Greenwich Ins. Co. v. Carroll

• Decision Date: 13 October 1903
• Docket Number: 2,410.
• Parties: GREENWICH INS. CO. et al. v. CARROLL, State Auditor.
• Court: U.S. District Court — Southern District of Iowa

125 F. 121

GREENWICH INS. CO. et al. v. CARROLL, State Auditor.

No. 2,410.

United States Circuit Court, S.D. Iowa, Central Division.

October 13, 1903

James C. Davis and George H. Carr, for complainants.

Charles W. Mullan, Atty. Gen., for defendant.

McPHERSON District Judge.

This case is pending on defendant's demurrer to a bill in equity, filed by a number of foreign fire insurance companies, against the defendant, who is Auditor of the state and Insurance Commissioner. The bill asks that defendant be restrained from taking action against them under certain statutes of the state, alleging that the statutes in question are void because in conflict with both the state and federal Constitutions. It is alleged that all these companies have been engaged in doing a fire insurance business in the state for a great many years, paying the fees and taxes, and in all respects complying with the laws relating to such companies and it is also alleged that, prior to the adoption of the statutes in question, they had established their business in equipping offices, paying out large sums in advertising and so on, and from year to year, including the current year they have fully complied with the laws of the state in making their reports as well as all other things, and the Auditor gave each of them a certificate authorizing them to continue in business. They each have an extensive business in Iowa carrying large and numerous risks on property in the state. It is alleged that there are 85 foreign companies, including complainants, doing business in the state, and which pay to the state annually large sums as fees and taxes.

The statutes complained of were enacted in the year 1896, and are now parts of the Code, being as follows: Section 1754 provides that it shall be unlawful for two or more fire insurance companies doing business in this state, or for the officers, agents, or employes, to make or enter into any combination or agreement relating to the rates to be charged for insurance, the amounts of commissions to be allowed agents for procuring the same, or the manner of transacting fire insurance in this state. Penalties and fines are to be imposed for a violation of the statute. Section 1755 provides that the Auditor shall summon before him and examine under oath all those he suspects of violating the statute; and if they fail to appear, or if he finds that they are doing the things inhibited, he shall revoke their permits to do business, and thereafter they shall not do business in the state. It is alleged that the Auditor is about to proceed against them, and that he will oust them from the state unless he is restrained.

The first question presented is, are the statutes in conflict with the state Constitution? Section 6, art. 1, provides that all laws of a general nature shall have uniform operation and that privileges and immunities shall not be granted which shall not on the same terms be granted to all.

Section 30, art. 3, provides 'that where a general law can be made applicable, all laws shall be general and of uniform operation throughout the state. ' The question was fully discussed in all its phases in the case of State v. Garbroski, 111 Iowa, 496, 56 L.R.A. 570, 82 N.W. 959, 82 Am.St.Rep. 524. The statute under discussion provided that peddlers plying their vocation outside of a city or town should pay a license or tax, but that a person who had served in the Civil War need not pay the fee. The statute was held unconstitutional. It is apparent to all that the statute involved in that case is not akin to the statutes now before the court. Judge Ladd in the Garbroski Case reviews many, if not all, the cases upon the subject, and one need not look further for the correct rule, or for the authorities, than his admirable opinion in the Garbroski Case.

All laws of a general nature shall have a uniform operation. These laws in question do have a uniform operation. No one can expect that all laws shall operate upon all people. We have laws with reference to the Legislature, and those laws operate upon that body alone. So as to the office of the Auditor, and a score of other offices, state, county, and municipal. And it is the same as to private affairs. Railroad companies are held liable for an injury to an employe brought about by the negligence of a fellow servant. Such legislation, as all known, is valid. Hundreds of statutes have been enacted in this state known by all to be intended to apply in each case to a single city or town, corporation or trade. That they are valid but few doubt. Statutes were enacted many years ago applying to bridges across the Mississippi river when there was but one bridge, and now there are but few. No one doubts their validity. Years ago statutes were passed authorizing the sale of a railroad to one at the state line, to thereby make a connecting line. But few, if any, ever doubted their validity. Illustrations will readily occur by which I could multiply these cases. And so it is as to granting immunities to some which are denied to others. Exempting farmers, merchants, manufacturers, mining companies, and other corporations from liability in case an employe is injured by another employe negligence, and holding a railroad liable, well illustrates the whole proposition.

