State v. Pilot Life Ins. Co.

• Citation: 257 S.C. 383,186 S.E.2d 262
• Decision Date: 05 January 1972
• Docket Number: No. 19345,19345
• Parties: v. PILOT LIFE INSURANCE COMPANY, Respondent-Appellant.
• Court: United States State Supreme Court of South Carolina

Page 262

186 S.E.2d 262

257 S.C. 383

v. PILOT LIFE INSURANCE COMPANY, Respondent-Appellant.

No. 19345.

Supreme Court of South Carolina.

Jan. 5, 1972.

Atty. Gen. Daniel R. McLeod and Glen E. Craig, Columbia, for appellant-respondent.

Walter J. Bristow, Jr., of Marchant, Bristow & Bates, Columbia, for respondent-appellant.

PER CURIAM:

We are satisfied that the Order of the Circuit Court correctly sets forth and disposes of all issues raised in this case. The Order of the Circuit Court shall be reported as the directive of this Court.

ORDER OF JUDGE RHODES

This action was instituted on December 30, 1968, pursuant to Section 37--127 of the Code of Laws of South Carolina (1962) to recover certain license fees alleged to be due under Sections 37--122 and 37--124 of the Code. Plaintiff also seeks interest and penalties in connection with such license fees. The complaint contains six (6) causes of action, one for each of the years from 1962 through 1967. Defendant filed an amended answer admitting certain paragraphs of the complaint and denying others, and setting up three (3) affirmative defenses.

In order to reduce the issues involved, the plaintiff and the defendant entered into the following stipulation which was submitted to me for decision:

'It is stipulated and agreed that the pleadings raise the following questions under Section 37--123 of the Code and that the below listed facts are true.

'1. Are the bonds described below eligible investments?

'Bowaters Carolina Corporation First Mortgage Bonds, 5.75 percent, Series A, acquired in 1958 and 1959; and 6 percent, Series B, acquired in 1961 and 1962.

'Bowaters Carolina Corporation, hereinafter called Bowaters, is a corporation organized and existing under the laws of Delaware which has domesticated in this State. At all times pertinent to this action Bowaters was owned and controlled by a foreign corporation, to wit: Bowaters Canadian Corporation, a corporation incorporated under the laws of Canada, (Formerly Bowater Corporation of North America, Limited) or Bowaters United States Corporation of Calhoun, Tennessee. Neither of such corporations has ever domesticated in this State.

'Bowaters' bonds described above were not valid until J. P. Morgan & Co., Incorporated, as Trustee, (Morgan Guaranty Trust Company of New York) of New York City, signed the certificate of authentication endorsed on such bonds. The principal of and interest on such bonds are payable at the office or agency of Bowaters in New York City.

'Such bonds are first mortgage bonds. The original Indenture of Mortgage and Deed of Trust securing such bonds was executed by Bowaters to the said Trustee and was recorded in the Office of the Clerk of Court for York County in Mortgage Book 96 at pages 117--325; and in the Office of the Clerk of Court for Lancaster County in Mortgage Book 72 at page 191. The Supplemental Indenture securing such bonds is dated as of July 1, 1960. Counsel for the parties feel that pages 12 through 28 of such original indenture are the pages thereof pertinent to this question and such pages are marked Exhibit A, attached hereto and made a part hereof; however, copies of the original and supplemental Indentures are offered in evidence and, with the permission of the Court, the same are hereby withdrawn and will be returned upon the request of the court.

'Such bonds and Indenture were completed, signed, sealed and delivered in New York; and the proceeds from such bonds were paid to the said Trustee in New York for the benefit of Bowaters.

'2. Is the following an eligible investment?

'Investment in note of Jack W. Nelson and Novie M. Nelson in the principal amount of $200,000 dated March 18, 1959.

'This note is secured under the Collateral Agreement covering the note and first mortgage of real and personal property of El Rancho Corporation to Jack W. Nelson and Novie M. Nelson on real estate in South Carolina. The mortgage is recorded in the office of the Clerk of Court for Horry County in Mortgage Book 273 at page 450. The note of El Rancho Corporation is in the principal amount of $707,274.04 and is dated October 31, 1956 and the mortgage of El Rancho Corporation is dated December 14, 1956. A copy of such Collateral Agreement dated March 18, 1959, is marked Exhibit B, attached hereto and made a part hereof. Counsel for the parties feel that such Collateral Agreement is the only document which needs to be reviewed by the Court in connection with this question; however copies of the Nelson note, the El Rancho note and the El Rancho mortgage are offered in evidence and, with the permission of the Court, the same are hereby withdrawn and will be returned upon the request of the Court.

