The Union Central Life Insurance Company v. Rahn, 6912

• Decision Date: 31 October 1941
• Docket Number: 6912
• Parties: THE UNION CENTRAL LIFE INSURANCE COMPANY, a corporation, Respondent, v. CONRAD RAHN and CATHERINE EMMA RAHN, husband and wife, Appellants
• Court: Idaho Supreme Court

118 P.2d 717

63 Idaho 243

THE UNION CENTRAL LIFE INSURANCE COMPANY, a corporation, Respondent, v. CONRAD RAHN and CATHERINE EMMA RAHN, husband and wife, Appellants

No. 6912

Supreme Court of Idaho

October 31, 1941

APPEAL from the District Court of the Third Judicial District, in and for Owyhee County. Hon. Charles F. Koelsch, District Judge.

Action by the Union Central Life Insurance Company against Conrad Rahn and wife to foreclose a mortgage. From a judgment of foreclosure, defendants appeal.

Judgment affirmed. Costs to respondent.

R. W Beckwith, for Appellants.

Compliance by foreign corporation with our insurance code, does not qualify it under our constitution and statutory laws to engage in the business of loaning money in this State and taking as security mortgages on real property in Idaho, from Idaho residents. (Article 11, Section 10, Idaho Constitution; 4774 to 4779 I. C. S.; 29-502 to 29-508 I. C. A.; 4780 to 4792 I. C. S.; 29-601 to 29-613 I. C. A.; State vs. Union Central Life Insurance Co., 8 Idaho, 240; 67 P. 647; National Savings & Loan Association vs. Gillis, 35 F.2d 386, at page 391; John Hancock Mutual Life Insurance Co. vs. Girard, 57 Idaho 198, 54 P.2d 254.)

The notes are usurous under Section 2553 I. C. S., now 26-1906 I C. A., and the amount paid must be applied on the principal indebtedness, and the action is therefore prematurely brought. (2552 I. C. S.; 2553 I. C. S.; 2554 I. C. S.; 29-1905 I. C. A.; 29-1906 I. C. A.; 29-1907 I. C. A. Am. Chp 197, 1933, S. L.; Vermont Loan and Trust Company vs. Hoffman, 5 Idaho 376, 49 P. 314; Vermont Loan and Trust Company vs. Tetzeoff, 6 Idaho 105, 53 P. 104; Ford vs. Washington National Building & Loan Company, 10 Idaho 30, 76 P. 1010; Easton vs. Butterfield Livestock Company, 48 Idaho 153, 279 P. 716; McDougall vs. Kasiska, 48 Idaho 424, 282 P. 943.)

Eugene H. Anderson and Merrill & Merrill, for Respondent.

A foreign insurance company licensed by the state insurance department after compliance with governing statutes is not required to comply with statutes applicable to foreign corporations generally in order to invest its funds and take security therefor. When a foreign company is licensed to transact an insurance business, the loaning of its money and taking security therefor is not an act in excess of its authorized powers. (Central Life Assur. Soc. v. Tiker, (Okla.) 57 P.2d 1182; Winter v. Prudential Ins. Co. (Okla.) 66 P.2d 514; Metropolitan Life Ins. Co. v. Whitestone Management Co., 8 F.Supp. 516; Metropolitan Life Ins. Co. v. Whitestone Management Co., 77 F.2d 255; Bankers Life Co. of Des Moines v. Horsefall (S. D.), 205 N.W. 714; John Hancock Mutual Life Ins. Co. v. Lookingbill (Iowa) 253 N.W. 604.)

In determining whether usurious interest has been charged or collected under particular contract, it is not permissible to consider only portion of term of contract, test being whether lender under contract charged or received profit on investment in excess of maximum rate for full period of loan. (Easton v. Butterfield Livestock Company, 48 Idaho 153, 279 P. 716; U. S. Building and Loan Association v. Lanzarotti, 47 Idaho 287, 274 P. 630; Eagle Rock Corporation vs. Idamount Hotel Co., 59 Idaho 413, 85 P.2d 242; Union Central Life Insurance Co. vs. La Follette (Ore.), 44 P.2d 165; Musser v. Murphy, 49 Idaho 141, 286 P. 618.)

GIVENS, J. Budge, C.J., and Morgan, Holden and Ailshie, JJ., concur.

OPINION

GIVENS, J.

Appellants resist the foreclosure by respondent of its mortgage on land owned by appellants, on the grounds the mortgage and notes securing it are usurious, in that they provide for compound interest, i. e., interest on past due interest, and that respondent is a foreign corporation not qualified to loan money in Idaho.

The notes did provide for interest on past due interest, but this court has held that it is what interest is paid, not what is contracted or asked, which governs under 26-1906 I. C. A. United States Building & Loan Association v. Lanzarotti, 47 Idaho 287, 274 P. 630; Easton v. Butterfield Live Stock Co., 48 Idaho 153, 279 P. 716; Eagle Rock Corp. v. Idamont Hotel Co., 59 Idaho 413, 85 P.2d 242.)