Classifications can be made, providing they are not arbitrarily made. If the Iowa statute provided that a railroad company were liable, in the case above stated, where an employe was injured in building a bridge, cutting timber, or at work in the shops, all the courts would have held the law invalid. But the Legislature provided for a recovery only when the injury occurred in the hazards arising from the use and operation of the road. If these statutes in question are otherwise valid, then it is not an arbitrary classification, because they apply to a business peculiar in itself.

All will agree that there must be rules and regulations applicable to insurance companies not applicable to other corporations. There must be some officer, with the powers of an Insurance Commissioner, to govern and direct and control them. The Iowa Supreme Court has upheld so many statutes in principle like this that the question now being discussed seems very clear to me. The following statutes have been held valid: (1) Innumerable curative and legalizing acts; (2) statutes making railway companies liable for double damages for stock killed; (3) allowing a defendant a continuance, as of course, when in the military service; (4) classifying railroads as to charges for carrying freights and passengers; (5) taxes need not operate upon all persons alike; (6) taxing railroads by one set of officers, and individuals by another; (7) exempting property from water taxes; (8) taxing foreign insurance companies on their business; (9) exempting certain property from municipal taxes, and compelling others to pay such taxes; (10) taxing transient merchants; (11) assessing stock of state bank differently from that of a national bank; (12) a special law authorizing the building of a particular railroad. No doubt there are others that have been upheld.

Counsel for complainant seem to have forgotten that special legislation in all cases is not prohibited. Special legislation is prohibited as to six enumerated subjects: (1) Assessment and collection of taxes; (2) for laying out highways; (3) for changing the names of persons; (4) for incorporating cities and towns; (5) for vacating roads, streets, and town plats; (6) for locating or changing county seats.

But as no one of the above referred to provisions of the Constitution is applicable to this case, it is necessary to see what other special legislation is prohibited. The Constitution then recites: 'In all cases above numerated, and in all other cases where a general law can be made applicable, all laws shall be general and of uniform operation throughout the state. ' It is too apparent to admit of discussion that there are hundreds of subjects upon which the state, through its Legislature, should speak: 'Where a general law cannot be made applicable, and where it cannot be of uniform operation throughout the state. ' And insurance is one of these subjects. In my judgment, the statutes in question are not prohibited by either of the state constitutional provisions.

Chapter 4, tit. 9, of the Iowa Code, which chapter includes the statutes now under consideration, affirmatively makes two among other things appear: (1) That it is the policy of this state to invite solvent and reliable foreign insurance companies to come into this state, particularly for the purpose of giving the people the benefit of competition, and partly for the purpose of obtaining revenue for the state treasury; and both purposes are subserved. (2) That it is the duty of the state auditor to license such companies to do business in the state, if upon investigation he finds them solvent and financially worthy. Such being the policy of the state, and such being the duty of the Auditor, he cannot deny the foreign companies, of the kind as above described, from receiving the proper certificate and from doing an Iowa business. Should he undertake to keep such a company out, the proper court will by mandamus compel him to grant the authority, and admit such company. This being so, he cannot put them out, after they are once lawfully and rightfully in, excepting by virtue of the power lodged with him under a valid and constitutional statute.

What was said by the Chief Justice in the case of R.R. v. State, 31 N.J.Law, 531, 543, although in a tax case, is pertinent:

'It is not denied that the corporate existence of a company is recognized, not by right, but by grace, in foreign jurisdiction, nor that each government has the competence to

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