk of the Wisconsin Court,

but This Case Comes Under the Well De-

fined Qualification or Exception to the

General Rule as to Timely Presentation. .

(1) The further raising of the federal questions was

postponed at the request of the court before the

decision and hence the raising of the federal ques-

tions in the Motion Brief was timely............

(2) Questions of lack of service, trial and due process

were preserved in the state courts for review on

EE NINE 36 Shr ouces ae ia wat cb eek dues eae

Gs

10

i

(3) The following federal questions were unexpectedly

injected into the proceedings at the time of the

decision by the Wis. Supreme Court and neces-

sarily decided on by the state court............ 18

(a) Lack of due process is shown by failure to give

proper notice, or to make ‘‘service by publication

1h WOOT WTOCUOTIBEE” oo csi sSccobersiesspaes 18

There is no statutory proceeding in Wisconsin

other than section 262.14 applicable to liquidation

oe re reer ere rrr Pea wat erat 22

No constructive service was made on policyholders

by way of service or notice on company or its of-

ee OE Te Mr te eee ETE w ee ree 23

Appearance of policyholders by committee to set

aside judgment is not waiver of their rights to

SE ages ECAR IRMA ES EEOC E NERO RS EA RE RESO 25

(b) It was unanticipated and unexpected that the court

would rule that refunds were an adequate means

of correcting the amount owed by individual pol-

icyholders on the assessment.................-. 26

(c) It was unexpected and unanticipated that the court

would rule that this assessment should be based

on ‘‘earned premiums’’ rather than on ‘‘annual

premiums’’ which raises a federal question..... 29

iil

(d) It was unanticipated and unexpected that the court

would rule against separate assessments fer losses

and expenses in public liability and automobile

GONE oc oss ddautsr eur ceeteaank leer 30

(e) It was not anticipated that the court would at-

tempt to rule on all contested matters without

eS Bg rer ree ney 33

BIO B36 35.6 65 sqeknesaccies ded eee 35

Wineonsin Hiatules .... oc. scvniresvsss 35, 36, 38

Supreme Court Rules of Practice......... 37

Cases Crrep

Alien v. Winne, 15 Wie: 135, TORI. 252 6c. cei kas 31

Anderson v. Coburn, 27 Wis. 558................00.- 19

Application of Whitman, 186 Wis. 434.............. 21

Baker v. Baker, E. & Co., 162 Ky. 683, 173 SW 109,

LRA 1917C 171, affirmed in 242 U. S. 394,

Gl i, ek. SOG, SF BOE BOR ee es eke 21

Barber v. Morris, 37 Minn. 194, 33 N.W. 559, 5 Am.

hy WOU: Ws os ckinc-nae herb neuke wr beean was 21

Beckett v. Cuenin, 15 Colo. 281, 25 P. 167, 22 Am.

SOO viv as weeiatnnahidies eee 20, 21

Blum Bros. Box Co. v. Stumbaugh, 207 N. W. 270

CUM i kage vey ae Panbead & tins Slee 25

Bonin v. Green Bay & Minn. Ry. Co., 43 Wis. 210, 212. 5, 6

iv

Brinkerhoff-Faris Co. v. Hill, 281 U. S. 681, 683....11, 12

Builders Mutual Casualty Co., 229 Wis. 365...... 21, 22

28, 29, 31

Castle v. Thomas, 16 Minn. 490.................... 25

Cheely v. Clayton, 110 U. S. 701, 28 L. Ed. 298, 4 S.

CR, Be isc seid vances canon are cee 20

Christopher v. Brusselback, 302 U. S. 500............ 24

Coe v. Armour Fertilizer Works, 237 U. S. 4138, 59

ke, Sos BOSC, OO OR; Bg ook kee nsacus een 34

Coleen v. Figgins, 1 Ill. 19........ WittT ey 25

Correll v. Greider, 245 Ill. 378, 92 N.E. 266, 137 Am.

WR, SO Slee v bcke hve an cee buen Mne eran 21

Davis v. Parcher, 82 Wis. 488, 498.................. 27

Dierolff v. Winterfield, 26 Wis. 175, 180............ 4

Krickson v. Macy, 231 N. Y. 86, 131 NE 744, 16

pe | eer PPE rer eri rts here ie. 20

Estate of Kronglaski, 222 Wis. 634.................. 25

Pioney.v. Guy, TOG Wee. BOG sis 25s dec snkacuveen 25

Frisk v, Riegelman, 75 Wis. 499, 43 N.W. 1117, 44

Wey OUD 65:24 cha RNS ROR Rea an eee 19

Galpin v. Page, 18 Wall. (U. S.) 350, 21 L. Ed. 959.... 20

Gilmore v. Lampman, 86 Minn. 493, 90 N.W. 1113,

0] Am. BE. Hep, Bi ii ek cet ct ee 21

Godfrey v. Valentine, 39 Minn. 338, 339............ 25

v

Grannis v. Ordean, 234 U. S. 385, 58 L. Ed. 1363, 34

ee Be ns Per rene ee nd epee, Wen

Great Northern Ry Co. v. Sunburst Oil & Refining

Oe ae ee. Se re

SERTOT Ve Maman, OO WPM BOE: ois ceva chanics s canes

Harris v. Hardeman, 14 How (U.S.) 334, 14 L. Ed. 444

Hawkins v. Gleme, 14) U, &. S20. .o05.506scccaccsans

Hopkms v. Giiman, 23 Wie. 612.............c0s008:

Kalckhoff, Adm’x. v. Zoehrlaut, imp., 43 Wis. 373, 380.

Lynde v. Lynde, 181 U. S. 183, 45 L. Ed. 810, 21 S.

ie AE nde ada A ember ea bhutan bes eRe ake

McGarrity v. Delaware River Bridge Commission, 292

U. S. 19, 20, 54 S. Ct. 565, 78 L. Ed. 1095....

Missouri v. Gehner, 281 U. S. 313, 320..............

Noble v. Union River Logging R. Co., 147 U. S. 165,

Of Sy Tes Bade A Os MO So hice cys co nh huccws

Oelbermann v. Ide, 93 Wis. 669, 68 N.W. 393........

Palmer v. McMaster, 13 Mont. 184, 33 P. 132, 40 Am.

be: I GR eo Ci Pe eee

People’s Wayne Co. Bank v. Wolverine Box Co., 250

Mich, 273, 230 N.W. 170, 69 A.L.R. 1024....

Pierce v. Kelly, imp., 39 Wis. 569...............6..

Pink vy. A.A.A. Highway Express Co., 314 U. S. 201..

Pringle v. Dunn & Others, 39 Wis. 435, 441, 442

vi

Roosevelt v. Land & River Co., 108 Wis. 653, 84 N.W.

PAAR SY Remake bb de RV ite pee ty Kies bed wick 20

Roosevelt v. Ulmer, 98 Wis. 356, 74 N.W. 124........ 19

Saunders v. Shaw, 244 U. S. 317, 320................ 10

State ex rel. Bergougnan Rubber Corp. v. Gregory,

Eee Wee, OO, 100 WLW, GIB... ivcsccascves 20

State ex rel. Palmer v. Gray, 92 Fla, 1123, 11 So.

