Prewitt v. Security Life Ins.

83 S.W. 611, 119 Ky. 321, 1904 Ky. LEXIS 167

• Court: Court of Appeals of Kentucky
• Decided: December 15, 1904
• Status: Published

Opinions

Opinion op tiib court by

JUDGE HOBSON.

In the first of tbe above cases the Security Mutual Life Insurance Company filed its petition in equity, alleging- that in the year 1900 it began business in Kentucky, having complied with the requirements of the statutes of the State applicable to foreign insurance companies, the plaintiff being a corporation organized under the laws of the State of New York; that the commissioner then granted it permission to transact the business of life insurance in this State, and it employed a large number of agents, established a large number of agencies throughout the State, expended large sums of money in advertising its business, and acquired a large and profitable business in the State; that in June, 1904, it removed to the circuit court of the United States for the Eastern District of Kentucky, without the consent of the other party, a suit brought against it in one of the circuit courts of the State; and that on September 29, 1904, the •defendant, Prewitt, as Insurance Commissioner, revoked its authority to do business in the State for the sole reason that it had removed the suit referred to to the circuit court of the United States, and refused and still refuses to set aside the revocation. It prayed an injunction requiring the commissioner to annul the revocation of its license and to continue its authority to transact the business of life insurance in the State. The defendant demurred to the petition, his demurrer was overruled, and. he declining to plead further, a judgment was entered as prayed in the petition.

In the other cases the petition is very similar, except that it is there averred that the commissioner has not yet revoked the plaintiff’s license, but that he threatens to do so, and, unless enjoined by the court, will revoke it, to the plaintiff’s irreparable injury; it being a foreign corporation created under the laws of the State of Connecticut. The defendant demurred to the petition, his demurrer was sustained, and, the plaintiff declining to plead further, its petition was dismissed. Both the appeals raise the same question and will he considered together.

By section 63.3, Kentucky Statutes, 1903, licenses to agents of foreign companies must be renewed annually, and any person acting as the agent of such a company without procuring a license, or after the license has expired, or has been suspended or revoked, shall he guilty of a misdemeanor and fined not less than $50 nor more than $100 for each offense. By section 634 every foreign insurance company, before transacting any business in this State, must return to the commissioner a copy of its charter or organic law, and the commissioner, upon being satisfied that the. company has complied with the laws of the State and is possessed with the legal reserve shall furnish to such agents as the company directs a license to transact business as agents for the company, und'er the seal of the Insurance Department. By section 657 foreign life insurance companies, in addition, must file statements annually of their condition on the 31st of December of the year preceding and certain evidences of their deposits, • securities, etc. By section 694 insurance companies other than life, not incorporated under the laws of this State, upon complying with the provisions of the statute, may be authorized by the commissioner to transact business in the State. By section 761, the fees to be charged by the commissioner are regulated.

Section 631, Kentucky Statutes, 1903, is in these words: “Before authority is granted to any foreign insurance company to do business in this State, it must file with the commissioner a resolution adopted by its board of directors, consenting that service of process upon any agent of such company in this State, or upon the commissioner of insurance of this State, in any action brought or pending in this State, shall be a valid service upon said company; but if process is served upon the commissioner it shall be his duty to at once send it by mail, addressed to the company at its principal office; and if any company shall, without the consent of the other party to. any suit or proceeding brought by or against it in any court of this State, remove said suit or proceeding to any federal court, or sihall institute any suit or proceeding against any citizen of this State in any federal court, it shall be the duty of the commissioner to forthwith revoke all authority to such company and its agents to do business in this State, and to publish such revocation in some newspaper of general circulation published in the State.”

The validity of the latter clause of the section is the only question to be determined upon the appeal. It is insisted that it is in conflict with the Constitution of the United States. Three decisions of the United States supreme court are relied on. In Home Insurance Company v. Morse, 20 Wall., 445, 22 L. Ed., 305, the statute of the State required the foreign insurance company to sign an agreement not to remove any of its cases to the federal courts. The company signed the agreement and afterward filed a petition seeking the removal of a suit brought against it to the federal court. The State court refused to remove the case, but on appeal to the United States supreme court the judgment of the State court was reversed, and it was held that the agreement in advance not to exercise a right guaranteed by the Constitution did not prevent the defendant from removing the case to the federal court. The opinion vras written by Judge Hunt, and goes no further than the question actually before the court.

