National Farmers Union Life Ass'n v. Krueger
| Decision Date | 01 July 1949 |
| Docket Number | 7117. |
| Court | North Dakota Supreme Court |
Syllabus by the Court.
1. Upon an appeal from an order or decision of an administrative agency under the provisions of Chapter 28-32, NDRC 1943, the district court must reverse the order or decision of the agency in so far as the agency's findings of fact are not supported by the evidence.
2. A state has the power to make the right of a foreign corporation or association to do business therein dependent upon such terms and conditions as it sees fit to impose.
3. A foreign fraternal benefit society doing business in this state must conform to all the laws regulating domestic societies except that it may invest its assets according to the laws of the state in which it is organized. (Sec 26-1229, NDRC 1943)
4. Under North Dakota laws, all adult insured members of fraternal benefit societies must be initiated.
5. Insurance contract issued by a fraternal benefit society which makes a part of the proceeds of the insurance payable directly to the United States Government as security for a loan, and prohibits a change of beneficiary without the consent of the government is violative of the North Dakota Statute (See. 26-1219, NDRC 1943) limiting the payment of benefits to certain restricted classes of persons and providing that the insured shall have the right to change beneficiary of his insurance.
6. In construing a statute of doubtful meaning, a court will, if reasonably possible, harmonize seemingly contradictory provisions, it will consider the purpose of the act and give weight to the practical construction of those charged with the duty of executing and applying it.
7. Under the Colorado law (Chapter 154, Laws of Colo. 1941) fraternal benefit societies may invest their assets in first liens upon real property and the improvements thereon not exceeding sixty-five per cent of the value thereof; but maximum loans may be made only in case the improvements are insured for sixty-five per cent of their value.
8. The allocation of reserves for payment of death benefits by a fraternal benefit society upon a flat rate basis without regard to the age of insured persons, or in the case of family contracts without regard to the number of persons in the family is contrary to the provisions of North Dakota law.
9. The power of the Insurance Commissioner to pass upon the security of an insurance company's investments must be exercised in the light of evidence and not upon speculation.
10. The funds of fraternal benefit societies are trust funds.
11. Officers of a fraternal benefit society may not make loans of the society's funds to themselves or in connection with any business transaction in which their personal interests conflict with their duties as trustees.
12. Evidence that the president of a fraternal benefit society received a salary of $7,000 per year and that the society has a free surplus of $8,000 is insufficient to support a finding of fact that the president's salary was excessive.
13. The evidence is considered and it is held that it supports the findings of fact of the Commissioner of Insurance in this proceeding in the following particulars: (1) that respondent has made the United States Government a beneficiary of its insurance contracts; (2) it has made allocations to death benefit reserves contrary to law; (3) its officers have made loans in which they had an interest adverse to their duties as trustees and (4) it has made an unauthorized investment in industrial stocks in the amount of $6,980.
Quentin N. Burdick, Jamestown, for petitioner and respondent.
Nels G. Johnson, Attorney General, Owen T. Owen, Assistant Attorney General, for defendant and appellant.
The respondent, National Farmers Union Life Association, is a fraternal benefit society organized under the laws of the State of Colorado. In the year 1946 and for some years prior thereto it had been licensed by the Insurance Department of the State of North Dakota to transact business in this State as a foreign fraternal benefit society. On April 8, 1947, the Commissioner of Insurance of the State of North Dakota, made his order denying a renewal of this license for the year 1947 and assigning his reasons for such denial. The respondent demanded and was granted a hearing upon the question of its right to a license renewal. At the hearing evidence was offered on behalf of both the Association and the Commissioner. Thereafter the Commissioner affirmed his order denying the renewal license. The Association thereupon appealed from the decision of the Commissioner to the District Court of Burleigh County pursuant to the statute authorizing appeals from the decisions of administrative officers. The district court entered judgment directing the issuance of a license to the Association, subject to the condition that it dispose of investments in industrial stocks in the sum of $6,980. The Commissioner has appealed to this court from that judgment and a trial anew is demanded.
The grounds of the Commissioner's refusal to renew the Association's license may be summarized under three headings. First, that the Association has violated express statutory requirements for fraternal societies in that it has failed to initiate members, that it has made contracts of insurance payable to beneficiaries who were not within the permitted class, that it has made loans in excess of statutory limitations and that it has refused to permit examination by the insurance department. Second, it has failed to abide by the terms of its own contracts in that under its Triangle Certificates, it has allocated a flat amount from premiums to death benefits without regard to the age of the insured persons contrary to the contract provision that the amount allocated for each insured should be the amount required for annual term insurance according to the National Fraternal Congress Table of Mortality and that it has valued its patronage group policies, not according to contract, but according to arbitrary reserve methods which are inaccurate. Third, it has adopted practices in fiscal management and accounting which endanger the association's solvency in that it has invested an excessive proportion of its assets in loans to new and speculative co-operative enterprises, that it has charged off agent's debit balances in the sum of $22,311.95, that it has unwarrantedly deducted $11,510.50 from advance premium liability, that it has made loans in connection with business transactions in which the officers of the Association had a direct interest, that it has paid an excessive salary and bonus to its president and that it has entered fictitious assets upon its books.
The proceeding before the Commissioner was held under the Administrative Practice Act. Chapter 28-32, NDRC 1943. The scope of review upon an appeal in such a proceeding is settled by Sec. 28-3219, NDRC 1943, which provides: '* * * the court shall affirm the decision of the agency unless it shall find that such decision or determination is not in accordance with law, or that it is in violation of the constitutional rights of the appellant, or that any of the provisions of this chapter have not been complied with in the proceedings before the agency, or that the rules or procedure of the agency have not afforded the appellant a fair hearing, or that the findings of fact made by the agency are not supported by the evidence, or that the conclusions and decision of the agency are not supported by its findings of fact.'
The Association upon the appeal in district court, and again in this court urged that the findings of fact upon which the Commissioner based his decision and order were not supported by the evidence. To the extent that the Association is right in this contention, the decision of the Commissioner must be reversed.
Before reaching the merits of the case, we must first determine the extent to which the laws of North Dakota and the laws of Colorado apply to the issues in controversy. Upon this issue the statutes of North Dakota control and the statutes of Colorado apply only in the instance where they are made applicable by the laws of North Dakota. A state has the power to make the right of a foreign corporation or association to do business therein dependent upon such terms and conditions as it sees fit to impose. Asbury Hospital v. Cass County, 72 N.D. 359, 7 N.W.2d 438; Weiditschka v. Supreme Tent of Knights of Maccabees, 188 Iowa 183, 170 N.W. 300, 175 N.W. 835; Modern Brotherhood of America v. Quady, 175 Minn. 462, 221 N.W. 721, 59 A.L.R. 162; State ex rel. Security Benefit Ass'n v. Shain, 342 Mo. 199, 114 S.W.2d 965. The controlling statute is:
Section 26-1229, NDRC 1943 which provides: * * *'
This statute clearly requires foreign fraternal benefit societies to conform to the laws of North Dakota in regard to all maters except investments, and as to them, they must conform to the laws of the state of incorporation.
The first issue upon the merits is the question of initiation of adult members. Section 26-1201, NDRC 1943 provides 'Any corporation, society, order, or voluntary association, without capital stock, organized and carried on solely for the mutual benefit of its...
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