Pe IE IEE. 5.5 > 5 bn ho peu ewk case een 20

Stewart v. Stringer, 41 Mo. 400, 97 Am. Dee. 278.... 20

Trowbridge v. Sickler, 48 Wis. 424, 4 N.W. 563...... 6

Voelz v. Voelz, 80 Wis. 504, 50 N.W. 398............ 19

Wilbright v. Wise, 4 Blackf. (Ind.) 137.............. 25

Windsor v. MeVeigh, 93 U. S. 274, 23 L. Ed. 914...... 34

Witt v. Meyer, 69 Wis. 595, 35 N.W. 25............ 19

Zecharie v. Bowers, 1 Smedes & Miss. 584, 40 Am.

Sy SEE od stu ha kes ehawaceae lh decawaie danas 20

Unitep States ConstiruTion

Pomrtoomth Amamment: ovo. oon sk coke vckecivees 15, 16

Ste Dy TD. BUR iis 5 x Shinn ea bs bd 26, 30

vii

Wisconsin STATUTES

NE PR ee ET CETL T Per re eee erty 22

SE UE bbe dadg anes dccncnsoeienvean veneteene 22

EA ph op eiadacnes sovbs ec vacs ao ay ee

i Se Cee: SOE och et var ebs eens cto encevawss 30

i I Es Si icuce sb ekeks skkeBenwenres 31

i Pe a6 505 Cada bane deere bowaseeeaucbeua 22, 23

eS bs a errr errr eee rT err ere 6, 7, 16

GE: SAE kos pena aneehecsniaavegierecaraas 3, 5, 37

A SD pay V ind eb dusonsaeeehaerkdiaenenne 3, 5, 37

DO DR heed edd caneneveeeensesesavoseene 3, 4, 37

SSD (sso os coud cian edeeneden evakek eee ene: Oar

i gk Err errerrree reer Tree re Se

i Be Pr rr ere er te ype 18, 19, 22, 35

i EE 35d vkban connnamehuws aaeelaeen 18, 22, 35

RL MED. cdupe Dike sev ckiaeabentehudaserakaen 19

I AED ki Knee ssausenha tamu teenecuuas 5

New York Statutes

IE a. 5d dina dansSaenninabaeesaveieens cans 21

viii

Sreconpary AUTHORITIES

es ee Se Pee rer eee errerrs

4 Corpus Juris, ‘‘Insurance’’, p. 1307..............

TEXT

Robertson & Kirkham, ‘‘ Jurisdiction of The Supreme

Court of the United States’’, p. 121........

8

SUPREME COURT OF THE UNITED STATES

OCTOBER TERM, 1942

No. 862

HERMAN A. HINZE, CARL E. STURM, ENDRE A.

SHARPEE, ET AL.,

Petitioners,

vs.

MORVIN DUEL, Commissioner or Insurance, as LiQut-

DATOR OF THE Wisconsin Mutua. Insurance CoMPany.

REPLY BRIEF OF PETITIONERS

PRELIMINARY STATEMENT

This reply brief is necessary to correct some of the

erroneous impressions which may have been created by

Respondent’s brief. In the interests of brevity it will be

impossible to answer all of the statements made. The at-

tempt to include all of the briefs submitted by both sides

Sere

2

in the Supreme Court of Wisconsin only adds confusion

since many parts are not pertinent for the purposes of

determination of federal jurisdiction.

This writ is requested by your petitioners for them-

selves and for approximately one thousand other former

policyholders of the Wisconsin Mutual Insurance Com-

pany who have had an assessment of 100% levied against

them, in an amount over $75,000 (R. 34). The acts com-

\ plained of are those of the Commissioner of Insurance of

the State of Wisconsin and of the Supreme Court of Wis-

consin, in denying these petitioners certain rights and

immunities guaranteed them under the Constitution. These

are set up in detail in the petition, incorporated herein

by reference for the sake of brevity.

After receiving no actual notice or notice provided for

under Wisconsin law in special proceedings, the appel-

lants made two applications to the lower court for trial

and hearing. One of these applications was founded en-

tirely upon lack of service and supported by numerous

affidavits (R. 34 to 46). Upon the denial of these two or-

ders, dated May 26, 1942, an appeal to the Wisconsin Su-

preme Court was perfected on these two orders as well

as on the original assessment order of November 29, 1941.

3

I,

FEDERAL QUESTIONS WERE ADEQUATELY ADVANCED

AT EARLIEST OPPORTUNITY AND PROPERLY PRE-

SERVED FOR REVIEW BY WRIT OF CERTIORARI

(A) Appellants’ Brief in Support of Motion for Rehearing is

Properly a Part of the Record Under Wisconsin Supreme

Court Practice

We take the definite position that under the practice

peculiar to Wisconsin, the brief in support of a motion

for rehearing is a proper part of the record, and to certify

it otherwise would not be in conformity with the statutory

Rules of Practice of the Supreme Court of Wisconsin. (See

Appendix I, Section 251.37, Rule 37; Section 251.38, Rule

38; Section 251.39, Rule 39; Section 251.40, Rule 40, and

Section 251.41, Rule 41)

These rules provide that the motion for rehearing shall

be deemed to be waived unless printed brief in support

of the motion is served and filed with the court within a

limited time (Rule 40), that the motion is deemed to have

been submitted only after printed briefs on the motion

have been ‘‘served and filed’? (Rule 41), and that a motion

for rehearing ‘‘shall be submitted on printed arguments,

of which twenty copies shall be furnished to the Clerk’’

(Rule 39).

If the brief in support of the motion for rehearing were

not a proper part of the record of the Wisconsin Court,

the Statute would not, after providing in Section 251.40

(Rule 40) that:

‘‘The printed arguments in support of the mo-

tion shall be served (on counsel) and filed (with

3 SPEER ERTIES ITT BS RAGS HET SET A pet ME a YATE

4

clerk of Supreme Court) within thirty days

after the decision .. .’’

conclude that:

‘‘in default thereof the motion shall be deemed

to have been waived.’’ (italics and parenthetical

matter supplied)

If the printed brief were not a part of the Wisconsin

record, the motion for rehearing would necessarily be

complete without a printed brief, and a dismissal of the

motion for rehearing would be in order for failure to file

such a printed brief, which is not the law of Wisconsin.

In Dierolff v. Winterfield, 26 Wis. 175, 180, we find:

‘‘The motion, therefore, to dismiss the motion

for rehearing, was unnecessary.’’

This is an entirely different situation than exists in the

original presentation before the Wisconsin Supreme Court

where oral presentation and affidavits for certain pur-

poses are allowed. It is provided in Section 251.39 (Rule

39) that:

‘*A motion for a rehearing shall not be argued

orally, but shall be submitted on printed argu-

ments, of which twenty copies shall be furnished

to the Clerk.’’ (italics supplied)

It will be noted that the submission of the motion is the

‘*printed argument’’, and that the formal notice of motion

is not printed. The only printing in a motion for rehearing

is the printed brief while the motion for rehearing itself

is a typed, single copy for purposes of notice (R. 141).

