Langdon v. Lutheran Broth.
| Decision Date | 20 March 1981 |
| Docket Number | No. 5324,5324 |
| Citation | 625 P.2d 209 |
| Parties | John T. LANGDON, Insurance Commissioner of the State of Wyoming and the Insurance Department of the State of Wyoming, Appellants (Respondents), v. LUTHERAN BROTHERHOOD, a Minnesota Corporation, Appellee (Petitioner). |
| Court | Wyoming Supreme Court |
John D. Troughton, Atty. Gen., Gerald A. Stack, Deputy Atty. Gen., Criminal Division and Walter Perry, III, Asst. Atty. Gen., Cheyenne, for appellants.
Glenn Parker and W. Douglas Hickey of Hirst & Applegate, Cheyenne, for appellee.
Before ROSE, C. J. *, and McCLINTOCK, RAPER **, THOMAS and ROONEY, JJ.
The sole question for consideration upon appeal is whether appellee, a fraternal benefit society, has exceeded its corporate powers that have been granted by statute. The district court concluded that the insurance commissioner's order revoking appellee's license to transact business in Wyoming as a fraternal benefit society was arbitrary and capricious and not in accordance with the law, and set the order of the commissioner aside. We agree with the district court's determination and will affirm.
Lutheran Brotherhood, appellee, is a fraternal benefit society that was originally organized and operated under the laws of Minnesota in 1917. Since that date, Lutheran Brotherhood has also been licensed in the District of Columbia and all of the states, including Wyoming. As of December 1978, Lutheran Brotherhood has assets amounting to $1.375 billion. During the past year, its members have donated 8 million hours of time and there have been approximately 47,000 acts of service. Included in these services are continuing education for Lutheran ministers, extension programs for newly founded missions, film libraries, matching gifts to Lutheran colleges and bible schools, orphan benefits, student loans, and student scholarships. Lutheran Brotherhood also provides life and health insurance for its members.
In 1969, Lutheran Brotherhood's management entered into an agreement to co-sponsor the sale of mutual funds with Federated Investors, Inc., of Pittsburgh, Pennsylvania. Lutheran Brotherhood invested one million dollars in each of the five mutual funds and Federated Investors provided legal advice. Each of these mutual funds is registered under the Federal Investment Company Act of 1940 and each is a Maryland corporation.
According to Lutheran Brotherhood, sponsorship of five mutual funds was undertaken in part to further several of its corporate purposes, which are " '... to encourage ... savings, (and) thrift ... on the part of its members,' " thereby giving its members the opportunity to invest in blue ribbon stock so that its members would have the opportunity to participate financially in our economy and to help them combat inflation. Another reason given for the sponsorship of the five mutual funds was to create an investment for Lutheran Brotherhood. Lutheran Brotherhood did invest funds in two subsidiary corporations known as Lutheran Brotherhood Securities Corporation (LBSC) and Lutheran Brotherhood Research Corporation (LBRC).
Lutheran Brotherhood could not qualify, under the Federal Securities and Exchange Regulation, Rule 15c(3)1(b)3, as a broker/dealer for the mutual funds; therefore, Lutheran Brotherhood was required to have a separate broker/dealer corporation. In 1970, Lutheran Brotherhood purchased 51% of the voting stock in a corporation that was and is presently a registered broker/dealer under the Federal Securities Exchange Act of 1934. This corporation was organized and owned by Federated Investors, Inc. Federated Investors still retains the remaining voting stock in this corporation and the corporation is presently called Lutheran Brotherhood Securities Corporation, hereinafter referred to as LBSC.
In addition, Lutheran Brotherhood also purchased 100% of the stock in a corporation organized by Federated Investors to provide investment advice for mutual funds. After the purchase of the stock, the name of this corporation was changed to Lutheran Brotherhood Research Corporation, hereinafter referred to as LBRC. LBRC is registered under the Federal Investors Advisors Act of 1940 and it provides advice to the five mutual funds that were sponsored by Lutheran Brotherhood. LBSC and LBRC are separate corporate entities and they are also fully taxable corporations.
The mutual funds are sold by salespersons who are also Lutheran Brotherhood district representatives. These salespersons are licensed under the Federal Securities Exchange Act of 1934 and the respective state securities laws, including that of Wyoming. When a Lutheran Brotherhood member purchases shares in a mutual fund, LBSC pays the salesperson 50% of the sales charge. The member is responsible for paying the sale charge. On the other hand, if the representative sells insurance to a Lutheran Brotherhood member he receives his compensation from Lutheran Brotherhood.
In a Notice to Correct Deficiencies, the Wyoming Insurance Commissioner informed the Lutheran Brotherhood that it must divest itself of its mutual fund business in order to comply with Chapter 34 of the Insurance Code. After a hearing was held, the commissioner found that Lutheran Brotherhood was engaged in the business of mutual funds through its subsidiaries, LBSC and LBRC, and that such activity was not permissible under the laws of Wyoming. Therefore, the commissioner revoked Lutheran Brotherhood's license to transact business in the State of Wyoming as a fraternal benefit society.
Upon appeal to the district court, the commissioner's order was set aside.
Appellants contend that the present appeal presents two questions: one of fact and one of law. We cannot agree. Here, there is no dispute as to the facts. Therefore, the resolution of the questions presented during the hearing and upon appeal requires conclusions of law.
First, we must determine whether the insurance commissioner was correct when he concluded that appellee's investments in LBSC and LBRC do not qualify as investments under the Minnesota Insurance Code. This issue can be resolved only by interpreting the applicable statutory provisions.
Appellants argue that this court must give deference to the commissioner's interpretation of the applicable statutes. While we agree that this court must give deference to an interpretation given to a statute by a commissioner charged with the agency's administration, Department of Revenue v. Puget Sound Power & Light Company, Mont., 587 P.2d 1282, 1286 (1978), it is ultimately for this court to construe the meaning of a statute, even if that interpretation is contrary to that of the commissioner. Hearst Corporation v. Hoppe, 90 Wash.2d 123, 580 P.2d 246, 250 (1978).
In the State of Wyoming, the licensing of a fraternal benefit society is governed by Chapter 34 of the Wyoming Insurance Code, § 26-34-101, et seq., W.S.1977. Section 26-34-133, provides that a foreign society may invest in such investments as are permitted by the state in which the society is incorporated. As stated in § 26-34-133:
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