'Plaintiff acknowledges that it is immaterial that the written obligation of Jack W. Nelson and Novie M. Nelson is described as a note instead of a bond. Plaintiff also acknowledges that the fact that an insurer bought or purchased a note secured by a real estate mortgage from the original payee and mortgagee, instead of being the original payee and mortgagee, would not preclude the investment from being an eligible investment under Section 37--123.

'El Rancho Corporation is a corporation organized and existing under the laws of Delaware which has never domesticated in this State.

'Such note of Jack W. Nelson and Novie M. Nelson was described by Defendant in its 1962 through 1967 Annual Statements (Section 37--293) as a collateral loan as distinguished from a mortgage loan on real estate; however, such collateral loan was claimed by the Defendant as a qualifying investment for each of the years on the Defendant's license fee statement.'

Exhibits A and B attached to the stipulation demonstrate that the mortgages securing the bonds are mortgages of real estate in South Carolina.

The determination of the questions involved in this stipulation turn upon the construction of sub-paragraph '(b)' of Section 37--123, Code of Laws of South Carolina (1962).

That section provides for a reduction of the graded license fee of insurance companies if certain funds are 'invested in any or all of the following securities or property, to wit,

'(b) first mortgage bonds of real estate in this State or first mortgage bonds of solvent domestic or domesticated corporations whose improved property is situate entirely within this State and which are owned and controlled independently of foreign corporations and operated entirely within the State.'

It is the position of the defendant that two (2) alternatives are provided in this sub-section, and that investment in the securities described in either alternative authorized the reduction. The two (2) alternatives are as follows:

'1. First mortgage bonds of real estate in this State and

'2. First mortgage bonds of solvent domestic or domesticated corporations, etc.'

Defendant does not contend that it comes within the provisions of the second alternative as both of the investments concerned in this stipulation are securities of foreign corporations which do not come within the qualifying terms of the second alternative; defendant does contend, however, that the investments mentioned in the stipulation come within the provisions of the first alternative, that is 'first mortgage bonds of real estate in this State.'

The plaintiff contends that item (b) of Section 37--123 has a general and a special provision as follows:

'General provision--first mortgage bonds on real estate in this State.

'Special provision--first mortgage bonds of solvent domestic or domesticated corporations whose improved property is situate entirely within this State and which are owned and controlled independently of foreign corporations and operated entirely within the State.'

The plaintiff further contends that the 'special provision' modifies the 'general provision' in such a way that the investments in the stipulation are not to be considered eligible investments.

I have given this matter considerable study, and I am of the opinion that, properly interpreted, the statute provides for two (2) alternatives, and that therefore the defendant must prevail, at least insofar as the Bowaters bonds are concerned. I believe that this is demonstrated by the plain words of the statute and also by its legislative history and the rules of statutory interpretation.

Present Section 37--123 was originally a part of section 14 of Act No. 3 of 1909, and read in its applicable parts as follows:

'. . . maintained in and invested in Any or all of the following securities, or property, to wit: bonds of this State, or of any county, city or town of this State or first mortgage bonds on real estate in this State, or first mortgage bond of solvent domestic corporations, whose property is situate entirely within this State, or any property situate in this State and taxable therein; . . ..' (Emphasis added).

It appears that the statute as originally enacted shows various classes of qualifying investments, each separately stated by the word 'or', Any of which would be authorized as an investment. There is no attempt to set up any special provision in a general statute. Indeed if any of the classes of investments are to be read together, it would place 'first mortgage bonds on real estate in this State' in with the class of investments including state, county and municipal bonds. The reason for this would be the punctuation, or lack of it, there being no comma between the word 'State' and the word 'or'.

However, as pointed out in numerous cases, 'punctuation is a most fallible standard by which to interpret a writing.' Ewing's Lessee v. Burnet, 11 Pet. (36 U.S.) 41, 9 L.Ed. 624 (1837). 'The presence or the absence of a comma, according to the whim of the printer or proofreader is so clearly fortuitous that it is wholly unsafe as an aid to statutory interpretation.' Erie R. Co. v. United States, 240 F. 28 (6 Cir. 1917). See also 2 Southerland, Statutory Construction, 3rd Ed. § 4939, pgs. 476--479.

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