A ea eos ace aaa a ee ceo ee ene eee

5

This notice is necessary for the purpose of entry of an

order to retain the record (R. 142) since otherwise the

clerk retains the record only for a period of twenty days

‘‘unless all parties interested consent to sooner remit the

same’’ (Section 251.37, Rule 37, and Section 251.38, Rule

38). Under Wisconsin practice, the court loses jurisdiction

upon the remission of the record to the lower court, which

occurs normally at the end of the twenty-day period, or at

the expiration of sixty days from the decision (Section

274.35 (2)), unless an order to retain is entered for the

purpose of a motion for rehearing, such as was done in

this ease (R. 142).

In Pierce v. Kelly, imp., 39 Wis. 569, at 569, when the

rule provided for thirty days instead of twenty, but was in

other respects the same, the Court said:

‘*This motion comes too late... this court loses

jurisdiction of appeals in thirty days after judg-

ment on them here, unless the jurisdiction is

retained by order of the court for the purpose

of a motion for rehearing, made within that

time. The statute makes no other exception, and

the court has no power to add others to the stat-

ute. ... Thirty days after the dismissal] in

this case had elapsed before this motion was

made. And the court had lost jurisdiction to

entertain the motion, or to deny it with costs.

The motion is therefore denied, without costs.’’

(italics supplied)

Also cited are: Pringle v. Dunn and others, 39 Wis. 435,

441, 442.

Bonin v. Green Bay & Minnesota Ry. Co.,

43 Wis. 210, 212.

6

Kalekhoff, Adm’x. v. Zoehrlaut, imp., 43

Wis. 373, 380.

Hopkins v. Gilman, 23 Wis. 512.

Trowbridge v. Sickler, 48 Wis. 424, 4 N.W.

563.

Again it is to be noted that the motion for rehearing

itself is not deemed to have been submitted until the print-

ed briefs of the parties (including the printed brief in sup-

port of the motion for rehearing) have been ‘‘served and

filed’’ within forty days from the decision. Section 251.41,

Rule 41, provides:

‘‘The printed arguments in opposition to the

motion shall be served and filed within forty

days after the decision, at which date the mo-

tion shall be deemed to have been submitted.’’

(italies supplied)

We therefore submit that under Wisconsin practice the

printed brief in support of a motion for rehearing is a

necessary and integral part of the record and of the pro-

ceedings. This is unlike the original presentation of a mat-

ter before the Wisconsin Supreme Court where affidavits

and oral argument are allowed. In a motion for rehearing

the entire record and proceedings submitted consist of the

criginal return and the printed brief.

In Bonin v. Green Bay & Minnesota Ry. Co., 43 Wis.

210, supra, we find a case where the court reversed a judg-

ment erroneously entered which was supported by an affi-

davit as an original appeal matter, the court commenting

(p. 212) as follows:

‘In this case, however, the appeal has not been

heard. The judgment was reversed under Rule

7

17, without hearing. And the present motion is

in effect for the hearing of the appeal. ...A

motion like the present, ought properly, and

indeed necessarily, to be founded upon affidavit

and made orally at the bar. And if not granted

within thirty days after judgment, it is suffi-

ciently in the nature of a motion for rehearing,

to authorize the order retaining the record with-

in the statute.’’ (italics supplied)

(B) In This Case the Record Shows That the Motion Brief

Has Been Sufficiently Certified to Be a Part of the Wis-

consin Record

We submit, contrary to the position taken by the Re-

spondent (Respondent’s Brief, p. 6) that the motion brief

is not only a proper and necessary part of the record under

Wisconsin Supreme Court practice, but that the record

itself shows it to be a part. We hesitate to gain any sup-

port for our viewpoint by way of reciting statements not

in the record and therefore uncertified which may have

been made to respective counsel by the clerks of the re-

spective courts, i.e., Wisconsin Supreme Court and U. S.

Supreme Court, as was attempted by counsel for the Re-

spondent (Respondent’s Brief, pp. 2 and 6). We do say

that it was proper to advise both clerks of our position

on the nature of the Wisconsin practice as well as to ad-

vise them of our intention to make use of the so called

‘‘surprise’’ case doctrine which would permit in any event

the inclusion of the motion brief as a part of the record

of the U. S. Supreme Court, even if not a part of the Wis-

consin Court record.

In taking this viewpoint we are well aware of the un-

aut OGTR O REY RT INNES OA EAT NMP OM LE a BRN It

SYP OEERNY cat

8

fortunate situation which occurred in the case of McGar-

rity v. Delaware River Bridge Commission, 292 U. S. 19,

20, 54'S. Ct. 565, 78 L. Ed. 1095. It seemed quite proper

to us to follow the suggestion made in Robertson & Kirk-

ham’s textbook, ‘‘Jurisdiction of the Supreme Court of

the United States’’, page 121, footnote 41:

‘‘Where the record filed in the Supreme Court

is unprinted, counsel who intend to rely upon

the doctrine of the ‘surprise’ cases should so

advise the Clerk of the Supreme Court. Other-

wise, in printing the record, he may omit the

petition for rehearing if it was denied without

more, pursuant to the general order of the court

requiring him to omit immaterial matter.’’

In fact, we cannot see how the clerk of the Wisconsin Su-

preme Court could make the affidavit required (R. 210) :

‘*... the above and foregoing is a true and cor-

rect transcript of all the record and proceedings

now on file and of record in my office, with all

things concerning the same in the above entitled

case in said court’’,

without including the motion brief which is undisputedly

on file, as part of the jurisdictional proceedings, and with-

out which the motion for rehearing would not have been

consummated.

In addition the clerk also certified the completeness of

this motion brief for the purpose of the record, as follows:

“‘T, Arthur A. McLeod, Clerk of the Supreme

Court of the State of Wisconsin, do hereby cer-

tify that the attached printed Appellants’ Brief

in Support of Motion for Rehearing is a full

TRS BD BY PONT AP ea ramet et wer a ye pie TIEN

9

and complete copy of the printed Appellants’

Brief in Support of Motion for Rehearing in

No. 83, August Term, 1942, and submitted to

the court on said motion, and of the whole

thereof.

In Witness Whereof, I have here-

unto set my hand and affixed the

(SEAL) seal of said Court at Madison, this

17th day of March, A. D. 1943.

(signed) ARTHUR A. McLEOD

Clerk of Supreme Court of Wiscon-

sin’’

(Italics supplied—not printed, but in original return, be-

tween R. 209 and R. 210)

The motion brief. was also incorporated in the record

by way of the formal notice of the motion for rehearing,

which caused the court to enter its order retaining the

record (R. 142), the pertinent parts of which are as follows:

‘

‘... upon all of the records, files and proceed-

ings served, filed and had herein or made part

thereof by reference or incorporated herein as

completely as though it were fully and in detail

set forth herein .. .’’ (R. 141)

A part of these ‘‘files and proceedings served, filed and

had herein’’ was the printed motion brief as required under

Section 251.40 of the Wisconsin statutes and Rule 40 of

the Wisconsin Supreme Court Rules of Practice, and was

filed as required within thirty days ‘‘after the decision’’.

