Bush v. New York Life Insurance

135 A.D. 447, 119 N.Y.S. 796, 1909 N.Y. App. Div. LEXIS 3995

• Court: Appellate Division of the Supreme Court of the State of New York
• Decided: December 3, 1909
• Status: Published

Opinion

Ingraham, J.:

This action was brought to obtain an adjudication upon the constitutionality of section 96 of the Insurance Law, which was added to the Insurance Law. (Gen. Laws, chap. 38; Laws of 1892, chap. 690) by chapter 326 of the Laws of 1906, and re-enacted in the Consolidated Laws (Chap. 28; Laws of 1909, chap. 33). The defendant demurred to the complaint, which demurrer the court below sustained, and from the judgment sustaining that demurrer the plaintiff appeals. Upon this appeal the defendant has submitted a brief, but its counsel stated on the argument that the defendant concurred with the plaintiff that this law was unconstitutional, but as the Attorney-General was to' submit - a brief on behalf of the State, he left the discussion as- to the constitutionality of the act with the counsel for the plaintiff and the Attorney-General.

The complaint alleges that the defendant is a life insurance company organized under the laws of the State of Hew York ; that the plaintiff was ancagent of the defendant for procuring new insurance. It would appear that there was an association among .the defendant’s agents called the “ Hylic for Agents;” that on the 1st .of March, 1900, the plaintiff applied for membership in this association and. agreed to be bound by the terms of such membership as set forth in the defendant’s authorized publications; that the defendant duly admitted the plaintiff as a member of the said “Hylic for Agents,” and' the plaintiff has continued to be such member and has enjoyed and is entitled to enjoy all the benefits, advantages and emoluments of membership therein ; that by the agreements under which this association is formed these memberships are composed of five classes, each to continue for a period of five years; that if during the first period of five years each “ Hylic ” annually produced not- less than $50,000 new insurance on other lives than his own, upon' which one full year’s premium is paid, the “ Hylic ” was to receive a certain specified compensation from the defendant; was to continue to be a member of the class; that plaintiff complied with this condition for five years, and on the 1st of January, 1906, he became what he calls a “ Hylic of the First Degree,” the duration of which was to be for five years from January 1,, 1906, provided the plaintiff procured each year not less than $50,000 of new insurance written on other lives than his own on which one full year’s premium was paid ; that the plaintiff continued to hold said membership until the year 1908 upon which the plaintiff was entitled to receive a certain percentage of the business that had been procured by him. The complaint then alleges that during the year 1908 the plaintiff had procured applications for new insurance on other lives than his own on which one full year’s premium had been paid, aggregating the sum of $43,000, in addition to the application for insurance on the life of one Burnett; that on the 23d day of December, 1908, the plaintiff procured an application from Burnett for $25,000 new insurance on his life on the ordinary life plan, premiums payable annually; and also received from the applicant the sum of $662.50, which was the first annual premium for the insurance so applied for by him; that Burnett was examined by one of the defendant’s medical examiners, and was shown to be of sound health and a first-class risk; that on the 24th day of December, 1908, the plaintiff delivered such application and written report of the me.dical examiner to the defendant and tendered to the defendant the amount of the said first premium and requested the defendant to issue a policy on the life of Burnett; that the defendant then and there failed and refused to issue said policy and rejected said application, admitting that the application papers were regular and satisfactory and the applicant was a desirable risk, but refused the application upon the ground that the defendant was, under section 96 of the Insurance Law, prohibited from issuing in any year new policies for a larger amount in the aggregate than $150,000,000 ; that during the said year 1908 the defendant had already received premiums on new policies aggregating $135,000,000, and in addition thereto had written new policies aggregating $30,000,000 which it had sent out for collection of the first premium and delivery, and ■that the defendant had already issued in the year 19,08 new policies for So large an amount in the aggregate that, on account of said limitation imposed by said law and -in order to keep within the same, the defendant had discontinued issuing in said year 1908 any more new policies, and for this reason and for this reason alone the defendant there and then rejected said application ; that if the plains tiff did not furnish $50,000 of new insurance in any one year.he would lose his membership in' the “Hylic” and could hot .be restored or become a member thereof because’ under section 97 of ■ ' the Insurance Law

* the defendant has discontinued admitting new - members into the “ Hylic for Agents,” and the plaintiff would thus lose the benefit of his contract with the. defendant under which he was entitled to a certain percentage of the business that, he had procured.

