Sanford v. Garamendi

• Decision Date: 28 August 1991
• Docket Number: No. C006971,C006971
• Citation: 233 Cal.App.3d 1109,284 Cal.Rptr. 897
• Parties: Robert SANFORD et al., Plaintiffs and Appellants, v. John GARAMENDI, as Insurance Commissioner, etc., et al., Defendant and Respondent. Security Pacific Bank, Intervenor and Respondent.
• Court: California Court of Appeals Court of Appeals

Page 897

284 Cal.Rptr. 897

233 Cal.App.3d 1109

Robert SANFORD et al., Plaintiffs and Appellants, v. John GARAMENDI, as Insurance Commissioner, etc., et al., Defendant and Respondent Security Pacific Bank, Intervenor and Respondent.

No. C006971.

Court of Appeal, Third District, California.

Aug. 28, 1991.

Rehearing Denied Sept. 23, 1991.

Review Denied Nov. 14, 1991.

James R. Kirby, II, Segal & Kirby, Sacramento, Foster De Reitzes, W. Caffey Norman, III, Michael N. McCarty, Luis R. Mejia, Heron, Burchette, Ruckert & Rothwell, Jay L. Alexander and Jonathan B. Sallet, Miller, Cassidy, Larroca & Lewin, Washington, D.C., for plaintiffs and appellants.

Daniel E. Lungren, Atty. Gen., and John K. Van de Kamp, Atty. Gen., Robert F. Tyler, Supervising Deputy Atty. Gen., and Robert D. Milam, Deputy Atty. Gen., for respondent.

James Garrett and Monique van Yzerlooy, Morrison & Foerester, San Francisco, for intervenor and respondent.

Christopher E. Chenoweth, San Francisco, for amicus curiae, California Bankers Ass'n.

PUGLIA, Presiding Justice.

Plaintiffs, individual insurance agents and brokers and their trade associations, appeal from a judgment denying the relief sought in a petition for writ of mandate and complaint for declaratory relief. This appeal concerns a provision of Proposition 103, an initiative measure adopted at the November 1988 General Election. The trial court held the provision, which expressly repealed Insurance Code section 1643, impliedly repealed Financial Code sections 772, subdivision (b) and 1208 to the extent they prohibit state banks and their subsidiaries from licensure as, or from acting as, insurance agents or brokers. Accordingly, the trial court declined plaintiffs' requests to direct the Commissioner of Insurance (Commissioner) to rescind insurance agency and brokerage licenses issued to state banks and to enjoin the licensing of state banks and their subsidiaries as insurance agents or brokers.

On appeal, plaintiffs challenge the trial court's determination of repeal by implication, noting such repeals are disfavored and arguing the criteria for finding an implied repeal are not met here. Plaintiffs contend (1) there is nothing within Proposition 103 or the ballot materials relating to it which gives undebatable evidence of an intent to supersede the Financial Code provisions at issue here and (2) Proposition 103 may be given effect without affecting those Financial Code provisions because they are not so inconsistent with Proposition 103 as to preclude concurrent operation.

We agree with plaintiffs that application of the doctrine of repeal by implication, under the facts here presented, is unwarranted. Nonetheless, plaintiffs are not entitled to all of the relief they seek. The clear intent of the initiative was to allow state banks to sell insurance, and there is nothing within the provisions of Financial Code sections 772, subdivision (b) or 1208 which precludes that intent from being fully implemented. However, neither the initiative nor the accompanying ballot materials suggests the measure had any application to bank subsidiaries. Accordingly, since Financial Code section 772, subdivision (b) survives the passage of Proposition 103, it continues to preclude bank subsidiaries from licensure as, or from acting as, insurance agents or brokers.

I

Of the five initiative measures on the November 1988 ballot relating to insurance, Proposition 103 was the only one that received a majority of the votes for passage. The defining hallmark of Proposition 103 is a provision requiring that premiums for motor vehicle, fire and liability insurance policies issued or renewed after November 8, 1988, be reduced 20 percent below the rates in effect on November 8, 1987. (Ins.Code, § 1861.01, subd. (a).) The initiative also prohibits insurers, subject to limited exceptions, from cancelling or refusing to renew automobile insurance policies. (Ins.Code, § 1861.03, subd. (c).) Another provision of Proposition 103 repealed Insurance Code section 1643. ¹ That section, with limited exceptions, prohibited banks, bank holding companies, and their subsidiaries and affiliates from being licensed as, or from acting as, insurance agents or brokers. Financial Code sections 772, subdivision (b) and 1208 deal generally with the same subject matter in respect to banks and their subsidiaries but are not mentioned in Proposition 103.