Where there has been a failure to print, serve and file a

printed brief in support of a motion for rehearing, the

Wisconsin practice would not record any motion to dismiss

— ecg eees eR Rie Se SE Nail on PAS Ot

NCES ON ESET EEE BAT ER LF PS ELITR OE LLLP SIE RUT METID NASTY

aR AOP OR

Dah Rey Ose ee ote

10

because a failure to finish and complete a motion for re-

hearing is the same as the lapse of the time for making

such a motion.

(C) Not Only is the Motion Brief a Part of the Record Under

the Practice as it Exists in Wisconsin and was Necessarily

So Certified by the Clerk of the Wisconsin Court, but This

Case Comes Under the Well Defined Qualification or Ex-

ception to the General Rule as to Timely Presentation

The general rule is to the effect that ordinarily federal

contentions first made in a motion for rehearing to the

state court will not be considered where the motion is de-

nied without more. The first qualification or exception to

this rule is that the state practice must afford the litigant

an opportunity to have the claimed federal right heard

and determined. The second qualification, supported by a

number of cases, is that where it is the act of the State

Supreme Court itself, done in its opinion and decision and

coming unexpectedly at the end of the proceeding when

the appellant no longer had any opportunity to add to the

record, which denies appellant a federal right and thus,

for the first time, imports into the case the federal ques-

tion sought to be reviewed, a raising of the question for

the first time in a motion for rehearing will be deemed to

be timely.

We find this principle well stated in the leading case on

the subject, Saunders v. Shaw, 244 U.S. 317, 320, as follows:

**.. . but when the act complained of is the act

of the Supreme Court, done unexpectedly at the

end of the proceeding, when the plaintiff in

error no longer had any right to add to the

11

record, it would leave a serious gap in the rem-

edy for infraction of constitutional rights if the

party aggrieved in such a way could not come

here. The defendant was not bound to contem-

plate a decision of the case before his evidence

was heard and therefore was not bound to ask

a ruling or to take other precautions in ad-

vance. The denial of rights given by the 14th

Amendment need not be by legislation. ... It

appears that shortly after the Supreme Court

had declined to entertain the petition for re-

hearing, the plaintiff in error brought the claim

of constitutional right to the attention of the

Chief Justice of the State by his assignment of

errors. We do not see what more he could have

done.’’

Another case in which this is well stated is Missouri v.

Gehner, 281 U. S. 313, 320:

‘*But here the company, at the first opportunity,

invoked the protection of the federal constitution

and laws of the United States. ... It may not

reasonably be held that the company was bound

to anticipate such a construction or in advance

to invoke federal protection. .. . Upon the

facts disclosed by this record it is clear that

appellant sufficiently raised in the highest court

of the state the federal questions here presented

and is entitled to have them considered.”’

In Brinkerhoff-Faris Co. v. Hill, 281 U.S. 673, 681, we

find this:

““. . . But, while it is for the state courts to

determine the adjective as well as the substan-

tive law of the state, they must, in so doing,

accord the parties due process of law. Whether

acting through its judiciary or through its legis-

lature, a State may not deprive a person of all

existing remedies for the enforcement of a

right, which the State has no power to destroy,

unless there is, or was, afforded to him some

real opportunity to protect it.’’

See also Great Northern Ry. Co. v. Sunburst Oil & Re-

fining Co., 287 U.S. 358, 366-367.

(1) ‘The Further Raising of the Federal Questions was Post-

poned at the Request of the Court Before the Decision

and Hence the Raising of the Federal Questions in the

Motion Brief was Timely

The above qualification or exception to the general rule

may be subdivided into two parts—the first relating to

what actually happened in the Supreme Court in this par-

ticular case, in that a decision was rendered without allow-

ing the appellants (petitioners here) an opportunity to pre-

sent the questions of due process of law before the court

rendered its decision, and thereby compelled the appel-

lants to take them up in their motion brief for rehearing.

This was stated in the opening sentences of the appel-

lants’ motion brief (R. 153) as follows:

‘‘This motion was made necessary for the fol-

lowing reasons: First, because at the suggestion

of the court, at the time of the hearing, the ques-

tions which were raised in the two petitions of

the appellants, heard on April Ist and April 24,

in the court below, were reserved and were not

ruled upon. These questions are of vital interest

to the appellants.’’

13

and this was further stated in (R. 154-155) quoting from

the motion brief filed by the appellants, as follows:

‘‘Many of the questions involyed were not

raised because of the suggestion of the court

and it will be noted that in the opening state-

ment of the appellants’ rm brief (page 2)

it was said:

‘In view of the suggestion by the court,

that if it consider the appeals from the or-

ders of May 26, 1942, material, it will eall

for further briefs, and therefore we refrain

from discussing these orders and our right

to have the order of November 29, 1941, re-

opened, based upon the petitions to which

these orders related and the right of the

trial court to consider such petitions’.”’

No such opportunity to present these federal questions, as

the court indicated it would give, was offered to the appel-

lants, and they had delayed their arguments on the same

until their motion brief, in reliance upon the expectation

of such opportunity. This case then represents a novel

situation within the exception to the general rule, i.e., where

the state practice must afford a litigant an opportunity to

have the claimed federal right heard and determined. If

the federal question is raised at its earliest opportunity

and the state court refuses to pass upon it, it will be

deemed to have been necessarily passed upon adversely

to the rights of the appellants.

BO Ca Reh Hires

14

(2) Questions of Lack of Service, Trial and Due Process

Were Preserved in the State Courts for Review on

Federal Grounds

Petitioners (appellants in state court) advanced in their

briefs, based on the record, questions of lack of service,

lack of trial and lack of due process of law on which to

base their federal rights and immunities under the 14th

Amendment in the Supreme Court of Wisconsin. Said court

prevented their review and compelled appellants to state

these federal questions for the first time in their brief in

support of the motion for rehearing, due to the surprise

ruling.

Questions of lack of service, trial and due process were

preserved as revealed by the record in the State Supreme

Court and were urged in the first brief for review. Counsel

for the Respondent takes the position (Resp. Brief, p. 9) ~

that questions of lack of service and due process of law

were not urged in the brief of the appellants (petitioners

here). This is not a true statement as an examination of

the first brief filed (Appendix IT herein) shows that these

points were brought to the court’s attention at some length.

This is adequately proved by an examination of the record

which states, from this motion brief, the pertinent sections

as follows (R. 175-177) :

‘*Because of the many questions left to be de-

cided, as revealed above, and because these ap-

pellants have been denied a trial in the circuit

court, the appellants wish to emphasize a point

which was urged both in the cireuit court and

before this court, viz., that the order here is

without validity and is entirely void because no

service or notice of any kind was given.

15

‘‘In the brief of the appellant it was stated (p.

8—now Appendix II herein):

‘... The order entered on that day provided

for no other or further notice to policyhold-

ers of inteition to levy an assessment than

’ the publication of a simple notice of hearing

) in the Wisconsin State Journal at Madison.

This was the extent of the notice though

on the assessment hearing, Mr. Yaudes,

' Deputy Liquidator, testified that between

, January 1, 1937, and February 1, 1941, over

1 15,000 policies were issued to about 9500

; policyholders scattered throughout the state.