. The plaintiff asks judgment that the court should adjudge and . decree that the refusal of the defendant to accept said premiums, and issue the policy referred to wag’without just cause or excuse; that the defendant be enjoined and restrained from canceling or forfeiting the said membership of the plaintiff in Hylic for Agents; that the defendant be compelled to credit the plaintiff in said-Hylic-, account for the year 1908 with the said $25*000- insurance* and. that the' defendant be required to pay to' the plaintiff his commissions on j the. first premium on the policy of insurance of Burnett , therein described. - There are other allegations of the. coinplaint tending to show that these provisions of section 96 of the Insurance Law applied to all of the large insurance companies incorporated Under the laws of the1 State of Hew York, except tke> Metropolitan Life ■ Insurance Company, arid that under this law the Metropolitan Life Insurance. Company is given the privilege of issuing unlimited insurance, while the other companies, including the. defendant, is v limited by the law to a certain amount of; new insurance in each year. Section 96 of the Insurance Law provides that “ No domestic life insurance corporation, except a corporation more than one-half of the outstanding insurance of which' on December thirty-first, ■ nineteen hundred and five, consisted of industrial insurance, shall issue in any year new policies for a larger amount in the aggregate than as follows, to wit: If the total amount of the insurance by said corporation in force on the thirty-first day of December of the preceding year, including only policies upon which the first premiums have actually been received, is in excess of fifty million dollars, the amount of new insurance which may be issued shall be determined by the following percentages .of said insurance in force, to wit: If said insurance in force is more than fifty million dollars and less than one hundred million dollars, not more than thirty per centum thereof; if more than one hundred million dollars and less than three hundred million dollars, not more than twenty-five per centum thereof; if more than three hundred million dollars but less than six hundred million dollars, not more than twenty per centum thereof; if more than six hundred million dollars but less , than one thousand million dollars, not more than fifteen per centum thereof; and if said amount of insurance in force shall be in excess of one thousand million dollars, not more than one hundred and fifty million dollars of new insurance shall be issued.”

The claim is made that in some way the State of New York is prohibited from restricting corporations that it has created as to the amount of new business which they shall engage in, or limiting them as to the business in which they can engage. I suppose that there could be no question as to the power of the State to grant such power to corporations which it organized as it pleased, or that under the reservation of power by the present Constitution (Art. 8, § 1) the State' had the right to amend or modify the charter of any corporation, or repeal or annul said charter altogether; and the fact that either by the original charter or an amendment to the charter of a corporation such corporation was given greater power than that given to other corporations, or that the powers of .one corporation were restricted so that it had the right to exercise less power than other corporations organized by the State, was not a violation of any constitutional right assured to any of the corporations by either the Constitution of this State or the Constitution of the United States. The plaintiff claims that this section is a violation of section 18 of article 3 of the Constitution of this State. That provides that “ The Legislature shall not pass a private or local bill * * * Granting to any private- corporation, association or individual any exclusive privilege, immunity or franchise whatever.” It is quite •cléar that this is neither a private' nor loyal bill, and it grants to no corporation exclusive privileges, immunity or franchise. It regulates the method of transacting business of certain corporations which it has organized and restricts them as to the amount óf business that they are' authorized to dobut the fact that another corporation is not so restricted is not a grant of an exclusive privilege, immunity or franchise to the unrestricted corporation. It is quite unnecessary to consider the various cases in which this clause' of the Constitution has been discussed. We. have examined them all, and ho case which is at all controlling has held that this provision of the. Constitution applies to such an act as the- one in question.' Nor does this act Violate in any way section 16 of article 3 of .the Constitution, which provides that “No private or local bill, which may be passed by the Legislature, shall embrace more than oné subject, and that shall be expressed in the title.” This section 96 of the Insurance Law is1, an amendment to- a. general law providing for incorporations and regulating the business of insurance companies. It is neither a private nor a local bill. 1 T cannot see that this 'bill violates any provision of the Federal Constitution. Equal protection of the law does not require a State to grant to each corporation that it organizes the same power to transact business or in relation to its business. It certainly would be within the power of the State to annul the- charter of every life insurance company that it had organized, if it wished, without' infringing any provision of the Federal Constitution. The case of Cotting v. Kansas City Stock. Yards Co. (183 U. S. 79), which is relied upon by the plaintiff, wás' one regulating in the State of Kansas the business of public stock yards, and applied to corporations as well as to private individuals. It was not. a law regulating the powers of a corporation organized by the State of Kansas; and what was said by the court in that case has clearly nothing to do with the question as to the power of the State to regulate the business of corporations organized under its laws. It is claimed, however, that the question as - to the constitutionality of the law is not before the court in-this case. In the first place, it is nowhere distinctly alleged that the defendant had reached its $150,000,000 limit. It i’s simply alleged. that the defendant refused to accept the insurance offered by the plaintiff upon the ground that the company had actually issued insurance to the amount of $135,000,000 of new insurance and had issued policies for $30,000,000 of new insurance upon which premiums had not been paid and the policies had not become operative. .This is not an allegation that the $150,000,000 limit had been reached. Nor do 1 think that the fact that the company refused this insurance, because of this law or otherwise, resulted in the plaintiff losing his position in this organization. If the plaintiff has performed the contract on his part, a failure of the defendant to’ accept insurance offered would not result in the plaintiff losing his position or interfere with his right to recover the amount which the defendant agreed to pay. The plaintiff would still have his action at law against the defendant to recover the amount due to him under its contract, and no act of the defendant in refusing to accept insurance and no breach of the contract on the part of the defendant could affect his right to recover or give him an action in equity to restrain the defendant from refusing to recognize this legal obligation. It is quite clear upon the complaint in this action and the conduct of the defendant in relation to it that the action is a collusive one, and brought to obtain a judgment which both parties to the action desire, and is not, thereforé, ad application in good faitli to enforce an existing right.

The judgment should be affirmed, with costs.

McLaughlin, Laughlin and Scott, JJ., concurred ; Patterson,. P. J., concurred in result.

Judgment affirmed, with costs.

Added by Laws of 1906, chap. 326; and revised in Consol; Laws,, chap. 28 (Laws of 1909, chap. 33), § 97, as amd. by Laws of 1909, chap. 301. — [Rep.