Springfield Fire & Marine Ins. Co. v. Holmes

• Decision Date: 16 March 1940
• Docket Number: No. 1550.,1550.
• Citation: 32 F. Supp. 964
• Parties: SPRINGFIELD FIRE & MARINE INS. CO. v. HOLMES, Auditor and Ex Officio Commissioner of Insurance of Montana.
• Court: U.S. District Court — District of Montana

32 F. Supp. 964

SPRINGFIELD FIRE & MARINE INS. CO. v. HOLMES, Auditor and Ex Officio Commissioner of Insurance of Montana.

No. 1550.

District Court, D. Montana, Helena Division.

March 16, 1940.

COPYRIGHT MATERIAL OMITTED

Howard Toole and W. T. Boone, both of Missoula, Mont., for plaintiff.

Harrison J. Freebourn, Atty. Gen., of Montana, and Lee Metcalf, Asst. Atty. Gen., of Montana, for defendant.

Before HANEY, Circuit Judge, and PRAY and BALDWIN, District Judges.

PER CURIAM.

This action in equity is brought for the purpose of testing the constitutionality of Chapter 95 of the Laws passed by the Twenty-fifth Legislative Assembly, in regular session, of the State of Montana, as interpreted by the Attorney General of that state, and as so interpreted threatened to be enforced against the complainant herein by the defendant as State Auditor and Ex Officio Insurance Commissioner of the State of Montana.

In its Bill of Complaint complainant prays:

1: That the aforesaid Chapter 95 of the Laws of Montana, 1937, insofar as it requires that an agent of this complainant locally licensed and resident within the State of Montana shall receive the full commission on all policies of insurance made, written or placed, or caused to be made, written or placed, upon insurable risks resident, situated or located within the State of Montana, and insofar as it prohibits this complainant from paying a portion of such commission on such insurance to agents and brokers in various other states of the United States, shall be declared to be void, invalid and unconstitutional and in conflict with the Fifth and Fourteenth Amendments to the Constitution of the United States;

2: That the said Chapter 95 of the Laws of Montana, 1937, aforesaid, insofar as it undertakes to empower and authorize the defendant to suspend this complainant's certificate of authority to do business in the State of Montana because of its refusal to pay the full commission to such resident agents and because of payment of a part of the commission to non-resident agents and brokers, be declared to be void, invalid and unconstitutional and in violation of the Fifth and Fourteenth Amendments to the Constitution of the United States; and,

3: That the defendant John J. Holmes as State Auditor and Ex Officio Commissioner of Insurance of the State of Montana, and all of his representatives, servants, employees, and their respective successors in office, and all persons acting under their authority, may be perpetually and forever restrained and enjoined from suspending or attempting to suspend this complainant's right to do business in the State of Montana or from cancelling or setting aside this complainant's certificate of authority so to do or from taking any further steps to that end, and that the said defendant be perpetually enjoined and restrained from refusing to renew this complainant's certificate of authority from time to time as provided by law, or from in any manner suspending, attempting to suspend, or otherwise interfering with the business of this complainant so long as this complainant shall comply with the requirement of the Laws of the State of Montana excepting the provisions of Chapter 95 of the Laws of Montana, 1937, hereinbefore referred to.

The parts of the act referred to material to the decision of the case in hand are as follows:

"Be it enacted by the Legislative Assembly of the State of Montana:

"Section 1. It shall be unlawful for any insurance company * * * doing business within the State of Montana * * * to make, write, place, or cause to be made, written or placed in this State, any policy, bond, duplicate policy, contract of insurance or contract of indemnity of any kind or character, or any general floating group policy upon persons or property, or upon any insurable risk, resident, situated or located in this State, unless written through and countersigned by an agent of this State, duly licensed to transact insurance, bonding or indemnity business therein. Emphasis supplied.

