State v. Fishback

• Decision Date: 12 November 1929
• Docket Number: 22022.
• Citation: 154 Wash. 297,282 P. 63
• Court: Washington Supreme Court
• Parties: STATE ex rel. AMERICAN AUTOMOBILE INS. CO. v. FISHBACK, Insurance Com'r.

282 P. 63

154 Wash. 297

STATE ex rel. AMERICAN AUTOMOBILE INS. CO. v. FISHBACK, Insurance Com'r.

No. 22022.

Supreme Court of Washington

November 12, 1929

Department 1.

Appeal from Superior Court, Thurston County; John M. Wilson, Judge.

Proceedings by the State, on relation of the American Automobile Insurance Company, against H. O. Fishback, as Insurance Commissioner. Judgment of dismissal, and plaintiff appeals. Affirmed.

Schwellenbach, Merrick & Macfarlane, of Seattle for appellant.

John H Dunbar and E. W. Anderson, both of Olympia, for respondent.

TOLMAN J.

The appellant, as petitioner, filed its petition in the court below, asking for a review of certain rulings of the insurance commissioner, alleging in substance as follows:

That it is a corporation organized under the laws of the state of Missouri authorized to engage in the insurance business, and has been so engaged since December, 1911; that on May 24 1912, it complied with all of the laws of the state of Washington with reference thereto, and became qualified and received a certificate and license to do business in the state of Washington, since which date it has from year to year complied with all of the requirements of the state of Washington with reference to conducting an insurance business, has paid all license fees, and is duly qualified to engage in the business of writing insurance in the state of Washington; that its capital and surplus available to policyholders for their protection amounts to $3,768,660.35 of which $1,000,000 is capital and the remainder is surplus; that it has admitted assets of $11,705,196, and it is in a sound financial condition having actual assets exclusive of its capital and in excess of its liabilities of $2,768,660.35; that, since entering the state of Washington, it has expended large sums of money in building up its business and good will within the state, has paid losses within the state in excess of $1,000,000, has established agencies in all of the principal cities and many other points within the state; and that, if it is now denied the right to continue its business within the state, it will be deprived of large property rights acquired as aforesaid.

It is further alleged that on March 5, 1929, the insurance commissioner notified the relator that it would be necessary for it to dispose of its investment in the sum of $1,000,000 in the American Automobile Fire Insurance Company, a Missouri corporation, by the sale of stock which it holds in such corporation or by the declaration of a dividend under which the stock of the American Automobile Fire Insurance Company held by it be distributed to its stockholders. The American Automobile Fire Insurance Company is alleged to be wholly owned by, and a subsidiary of, the relator; none of its capital stock being owned by any one else, and that the subsidiary Fire Insurance Company was organized by the relator solely because of the requirements of other states in which the relator is operating; that the assets of the relator are not in any way affected or changed by the organization of the Fire Insurance Company, since it transferred to that subsidiary company $1,000,000 of its assets, and received in exchange therefor the whole of its capital stock of the value of $1,000,000; and therefore, as matters now stand, its financial condition is unaffected by the organization of the subsidiary company.

It is further alleged, as appears to be obvious, that a compliance with the insurance commissioner's demand that it distribute the stock of the subsidiary company by way of a dividend to its stockholders would reduce its assets to the extent of $1,000,000, and thereby reduce the fund maintained for the protection of policyholders to that extent, and that no benefit to the state of Washington or to policyholders in the state of Washington could arise from its compliance with the demand of the insurance commissioner in that respect.

It further appears that the subsidiary company, the American Automobile Fire Insurance Company, was organized on January 1, 1928, and, of course, it follows therefrom that its securities are not technically within the terms of our statute, which will be hereafter noticed.

The complaint further alleges that on April 1, 1929 (presumably because of noncompliance with the demand of March 5, 1929), the insurance commissioner served upon the relator a notice of revocation of its authority to further transact business in the state of Washington in words as follows:

'Your annual statement for December 31, 1928, shows that you have invested $1,000,000 of your funds in stock of the American Automobile Fire Insurance Company. It shows further that your total paid up capital and surplus as of said date is $3,768,660.35. The American Automobile Fire Insurance Company was organized on January 1, 1928.

'It is my opinion that such investment is in violation of the laws of this state. It would be prohibited to a domestic insurance company by sections 7062 and 7063, Remington's Compiled Statutes, and I take the

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