(R. 149, C. 61) No notice of assessment was

served or directed to be served upon the

, company or its officers.’

. ‘*And further, in the Appellants’ brief, page 13,

| (Now Appendix II herein):

) ‘. .. This petition was supported by the

affidavits of 49 policyholders from all parts

of the state and was grounded upon the

$ proposition having been entered without

personal service of notice upon the policy-

holders and indicating clearly that large

; numbers of the policyholders had no notice

. in fact, ... and upon questions of juris-

1 diction.’

. ‘“The court has failed to give any decision on

this point which involves fundamentally, because

of lack of service, the jurisdiction of the order

of November 29, 1941. Failure to give notice

: or the notice required under the statute, be-

A comes fundamentally a question of due process

t of law under the 14th Amendment to the Con-

stitution of the United States, which reads as

follows:

*... No State shall make or enforce any law

which shall abridge the privileges or im-

munity of citizens of the United States; nor

16

shall any State deprive any person of life,

liberty, or property, without due process of

law; nor deny to any persons within its

jurisdiction the equal protection of the

laws.’

‘*Therefore this question cannot be ignored and

if the court does not grant a rehearing, this

issue will be wide open for adjudication against

policyholders on their assessment.’’ (Parentheti-

cal material supplied)

Counsel for the respondent himself admits (Respond-

ents’ Brief, in opposition to Motion for Rehearing, p. 6)

the raising of these questions in the circuit court. Lack of

notice and the right to trial and the lack of due process of

law were brought to the court’s attention in brief filed

(Appendix II herein) at pages 7, 12, and 13, and of course

at considerable length in the Appellants’ Motion Brief (R.

153, 154, 155, 156, 159 and 175-197), which of course is ad-

mitted by counsel for respondent in his brief (Respond-

ent’s brief, p. 8).

It is to be noted that counsel for appellants complied

with the request of the state court as stated in the appel-

lants’ brief (R. 153) and did not raise any of these ques-

tions in the reply brief then to be printed and filed (Appen-

dix III herein). It should be noted also that the appellants,

under Rule 17 (Section 251.17 Wis. stats.) had a right to

file a reply brief.

In addition to briefs filed by counsel in the Circuit Court

for Dane County, the record shows that the questions of

service and due process were emphasized in said proceed-

ings.

AWE fT NCTE TY PAA De ET RN RRNA PATS TEE EN MP NEE OOS,

17

In the order to show cause, heard below on April 24,

1942 (R. 34) the petitioner stated:

‘*... that from his investigation of the facts and

interviewing numerous policyholders, as well as

from his own experience, the policyholders were

not informed as to the basis of or the nature

of the assessment made by the order of Novem-

ber 29, 1941; that an examination of the record

in this case indicates that neither the petition

nor the plan of assessment was ever served up-

on the insurance company, its officers or policy-

holders, the only service being by publication

in the Wisconsin State Journal (Madison, Wis.)

while policyholders affected to the extent of

about 10,000, lived in all parts of the state...”

(parenthetical material supplied)

and further stated (R. 39):

.

. and of the failure of the Commissioner of

Insurance to give adequate notice to the policy-

holders of the plan of assessment proposed by

wr

Approximately 44 affidavits were attached to said order

to show cause, and were incorporated therein by reference

and made a part thereof, stating in substance (1) that the

‘First Notice of Assessment’? (which in most cases was

received during December, 1941, and January, 1942) was

the first information that these affiants had of any assess-

ment levied against them, and (2) that they did not read

or see in any newspaper, including the Wisconsin State

Journal, any published notice of the order to show cause

which resulted in the assessment order of November 29,

1941, and (3) that they had no notice of any intention to

18

assess, or of indication that they were liable to assess-

ment (R. 43-46).

These contentions were further supported by the affi-

davits of five other policyholders (petitioners here), stat-

ing that they had talked to more than 600 policyholders

(R. 40-43) living in all parts of the State of Wisconsin.

(3) The Following Federal Questions Were Unexpectedly

Injected Into the Proceedings at the Time of the De-

cision by the Wisconsin Supreme Court and Necessarily

Decided on by the State Court

(a) Lack of Due Process is Shown by Failure to Give

Proper Notice, or to Make “Service by Publication

in Special Proceedings”

It was unanticipated and unexpected that the court would

rule that

‘‘the order (the order te show cause for assess-

ment) came on for hearing on November 10,

1941, due notice thereof having been given...”

(R. 128) since the statute (Wis. stats. 262.14) provided

that in all special proceedings where service was to be

had by publication, there should be

(a) proof by affidavit or other evidence in order to

authorize service for such publication ‘‘before

entering judgment against any defendant .. .”

(Section 262.13, Appendix I herein)

(b) publication in a newspaper ‘‘likely to give notice

to the defendant’’ (Section 262.13 (2), Appen-

dix I herein), and

(ec) in case the defendant’s post office address is

known or can be ascertained, it is required that

19

he be mailed a copy of the summons and com-

plaint or notice of the object of the action (Sec-

tion 262.13 (2), Appendix I herein)

(italics and parenthetical material supplied)

The Supreme Court of Wisconsin itself ruled, in this case,

in correcting a reference by respective counsel to the use

of the word ‘‘judgment”’ in respect to the November 29,

1941 finding, that this was a special proceeding, and cited

Section 270.53, Wis. Stats. (R. 126).

None of the procedure above (a), (b), and (c), was fol-

lowed. The record (R. 8) shows that notice was given mere-

ly by publication in the Wisconsin State Journal, located

at Madison (Wis.), a newspaper not ‘‘likely to give notice

to the defendant’’—in this case, 10,000 former policyhold-

ers residing in all parts of the State of Wisconsin. There

is nothing in the record to show that this publication was

to be made or was made in an official state paper as stated

by counsel for the respondent (Respondent’s Brief, pp.

2 and 12).

The approval of the procedure used in securing juris-

diction of policyholders was unexpected in that it was not

the accepted publication procedure approved by the Wis-

consin Supreme Court in past decisions, as will be seen

by an examination of the following cases:

Voelz v. Voelz, 80 Wis. 504, 50 N.W. 398

Oelbermann v. Ide, 93 Wis. 669, 68 N.W. 393

Anderson v. Coburn, 27 Wis. 558

Witt v. Meyer, 69 Wis. 595, 35 N.W. 25

Frisk v. Riegelman, 75 Wis. 499, 43 N.W. 1117,

44 N.W. 766

Roosevelt v. Ulmer, 98 Wis. 356, 74 N.W. 124

20

State ex rel. Bergougnan Rubber Corp. v. Greg-

ory, 179 Wis. 98, 190 N.W. 918

Roosevelt v. Land & River Company, 108 Wis.

653, 84 N.W. 157

Hafern v. Davis,-10 Wis. 501

It is the general rule, since service by publication was un-

known to the common law and depends upon statutory

authorization, that there must be a strict compliance with

the law. This is exemplified in the cases involving the con-

struction and application of the provisions authorizing

substituted and constructive service.

