Johnson & Higgins of Mississippi, Inc. v. Commissioner of Ins. of Mississippi

• Decision Date: 03 November 1975
• Docket Number: No. 48360,48360
• Citation: 321 So.2d 281
• Parties: JOHNSON & HIGGINS OF MISSISSIPPI, INC. v. COMMISSIONER OF INSURANCE OF the State of MISSISSIPPI.
• Court: Mississippi Supreme Court

Page 281

321 So.2d 281

JOHNSON & HIGGINS OF MISSISSIPPI, INC. v. COMMISSIONER OF INSURANCE OF the State of MISSISSIPPI.

No. 48360.

Supreme Court of Mississippi.

Nov. 3, 1975.

Watkins & Eager, Jackson, for appellant.

Wells, Gerald, Brand, Watters & Cox, Calvin L. Wells, Frank T. Moore, Jr., William B. Wicker, Jackson, for appellee.

Before RODGERS, SUGG and BROOM, JJ.

BROOM, Justice.

The Commissioner of Insurance refused to issue a full line insurance privilege license to appellant, Johnson & Higgins of Mississippi, Inc., a Mississippi corporation, and a similar license to the other appellant, John A. Spencer (Spencer), an individual, as resident agent for the Corporation. On appeal to the Circuit Court of the First Judicial District of Hinds County, the Commissioner's action was affirmed. The two applicants appeal here and we reverse.

Chief among the several issues raised are the following: (1) Is a corporation eligible for licensing as an insurance agency pursuant to Mississippi Code Annotated sections 83-17-205 (1972) and 27-15-85 (1972)? (2) May the Commissioner of Insurance pierce the veil of a Mississippi corporation and ignore its corporate existence upon finding that it is wholly owned by a New York corporation?

The following facts are revealed by the record. On June 12, 1973, Johnson & Higgins of Mississippi (authorized by its charter to conduct a general agency and a general business as insurance agent in various classes and forms of insurance and re-insurance) applied for a full line privilege license. Accompanying that application was an application for a full line privilege license for Spencer, who was to serve as resident agent. By letter on July 23, 1973, the insurance commissioner formally declined to issue the licenses applied for. On September 6, 1973, the applicants requested a recorded hearing on the matters.

Hearing was held on December 10, 1973, after which the Commissioner again refused to issue the licenses. In support of her decision, she cited the following reasons:

(1) That Johnson & Higgins of Mississippi is a wholly owned subsidiary of Johnson & Higgins, Inc. (a New York corporation herein referred to as Johnson & Higgins of New York) and that Johnson & Higgins of New York refuses to disclose its stockholders. Further, full disclosure of the stockholders would be necessary in order to assure compliance with Mississippi Code Annotated section 83-21-15 (1972) dealing with the regulation of non-resident brokers or agents.

(2) That the petitioners offered no evidence as to whether any officer, director or shareholder of Johnson & Higgins of New York currently held a license as a non-resident agent.

(3) That the petitioners presented no evidence that they did not contemplate violating Mississippi Code Annotated sections 83-17-21 (1972), requiring that policies be written through resident local agents, or 83-17-7 (1972), forbidding payment of commissions on policies written on risks in this state to an unlicensed recipient.

(4) That it has been the past practice of the Commissioner of Insurance of this state to deny a license to any corporation where it was known to such commissioner that the corporation was dominated by non-residents of the state and particularly when there was an indication that a non-resident agent licensed by the state had an interest in such a corporation.

I.

The first proposition we reach is: May a corporation be licensed as an insurance agency under the laws of Mississippi? Appellees contend that the 1964 amendment of current Mississippi Code Annotated section 83-17-205 (1972), which requires that the applicant for a license to be a 'natural person,' effectively denies a corporation the right to be licensed as an agency. This construction overlooks the fact that two separate classifications of licensees are clearly contemplated by the legislature in statutes related to insurance agents and agencies.

Mississippi Code Annotated section 27-15-85 (1972), entitled 'Incorporated insurance agencies and general agencies,' imposes a state-wide privilege tax on such agencies. Mississippi Code Annotated section 27-15-87 (1972) imposes a similar tax on agents or solicitors.

Section 27-15-85 provides in part:

Every person acting as agent or solicitor for any such agency shall qualify under the provisions of sections 83-17-201 to 83-17-225, Mississippi Code of 1972; and no person shall be exempt from the privilege tax placed on insurance agents by this section by reason of the fact that he is a stockholder or officer in any such incorporated agency, or by reason of the fact that he represents such an agency, but every agent or solicitor, except two executive officers of such agency, shall pay the privilege tax herein imposed.

Section 27-15-87 provides:

Whenever a solicitor is employed by any such agent or agency to solicit business for its account . . ..

At least three other statutes refer to the existence of an incorporated agency: Mississippi Code Annotated sections 83-5-19 (1972), 83-17-203 (1972), 83-17-213 (1972).

Although in the strict legal sense, 'agency' denotes the relationship between a principal and one empowered to act for him, it has been recognized that 'agency' in every day usage may also refer to a place of business. Atlanta Accident Ass'n v. Bragg, 102 Ga. 748, 29 S.E. 706 (1897).

Logic dictates the conclusion that the legislature recognized the existence of an incorporated agency operated by a qualified agent or agents, taxable by law, capable of maintaining a central place of business, complete with clerical personnel, for the administration of its affairs. This conclusion is augmented by the fact that the blank forms, provided by the Commissioner herself to license applicants, repeatedly and expressly recognized the distinction between individual agent applicants and corporate agency applicants.

The above statutes considered in their entirety with the attendant circumstances, coupled with the fact that there are approximately 276 licensed incorporated insurance agencies in Mississippi, preclude any finding that a corporate agency is not a proper legal entity for licensing.

II.

By requiring that Johnson & Higgins of New York disclose the rolls of its stockholders, the Commissioner ignored the separate corporate identities of Johnson & Higgins of Mississippi and Johnson & Higgins of New York.

The general rule of law basic to the concept of the corporation is that the distinct corporate identity will be maintained unless to do so would subvert the ends of justice. In disregarding the separate existence of Johnson & Higgins of Mississippi, the Commissioner made the following findings of fact:

1. That Johnson & Higgins of New York owns one hundred percent of the stock of Johnson & Higgins of Mississippi.

2. That Johnson & Higgins of New York is a 'closed corporation.'

Based on these findings, the Commissioner chose to ignore the corporate existence of Johnson & Higgins of Mississippi and required the disclosure of the shareholders of Johnson & Higgins of New York.

With regard to corporate identity, it has been said:

The corporate entity is distinct although all or a majority of its stock be owned by a single individual or corporation, or although the corporation is a so-called 'family' or 'closed' corporation. 18 Am.Jur.2d Corporations § 13 at 558-59 (1965).

Also:

Ownership of all the stock of a corporation coupled with common management and direction does not, however, operate as a merger of the two corporations into a single entity . . .. One corporation may be disregarded where the two are identical or indistinguishable in fact. Unless it is a mere instrumentality or agency or adjunct in that sense, or as a sham or is used in fraud, by the dominant corporation, it will not be disregarded; and it will not be disregarded unjustly. (1 W. Fletcher, Cyclopedia of the Law of Private Corporations § 43 at 209 (Perm.Ed.1974)).

Nothing in the record indicates that Johnson & Higgins of Mississippi was a mere instrumentality, or agency or adjunct of Johnson & Higgins of New York in the sense that the two corporations are identical or indistinguishable in fact. Nor was it...