Prewitt v. Security Mut. Life Ins. Co.

• Decision Date: 19 January 1905
• Citation: 119 Ky. 321,84 S.W. 527
• Parties: PREWITT, Ins. Com'r, v. SECURITY MUT. LIFE INS. CO. TRAVELERS' INS. CO. v. PREWITT, Ins. Com'r.
• Court: Kentucky Court of Appeals

84 S.W. 527

119 Ky. 321

PREWITT, Ins. Com'r, v. SECURITY MUT. LIFE INS. CO.

TRAVELERS' INS. CO. v. PREWITT, Ins. Com'r.

Court of Appeals of Kentucky.

January 19, 1905

"Not to be officially reported."

Dissenting opinion. For majority opinion, see 83 S.W. 611.

Hazelrigg Chenault & Hazelrigg, N. B. Hays, Atty. Gen., and Henry R Prewitt, for appellant Insurance Commissioner. Pirtle Trabue, Doolan & Cox and Wm. Bro. Smith, for appellant Travelers' Ins. Co. Wm. Marshall Bullitt, for appellee Security Mut. Life Ins. Co.

BARKER J.

Believing that the conclusion reached by the majority of the court in these cases cannot be justified either by reason or upon authority, I feel it my duty to present my views in a dissenting opinion. I do this with great modesty and with great reluctance--the first, from solicitude lest I fail to do justice to the importance of the subject; and the second from my disinclination to differ from the opinions of those whose attainments I hold in so high esteem.

The question presented by these records is whether a state may enact a valid law, which shall present to a foreign corporation the alternative either of surrendering its right, under the provisions of the Constitution and laws of the United States, to remove to the federal court an action instituted against it by a citizen in the state court, or of not being permitted to do business in the state. The proper solution of this question is essential to the orderly adjustment of the conflicting spheres of our dual system of jurisprudence, national and state.

When our complex form of government was established, the national Constitution, and the laws enacted in pursuance thereto, were made the supreme law of the land (Const. U.S. art. 6); and it must necessarily follow, as a logical and legal sequence, that whenever a state law comes in conflict with a national law the former must give way --it is void. The statutes of the United States, in pursuance of a settled national policy of affording to citizens of each state the means of escaping the dangers of local prejudice in favor of home litigants, prescribe the conditions and terms under which such actions may be removed to the federal courts. This is done in the interest of fair and impartial trials, or, in other words, in the interest of justice.

The laws of our commonwealth bearing upon the question under investigation are divided into two branches, although the intent of each is the same; the divergence being merely in the particular manner of enforcing the same principle against different classes of corporations. Sections 572 and 573 of the Kentucky Statutes of 1903 apply to all foreign corporations doing business in the state, except insurance companies, and are as follows:

"Sec. 572. If any foreign corporation shall, without the consent of the adverse party, remove to the federal court any action pending against it in any court of this state, or institute an action against a citizen of this state in a federal court of this state, such action on the part of the corporation shall forfeit its right to transact or carry on any business in this state; and such corporation, and any officer, agent or employé thereof, who shall thereafter transact or engage in any business or employment for such corporation in this state shall be severally guilty of a misdemeanor, and, upon indictment and conviction in the circuit court of any county in which such corporation, or any officer, agent or employé thereof transacts or engages in any business, be fined for each offense not less than five hundred nor more than one thousand dollars.

"Sec. 573. The provisions of all charters and articles of incorporation, whether granted by special act of the General Assembly or obtained under any general incorporation law, which are inconsistent with the provisions of this chapter concerning similar corporations, to the extent of such conflict, and all powers, privileges or immunities of any such corporation which could not be obtained under the provisions of this chapter, shall stand repealed on September 28, 1897; and if the officers, managers or agents of such corporation shall, after said date, exercise any powers, privileges or immunities repealed by this section or inconsistent with the provisions of this chapter, relating to similar corporations, or which could not be obtained under this chapter, the officer, manager or agent so offending, and the corporation for which he acts, shall each be guilty of a misdemeanor, and fined for each offense not less than one hundred nor more than one thousand dollars, and upon the conviction of the corporation, the trial jury may, at their discretion, direct the forfeiture of its charter or articles of incorporation, in which case the court shall so adjudge. After the twenty-eighth day of September, 1897, the provisions of this chapter shall apply to all corporations created or organized under the laws of this state, if said provisions would be applicable to them if organized under this chapter."

