Allen v. Pavach

• Decision Date: 07 October 1975
• Docket Number: No. 574S107,574S107
• Citation: 335 N.E.2d 219,263 Ind. 574,49 Ind.Dec. 145
• Parties: Lloyd M. ALLEN, as Commissioner of Department of Insurance, State of Indiana, Appellant (Defendant below), v. Anthony PAVACH and Damon S. Roach, Appellees (Plaintiffs below).
• Court: Indiana Supreme Court

Page 219

335 N.E.2d 219

263 Ind. 574

Lloyd M. ALLEN, as Commissioner of Department of Insurance State of Indiana, Appellant (Defendant below), v. Anthony PAVACH and Damon S. Roach, Appellees (Plaintiffs below).

No. 574S107.

Supreme Court of Indiana.

Oct. 7, 1975.

Rehearing Denied Dec. 4, 1975.

Duge Butler, Jr., Butler, Brown & Hahn, Indianapolis, for appellees.

Theodore L. Sendak, Atty. Gen., Arthur M. Small, Deputy Atty. Gen., Indianapolis, for appellant.

GIVAN, Chief Justice.

This appeal arises from Appellees' action for injunctive and declaratory relief in Marion Superior Court. This Court entertains jurisdiction pursuant to Ind. Rules of Proc. Rule AP. 4(A)(8), as the trial court found Acts 1973, P.L. 326, §§ 4 and 5, to be unconstitutional.

The facts were stipulated as follows:

1. The plaintiff is a resident of Marion County, State of Indiana, and is a Professional Bail Bondsman.

2. The defendant is the duly appointed Commissioner of the Department of Insurance of the State of Indiana.

3. The plaintiff is registered and has qualified as a Professional Bondsman, pursuant to Ind.Ann.Stat. 9-3701 et seq., with the Department of Insurance, State of Indiana.

4. The First Regular Session of the 98th General Assembly of the State of Indiana passed Public Law 326, which statute amends Ind.Ann.Stat. 9-3701.

5. The plaintiff's license to operate as a professional bondsman expired on September 30, 1973, but all such licenses were extended by the Insurance Commissioner to date of October 8, 1973, which date falls on a holiday.

The issues presented by the complaint are:

Whether Public Law 326, Acts of 1973, has deprived the plaintiff of his right to due course of law under the Indiana Constitution, Article 1, Sec. 12, his right to equal protection under the Indiana Constitution Act. 1, Sec. 23, and his right to due process of law under the Constitution of the United States, 14th Amendment, Sec. 1, by:

a) Arbitrarily establishing two classes (individual-insurance company) to sell bail bonds;

b) Arbitrarily establishing different standards for the two classes established which must be met before they may sell bail bonds;

c) Arbitrarily establishing maximum amount of bail bonds that may be written by an individual professional bail bondsman, and placing no limit upon individuals selling bail bonds for an insurance corporation;

d) Arbitrarily requiring a $100,000.00 cash bond for an individual professional bail bondsman and providing no cash bond for individual salesmen employed by an insurance company.

Following argument and submission of briefs to the trial court, the judge made the following conclusions of law:

'1. The law is with the plaintiffs.

'2. Sections 4 and 5 of Public Law 326 are discriminatory in their effect on professional bondsmen.

'3. The discrimination established by Sections 4 and 5 of Public Law 326 is arbitrary, unreasonable, and of an unusual nature; it therefore is discriminatory in fact and in law, and a (sic) as applied to plaintiffs is therefore unconstitutional. It is not based on a substantial difference of situation or circumstances indicating any necessity for such determination.

'4. Because of the constitutional violations, Sections 4 and 5 of Public Law 326 are expressly found to be unconstitutional and therefore void.'

Appellant raises one issue for review: Whether the trial court erred in finding §§ 4 and 5 of P.L. 326, Acts of 1973, to be arbitrary and unreasonable and therefore unconstitutional.

Appellees admit that the bail bond business, because of its close relation to the criminal justice system, is a proper subject for legislative regulation. In fact, other jurisdictions have uniformly so held. See e.g., Jackson v. Beavers (1923), 156 Ga. 71, 118 S.E. 751; McDonough v. Goodcell (1939), 13 Cal.2d 741, 91 P.2d 1035. See also Annot., 13 A.L.R.3d 618 (1967).

At the outset, it should be noted that a corporation is a 'person' within the meaning of the equal protection and due process provisions of the United States Constitution. 18 Am.Jur.2d Corporations, § 21.