Beckett v. Cuenin, 15 Colo. 281, 25 P. 167, 22

Am. St. Rep. 399;

State ex rel. Palmer v. Gray, 92 Fla. 1123, 11 So.

242, citing RCL

Zecharie v. Bowers, 1 Smedes & Miss. 584, 40

Am. Dee. 111

Stewart v. Stringer, 41 Mo. 400, 97 Am. Dee. 278

Erickson v. Macy, 231 N. Y. 86, 1381 NE 744,

16 ALR 1322

Grannis v. Ordean, 234 U. S. 385, 58 L. Ed.

1363, 34 S. Ct. 779

Noble v. Union River Logging R. Co., 147 U.S.

165, 37 L. Ed. 123, 13 S. Ct. 271

Cheely v. Clayton, 110 U. 8S. 701, 28 L. Ed. 298,

48. Ct. 328

Galpin v. Page, 18 Wall. (U. S.) 350, 21 L.

Ed. 959

Harris v. Hardeman, 14 How (U. S.) 334, 14

L. Ed. 444

This includes the requirement that the affidavit required

by statute is essential for valid service and is a prerequi-

site to a valid judgment.

SVT OS ete

21

Beckett v. Cuenin, 15 Colo. 281, 25 P. 167, 22

Am. St. Rep. 399

Correll v. Greider, 245 Ill. 378, 92 NE 266, 137

Am. St. Rep. 327

Baker v. Baker, E. & Co., 162 Ky. 683, 173 SW

109, LRA 1917C 171, affirmed in 242

U. S. 394, 61 L. Ed. 396, 37 S. Ct. 152

Gilmore v. Lampman, 86 Minn. 493, 90 N.W.

1113, 91 Am. St. Rep. 376

Barber v. Morris, 37 Minn. 194, 33 N.W. 559

5 Am. St. Rep. 836

Palmer v. McMaster, 13 Mont. 184, 33 P. 132,

40 Am. St. Rep. 434

The case of Pink v. A.A.A. Highway Express Co., 314 U.

S. 201 (Respondent’s Brief, p. 13) is not in point as ap-

’

pears on the very face of the quotation,

‘*. .. when made in conformity to the statutes

of the state of its organization.’’

In this ease actual mail notice was given in conformity to

Section 422, N. Y. statutes:

**pursuant to Section 422 and the order, the

superintendent mailed notice of the order to

each policyholder, including respondents .. .’’

It is this lack of conformity with the ‘‘statutes of the state

of its organization’? that we complain about in the present

case,

In the case of ‘‘ Application of Whitman’’, 186 Wis. 434,

and in the case In Re Builders Mutual Casualty Co., 229

Wis. 365, cited by counsel for respondent (Respondent’s

Brief, p. 13), we find that publication was had in several

newspapers throughout the state, in the Whitman case in

22

four (4) newspapers. In the Builders Mutual case there

was no restraining order entered against the officers of

the company as in this case, so that both cases cited are

distinguished from the present one in these two essential

points. (For further discussion see Appellants’ Motion

Brief, R. 175-183.)

THERE IS NO STATUTORY PROCEEDING

IN WISCONSIN OTHER THAN SECTION

262.14 APPLICABLE TO LIQUIDATION

PROCEEDINGS

An examination of Sections 200.08 and 200.09 of the Wis-

consin statutes, which make applicable the provisions of

Section 220.08 (cited by respondent, Respondent’s Brief,

p. 14, and printed in the Appendix thereto) reveals no pro-

vision for such publication—the closest approach to the

same being in subsection (6) of 200.08 which states:

‘to carry out the purposes of this section, the

Commissioner shall have power, subject to the

approval of the court, to make and prescribe

such rules and regulations as to him shall seem

proper ...’’

This, however, applies to ‘‘rules and regulations’’ and

does not apply to the proposition of securing jurisdiction

necessary to make a valid order against policyholders.

To hold that adequate notice was given in this case

would be to ignore the requirement of due process that a

person affected by the judgment sought must have notice

and an opportunity to defend. The notice required in Wis.

Stats. 262.14 and 262.13 is reasonable, and would, in gen-

eral, give knowledge of such a proceeding and an oppor-

tunity to be heard. But the provisions cited by counsel for

the respondent are not reasonable and therefore lack due

process of law.

According to counsel’s contention in re 220.08, the com-

missioner and the court could prescribe ‘‘no notice’’ or

inadequate notice, which is not reasonable. Such inade-

quate notice, however, was given in this case. We do not

dispute the fact that the commissioner had jurisdiction

to liquidate this company, nor that he was in charge of its

assets, but we do dispute the question of proper service,

which is a federal question of due process of law under

the 14th Amendment.

NO CONSTRUCTIVE SERVICE WAS MADE

ON POLICYHOLDERS BY WAY OF SERV-

ICE OR NOTICE ON COMPANY OR ITS OF-

FICERS

Since no service was made under any statutory author-

ity in Wisconsin, we may well look to see if service was

made upon the company or its officers as representatives

of the policyholders. The record (R. 8) shows that no such

service was made. In this case neither the company nor its

officers were summoned into court. In order that there be

a judicial determination which would bind the policyholder,

the company or its officers must have been served. But

where there is no statutory procedure and no valid decree

against a company, as representative of the policyholders,

then any judgment or decree in which the policyholder’s

liability is summarily disposed of behind his back, without

24

notice or without a hearing, lacks due process of law. (Kor

further dscussion of the law see Appellants’ Motion Brief,

R. 183-192).

It was so held in Christopher v. Brusselback, 302 U. 8.

500, where the court decreed that all stockholders were

liable for a 100% assessment. The court stated:

‘« |. There is nothing in the statute relating to

the organization of Federal Land Banks and

the imposition of the stockholders’ liability to

suggest that by virtue of their membership in

the corporation the stockholders can be said to

have subjected themselves to a procedure of

determining in their absence the essential con-

ditions of liability, or to have relinquished their

right to contest, as in any other litigation, every

step essential to its establishment. . .’’ (italics

supplied)

We are glad to see that counsel for respondent has

abandoned his former theory that personal service upon

the company or its officers is service upon the policyhold-

ers (Respondent’s Brief, p. 15) and agrees that this would

be a useless formality in view of the fact that the com-

pany was practically defunct and could take no action

except under the direction of the court. We can agree that

the company’s presence in the proceedings was necessary

to give the court jurisdiction of its property and assets

and to liquidate the company, but we disagree with the

contention that this automatically gave notice to policy-

holders. In view of the fact that the said officers were en-

joined and restrained from exercising any corporate privi-

leges it would be a pure legal fiction to say that after that

EAD OE LN nS PRE iB AR, ar

25

date the policyholders were or could be represented by the

corporation.

The situation is entirely different from that in Hawkins

vy. Glenn, 131 U.S. 319, in which the corporation continued

to function. In the present case, the primary right to be

adjudicated is the policyholder’s liability.

Finney v. Guy, 106 Wis. 256

Blum Bros. Box Co. v. Stumbaugh, 207 N.W.

270 ( Wis.)