The next case relied on is Doyle v. Continental Insurance Company, 94 U. S., 535, 24 L. Ed., 148; the opinion being also written ¡by Judge Hunt. In that case there wras. a State statute corresponding to section 631 above quoted^ and the State officer under it was about to cancel the license of the insurance company. The plaintiff made, in substance the •same allegations as are made in the case before us, and prayed an injunction as in these cases. The supreme court, reversing the court below, dismissed the bill. After distinguishing the case from the Morse Case, the court said: “The cases of Bank v. Earle 13, Pet., 519 [10 L. Ed., 274], Ducat v. Chicago, 10 Wall., 410 [19 L. Ed., 972], Paul v. Virginia, 8 Wall., 168 [19 L. Ed., 357], and Insurance Company v. French, 18 How., 404 [15 L. Ed., 451], establish the principle that a State may impose upon a foreign corporation, as a condition of coming into or doing business within its territory, anj7 terms, conditions, and restrictions it may think proper that are not repugnant to the Constitution or laws of the United States. The point is elaborated at great length by Chief Justice Taney in the case first named, and by Mr. Justice Field ( Curtis) in the case last named'. The correlative power to revoke or recall a permission is a necessary consequence of the main power. A mere license by a State is always revocable. Rector v. Philadelphia, 24 How., 300 [16 L. Ed., 602]; People v. Roper, 35 N. Y., 629; People v. Commissioners, 47 N. Y., 501. The power to revoke can only be restrained, if at all, by an explicit contract upon good consideration to that effect. Humphrey v. Pegues, 16 Wall., 244 [21 L. Ed., 326]; Tomlinson v. Jessup, 15 Wall. 454 [21 L. Ed., 204]. License lo a foreign corporation to enter a State does not involve a permanent right to remain, subject to the laws and Constitution of the United 'States. Full power and control over its territories, its citizens, and its business belongs to the State. If the State has the power to do an act, its intention or the reason by which it is influenced in doing it can not be inquired into. Thus the pleading before us alleges that the permission of the Continental Insurance Company to transact its business in Wisconsin is about to be revoked for the reason that it removed the case of Drake from the State to the federal courts. If the act of an individual is within the terms of the law, whatever may be the reason which governs him or whatever may be the result, it can not be impeached. The acts of a State are subject to still less inquin-, either as to the act itself or as to the reason for it. The State of Wisconsin (except so far as its connection with the Constitution and laws of the United States alters its position) is a sovereign State, possessing all the powers of the most absolute government in thejsvorld. The argument that the revocation in question is made for an unconstitutional reason can not be sustained. The suggestion confounds an act with an emotion or a ment'al proceeding which is not the subject of inquiry in determining the validity of a statute. An unconstitutional reason or intention is an impracticable suggestion, which can not be applied to the affairs of life. If the act done by the State is legal — is not in violation of the Constitution or laws of the United States — it is quite out of the power of any court to inquire what was the intention of those who enacted the law. In all cases where the legislation of a State has been declared void, such legislation has been based upon an act or a fact which was itself illegal ” After discussing certain previous decisions, the court added: “It is said that we thus indirectly .sanction what we condemn when presented directly, to-wit, that we enable the State of Wisconsin to enforce an agreement to abstain from the federal courts. This is an 'inexact statement.’ The effect of our1 decision in this respect is that the State may compel the foreign company to abstain from the federal courts or to cease to do business in the State. It gives the company the option. This is justifiable, because the complainant has no constitutional right to do business in that State. That State has authority at any time to declare that it shall not transact business there. This is the whole point of the case, and, without reference td the injustice, the prejudice, or the wrong that is alleged to exist, must determine the question. No right of the complainant under the laws or Constitution of the United States, by its exclusion from the State, is infringed; and this is what the State n'ow accomplishes. There is nothing, therefore, that will justify the interference of this court.”

It is conceded by counsel that if this case is still authority, these actions must fail. But it is insisted that in Barron v. Burnside, 121 U. S., 186, 7 Sup. Ct., 931, 30 L. Ed., 915, this case was, in effect, overruled. In Barron v. Burnside there was a State statute requiring every foreign corporation to have a license before engaging in business in the State. The license, by the terms of the statute, was not to be issued except upon the application of the company by a resolution of the board of directors or stockholders authorizing it, and containing a stipulation that the permit should be subject to each of the provisions of the act, one of which was-that the permit -should be void if the corporation removed a case to the federal courts. Barron was arrested under the statute for doing business for a foreign corporation without complying with the statute, and obtained a writ of habeas corpus, which was sustained by the United States supreme court. The court, after quoting the statute and discussing it at some length, said: “This proceeding is a unit. The filing of the articles of incorporation and the provision in regard to service of process are to be authorized by the same resolution which requests the issue of the permit; and this request or application is to contain the stipulation above mentioned. These various things are not separable.” Then, after some further discussion of the statute, the court concludes with these words: “In view of these considerations, the case falls directly within the decision of this court in Home Insurance Company v. Morse [20 Wall., 445, 22 L. Ed., 365].” It then proceeds, after showing what was. decided in the Morse Case, to discuss the Doyle Case in these words: “The case of Doyle v. Continental Insurance Company, 94 U. S., 535, 24 L. Ed., 148, is relied on by the defendant in error. In that case this court said that it had carefully reviewed its decision in Home Insurance Company v. Morse, and was satisfied with it. In referring to the second conclusion in Insurance Company v. Morse, above recited, namely, that the statute of Wisconsin was repugnant' to the Constitution of the United States, and was illegal and void, the court said, in Doyle v. Continental Insurance Company, that it referred to that portion of the statute which required a stipulation not to transfer causes to the courts of the United States. In that case, which arose under the statute of Wisconsin, the foreign insurance company had complied1 with the statute, and had filed an agreement not to remove suits into the federal courts, .and had received a license to do business in the State. Afterwards it removed into the federal court a suit brought agailnst it in a State court of Wisconsin. The State authorities threatening to revoke the license, the company filed a bill in the circuit court of the United States, praying for an injunction to restrain the revoking of the license. A temporary injunction was granted. 'The defendant demurred to the bill, the demurrer was overruled, a decree was entered making the injunction perpetual, and the defendant appealed to this court. This court reversed the decree and dismissed the bill. The point of the decision .seems to have been that, as the State had granted the license, its officers would not be restrained by injunction 'by a court of the United States from withdrawing it. All that there is in the case beyond this, and all that is said in the opinion which appears to be in conflict with the adjudication in Insurance Company v. Morse, supra, must be regarded as not in judgment.”

