State Medical Soc. of Wisconsin v. Commissioner of Ins.
| Decision Date | 02 October 1975 |
| Docket Number | No. 573,573 |
| Parties | STATE MEDICAL SOCIETY OF WISCONSIN, Appellant, v. COMMISSIONER OF INSURANCE, Respondent. |
| Court | Wisconsin Supreme Court |
Action brought by the State Medical Society (hereinafter SMS) to review the decision of the State Commissioner of Insurance which denied the application of SMS to organize a stock insurance corporation and to transfer to it all assets, contracts and liabilities which it now has in connection with its operation of its nonprofit plan for sickness care under Sec. 148.03, Stats. The Wisconsin Physicians Service (hereinafter WPS) operates the plan as a division of SMS. The reviewing court affirmed the decision of the Commissioner. SMS appeals from the judgment.
On June 20, 1973, SMS as incorporator filed an application with the Commissioner of Insurance for an organization permit as a Ch. 611, Stats., domestic stock insurance corporation. In listing the amount and source of funds for organizing expenses and proposed operating capital, Sec. 611.13(2)(e) and (i), Stats., SMS stated its intention to transfer all the assets and liabilities of its WPS operation to the new corporation. The commissioner sought the advice of the attorney general as to whether the proposed reorganization was contrary to law.
In reply, the attorney general concluded that such reorganization could not be permitted. The application was denied.
Tinkham, Smith, Bliss, Patterson & Richards, Wausau, Murphy, Stolper, Brewster & Desmond, S.C., Milwaukee, and John A. Kluwin, Milwaukee, of counsel, for appellant.
Bronson C. LaFollette, Atty. Gen., John E. Armstrong, Asst. Atty. Gen., Madison, for respondent.
Three issues are presented for review:
1. May SMS legally convert its WPS division into a Ch. 611, Stats., domestic insurance corporation?
2. Is a denial of this conversion a violation of the equal protection of law?
3. Is a denial invalid as based on legislation impairing the obligations of contract?
SMS and the respondent concur on this appeal with the reviewing court's assessment that SMS could organize a subsidiary corporation for the conduct of an insurance business. This general proposition is true, but it must be clarified in order to demonstrate the error in petitioner's reasoning justifying its proposed action in regards to WPS.
The powers of SMS are currently propounded in Sec. 148.01, Stats.:
The society was incorporated in the year 1841 pursuant to Laws of 1841, Bill No. 53, Ch. 2, Sec. 1. Later statutes contained provisions for SMS to be continued with the general powers of a corporation.
Petitioner SMS contends that it is not 'a unique organization,' as assessed by the trial court. It finds little distinction in being a nonprofit association, holding a charter from the state and being cloaked with the general powers of a corporation. Whatever the number of entities which might be found to exist under each category, suffice it to say that it is a rare organization that possesses all three attributes plus a history of statutory enactments reaffirming its existence and granting it special powers. It is the grant of one such privilege, enabling the WPS plan, that provoked the appeal here. Sec. 148.03, Stats., provided:
The language employed in Sec. 148.01, Stats., was the acknowledged model for the legislative enactments empowering similar societies for state dentists, Sec. 447.11, Stats., pharmacists, Sec. 450.12, Stats., and optometrists, Sec. 449.13, Stats., with the modification that their powers be that of a 'domestic nonstock corporation.' Of the three organizations, only the dentists had a chartered society prior to the adoption of art. IV, sec. 31 of the Wisconsin Constitution. See Ch. 462, Private & Local Laws of Wisconsin, 1871. The adoption of that constitutional provision prohibited the legislature from enacting special or private laws '. . . granting corporate powers or privileges, except to cities.' The granting of corporate powers to the optometrists and pharmacists and the reaffirmation of the broad powers and grants of special operations to the state medical and dental societies would be an affront to this constitutional restriction, if we accept petitioner's contention that it is just an ordinary corporation. This is so because:
State ex rel. Warren v. Reuter (1969), 44 Wis.2d 201, 227, 228, 170 N.W.2d 790, 802.
Every act of the legislature, however, is entitled to a presumption of constitutionality. Id. at 211, 170 N.W.2d 790. This court has recognized that the purpose of art. IV, sec. 31 is to insure that legislation will promote the general welfare and further statewide interest, as opposed to private concerns. State ex rel. La Follette v. Reuter (1967), 36 Wis.2d 96, 113, 153 N.W.2d 49; State ex rel. Warren v. Nusbaum (1973), 59 Wis.2d 391, 208 N.W.2d 780. The Nusbaum case reiterates that the legislature may grant limited corporate powers to the entities it creates to promote a public purpose, as is the situation for the optometric and pharmaceutical associations. The addition of the power to conduct nonprofit plans to the state medical and dental societies is more in the nature of a franchise than the grant of corporate power, and the Constitution should not be construed to prohibit the grant of a power which the entity could arguably exercise in fact under its general corporate powers. State ex rel. Warren v. Reuter, supra, at 228, 170 N.W.2d 790.
There is no basis, therefore, for SMS to deny that it is unique and charged with a public interest. To contend that the uniqueness lies only in its WPS division is to ignore the fact that possessing authority over the legislatively empowered division is notable in itself. SMS has recognized the particular necessity of the special grant. In a history of the society's efforts in the health plan areas, submitted by SMS in connection with the Ch. 611 application, the following comment regarding the creation of the health plan power (Ch. 350, Laws of 1935) was made in a report of the special Committee on the Distribution of Medical Services.
Wisconsin State Medical Journal (Oct., 1935), at p. 762.
What is the extent of the power, then, that Sec. 148.01, Stats., contemplates? A guide by analogy is found in 42 Op.Atty.Gen. 333. In an opinion addressed to the late MARVIN B. ROSENBERRY, former CHIEF JUSTICE of the Wisconsin Supreme Court, in this capacity as Chairman of the Special Committee on the Constitution and By-Laws of the State Historical Society, the attorney general reviewed the application of the newly created Sec. 181.76(4), Stats.:
'(4) A domestic corporation without stock which is not subject to ch. 181 and which does not elect to become subject to it, may conduct and administer its business and affairs under the provisions of ch. 181 to the extent that the provisions of ch. 181 are not inconsistent with the articles or form of organization of such corporation or with any provisions elsewhere in the statutes or under any law relating to such corporation.' (emphasis added)
to entities organized under special legislative act, such as SMS. The entity under study, the State Historical Society, had been created by a special act, had been 'continued' in its powers through various statutes, and '(f)rom time to time specific statutory powers of the society (had) been broadened by legislative act. . . . ' Id. at 336. In short, its history mirrored that of SMS.
In discussing this 'private corporation with a public purpose,' the attorney general noted:
'' Id. at 336.
The above opinion is consistent with the trial court's assessment that generally petitioner SMS may avail itself of the numerous powers of a corporation. It would be more correct to add that such utilization of power is not the action of an ordinary corporation, but is an exercise subject to the restraints of existing statutes and conducted in an atmosphere charged with public interest. See 42 Op.Atty.Gen. 333, 336; 14 Op.Atty.Gen. (March 1, 1974).
The question to be answered is whether SMS may transfer the assets, contracts and liabilities it had accumulated...
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