Duel v. State Farm Mut. Auto. Ins. Co.

• Decision Date: 13 March 1942
• Citation: 240 Wis. 161,1 N.W.2d 887
• Parties: DUEL, Commissioner of Insurance, v. STATE FARM MUT. AUTOMOBILE INS. CO. (two cases).
• Court: Wisconsin Supreme Court

240 Wis. 161

1 N.W.2d 887

DUEL, Commissioner of Insurance,

v.STATE FARM MUT. AUTOMOBILE INS. CO. (two cases).

Supreme Court of Wisconsin.

Jan. 13, 1942.

Rehearing Denied March 13, 1942.

Appeals from orders of the Circuit Court for Dane County; Arold F. Murphy, Judge.

Affirmed.

Actions brought respectively on June 4, 1940 and May 16, 1941 by Morvin Duel, Commissioner of Insurance of Wisconsin, plaintiff, against State Farm Mutual Automobile Insurance Company, an Illinois Corporation, defendant, to enforce orders of plaintiff dated May 18, 1940 and May 5, 1941, declining to renew defendant's license to conduct the insurance business in the state of Wisconsin for license periods ending respectively May 1, 1941 and May 1, 1942.

The complaint in the second action alleges that these actions were brought under the provisions of sec. 285.06, Stats., to enforce orders of the commissioner and under sec. 269.56, Stats., for judgment declaring the rights and duties of plaintiff commissioner and the rights of defendant.

The facts as alleged in this complaint are as follows: Defendant is an Illinois corporation and is engaged in the business of insuring various automobile risks. It was granted a license to do business in this state beginning May 1, 1939 which license terminated May 1, 1940. Defendant seasonably applied for renewal of this license but no determination with respect thereto had been made by plaintiff at the time the original license expired. On May 11, 1940, in response to a request from the insurance commissioner of Illinois, plaintiff wrote a letter enclosing a copy of his decision with respect to the re-licensing of defendant, which decision disclosed a purpose not to re-license the company. When this information reached defendant, the latter without applying for a re-hearing, commenced an action in the Federal District Court for the Western District of Wisconsin, asserting that plaintiff had no power to withhold the license, and seeking to restrain plaintiff from interfering with defendant's business in the state of Wisconsin.

Upon the basis of this complaint, a temporary restraining order issued out of the Federal District Court pending a hearing for a temporary injunction, and plaintiff was notified of the date of hearing in the federal court, the matter to be heard before a three-judge court convening pursuant to sec. 266 of the Judicial Code, as amended, 28 U.S.C.A. § 380.

In the federal court defendant took the position that it was proceeding under sec. 266 of the Judiciary Act and while the restraining order was in full force and before there was any hearing or determination upon the application for a temporary injunction, plaintiff commenced an action in the circuit court for Dane County pursuant to the provisions of sec. 285.06, Stats., to enforce the provisions of the Wisconsin Statutes relating to foreign insurance companies doing business in this state, to restrain defendant from doing business in the state and pursuant to sec. 269.56 for a declaration as to the extent of plaintiff's powers as insurance commissioner and the legality of defendant's methods of doing business.

In pursuance of sec, 285.06, Stats., and sec. 266 of the Judiciary Act the circuit court of Dane county immediately granted a stay of the proceedings brought by plaintiff to enforce plaintiff's findings pending determination of plaintiff's action in the circuit court, duly notified the District Court of the United States for the Western District of Wisconsin of the pendency of the action in circuit court and attached a copy of the stay. The District Court of the United States for the Western District of Wisconsin thereupon, in compliance with sec. 266 of the Judicial Code, entered an order on June 6, 1940 staying all proceedings pending final determination of the action in the courts of the state of Wisconsin.

There follow allegations tending to show that the trial of the action in the circuit court was delayed at the request of defendant. It is alleged that defendant was not granted a license to do business for the year expiring May 1, 1941 but that it continued to do business during that time. That defendant seasonably applied for license for the year beginning May 1, 1941 and was advised on April 24, 1941 that for the same reasons that the license had theretofore been refused for the preceding year no license would be granted upon the new application, there having been no showing that any material change had occurred in the manner in which defendant had conducted its business.