The cases cited by counsel (Respondent’s Brief, bottom

p. 15) do not help because they are founded on a notice

by publication which is in accordance with the state statute

which is not the situation here.

APPEARANCE OF POLICYHOLDERS BY

COMMITTEE TO SET ASIDE JUDGMENT

IS NOT WAIVER OF THEIR RIGHTS TO

OBJECT

It is the general rule of law that there is no waiver on

the part of policyholders by making onemae appearance

even if coupled with a plea on the merits. (See Appel-

lants’ Motion Brief, R. 194-197)

2 R.C.L. section 13, p. 332

4 Corpus Juris, ‘‘Insurance’’, sub-title ‘‘ Void

and Legal Process’’, p. 1557

Coleen v. Figgins, 1 Ill. 19

Wilbright v. Wise, + Blackf. (Ind.) 137

Castle v. Thomas, 16 Minn. 490

Godfrey v. Valentine, 39 Minn. 338, 339

Correll v. Greider, 245 Ill. Rep., 378, 380-381

Kstate of Kronglaski, 222 Wis. 634

26

(b) It was Unanticipated and Unexpected That the Court

Would Rule That Refunds Were an Adequate Means

of Correcting the Amount Owed by Individual Policy-

holders on the Assessment (R. 131)

This does violence to the statute, the Articles of Incor-

poration of the Wisconsin Mutual Insurance Company,

and its by-laws, and represents an impairment of the obli-

gation of contract under Article I, Section Ten, of the U.

S. Constitution.

This was a 100% assessment of the premiums previously

paid by policyholders during the period January 1, 1937,

to February 1, 1941. As such it assessed all regardless of

whether or not that represented the just proportion of the

policyholder’s contractual liability. The assessment ap-

proved by the court is the reverse of what the contract

provides for and what the law requires in that the liqui-

dator proposes to collect all he can and allot the collection

to the period for which some liability exists, instead of de-

termining the liability in advance and making the assess-

ment accordingly. In the last analysis, this assessment

amounts to a command to the policyholder:

‘You pay us the full amount of your maximum

liability; we will then determine what you are

liable for and if anything is left, you will get

it back.’’

The liquidator testified that he might use the contributions

made for 1939 liability to pay for 1937 or 1938 losses (R.

69) as follows:

‘‘In collecting of assessments, it is possible

that the money the policyholder contributes by

" 5 Om Ce LEE A OPTLTONN © DS ATS MERCI

SRSA OEE RST RBI IL IT ter eran anes EE ORT TONY ROMER OT RDI BP

27

assessment for a policy outstanding in 1939 could

be used to pay losses incurred in 1938, because

you would collect an assessment on all policy-

holders for a period, and it is possible that a

policyholder within 1939 would pay this assess-

ment... The cash which is received from these

assessments goes into one big pool to pay losses

covering any time from January 1, 1937, until

February 5, 1941.’’

The liquidator, however, testified and admitted that an

sly allocation of losses and expenses and of premium liability

37, by monthly amounts had been made (R. 108-109).

of There was no finding as to the amount necessary to pay

the liabilities for any part of said period as to policyholders

ap- who were members only during a part of the period. Yet

“act it is agreed that a policyholder is liable only for losses and

jui- expenses incurred during the period he was a member.

‘lon We direct especial attention to the year 1938 in which

de- operations were profitable in five out of the twelve months

eS8- (R. 192). This is set up in detail in a table in Appellants’

ent Reply Brief, pp. 5-9 (Appendix III herein), In fact, the

first six months of operation showed a net surplus of $839,

— yet every member who belonged to the company during

are any part of this period was assessed 100% of the earned

get premiums, in the total amount of $45,815.00, The poliey-

holders who were members only during this 6 months’

cons period of time are not liable for one penny of assessment

(R. under the law and under their contract.

We had anticipated that this method would not be ap-

‘ie proved since it was condemned by the Wisconsin Supreme

S

Court in Davis v. Parcher, 82 Wis. 488, 498:

28

‘‘The assessment is a horizontal one,—just forty

per cent of the face of each note, without regard

to whether that is or is not the just proportion

of the losses and expenses which occurred dur-

ing the life of each policy, and hence properly

chargeable to the maker of the note, and also

without regard to the amount which had been

paid on such note. It appears that this assess-

ment requires some members of the company to

pay a proportionate share of losses which oc-

curred before they became members. This vio-

lates a cardinal rule of mutual insurance, as

well as the rule of the statute.”’

Sincee losses varied considerably from year to year, it

was illegal to assess uniformly for the entire period. This

inequity is aggravated by the failure to establish liabili-

ties in advance of the assessment.

Also the decision was a surprise ruling and especially

unexpected and unforeseen in view of the court’s intima-

tion, in In Re Builders Mutual Casualty Co., supra,

383, as follows:

‘‘We say no more upon this because of the fact

that we are not dealing with the first assess-

ment but with the second. The first assessment

was levied upon precisely the same basis as was

this. Had the same objection been made then as

is made here, it may very well be that this court

might have been compelled to sustain it. At

least, a showing could have been made that

would start the liquidation off upon the right

principle if the company’s books and the whole

situation was in such shape as to make this

practical. ... It may well be, in view of the

instalment method of discharging incurred loss-

REEL POE IE LE A PRE CD UF TNE AS 8)

29

es on workmen’s compensation policies, that a

liberal portion of the claims now outstanding

are for losses incurred in the later years. To

now open up the assessment and change the

whole basis upon which it is levied, would, it

seems to us, require a re-examination of the

whole basis of the first assessment and a re-

adjustment that would make the second assess-

ment equitable, in view of the basis for the first

assessment .. .’’

Your petitioners relied, in the present liquidation pro-

ceedings, upon this indication because this was a first assess-

ment and there had been an allocation of losses and ex-

penses to the particular month, and an allocation of the

earned premiums to the particular month, as is shown by

the liquidator’s bookkeeping method, so that the difficulty

confronted in the Builders Mutual liquidation was not in-

volved in this present liquidation. Your petitioners had a

right to rely upon this intimation of the court and the said

decision was thereforecunexpected and unanticipated. The

bookkeeping method was set up in complete form and

stated:

‘*the amount allocated to the time any particular

policyholder was a member may then be ascer-

tained by summation of the appropriate month-

ly totals.’’

(c) It was Unexpected and Unanticipated That the Court

Would Rule That This Assessment Should be Based

on “Earned Premiums” Rather than on “Annual

Premiums” Which Raises a Federal Question

The different policies of the Wisconsin Mutual Insur-

ance Company restricted contingent liability in the follow-

ing language:

30

“The contingent liability of the assured under

this policy is limited to an amount equal, and

in addition, to the annual premium stated in

the policy.’’ (R. 86-88)

The statutes also require whatever contingent liability is

imposed to be assessed on the basis of the ‘‘annual premi-

um’? (Section 201.02 (5), Wis. Stats.). This assessment,

however, was based on the earned premium rather than on

the annual premium (R. 68) and this was approved by the

court (R. 140). This violates the Articles of Incorporation

of the company, the contract of insurance and the statutes,

and deprives these petitioners of property without due

process of law under the 14th Amendment. It also impairs

the obligation of contract under Article I, Section Ten, of

the U. S. Constitution. The injustice which results cannot

be calculated at this time without a hearing and a trial but

some of the facts are disclosed in the record (R. 24-25,

paragraph 13).