The equal protection clauses of the United States and Indiana Constitutions do not prevent the legislature from indulging in classifications which treat one group differently from another. The test is whether the difference in treatment is an invidious discrimination. Lehnhausen v. Lake Shore Auto Parts Co. (1973), 410 U.S. 356, 93 S.Ct. 1001, 35 L.Ed.2d 351. Similarly, the due process clause protects only against invidious discrimination. Ferguson v. Skrupa (1963), 372 U.S. 726, 83 S.Ct. 1028, 10 L.Ed.2d 93. Generally, if a classification has a rational or reasonable basis, it will be sustained. Graham v. Richardson (1971), 403 U.S. 365, 91 S.Ct. 1848, 29 L.Ed.2d 534; State ex rel. Miller v. McDonald (1972), Ind., 297 N.E.2d 826, 37 Ind.Dec. 332. Corporations may be classified and treated differently when the classifications are based upon distinctions having a fair and reasonable relation to the purpose of the legislation. Atchison, T. & S.F. Ry. Co. v. Vosburg (1915), 238 U.S. 56, 35 S.Ct. 675, 59 L.Ed. 1199. Further the enactment is presumed to be valid, the burden resting upon the party challenging its validity to overcome the presumption. Graham, supra; State ex rel. Miller, supra.

Acts 1973, P.L. 326, § 4, amending the deposit requirements of professional bondsmen, reads in part, as follows:

'Section 4. IC 1971, 35--4--5--34 is amended to read as follows: Sec. 34. Professional bondsmen and property bondsmen shall, before writing cash, property or security bail bonds deposit with the commissioner cash, bearer bonds or other negotiable securities in the same manner as required of domestic insurance companies, an amount determined by the commissioner not less than having a value of at least one-hundred thousand dollars ($100,000) in order to obtain a license to engage in the bail bond business, out of which the commissioner shall satisfy judgment on all forfeitures which have not been paid. The deposit shall be subject to all laws, rules and regulations as deposits by domestic insurance companies.'

IC 35--4--5--35 (Burns' Ind.Stat.Ann., 1975 Repl.) pertaining to the insurer's deposit, reads as follows:

'Deposit by insurers with commissioner--Amount.--All insurers must deposit with the commissioner cash, bearer bonds or other negotiable securities having a value of at least seventy-five thousand dollars ($75,000), in order to obtain a license to engage in the bail bond business, out of which the commissioner shall satisfy judgment on all forfeitures which have not been paid. Such deposit shall be subject to all laws, rules and regulations as are deposits by domestic insurance companies. (Acts 1961, ch. 263, § 32a, as added by Acts 1969, ch. 241, § 17, p. 927.)'

The State is attempting to protect itself from bail bond forfeitures and to insure that defendants will be present for trial. Although the statute provides two different deposit requirements for the writing of bail bonds, a rational basis for the differentiation can be found. In determining the constitutionality of statutes, legislative classifications will not be set aside if any state of facts rationally justifying them is demonstrated to or perceived by the courts. United States v. Maryland Savings-Share Ins. Corp. (1970), 400 U.S. 4, 91 S.Ct. 16, 27 L.Ed.2d 4; State ex rel. Miller v. McDonald, supra.

The ability to meet forfeitures is dependent on the assets of the bondsman. The assets of an 'insurer' are required by law to be substantial. See IC 27--1--6--15, (Burns' Ind.Stat.Ann., 1975 Repl.); IC 27--1--6--16, (Burns' Ind.Stat.Ann., 1975 Repl.); IC 23--1--16--2, (Burns' Ind.Stat.Ann., 1972 Repl.). Further, insurers are heavily subject to control by the Department of Insurance. IC 27--1--1--1, (Burns' Ind.Stat.Ann., 1975 Repl.).

On the other hand, professional bondsmen are not required to have a minimum amount of assets, nor are they as heavily regulated by the Department of Insurance. Thus, there are real and substantial differences between professional bondsman and insurers relating to the protection of the State against forfeitures which justifies treating the classes differently. Given the above differences, the trial court's finding that the standards are arbitrary is unfounded. If the classification has some reasonable basis, it does not offend the Constitution merely because the classification is not mathematically precise or because in practice it results in some inequality. Dandridge v. Williams (1970), 397 U.S. 471, 90 S.Ct. 1153, 25 L.Ed.2d 491. Further, the greater deposit required of individuals decreases any chance that a bondsman would forfeit a deposit and migrate rather than pay a large judgment. Because of its required assets any multiple investors, an insurance company is relatively stable of itself.

Appellees also urged below that §§ 4 and 5 of P.L. 326, violates their rights to due process and equal protection by excluding surety bondsmen from deposit requirements and by establishing a limit upon the amount of bail bonds that could be written by a professional bondsman while not setting a limit upon surety bondsmen. These arguments are based upon the premise that surety bondsmen and professional bondsmen are in the same class. However, surety bondsmen are, in fact, agents of and execute bonds for insurers. IC 35--4--5--1 (Burns' Ind.Stat.Ann., 1975 Repl.) A forfeiture on a bond written by a surety bondsman would be covered by the insurer's deposit and assets. Thus, surety bondsmen are not in the same class as professional bondsmen, but rather are a part of the insurer classification. The discussion above, differentiating between insurers and professional bondsmen, is, therefore, applicable here. That there is a rational basis for different treatment of insurers and professional bondsmen, as noted above, is sufficient to uphold the different treatment of surety bondsmen and professional bondsmen.

Acts 1973,...