On May 5, 1941 the defendant received written official notification of this action and commenced a second action in the United States District Court for the Western District of Wisconsin to restrain plaintiff. Plaintiff thereupon commenced the second action in the circuit court for Dane county seeking the same relief as his first action. Plaintiff alleges that one of the objectionable and unlawful practices of the company is that of charging a substantial life membership fee in addition to its premiums, thereby producing a large part of the charge for insurance, without setting up any reserves therefor. Plaintiff further alleges that with the exception that H. J. Mortensen, insurance commissioner, granted a license to defendant to do business for the year 1939-1940, it has been the uniform administrative interpretation of the statutes by the insurance department for many years that the life membership plan is unlawful under the laws of Wisconsin and that it was not and is not such as to safeguard the interests of the policyholders and the people of the state; that the unlawfulness of the practice impliedly established by a Supreme Court decision in this state in an action of Employers Mutual Indemnity Insurance Company and others v. Workmens Mutual Insurance Company, in which action plaintiff sought leave in Supreme Court, pursuant to the provisions of sec. 286.36, Stats., to commence an action against the Workmens Mutual Insurance Company to vacate its charter and annul its existence for the reason that this company, among other things, had in violation of its charter and the laws of the state, written insurance in which a life membership fee was exacted without maintaining reserves in relation to this fee. It is alleged that in order to obtain leave of this court to sue for such purpose, it was necessary to convince this court that such allegations, if controverted, would entitle plaintiffs to a judgment of forfeiture. (The complaint does not allege any final disposition of this action.) At the time that this action, involving the Workmens Mutual, was pending, this defendant withdrew its application for a license to do business within the state, although it had theretofore frequently sought such a license. It again applied for a license in 1937 but did not press the application until the summer of 1939. While such application was pending, State Farm Mutual Insurance Company of Wisconsin commenced an action to restrain the insurance commissioner from granting a license to defendant by reason of the similarity of the names of the two companies and a temporary restraining order was served upon the commissioner. On July 12, 1939 this order was set aside and vacated, whereupon the then commissioner of insurance immediately issued a license to defendant, the license being issued before a stay order and appeal papers could be perfected. This rendered the action in the circuit court moot and no determination was made upon the merits.

Plaintiff asserts in summary that his acts were within his power and authority and that the methods and practices of defendant violate the applicable laws of the state of Wisconsin. The prayer is for a judgment restraining defendant from doing business in Wisconsin and for declaratory relief as to the extent of his powers.

To the complaints, general demurrers were interposed and on July 8, 1941 the court entered orders overruling the demurrers. Defendant appeals.

Rieser & Mathys, of Madison, and Ekern & Meyers, of Chicago, Ill. (R. M. Rieser and Frank T. Boesel, both of Madison, Herbert H. Naujoks, of Chicago, Ill., and James J. Kerwin, of Milwaukee, of counsel), for appellant.

John E. Martin, Atty. Gen., and N. S. Boardman, Asst. Atty. Gen., for respondent.

WICKHEM, Justice.

It is plaintiff's contention that defendant's methods of conducting its business are unlawful under the Wisconsin Statutes and that under sec. 201.34, Stats., plaintiff has the power and the duty to refuse to renew defendant's license. The principal controversy rages about defendant's exaction, in addition to the charge which it denominates a “premium”, of a membership fee for which it purports to give no insurance and in respect of which it sets up no reserves. The methods of business of defendant, and particularly the membership fee plan, had apparently constituted the basis for objections to the licensing of plaintiff for a number of years prior to 1939, but the application for a license not having been pressed until that year, no determination was made by the insurance commissioner until that time. After an investigation by field agents, Mr. Mortensen, who was at that time insurance commissioner, granted defendant a license and filed a memorandum disposing of the objections to defendant's practices favorably to defendant.

It will be convenient at the outset to consider and deal with defendant's claim that plaintiff had neither power nor jurisdiction to decline to license defendant. Defendant relies upon the following rules:

(1) That the insurance commissioner has only such powers as are conferred by statute and that these must be found within the four corners of the statute. Union Indemnity Co. v. Smith, 187 Wis. 528, 205 N.W. 492;State ex rel. Wisconsin Inspection Bureau v. Whitman, 196 Wis. 472, 220 N.W. 929;City of Milwaukee v. Railroad Comm., 206 Wis. 339, 240 N.W. 165.

(2) That a foreign corporation may conduct its business...