"A resident agent shall countersign all policies, bonds or contracts of indemnity so issued, and shall receive the full commission on all such policies, bonds or contracts of insurance on indemnity, when the premium is paid emphasis supplied, to the end that the State may receive the tax required by law to be paid on the premiums collected for insurance on all persons, property or other insurable risks resident, situated or located within this State; provided that nothing in this act shall be construed to prevent any insurance company or association from issuing policies, bonds or contracts of insurance at its principal or department offices, covering property or persons or other insurable or indemnity risks resident, situated or located in this State; provided, however, such policies are issued upon application procured and submitted to such company or association by a resident agent, who shall keep a record of all such policies, bonds or contracts of indemnity so issued, and countersign the same, and that said resident agent or agents shall receive the full commission on all policies when premium is paid. It shall be unlawful for any such resident agent to rebate or divide such commission, with intent to evade the provisions of this act; and any violation of this provision shall be punished as provided in Sections 6123 and 6124 Revised Codes of Montana 1935. Emphasis supplied. * * *

"Section 2. Exceptions. * * *

"Section 3. Penalties. Any * * * fire insurance company * * * wilfully failing to observe or comply with the provisions of this act shall be guilty of a misdemeanor and shall be subject to and liable to pay a penalty of five hundred dollars ($500.00) for each violation thereof, and for each failure to observe and comply with the provisions of said section, after notice and hearing by the state commissioner of insurance, in the same manner as provided by law for the investigation and punishment by the state commissioner of insurance for other infractions and violations of the insurance laws of this State. * * *

"After such notice and hearing the commissioner of Insurance may, in his discretion, revoke the certificate of authority issued to any corporation, society or agent on his being satisfied, after notice and hearing as provided by law, that such corporation, society or agent has violated any of the provisions of this Act. This penalty is in addition to the other penalties herein described. Emphasis supplied * * *

"Section 4. Any insurance * * * corporation * * * whose authority to transact business in this State shall have been so revoked shall not again be authorized or permitted to transact business within the State of Montana until it shall have paid the amount of any fine or fines assessed * * * and shall have filed in the office of the state auditor a certificate signed by its president or other chief executive officer to the effect that the terms and obligations of the provisions of this act are accepted by it as part of the conditions of its right and authority to transact business in this State." (Emphasis supplied.)

This cause came regularly on for hearing on plaintiff's motion for a temporary injunction, before a Three Judge Court, the Honorable Bert Emery Haney, one of the Judges of the United States Circuit Court of Appeals, Ninth Circuit, the Honorable Charles N. Pray and the Honorable James H. Baldwin, United States District Judges, District of Montana, judges presiding, as provided by the Act of June 18, 1910, c. 309, Sec. 17, 36 Stat. 557, as amended, Sec. 380 of Title 28, U.S.C.A. Thereupon a stipulation of facts was filed and presented to the Court, and counsel for plaintiff introduced in evidence, without objection, a copy of an Order to Show Cause made by said John J. Holmes as State Auditor and Commissioner of Insurance Ex Officio of the State of Montana on September 7, 1938, in re Revocation State Insurance Department License No. 2211, addressed to the complainant Springfield Fire and Marine Insurance Company, a corporation, and requiring it "by and through its officers, or counsel, or otherwise, to appear before the said State Auditor and Ex Officio Commissioner of Insurance in and for the State of Montana * * * there to show cause why Montana Insurance Department License No. 2211 heretofore issued to the said Springfield Fire & Marine Insurance Company, a corporation, should not be cancelled, vacated, set aside and held for naught", certified by said John J. Holmes as State Auditor and Commissioner of Insurance Ex Officio of the State of Montana to be "a true, full, complete and exact copy of Order to Show Cause entered against the Springfield Fire & Marine Insurance Company as the same appears in my office of which I am the legal keeper".

The case was argued by counsel for the parties litigant and submitted to and taken under advisement by the Court on the merits, on the pleadings, the stipulation of facts so filed and said copy of Order to Show Cause so certified.

The Pleadings:

It is alleged in the Bill of Complaint, and expressly admitted by the Answer, that:

1: The complainant, Springfield Fire & Marine Insurance Company, is a corporation duly organized and existing under and by virtue of the laws of the State of Massachusetts, and a citizen of the State of Massachusetts, and a resident of the State and District of Massachusetts;

2: That complainant, as such corporation, is duly entered and qualified to do and carry on the business of writing, underwriting, placing, soliciting and otherwise engaging in the fire insurance business and in making, placing and executing fire insurance contracts in the various states of the United States, and particularly within the State of Montana;

3: Complainant is and for many years has been duly qualified to do business in the State of Montana and engaged in soliciting, making, writing and placing policies and contracts of fire insurance upon property and...