Section 26-1905 I. C. A., prior to the amendment thereof by Chapter 197 of the 1933 Session Laws, page 390, the mortgage being executed January 24, 1930, governs the permissible rate, which was 10%. (Brunswick Realty Co. v. University Inv. Co., 43 Utah 75, 134 P. 608; Adams v. Shirk, 117 F. 801; Culver v. Cougle, 165 Ill. 417, 46 N.E. 242; Abner v. York, 19 Ky. L. 643, 41 S.W. 309; Mix v. Fidelity Trust & Safety-Vault Co., 103 Ky. 77, 44 S.W. 393; Mastin v. Cochran's Ex'r., 25 Ky. L. Rep. 712, 76 S.W. 343; Lewis v. Dunlap, 112 S.C. 544, 100 S.E. 170.)

The sixth covenant in the mortgage is as follows:

"Sixth. In case of failure to pay the taxes, assessments, charges, liens, costs, expenses, attorney's fees, water, reservoir or ditch dues, rents or assessments, as aforesaid, or to effect said insurance, the mortgagee may pay the same, and effect such insurance. The amounts so paid shall be due and payable, at the option of the mortgagee, with interest at the rate of ten per cent. per annum and reasonable attorney's fees incurred in the collection thereof, and such amounts shall be secured hereby."

A careful computation discloses no interest in excess of 10% on the principal of the notes and mortgage and advances admittedly proper for taxes, insurance, etc., was prayed for in respondent's complaint or allowed in the judgment.

Appellants admit respondent has at all times complied with sections 40-501 to 40-513 I. C. A., but contend this authorized it to do only an insurance business, and, not having complied with sections 29-501 to 29-508, could not engage in the business of loaning money.

Article 11, section 10, ^[1] of the Idaho Constitution, establishes the basic requirement permitting foreign corporations to do business in this state. Section 40-502 ^[2] requires as compliance with the above that insurance companies designate the commissioner of finance as their agent for service of process. Ada County would, as his official residence, then be the principal place of business in the state for service of process on insurance companies. (65-101 and 65-2402 I. C. A.) Section 29-501 ^[3] requires general foreign corporations to designate an agent and place of business in the state. Section 40-502 is as much compliance with the constitution as 29-501, hence no constitutional question is involved.

Appellant argues that the clause in 40-502 relieving insurance companies from complying with sections 29-501 to 29-508 applies only to insurance business and not to such a company engaged in loaning money, and adverts to fees required by 29-603. The license fees paid by insurance companies under 40-804 are comparable with those required under 29-603, hence there is nothing to indicate the legislature meant to require both; furthermore, the statutes expressly countenance, sanction, and make certain concessions to insurance companies loaning money in this state (sections 40-808 ^[4] and 40-606 ^[5] I. C. A.) which thus recognize that loaning money is a concomitant part of the business of an insurance company.

Since State v. Union Central Life Insurance Co., 8 Idaho 240, 67 P. 647, was decided, the pertinent statute was amended and changed by section 40-502, relieving insurance companies from complying with 29-501 to 29-508, and insurance companies are not restricted to the insurance business as distinguished from loaning money.

Under statutes sufficiently similar to ours to make them in point all the decisions of other courts we have found have uniformly held compliance with the insurance statute obviates compliance by an insurance company, though engaged in loaning money, with the general corporation statutes, and appellants have cited none to the contrary. In Bankers' Life Co. of Des Moines, Iowa, v. Horsfall, 48 S.D. 629, 205 N.W. 714, which was an action to foreclose a mortgage, the supreme court of South Dakota said:

"In their argument, appellants claim that respondent was not authorized to invest its funds in the note and mortgage in this suit, that it was only authorized to do an insurance business in this state, and so could only write and issue insurance policies and collect premiums. The investment of the funds of an insurance company is as much its business as the writing of insurance, and that is one of the necessary incidental powers of such companies, even in the absence of express statutory authority. It is evident that the Legislature never intended that any attempt of an insurance company to loan money on real estate in this state, without first having filed articles of incorporation with the secretary of state, 'must be held void.'" And in Metropolitan Life Ins. Co. v. Whitestone Management Co., (N.D.Ill.) 8 F.Supp. 516, the insurance company had complied with the Illinois statutes relating to life insurance companies but had not qualified under the general corporations act. The court stated: " * * * its rights in the matter of loaning money are confined to the lending of its funds in furtherance of and as incidental to its expressed corporation purpose, to wit, insurance. I am of the opinion that, where a corporation is empowered by its charter to do such an insurance business, the expressed charter power carries with it as a necessary incident the right of the corporation to invest its funds in connection with the business."

The Circuit Court of Appeals, Second Circuit, affirmed the opinion of the district court in 77 F.2d 255. The supreme court of Iowa, in John Hancock Mut. Life Ins. Co. v. Lookingbill, 218 Iowa 373, 253 N.W. 604, another foreclosure action, held as follows:

"The insurance company...