Continental Life Ins. & Inv. Co. v. Hattabaugh

• Decision Date: 03 February 1912
• Citation: 21 Idaho 285,121 P. 81
• Parties: CONTINENTAL LIFE INSURANCE AND INVESTMENT COMPANY, a Corporation, Plaintiff, v. I. C. HATTABAUGH, as Insurance Commissioner of the State of Idaho, Defendant
• Court: Idaho Supreme Court

121 P. 81

21 Idaho 285

CONTINENTAL LIFE INSURANCE AND INVESTMENT COMPANY, a Corporation, Plaintiff, v. I. C. HATTABAUGH, as Insurance Commissioner of the State of Idaho, Defendant

Supreme Court of Idaho

February 3, 1912

LIFE INSURANCE CORPORATIONS-REGULATION OF DOING BUSINESS WITHIN THE STATE-CONSTITUTIONAL PROVISIONS-POWER OF THE LEGISLATURE-FORM OF POLICY.

(Syllabus by the court.)

1. A corporation is not a citizen within the meaning of the constitution of the United States which prohibits the enactment of laws which abridge the privileges and immunities of a citizen of the United States, and has no privileges or immunities secured to citizens against legislation.

2. A corporation is a creature of the laws of the state or sovereignty where created, and has no legal existence beyond the limits of such state or sovereignty, except such as are granted to such corporations by the laws of the states in which such corporations apply for permission to carry on their business, and the assent of the state or sovereignty may be upon such terms and conditions as such state or sovereignty may deem proper, and such conditions may be prescribed by law.

3. It is within the power of the legislature of this state to enact a statute which prescribes the conditions upon which life insurance companies may do business within the state, and to prescribe the form and conditions of the policies issued by such companies.

4 Subds. 1, 7 and 10 of sec. 42, chap. 228, Sess. Laws 1911, p 732, which regulate and fix the rate of interest to be charged by life insurance companies doing business within the state, upon loans of money upon the policy and forbearances in the collection of dues upon the policy, are provisions which are required to be made a part of the policy of life insurance, and are not independent conditions or agreements.

5. The form of policy involved in this case and presented by plaintiff to the defendant for approval, and upon which permission to do business is asked, in its terms contains the provisions required by the statute, except the rate of interest is designated to be six per cent instead of five per cent, as designated in the statute, and these conditions and privileges are granted by the company to the insured and are an integral and essential part of the contract of insurance made between the company and the insured.

6. Whether or not loaning money on life insurance policies is peculiar to life insurance companies will not render the provisions of a statute void, which require life insurance companies to make such provisions a condition in the policy of insurance issued by a life insurance company, as a condition for such insurance companies doing business in the state.

7. Where a policy of life insurance makes one of the conditions of the policy that the company will loan money upon the policy issued by the company, at a fixed rate of interest and upon indulgences and forbearances, the company cannot successfully contend that such part of the agreement thus made is not a part of the insurance policy, and therefore the company issuing the same is not governed by a statute regulating the right to do business within the state by such insurance company.

8. There is no provision in the state or federal constitution which in any way limits the power of the legislature in making a classification of persons or corporations writing insurance within the state of Idaho, and placing in a separate class those persons or corporations who loan money upon policies written, and limit the charge to be made for the use of such loans to five per cent, although such statute makes no limitation of the rate of interest to be charged upon money loaned upon other securities, except the general statute of the state regulating the rate of interest.

9 Subds. 1, 7 and 10 of sec. 42, chap. 228, Sess. Laws 1911, p 732, do not violate the provisions of the constitution of this state or of the United States, in that such provisions permit the taking of property without due process of law, for the reason that such provisions relate to the regulation of doing business within the state after July 1, 1911, a date subsequent to the passage of the act, and in no way affect any property, or right of contract, prior to said date.

10. The fact that other states have passed laws regulating the doing of life insurance business within such states, which are different from the laws of the state of Idaho, is no reason for this court to hold that a regulation made by the legislature of the state of Idaho is unconstitutional, unfair or unreasonable.

11. The requirement of the statute that a life insurance policy shall contain as a part of the policy a table of cash, paid-up and extended insurance options available under the policy for a period up to the age of ninety-six years, is not an unfair or unreasonable re- quirement, and may be enforced by the insurance commissioner of the state.

12. This court will follow the general rule that every reasonable construction must be resorted to by the court in order to sustain a statute and uphold its constitutionality.

An original application to this court for a writ of mandate.

Application for writ of mandate denied. Costs awarded to the defendant.

Martin & Martin, and B. F. Neal, for Plaintiff.

The statute necessarily interferes with the right of contract. (Lochner v. New York, 198 U.S. 45, 3 Ann. Cas. 1133, 25 S.Ct. 539, 49 L.Ed. 937; Minnesota v. Barber, 136 U.S. 313, 10 S.Ct. 862, 34 L.Ed. 455; Brimmer v. Rebman, 138 U.S. 78, 11 S.Ct. 213, 35 L.Ed. 862; Yick W o v. Hopkins, 118 U.S. 356, 6 S.Ct. 1064, 30 L.Ed. 220; Ritchie v. People, 155 Ill. 98, 46 Am. St. 315, 40 N.E. 454, 29 L. R. A. 79, 82, and cases cited; Adair v. United States, 208 U.S. 161, 13 Ann. Cas. 764, 28 S.Ct. 277, 52 L.Ed. 437, and cases cited; Chicago v. McGuire, 219 U.S. 549, 31 S.Ct. 259, 55 L.Ed. 259.)