We do not understand this to overrule the Doyle case; for certainly, if the State can not withdraw the license it has once granted, any court of competent jurisdiction may so decide. If the State statute withdrawing the license was unconstitutional and void, the supreme court of the United. States had the same power to declare the statute in that case unconstitutional as it had to declare the statute unconstitutional in Barron v. Burnside. Our statute is not liable to the objections made to the statute in either the Morse case or the Barron case. Under our statute the foreign insurance company is at liberty to remove its cause to the federal court whenever it sees proper. It is required to sign no stipulation or agreement interfering with that right. The regulation is reasonable that the State, for the protection of its citizens against unsafe insurance companies, should require them, before doing business in the State, to obtain a license from the insurance commissioner, and to furnish him such evidences of their solvency as will protect insurers in this State before he is authorized to grant them a license: The license which the State grants is purely a matter of grace, and, like any other license, may be revoked by the licensor at pleasure. The revocation of the license interferes with no legal right of the licensee; for, when he takes it, he takes it subject to revocation. He can not question the reason of the licensor for revoking the license, as the 'State may exclude foreign corporations from doing business in the State with or without reason. If I have license to cross my neighbor’s lot, and he revokes it because I brought a suit against his son, I can not enjoin him from revoking the license on the ground that 1 had a constitutional right to go to the courts for relief, and that my exercise of a constitutional right was no just reason for his revoking the license he had given me; for he had an absolute right to revoke the license, and the fact that he did it out of spite, or for a bad reason, is immaterial. The State, by her1 statutes above referred to, in effect, says to the foreign insurance companies: “I will license you to do business here on the same plane asi domestic corporations, and if you come here you must stand o<n no more favorable ground than the domestic insurance companies. If, after you come, you refuse to so stand, I will withdraw my license.” The reason for the statute is notv distrust of the federal courts, but the practical denial of justice that results, in a sparsely settled State like ours, if the case must be tried 100 or 200 miles from where the parties and witnesses reside. Domestic insurance companies enjoy no such immunity, but must try their cases in- the vicinage. The State simply says to the foreign insurance companies : “I will withdraw my license if you insist on privileges not enjoyed by home companies.” If the State, on the day before these suits were filed, by legislative act had withdrawn all licenses to foreign insurance companies, reciting in the preamble to the act that it was enacted inasmuch as the two cases above referred to had been removed to the United States circuit court, could these plaintiffs have complained ? If not, how >are they affected by the fact that the State acts by an executive officer, and not by a special statute? Certainly they can not complain that the license of certain other companies was not revoked.

The case of Commonwealth v. East Tennessee Coal Company, 97 Ky., 238, 17 R., 139, 30 S. W., 608, did not involve the revocation of a license granted by the State, but was in effect similar to Barron v. Burnside, above cited, being a proceeding to impuse a fine on the defendant after it removed a ■ case from the State courts. The naked question presented here is, may the State, without cause, revoke a license it has once granted, for a bad reason is no worse than none at all. The distinction is a narrow one, but none the less sound, unless the w’hole doctrine that the State may grant or withhold a license as it sees fit is to he abandoned. It is juggling with words to say that a State may at will prohibit foreign corporations from doing business in the State (Hooper v. California, 155 U. S., 650, 15 Sup. Ct., 207, 39 L. Ed., 297), and yet that it may not at will withdraw a license which it has once granted to such corporations. It seems to us that the Boyle Case rests on sound principles, and that the Barron Case in no wise conflicts with it; for that case is by the court expressly put upon the ground that the statute there, when properly construed, fell within the rule laid down in the Morse Case. 6 Thompson on Corporations, secs. 7466-7467; 13 Am. & Eng. Ency. of Law, p. 867; People v. Pavey, 151 Ill., 101, 37 N. E., 691.

The judgment in the first case is therefore reversed, for further proceedings consistent herewith.

The judgment in the second case is affirmed.

Chief Justice Burnam and Judge Barker dissent.