The statute applicable to foreign insurance corporations is to be found in sections 631 and 633 of the Kentucky Statutes of 1903, and is as follows:

"Sec. 631. Before authority is granted to any foreign insurance company to do business in this state, it must file with the Commissioner a resolution adopted by its board of directors, consenting that service of process upon any agent of such company in this state, or upon the Commissioner of Insurance of this state, in any action brought or pending in this state, shall be a valid service upon said company; and if process is served upon the Commissioner it shall be his duty to at once send it by mail, addressed to the company at its principal office; and if any company shall, without the consent of the other party to any suit or proceeding brought by or against it in any court of this state, remove said suit or proceeding to any federal court, or shall institute any suit or proceeding against any citizen of this state in any federal court, it shall be the duty of the Commissioner to forthwith revoke all authority to such company and its agents to do business in this state, and to publish such revocation in some newspaper of general circulation published in the state."

"Sec. 633. Licenses to agents of foreign companies must be renewed annually in the same manner as original licenses, upon a finding by the Commissioner that the company represented by the agent has fully complied with the law, and maintains its required capital or reserve; and whoever solicits and receives application for insurance on behalf of any insurance company, or transmits for any person other than himself an application for insurance, or a policy of insurance to or from such company, or advertises that he will receive or transmit the same, or who shall, in any manner, directly or indirectly, aid or assist in transacting the insurance business of any insurance company, shall be held to be an agent of such company within the meaning of this article, anything in the policy or application to the contrary notwithstanding; and any person acting as the agent of any company within the meaning of this section, without first procuring and having a license from the Commissioner to act as such agent, or, after such license has expired, been suspended or revoked, or who shall procure any premium or obligation therefor by fraudulent representations, shall be deemed and held guilty of a misdemeanor, and, upon conviction for such offense, shall be fined not less than fifty nor more than one hundred dollars for each offense."

The question involved here was presented for adjudication in this state for the first time in Commonwealth v. East Tennessee Coal Co., 97 Ky. 238, 30 S.W. 608, and Commonwealth v. Jellico Coal Co., 97 Ky. 246, 30 S.W. 611. These cases arose under section 572 of the Kentucky Statutes of 1903; the two corporations, as their names import, being coal companies. The opinions in both were delivered by the court, through Judge Eastin, and contain a learned and thorough discussion of the question at bar. In both, section 572, which, as said before, applies to foreign corporations (except insurance) doing business in the state, was held to be void, because in contravention of the Constitution and laws of the United States. These cases are both practically overruled by the opinion of the majority, although this has not been done in express language; the court, as it seems to me, unsuccessfully seeking to distinguish them from the cases at bar, and, in so doing, inadvertently, of course, misstating the question involved in them. The following is the language of the opinion with reference to the case containing the reasoning on the constitutional question: "The case of Commonwealth v. East Tennessee Coal Co., 97 Ky. 238, 30 S.W. 608, did not involve the revocation of a license granted by the State, but was in effect similar to Barron v. Burnside [121 U.S. 186, 7 S.Ct. 931, 30 L.Ed. 915], above cited; being a proceeding to impose a fine on the defendant after it removed a case from the state court." Judge Eastin commences his opinion with the following language: "This appeal involves the constitutionality of section 572 of the Kentucky Statutes of 1903, which is in these words, to wit: ***" Then, after citing section 572, he said: "Under this provision of the statutes, this action was brought by appellant in the Whitley circuit court for the purpose of having it judicially declared that appellee had forfeited its right to carry on business in Kentucky, and of enjoining it from doing so. In the petition it is alleged that appellee is a foreign corporation, created by the laws of the state of Tennessee, but engaged for several years past in carrying on...