Robertson v. People of State of California

• Decision Date: 03 June 1946
• Docket Number: No. 274,274
• Citation: 90 L.Ed. 1366,328 U.S. 440,66 S.Ct. 1160
• Parties: ROBERTSON v. PEOPLE OF STATE OF CALIFORNIA
• Court: U.S. Supreme Court

328 U.S. 440

66 S.Ct. 1160

90 L.Ed. 1366

ROBERTSON

v PEOPLE OF STATE OF CALIFORNIA.

No. 274.

Argued Jan. 8, 9, 1946.

Decided June 3, 1946.

Rehearing Denied Oct. 14, 1946.

See 67 S.Ct. 25.

Appeal from the Superior Court of Ventura County, State of california.

[Syllabus from pages 440-442 intentionally omitted] Messrs. Robert R. Weaver, of Phoenix, Ariz., and Earl Blodgett, of Los Angeles, Cal., for appellant.

Messrs. T. A. Westphal, Jr., of Oakland, Cal., and M. Arthur Waite, of Ventura, Cal., for appellee.

Mr. Justice RUTLEDGE delivered the opinion of the Court.

This case differs from Prudential Insurance Co. v. Benjamin, 328 U.S. 408, 66 S.Ct. 1142, in three respects. It is a criminal cause; the statutes involved regulate, rather than simply tax, the business of insurance; and appellant's acts held to violate them were done before the McCarran Act's¹ effective date.

Appellant was convicted in a state court for violating §§ 703(a) and 1642 of the California Insurance Code and the conviction was sustained on appeal to the Superior Court of Ventura County.² Appellant now urges here primarily that the application which has been made of those sections is a regulaton of interstate commerce forbidden by the commerce clause of the Constitution, Article I, § 8, in view of United States v. South-Eastern Underwriters Ass'n, 322 U.S. 533, 64 S.Ct. 1162, 88 L.Ed. 1440. He also puts forward due process and equal protection arguments, resting on his conception of the applicability of those provisions of the Fourteenth Amendment.³

The California Insurance Code, provisions are as follows:

'703. Except when performed by a surplus line broker, the following acts are misdemeanors when done in this State:

'(a) Acting as agent for a nonadmitted insurer in the transaction of insurance business in this State.'

'1642. A person shall not act as an insurance agent, broker, or solicitor until a license is obtained from the commissioner, authorizing such person so to act.'⁴

The complaint charged in two counts that appellant had (1) acted without a license as an agent for a nonadmitted insurer in soliciting and selling a policy contrary to § 703(a), and (2) solicited and sold a policy of insurance without being licensed as required by § 1642.

The evidence, which is undisputed, disclosed the following facts. The First National Benefit Society is an Arizona corporation, conducting from Phoenix a mutual benefit type of insurance business. Its method of operation must be inferred from the facts of record, in the absence of other evidence. One O'Lein, then an elderly resident of Ventura, California, had difficulty in securing insurance on account of his age. Prior to August 28, 1944, he had learned of the Society's 'Gold Seal' policy, by radio and through 'literature.' This apparently was mailed from the home office and included a printed from of return postal card marked, presumably pursuant to postal permit, 'Postage will be Paid by Addressee,' the Society. O'Lein filled in and returned the card to the Society in Phoenix, asking it to 'send me, without obligation, details of 'Gold Seal' Policies.' A few days later, on August 28, 1944, appellant called at O'Lein's home with the card, stating he represented the First National Benefit Society. Thereupon he explained to O'Lein the terms of the policy, its benefits, and costs, soliciting and persuading the prospect to take out a policy for himself and one also for his wife. No medical examination was required. Appellant filled in the application forms, procured the signatures, accepted from O'Lein a check made out in appellant's name in payment of the first quarterly premiums, gave receipts, later cashed the check at a local bank, and received the proceeds. A few days later the O'Leins received policies by mail from the Society's office in Phoenix.

The evidence further showed that the Society was not admitted to do business in California and that appellant had no license of any kind to act as an insurance agent, broker or solicitor there.

We may deal first exclusively with the objections founded on the commerce clause, since each of the others would be obviously without merit but for the supposed effects of the South-Eastern decision⁵ not only in relation to the prohibitory consequences of that clause but also, apparently, to resurrect other limitations upon state power long since settled adversely to such claims in reference to the business of insurance.⁶

I.