Any action of the legislature which decreases the value of the property of its owner arbitrarily is taking his property "without due process of law." (Smyth v. Ames, 169 U.S. 466, 18 S.Ct. 418, 42 L.Ed. 819, 841.)

A corporation is a person within the meaning of the fourteenth amendment. (Southern Ry. Co. v. Greene, 216 U.S. 400, 30 S.Ct. 287, 54 L.Ed. 536, 540; Gulf C. & S. F. R. Co. v. Ellis, 165 U.S. 150, 17 S.Ct. 255, 41 L.Ed. 666.)

The legislature has power to classify subjects for legislation, but this classification for legislative purposes must have some reasonable basis upon which to stand. (Vermont Loan & Trust Co. v. Whithad, 2 N.D. 82, 49 N.W. 318, 320; Brown-Forman Co. v. Kentucky, 217 U.S. 563, 30 S.Ct. 578, 54 L.Ed. 883.)

Arbitrary selection cannot be justified by calling it classification. (Gulf, C. & S. F. R. Co. v. Ellis, supra; Cotting v. Kansas City Stockyards Co., 183 U.S. 79, 22 S.Ct. 30, 46 L.Ed. 72; Connolly v. Union Sewer Pipe Co., 184 U.S. 540, 22 S.Ct. 431, 46 L.Ed. 679; Pembina Consol. Silver Min. & Mill. Co. v. Pennsylvania, 125 U.S. 181, 8 S.Ct. 737, 31 L.Ed. 650; Magoun v. Ill. Trust & Sav. Bank, 170 U.S. 283, 18 S.Ct. 594, 42 L.Ed. 1037.)

There being a constitutional provision forbidding special or local laws upon the subject of interest, the legislature was without power to pass a special law on the subject of interest. (Lewis' Sutherland Stat. Const., 2d ed., sec. 191, pp. 340, 341; State v. Supervisors, 25 Wis. 339; State v. Riordan, 24 Wis. 484; State v. Dousman, 28 Wis. 541; Pasadena v. Stimson, 91 Cal. 238, 27 P. 604; Crabb v. State, 88 Ga. 584, 15 S.E. 455; Henderson v. Koenig, 168 Mo. 356, 68 S.W. 72, 57 L. R. A. 659; State v. Anslinger, 171 Mo. 600, 71 S.W. 1041.)

A special law is one which relates and applies to particular members of a class, either particularized by express terms of the act or separated by any method of selection from the whole of the class to which the law might, but for such limitations, be applicable. (Lewis' Sutherland Stat. Const., 2d ed., pp. 351, 352; State v. Cooley, 56 Minn. 549, 58 N.W. 150.)

If it is limited to particular parts or designated parts of a class, it is special. (Lewis' Sutherland Stat. Const., 2d ed., 352; Lippman v. People, 175 Ill. 101, 51 N.E. 872; In re Sohncke, 148 Cal. 262, 113 Am. St. 236, 7 Ann. Cas. 475, 82 P. 956, 2 L. R. A., N. S., 813; Harper v. Galloway, 58 Fla. 255, 19 Ann. Cas. 235, 51 So. 226; Rodge v. Kelley, 88 Miss. 209, 117 Am. St. 733, 40 So. 552, 11 L. R. A., N. S., 635.)

D. C. McDougall, Attorney General, O. M. Van Duyn, and J. H. Peterson, Assistants, for Defendant.

A corporation is not a citizen within the meaning of the provisions of the federal constitution, and hence has not privileges and immunities secured to citizens against state legislation. (Paul v. Virginia, 8 Wall. (U.S.) 168, 19 L.Ed. 357; Orient Ins. Co. v. Daggs, 172 U.S. 557, 19 S.Ct. 281, 43 L.Ed. 552.)

The state may distinguish, select and classify subjects of legislation, and necessarily the powers must have a wide range. Classification suffices if it is practical, and is not reversible unless palpably arbitrary. (Orient Ins. Co. v. Daggs, supra; Magoun v. Ill. Trust & Sav. Bank, 170 U.S. 283, 18 S.Ct. 594, 42 L.Ed. 1037; Mo. P. R. R. Co. v. Mackay, 127 U.S. 205, 8 S.Ct. 1161, 32 L.Ed. 107; Minn. & St. L. R. R. Co. v. Beckwith, 129 U.S. 26, 9 S.Ct. 207, 32 L.Ed. 585.)

The right of the state to prohibit corporations, either foreign or domestic, from doing business within the state, or as to regulating them to any degree which they see fit, has been settled. (Hooper v. California, 155 U.S. 648, 15 S.Ct. 207, 39 L.Ed. 297; Waters-Pierce Oil Co. v. Texas, 177 U.S. 29, 20 S.Ct. 518, 44 L.Ed. 657; Hancock Mutual Life Ins. Co. v. Warren, 181 U.S. 73, 21 S.Ct. 535, 45 L.Ed. 955.)

Equal protection of the law is not denied to a corporation...