On the day following passage of Proposition 103, a number of insurance companies jointly commenced a proceeding in the California Supreme Court challenging the constitutionality of the initiative on various grounds. The Supreme Court decided that case in May 1989 and upheld the initiative against most of the claims of unconstitutionality. (Calfarm Ins. Co. v. Deukmejian (1989) 48 Cal.3d 805, 258 Cal.Rptr. 161, 771 P.2d 1247.)

While Calfarm was pending, several state banks filed applications with the Commissioner for licenses to sell general lines of insurance. Over the objection of plaintiffs, the Commissioner announced the Department of Insurance would not reject an application from a state-chartered bank for an insurance agency or brokerage license. In taking this position, the Commissioner relied upon a January 4, 1989, "interpretive opinion" of the Superintendent of Banks (Superintendent) which concluded Proposition 103 impliedly repealed Financial Code sections 772, subdivision (b) and 1208.

Shortly thereafter, the Commissioner began to license state-chartered banks as insurance agents. The Commissioner made plain an intent to continue to issue such licenses to banking organizations as applications were received and processed.

Plaintiffs then initiated in superior court the action from which this appeal arises, asking the court to: (1) declare the Superintendent's "interpretive opinion" legally erroneous in its conclusion that Proposition 103 impliedly repealed Financial Code sections 772, subdivision (b) and 1208; (2) direct the Commissioner to rescind the licenses issued to banks pursuant to the invalid interpretation; and (3) enjoin the Commissioner from further licensing of banks to engage in the general insurance agency or brokerage business.

Following hearing and argument, the trial court denied the requested relief, ruling Proposition 103, in expressly repealing Insurance Code section 1643, by implication repealed Financial Code sections 772, subdivision (b) and 1208, thereby eliminating any statutory impediments to the licensure of banks and their subsidiaries as insurance agents or brokers.

II

Before turning to the merits, we set forth the relevant provisions of those sections of the Insurance Code and Financial Code which are implicated in this action. With limited exceptions not relevant here, Insurance Code section 1643, which was expressly repealed by Proposition 103, provided that no bank, bank holding company, subsidiary, or affiliate thereof may be licensed as or act as an insurance agent or broker in California. Thus, Insurance Code section 1643 operated as a general prohibition against banks and their subsidiaries engaging in the insurance business. ²

Financial Code section 1208 provides a commercial bank located in a place not exceeding 5,000 in population "may act as agent for any fire, life or other insurance company authorized to do business in California ... if the bank is engaged in such business on October 1, 1949, and is duly licensed under the Insurance Code[.]" ³

Financial Code section 772 states in relevant part: "(a) [A] bank may invest in the capital stock, obligations, or other securities of one or more corporations. [p] (b) No such corporation may act as an insurance company, insurance agent, or insurance broker." ⁴

In his interpretive opinion the Superintendent concluded that in light of the express repeal of Insurance Code section 1643, Proposition 103 impliedly repealed Financial Code section 1208 to the extent that section constitutes an implicit denial of plenary authorization to banks (except for those banks expressly so authorized therein) to engage in the insurance business, and impliedly repealed subdivision (b) of Financial Code section 772 to the extent that section prohibits corporations in which banks have invested from acting as insurance agents or brokers. The trial court agreed with the Superintendent's conclusions and held that banks and their subsidiaries may now engage in the insurance agency and brokerage business.

We agree with the trial court's conclusion that as a result of Proposition 103's express repeal of Insurance Code section 1643, banks may now engage in the insurance agency and brokerage business. However, we disagree with the trial court's conclusion that Proposition 103 impliedly repealed Financial Code section 772, subdivision (b). Neither the initiative itself nor the accompanying ballot materials in any way suggested the measure was designed to allow bank subsidiaries to act as insurance agents or brokers. In the absence of any such evidence, and because the continuing viability of Financial Code section 772, subdivision (b) may be harmonized with the provisions of the initiative, bank subsidiaries may not engage in the insurance agency and brokerage business. Furthermore, we disagree with the trial court's conclusion that Proposition 103 impliedly repealed Financial Code section 1208. Nevertheless, that does not alter our conclusion that express repeal of Insurance Code section 1643 removes all statutory impediments to banks engaging in the insurance agency and brokerage business because there is nothing contained in Financial Code section 1208 that prohibits them from doing so.

III

We address first the issue whether Proposition 103 was intended to allow banks to be licensed as and to act as insurance agents and brokers. Although plaintiffs make several claims in support of their assertion the measure intended no such result, their arguments lack both merit and conviction.

In...