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STATE SECURITY LIFE INSURANCE CO. v. STATE OF MISSISSIPPI

NOVEMBER 19, 1986

STATE SECURITY LIFE INSURANCE CO.
v.
STATE OF MISSISSIPPI, BY AND THROUGH GEORGE DALE, COMMISSIONER OF INSURANCE



BEFORE HAWKINS, P.J., DAN LEE AND SULLIVAN, JJ.

HAWKINS, PRESIDING JUSTICE, FOR THE COURT:

This case is on appeal to us by the State Security Life Insurance Company (SSLIC) from a default judgment of the chancery court of Rankin County making permanent a temporary restraining order. Finding the chancellor erred in entering such judgment when there was an answer on file and the individuals were present in court desiring a trial (albeit with a request for a continuance), we reverse.

FACTS

 On October 3, 1984, Dale filed a complaint in the chancery court of Rankin County, naming as defendant State Security Life Insurance Company (SSLIC), Gardner Land Co., Inc. (GLC), Mississippi Insurance Service, Inc. (MIS), and Security Management Corporation (SMC), in accordance with Miss. Code Ann. 83-1-29 (Supp. 1985). The complaint was filed following a Department of Insurance (Department) examination of SSLIC, the complaint averring that SSLIC was insolvent and its condition such as to render further business operations hazardous to the public and its policyholders

 The complaint further alleged that GLC, MIS and SMC were but shell corporations for SSLIC, and in addition made a number of other allegations, including one averring that SSLIC had caused false statements to be made in its annual statement submitted to the Department. The complaint additionally sought to pierce the defendants' corporate veil and have all corporate assets placed in receivership. The complaint was 39 pages, with an additional 25 pages of exhibits.

 The complaint asked for a temporary restraining order (TRO) prohibiting SSLIC from further business and appointing Dale as the temporary receiver. Chancellor Billy G. Bridges, on the basis of the verified complaint, granted the relief sought without notice on October 3. The chancellor granted a mandatory injunction compelling GLC, MIS and SMC to turn over to Dale all documents and other records which were requested by him in writing for the purpose of determining the

 financial condition and legality of the conduct of those entities. The chancellor also issued a fiat requiring SSLIC to appear at 9:00 a.m. on October 12, 1984, and to plead, answer or demur to the complaint, and show cause why the temporary order should not be made permanent. Notice was served on the defendants on October 4.

 On October 5 Jackie Gardner, president of SSLIC, withdrew $38,000 from three separate savings accounts at First Jackson Savings Bank. The accounts belonged to GLC, MIS and Gardner's personal account.

 On October 8 the State filed an amendment to the complaint, adding four additional defendants alleged to be "spokes in the wheel of deceit and deception" perpetrated by SSLIC. The defendants were Pinetree Investments of Forrest County, Inc., Delta Computer Management, Inc., Educators Security, a limited partnership, and Gardner, individually. The amended complaint sought a TRO prohibiting all defendants from removing any funds from any depository, and to compel them to return funds withdrawn since October 4. The corporations were required to turn over their records to the State. The amended complaint also sought to place all assets of the new defendants in receivership. Chancellor Bridges granted the relief sought in the amended complaint and, thereafter, issued a second fiat again setting hearing on the amendment to the complaint for October 12, 1984, at 9:00 a.m. when the defendants were to appear and answer, plead or demur to the complaint.

 On October 9 Fred A. Ross, Jr., was retained as counsel for SSLIC. On October 10 Ross submitted a proposed order continuing the trial from October 12 to October 17. Apparently, Ross made an ore tenus motion for the continuance and represented to Chancellor Bridges that the State's attorneys had agreed to the continuance. Relying on Ross' representation, the chancellor signed an order continuing the cause.

 Upon learning that the State's attorneys had not agreed to the continuance, Chancellor Bridges rescinded the continuance the same day (October 10) and reinstated the original order. Shortly thereafter, the State attempted without success to inform Ross, who had just left on an 11:00 a.m. flight to Washington, D.C. A copy of the modified order was delivered to Ross' office, where his secretary acknowledged receipt at 1:40 p.m. on October 10.

 On October 11 W. S. Moore, on behalf of Ross, filed a petition to remove the proceeding to the U.S. District Court

 for the Southern District of Mississippi. A hearing was held before Judge William H. Barbour on October 12 at 9:00 a.m. At approximately 10:05 a.m. Judge Barbour entered an order remanding the proceeding. That order was recorded at the chancery clerk's office for Rankin County at 10:35 a.m. Thereafter, the hearing originally scheduled for 9:00 a.m. was commenced before Chancellor Bridges at the Rankin County Courthouse. At the hearing, an introductory statement was first made by Assistant Attorney General Stephen Kirchmayr, setting forth the jurisdictional matters of this proceeding. Kirchmayr told the court that upon the filing the petition for removal, the chancery court lost its jurisdiction. That jurisdiction was returned to the chancery court upon entry of the order of remand. Following that, Deputy Attorney General W. D. Coleman, began an introductory statement of the background for the institution of the instant proceeding.

 During the course of Coleman's oration, Gardner, together with Moore, entered the courtroom. Moore stated he was appearing that day at the request of Fred Ross, and that he did not represent SSLIC, Gardner, or any of the other defendants.

 After the government's statement, the chancellor asked Moore if the defendants were seeking a continuance or were they prepared to go to trial. Moore responded that if they had access to the records they could be ready. The chancellor then stated that he would give the defendants the opportunity to review the records during the hour and a half noon recess.

 Following the noon recess, Gardner testified in support of a continuance. He stated that SSLIC was unable to present a case in their defense without access to their records. He testified that during the noon recess the building was locked up which prevented his access to the records.

 After statements by the court and Coleman setting forth the facts relating to the earlier continuance requested by Ross, which was denied, the chancellor asked both parties what injury would be suffered if he granted a continuance. The State said that a delay in appointing the permanent receiver would affect the ability of the receiver to give favorable bids on the insurance business of SSLIC. The court asked Moore if he was aware of any injury that would result if the court did not grant a continuance, when the defendant would have available all tools of dissolution and ...


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