This illustrates, however, how erroneous the approach

to these assessments was, how necessary the trial was

which has been denied, and how little attention has been

paid to the contracts entered into by these petitioners.

(d) It was Unanticipated and Unexpected That the Court

Would Rule Against Separate Assessments for Losses

and Expenses in Public Liability and Automobile

Policies

The court failed to approve separate assessments for

losses and expenses relating to liability insurance business

(201.04 (5) Wis. Stats.) as distinct from automobile insur-

ance business (201.04 (15) Wis. Stats.). This violated

ARSON ENED ALOE LE SOAS SS PRANTL i EME IB BNE LMP aR EE ae,

31

Article 1, Section Ten, of the U. S. Constitution and consti-

tutes a taking of property without due process of law under

the 14th Amendment. The company was authorized to do

general casualty business. It has always been held that

premium notes given in one department of a company main-

taining two separate departments under its charter and

by-law provisions, would have to be treated entirely sep-

arately and one department could not be assessed for losses

incurred in the other.

Allen v. Winne, 15 Wis. 113, 120-122.

It was further enacted into the law in Wisconsin (201.05

(2) (e)) that

‘‘there be maintained separate and distinct re-

serves in trust for each kind of insurance so

written.’

In the Builders Mutual Casualty Co. case, supra, the

court again gave approval to this principle and said:

‘“*... It is equitable and fair to levy an assess-

ment upon the policyholders in that branch of

the company’s activities whose premiums are

insufficient to cafry the risk against which they

are insured... .”’

In this present case, the company had earned premiums

of $9,581.09 on public liability against which it had total

losses and expenses of $11,000 (R. 54). In other words,

there was a net underwriting loss of $1,419 for which an

assessment of $9,581.09 is being levied, or the order

calls for each policyholder to pay an additional dollar for

every dollar of premium collected. The court refused to

modify the assessment partly on the ground that

32

‘¢ It does not appear that any liability poliey-

holder is complaining’’

although the record shows the need for trial and the fact

that complaint was made (R. 23) as follows:

‘11. The Wisconsin Mutual Insurance Company

wrote two kinds of insurance, automobile insur-

ance and public liability insurance, as_ these

terms are defined in section 200.04, Wisconsin

Statutes. No segregation of liability is made in

the assessment proceedings for liabilities result-

ing from the automobile business as distinct

from the public liability business. Neither are

the policyholders segregated or the experience

under each class or kind of insurance shown.

Under the method of assessment employed, poli-

cyholders for public liability will be required

to pay liability for automobile insurance losses,

and vice versa. Likewise, liquidation and other

expense being lumped, so far as appears in this

proceeding, it will be shared by persons who

were not responsible therefor and for that rea-

son the present assessment does not meet the

requirements of law.’’

These petitioners, in their mgm brief (R. 159) offered

to submit a list of public liability policyholders (in excess

of six) whom they represented. No evidence, to indicate on

what basis liquidation expenses were allocated to these

operations or whether any lability still remained on these

particular policies, was offered because no trial was allowed.

By refusing trial, there was nothing in the record to

show that there was a single dollar of unliquidated or liqui-

dated claims pending at the time of liquidation so far as

public liability claims were concerned. In view of the law

and the Articles of Incorporation and by-laws of the com-

slicy-

fact

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2 law

com-

ST POONA RN OG ie ED DE LEONE FAs MELT RETO MY AERA

33

pany, and the policy contracts, these petitioners were sur-

prised and could not have anticipated such a ruling, deny-

ing them federal rights and immunities.

(e) It Was Not Anticipated That the Court Would At-

tempt to Rule on All Contested Matters Without

Trial in Lower Court

Regardless of the sufficiency of the notice or whether

such notice had any statutory justification, your thousand

and more petitioners (with the exception of one or two)

had no notice at all of the hearing which resulted in the

November 29, 1941 assessment order which fixed their lia-

bility (R. 34-46). They were refused their day in court with

more than $75,000 of their money at stake. (R. 34) The

November 27, 1941 hearing which resulted in the Novem-

ber 29, 1941 order of assessment, was a default hearing.

Testimony was given by only one witness, for the Insur-

ance Commissioner. Appearances were made by only three

(R. 10, 5, 7) out of 9,500 policyholders (R. 61), all of

whom requested adjournment (R. 76-77, 82).

On pages 9 and 10 of the petition to the Supreme Court

of the United States, these petitioners set out twelve con-

tentions which were given in their order to show cause

requesting trial. Many of these questions have not been

passed upon by the State Supreme Court although the or-

ders denying these petitioners a trial to hear such conten-

tions have been affirmed, and many other questions have

been passed upon with no evidence allowed to be presented

by these petitioners. (Nov. 29, 1941 order and May 26,

1942 orders)

34

We contend therefore that regardless of what the result

of a trial might have been, or might now be, these peti-

tioners were entitled to a trial and full hearing, and that

such trial and hearing were a matter of right and not of

favor or discretion.

Coe v. Armour Fertilizer Works, 237 U. S. 413,

59 L. Ed. 1027, 35 S. Ct. 625

Lynde v. Lynde, 181 U. S. 183, 45 L. Ed. 810,

21 S. Ct. 555

People’s Wayne Co. Bank v. Wolverine Box

Co., 250 Mich. 273, 230 N.W. 170, 69

A.L.R. 1024

Windsor v. MeVeigh, 93 U. S. 274, 23 L. Ed. 914

The petition for writ of certiorari should be granted.

Respectfully submitted,

Austin H, ForkKNER

JOHN WaTTAWA

Counsel for Petitioners

. Ask SERN RANG DEER WANE Da We DERE RBIS EN ae Fs BABAR TS i 10 BO Re ATT ae a ee |

|

35

APPENDIX I

WISCONSIN STATUTES

I. SERVICE BY PUBLICATION:

Section 262.14

‘262.14 Service by publication in special proceedings.

Service by publication of any process or notice

in any special proceeding, except probate pro-

ceedings, may be made when the plaintiff is un-

able with due diligence to make service of such

process or notice upon the defendant or party

upon whom service is required. Such publication

proof thereof shall be made as required by see-

tion 262.13.’’

(Supreme Court Order, effective July 1, 1941)

Section 262.13

‘262.13 Publication or service outside state; proof of

grounds: mode of service.

‘*(1) Before entering judgment against any de-

fendant who has been served with summons by

publication or personally without the state pur-

suant to Rule 262.12 and who has not appeared,

the court shall require proof by affidavit or

other evidence to be made and filed of the non-

residence of the defendant where not shown by

the verified complaint and of the existence of

any other fact not shown by the verified com-

plaint and necessary to authorize service to be

made by publication and that the service was in

fact made as the rule requires. The court may

require additional proof. Said proof shall be

conclusive in all collateral actions and proceed-

ings.

‘*(2) Service of the summons by publication shall

consist of its publication in a newspaper likely