Little need be said in relation to the general licens requirement of § 1642, except to state more fully its effects by virtue of its relation to other provisions of the California Insurance Code, which prescribe the conditions for securing the license. Those requirements, in summary, are that an application must be made upon a prescribed form setting forth the kinds of insurance the applicant desires to transact (§ 1643); he must be a citizen of the United States or one who has applied for citizenship; and must have attained his majority (§ 1648.5); he must pass a written examination as to his qualifications (§ 1674) and pay two fees, one a filing fee of $4, the other an examination fee of $5 (§ 1678). On his fulfilling these conditions the license is issued if the state commissioner of insurance is satisfied that he is qualified and intends in good faith to carry on the business (§ 1649).

Section 1639 declares that the purpose of these and other provisions of the Code is 'to protect the public by requiring and maintaining professional standards of conduct on the part of all insurance agents * * * acting as such within this State.' The statutory requirements apply to all agents, without discrimination, whether they represent California or out-of-state insurance companies and whether the business done is interstate or local in character. They apply only to agents acting in California, not to acts done outside the state.

Appellant has not sought to obtain a license under the Code provisions, has not been denied one, and has not attacked any particular requirement. His charge is wholesale, not particular. It is, in effect, that since the entire series of acts done by him was directed to the conclusion of an interstate transaction, within the South-Eastern ruling, those acts though taking place altogether within California were inseparably a part of the interstate transaction and therefore beyond reach of the state's licensing or regulatory power. The contention appears to contemplate not only that appellant's acts were interstate commerce, but also that the state cannot impose any licensing requirement upon them or, it would seem, upon any phase of conducting an interstate insurance business through agents acting in person.

To state the argument in this way is in effect to answer it. We accept the regulation for what is purports to be on its face and by the statute's express declaration, namely, a series of regulations designed and reasonably adapted to protect the public from fraud, misrepresentation, incompetence and sharp practice which falls short of minimum standards of decency in the selling of insurance by personal solicitation and salesmanship. That such dangers may exist, may even be widely prevalent in the absence of such controls, is a matter of common knowledge and experience. And no argument is needed to show that these evils are most apt to arise in connection with the activities of the less reliable and responsible insurers, as well as insurance brokers or salesmen, and vitally affect the public interest.⁷

Such being the purpose and effect of § 1642, there can be no substantial question concerning its validity on com- merce clause grounds. That is true whether appellant's acts are taken, in their setting, as being 'in' commerce or only as 'affecting' it. For the case is ruled, so far as § 1642 is concerned, by decisions such as State of California v. Thompson, 313 U.S. 109, 110, 61 S.Ct. 930, 931, 85 L.Ed. 2 19; Hartford Accident & Indemnity Co. v. People of State of Illinois, 298 U.S. 155, 56 S.Ct. 685, 80 L.Ed. 1099; Smith v. State of Alabama, 124 U.S. 465, 8 S.Ct. 564, 31 L.Ed. 508; Nashville, C. & St. L. Ry. Co. v. State of Alabama, 128 U.S. 96, 9 S.Ct. 28, 32 L.Ed. 352; and Union Brokerage Co. v. Jensen, 322 U.S. 202, 64 S.Ct. 967, 88 L.Ed. 1227, 152 A.L.R. 1072.⁸

If, in the absence of contrary action by Congress, a state may license agents or brokers for the sale of interstate transportation in order to prevent fraud, State of California v. Thompson, supra; trainmen engaged in interstate commerce to secure their competence, Smith v. State of Alabama, supra; Nashville, C. & St. L. Ry. Co. v. State of Alabama, supra; the sale on commission of interstate consignments of farm produce to secure honest dealing and financial responsibility, Hartford Accident & Indemnity Co. v. People of State of Illinois, supra; and the activities of customs brokers to secure responsibility in the state courts on claims arising locally, Union Brokerage Co. v. Jensen, supra, by the sorts of conditions imposed through the respective licensing provisions, there can be no valid reason for outlawing § 1642 here.

That appellant's activities were of a kind which vitally affect the welfare and security of the local community, the state and their residents could not be denied. Cf. Hoopeston Canning Co. v. Cullen, 318 U.S. 313, 316 ff, 63 S.Ct. 602, 605, 87 L.Ed. 1722, 145 A.L.R. 1113. They had in fact a highly 'special interest' in his localized pursuit of this phase of the comprehensive process of conducting an interstate insurance business. Cf. Union Brokerage Co. v. Jensen, supra, 322 U.S. at page 212, 64 S.Ct. at page 973, 88 L.Ed. 1227, 152 A.L.R. 1072. Here, as in each of the instances cited, appellant's activities called in question were concentrated in the regulating state, although affecting or constituting interstate commerce. Moreover the licensing provision of § 1642 is regulatory, not exclusory in character; is...